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BenefitsLink Retirement Plans Newsletter

May 10, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Transition/Conversion Manager
for OneAmerica Financial Partners in IN

Pension Administration Project Manager
for Aon Hewitt in IL, TX

Retirement Plan Administrator
for Retirement Plan Services, LLC in IA, MO

Qualified Retirement Plan Compliance Leader
for Polycomp Administrative Services, Inc. in CA

Sales Administrative Coord
for The Standard in TX

Pension Administrator
for Actuaries Unlimited, Inc. in CA

Plan Administrator
for Rapidly Growing 401(k) Third Party Administration and Recordkeeping Firm in PA

Plan Administrator/Consultant
for Independent Retirement Consulting, LLC in OR

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Webcasts and Conferences


[Official Guidance]

'Pension Loans' or Settlement Income Streams: What You Need to Know Before Buying or Selling Them (PDF)
"After acquiring the rights to a future income stream (such as a retiree's pension payments), these pension purchasing or structured settlement companies ... may turn around and sell these income streams to retail investors ... [T]hese products go by various names -- pension loans, pension income programs, mirrored pensions, factored structured settlements or secondary-market annuities. [T]hey may be pitched to investors with words like 'guaranteed' and 'safe' -- and may tout robust returns ... [T]he advertised returns may sound enticing, but investors should be aware that these investments can be risky and complex." (Office of Investor Education and Advocacy, Securities and Exchange Commission)


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[Official Guidance]

Text of IRS Private Letter Ruling Extending 60-Day Rollover Period Because of Bank Error (PDF)
"Taxpayer A maintained IRA B, a [CD], with Bank C. Upon maturity of the CD ... Taxpayer A initiated a transfer of Amount 1 from IRA B to an account at Bank D. Instead of depositing Amount 1 into a rollover IRA account as Taxpayer A intended, Bank D deposited Amount 1 in Account E, a non-IRA CD.... When the mistake was discovered ... Bank D transferred Amount 3 to ... and IRA CD. Taxpayer A ... believed that Account E was and IRA and that Bank D made a mistake in depositing Amount 1 into a non-IRA CD." [PLR 201319034, dated Feb. 14, 2013, published May 9, 2013] (Internal Revenue Service)

[Guidance Overview]

SEC, FINRA Issue Investor Alert on 'Pension Loan' or Settlement Income Streams
"The investor alert informs investors about the risks involved when selling their rights to an income stream or investing in someone else's income stream. The alert urges investors considering an investment in pension or settlement income streams to proceed with caution.... The investor alert contains a checklist of questions before selling away an income stream[.]" (Securities and Exchange Commission)

[Guidance Overview]

DOL Proposes to Include 'Lifetime Income Illustrations' in Benefit Statements (PDF)
"Although the ANPRM only addresses a narrow issue presented under ERISA section 105 -- that is, how to present a description of a participant's 'total benefits accrued' under a [DC] plan, it is better understood as a next step in a broader DOL initiative to facilitate access to 'lifetime income options' that could provide a lifetime stream of income after retirement to American workers who now primarily save for retirement through [DC] plans." (Groom Law Group)

[Guidance Overview]

Safe Harbor 'ERISA Special Entity' and 'Non-special Entity' Letters Published by International Swaps and Derivatives Association
"[Swap dealers (SDs)] must ensure that they remain independent of special entities in their swap dealings, or face increased advisory responsibilities. Special entities are certain local, state and federal government entities and qualified retirement plans. The ERISA special entities letter is designed to help SDs document their independence from ERISA special entities with which they enter into swaps.... [The letter helps] SDs take advantage of certain safe harbors contained within the final EBCS." (Practical Law Company)


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SEC Floats Small Step in Money Market Fund Reform
"U.S. securities regulators are reviewing a proposal that would require the riskiest money-market mutual funds to adopt a floating share price, according to a person familiar with the matter. The proposal from the [SEC] would impose the change only on the type of funds that suffered a flood of investor redemptions in September 2008, when the $62.5 billion Reserve Primary Fund collapsed, said the person, who asked not to be identified because the proposal isn't public." (Investment News; free registration required)

In Reversal, PBGC Covers Pension of Hospital Center After IRS Revokes 'Church Plan' Status
"[I]n 2003, after the hospital became affiliated with Cathedral Healthcare System Inc., the [IRS] determined that the hospital's pension plan had become a church plan, which removed it from PBGC's protection. Soon after that, the hospital began winding down its operations and laying off employees. Over the past several years, at the request of the Pension Rights Center, PBGC worked with the hospital's former staff and the IRS to revisit that designation. IRS recently set the designation aside and PBGC can now cover the pensions." (Pension Benefit Guaranty Corporation)

Illinois Senate Approves Union-Backed Pension Plan for State Employees
"The Illinois Senate approved a union-backed plan to cut the retirement benefits of nearly 700,000 teachers, state workers and retirees today, taking a vote that is directly at odds with House approval of a competing pension plan last week. Unless one side blinks and approves the other's plan by the May 31 scheduled adjournment, another legislative session will pass without movement on one of the state's most serious financial challenges." (Chicago Daily Herald)

