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BenefitsLink Retirement Plans Newsletter

June 6, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Strategic Communications Consultant - Team Lead
for New York Life Retirement Plan Services in MA

Benefits & Compensation Manager
for Mayville Engineering Co., Inc. in WI

Employee Benefits Consultant/Attorney
for Aon Hewitt in IL

Sales Associate
for Retirement, LLC & Jennings Law Firm, Ltd. in IL

Director, Structured Settlement Market & Product Development & Management
for Prudential in NJ

ERISA Consultant I
for Ascensus in MN

Defined Contribution Consultant
for The Benefit Practice in FL

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Webcasts and Conferences

Results of Mercer's 2013 US Pension Risk Survey with CFO Magazine Webcast
June 25, 2013 WEBCAST
(Mercer)

"Strengthening the Multiemployer Pension System: What Reforms Should Policymakers Consider?" Hearing
June 12, 2013 in DC
(Committee on Education and the Workforce)

Health and Welfare Update and Planning for 2014 Teleconference
June 19, 2013 WEBCAST
(Kilpatrick Townsend & Stockton LLP)

2013 ERISA Update Seminar
November 20, 2013 in Hawaii
(TRI Pension Services)

View All Webcasts and Conferences


 

[Official Guidance]

Text of SEC Proposed Rule on Money Market Fund Reform, Amendments to Form PF (PDF)
698 pages. "The [SEC] is proposing two alternatives for amending rules that govern money market mutual funds ... The two alternatives are designed to address money market funds' susceptibility to heavy redemptions, improve their ability to manage and mitigate potential contagion from such redemptions, and increase the transparency of their risks, while preserving, as much as possible, the benefits of money market funds.... The SEC also is proposing additional amendments that are designed to make money market funds more resilient by increasing the diversification of their portfolios, enhancing their stress testing, and increasing transparency by requiring money market funds to provide additional information to the SEC and to investors. The proposal also includes amendments requiring investment advisers to certain unregistered liquidity funds, which can resemble money market funds, to provide additional information about those funds to the SEC." (U.S. Securities and Exchange Commission)


[Advert.]

Learn, Network and Sell at the SPARK National Retirement Industry Conference - June 16-18, Washington DC

Sponsored by SPARK (Society of Professional Asset Record Keepers)

Join top industry recordkeepers, asset managers, TPAs, advisors, marketing and sales executives for unequaled educational and networking opportunities. Learn the latest market trends, business strategies, regulatory and legislative issues, and product developments.


SEC Fact Sheet on Proposed Money Market Fund Reforms
"The [SEC] voted unanimously to propose rules that would reform the way that money market funds operate in order to make them less susceptible to runs that could harm investors. The SEC's proposal includes two principal alternative reforms that could be adopted alone or in combination. One alternative would require a floating net asset value (NAV) for prime institutional money market funds. The other alternative would allow the use of liquidity fees and redemption gates in times of stress. The proposal also includes additional diversification and disclosure measures that would apply under either alternative." (U.S. Securities and Exchange Commission)

SEC Backs Two Options to Control Money Funds
"One [proposal] would require the prime institutional funds, considered the riskiest money markets, to have net asset values that fluctuate daily with market conditions rather than maintain a stable $1 share price.... [The] second proposal would maintain a stable NAV for funds but impose restrictions on redemptions and charge withdrawal fees during financial market stress ... Under this approach, if the fund's weekly liquid assets fall below 15% of its total assets, the fund would be required to impose a 2% redemption fee unless the fund's board determined that such a fee would be harmful to the fund." (Investment News; free registration required)

It's Here: SEC Proposes Floating NAV for Money Funds
"The SEC's floating NAV only is for prime MMFs that invest in corporate debt, not those that invest in government and municipal debt. Prime MMFs were subject to investor runs during the 2008 financial crisis and the SEC is hoping that ending the stable NAV for these investments will prevent future runs." (Association for Financial Professionals)

Adding Categories: a Sample of a New and Improved 401(k) Investment Option Menu
"401k plan design remains, for the most part, unchanged since the mutual fund industry allied with plan recordkeepers to take over the retirement plan market in the 1980s. Ever since, fitting plans into the needs of the service providers has trumped creating a retirement plan that actually helps more people retire with more money.... Many companies are now adopting systemic changes to their 401k that create plans more in line with the language, needs and motivations of their employees." (Fiduciary News)


[Advert.]

Retirement Plan Solutions for Employee Benefits Professionals

Sponsored by SunGard Relius Education

Fundamentals is a 3-day course that combines an introduction to 401(k) plans with a comprehensive study of defined contribution plan requirements and challenges of qualified plan administration, including the new EPCRS procedure. Learn more.