DOJ and SEC Scrutinize Potential Misuse of Rule 10b5-1 Trading Plans by Corporate Directors Affiliated with Investment Advisers
"With the government now focused on the potential misuse of trading plans, the fund industry, public companies and directors (especially those affiliated with funds) should expect closer scrutiny of Rule 10b5-1 plans.... [C]orporations and their directors, along with investment funds and their advisers, should consider reviewing their use of, and policies/procedures concerning, Rule 10b5-1 plans." (Dechert LLP)

Low Interest Rates Could Ding Retirement Plans, EBRI Warns
"In a scenario where retirement income and wealth account for 100% of an investor's simulated retirement expenses ... around a quarter of Baby Boomers and Gen Xers who would have had sufficient retirement income under interest rates at historical averages would run out of money if the current low rates were taken as a permanent condition.... [O]nly 5% to 8% of the same Boomers and Xers would run out of money under perpetually low rates if income and wealth accounted for 80% or less of their retirement expenses[.]" (On Wall Street)

For Advisors, Justifying Fees Means Justifying Value
"The strategy that self-directed platforms are using is clear: devalue the advisor and create the illusion that investors can achieve financial goals on their own without paying an advisor. In essence, these platforms claim that technology can do all the heavy-lifting. Because fee-conscious investors find such a prospect quite seductive, advisors must now act decisively to protect the economic health of their practices." (Financial Advisor)

Advisors Must Better Plan for Health Care Costs
"When addressing health care with clients, include the following subjects into the discussion ... [1] What is your cash flow to pay for serious illnesses? Do you want to tap into your retirement plan or access life insurance benefits? [2] Tax planning: Understand all co-pays and out of pocket expenses. Track these during serious illnesses for more effective tax planning. [3] Family deductibles: If you know your clients have hit greater than 10% of adjusted gross income for deductibles, make sure everyone in the family gets their health needs taken care. All of those expenses are deductible." (Financial Planning)


So How Do We Make Retirement Less of a Gamble?
"The advice to participants to request formal acknowledgment from their financial advisors of their status as a 'fiduciary' is dubious at best (for one problem, it's unlikely the average participant could draft a meaningful fiduciary contract). Smith's piece does not reflect the recent legislative and litigation efforts -- enhanced fee disclosure, increased fiduciary responsibilities -- which, while slow to develop and long overdue, are nonetheless beginning to address the very problems Smith laments." (Retirement Town Hall)


President Proposes IRA Changes
"The proposal amounts to killing a mosquito with a sledgehammer, based on the following three considerations: [1] This proposal would require an entirely new information-gathering and enforcement mechanism.... There are probably thousands of [people] who have accumulated 'too much,' but that's a drop in the bucket compared to the millions and millions who have 'too little.' So this newly created giant dragnet will snare just a few people.... if their IRAs are already that large, they don't want to put more in anyway!" (Natalie Choate for Morningstar Advisor)


Text of ACLI Statement on DOL Draft Proposal for Translating Savings Into Lifetime Income
"The proposal represents a significant step forward in educating workers about retirement and helping them achieve their retirement security goals.... Most workers recognize the need to accumulate retirement assets, but many may not think about the need to manage their assets over the course of a retirement that could last 20 or 30 years. Understanding what a lump sum really means in terms of paying the monthly bills will help countless workers ensure they are on the right path to meeting their retirement goals." (American Council of Life Insurers)

Benefits in General; Executive Compensation

Health Care Concerns & Retirement Planning (PDF)
"In 2012, 45 percent of individuals reported that medical expenses were extremely important when it came to planning for retirement, and 26 percent reported that they were very important ... Moreover, the percentage of individuals reporting that medical expenses were extremely important when it came to planning for retirement increased from 27 percent in 2003 to 45 percent in last year's [survey]." (EBRI)

Proskauer ERISA Litigation Newsletter, May 2013
Articles include: [1] U.S. Supreme Court Provides Defendants With More Ammunition for Defeating Class Certification by Requiring Classwide Proof of Damages; [2] District Court Limits the Collection of Withdrawal Liability Against Private Equity Funds; [3] Monetary Damages Potentially Available For Inadequate Disclosure; [4] U.S. Supreme Court Rules That Plan Terms Trump Equitable Defense; and [5] U.S. Supreme Court Agrees To Hear Case On ERISA Statute of Limitations. (Proskauer Rose LLP)

Best Laid Plans Gone Awry: Practices for Rule 10b5-1 Trading Plans
"[I]nvestigations have been initiated by U.S. Attorney's Offices and the SEC into possible abuses by corporate executives of such plans... Companies and their boards of directors should review and strengthen their insider trading policies concerning Rule 10b5-1 trading plans. Such measures will raise the likelihood that the plan will be successful as a defense, the company's insider trading policy will be deemed rigorous by regulators and governmental entities and more favorable directors' and officers' (D&O) insurance policy terms and premiums will be available due to a reduced risk profile." (Pillsbury Winthrop Shaw Pittman LLP)

Press Releases

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