Promoting and Evaluating the Success of Your 401(k) Plan (PDF)
"Focusing on the right goals can substantially improve a Plan's performance and help assure a Plan's success as an employer-sponsored benefit arrangement for employees. Plan fiduciaries who take the initiative to improve Plan performance can mitigate the legal risks associated with operating their Plans and also reduce their potential fiduciary liability. Successfully managed Plans can also help employers reap the economic rewards of a more motivated and productive workforce." (The Wagner Law Group, prepared for Legg Mason)

Adding Real Assets, Emerging Markets Securities and Liquid Alternatives Could Improve Returns of Direct Contribution Retirement Plans
"[N]on-traditional approaches could enhance the success of investors in the current environment, which it expects to be characterized by lower long-term expected returns, higher volatility and heightened inflation risk. If DC plans were constructed more similarly to DB plans, approximately 20 percent of the DC plan assets would be allocated to non-traditional strategies such as real assets, total emerging markets (which combine equities and fixed income) and liquid alternatives[.]" (BNY Mellon)

Rise of Private-Sector DC Plans Expected to Improve Retirement Security (PDF)
"The share of retirees receiving private-sector pension income increased by more than 50 percent between 1975 and 1991, and has remained fairly stable since.... The 401(k) system provides unparalleled portability, ownership, and innovation to American workers.... A number of studies have concluded that the majority of private-sector workers who have access only to DC plans during their working careers will be better off than if they had access only to DB plans." (Investment Company Institute)

Is Your Nonprofit Organization 'Bitaxual'? If So, Watch Out!
"[T]he label 'bitaxual' [describes] those entities that are ... both exempt from tax based on the fact that they are an 'instrumentality' of government and because they have received a tax-exemption from the IRS as a Code section 501(c)(3) organization. One example ... is a public hospital district.... [These entities] are special because they can simultaneously maintain an eligible deferred compensation plan under Code section 457(b) and a Code section 403(b) plan.... [Periodically] the IRS checks its database of 501(c)(3) entities looking for charities that haven't filed their Form 990. If the IRS finds one, and doesn't know that the 501(c)(3) is also a governmental entity, it will automatically revoke the entity's 501(c)(3) status if no Form 990 was filed for three consecutive years." (Focus on Public Benefits)

DOL Seeks Input on Required Disclosure of Estimated Annuity Value of Account Balances
"The DOL clearly recognizes that there are many issues involved in requiring plans to provide these estimates and, as a result, the Notice asks for comments on virtually every aspect of the proposal ... While the idea of requiring ERISA-covered DC plans to disclose an estimated monthly annuity amount is still taking shape, various indicators point to definite agency interest in providing this information." (Segal Consulting)

Advocacy Groups Warn SEC Against Watered-Down Fiduciary Standard
"The [the groups, which include the Investment Adviser Association and the Certified Financial Planner Board of Standards,] said that their support for a uniform fiduciary standard is conditioned on a rule that would be 'no less stringent' than the current standard to which advisors are held. A more lax fiduciary rule designed for broker-dealers, if applied as the uniform standard the SEC envisions, could have the perverse effect of lowering the standard of care advisors are currently required to exhibit when providing their retail clients with personalized investment advice." (On Wall Street)

California Reform Prohibits New Supplemental Pensions by Cities
"A little-known private firm that has sold customized supplemental pensions to dozens of California cities ... is prohibited from selling more by a pension reform bill that took effect this year.... [T]he menu of pension formulas available through the California Public Employees Retirement System is limited and set by legislation. Unions for most workers could bargain for a half dozen pension formulas, ranging from modest to very generous. PARS gives employers the flexibility to customize pension formulas, target specific groups, set eligibility and vesting requirements, offer payment through insurance-run annuities or lump sums and direct some investments." (CalPensions)

[Opinion]

Text of PSCA Comments to ERISA Advisory Council on Locating Missing and Lost Participants
Recommendations include: "The DOL should extend the safe harbor rules under ERISA Regulation Section 2550.404a-2 to missing beneficiaries in addition to participants ... The DOL should extend the safe harbor rules under ERISA Regulation Section 2550.404a-2 to distributions to missing or unresponsive participants, without regard to the size of the benefits, when benefits become payable after attaining the plan's normal retirement date.... As a practical matter, account balances of less than $1,000 continue to cause administrative headaches." (Plan Sponsor Council of America)

[Opinion]

SEC Money Market Plan Falls Short, Critics Charge
"[S]ome observers cast doubt on the effectiveness of the new proposal, arguing it did little to address the underlying fears that money market mutual funds are subject to runs and potential systemic panic.... The SEC's proposal, which will allow a 90-day public comment period, noticeably omitted mention of requiring funds to raise more capital to absorb potential losses -- an option that had been included in the earlier draft plan promoted by Schapiro last year as well as recommendations laid out by the Financial Stability Oversight Council." (On Wall Street)

[Opinion]

Statement by Commissioner Paredes on SEC Proposal on Money Market Fund Reform
"[At] present, I remain unconvinced that floating the NAV is justified on a cost-benefit basis. But floating the NAV is just one of the proposed alternatives. It is particularly important to me that liquidity fees and gates are being proposed as a separate, standalone alternative so that, if appropriate, this alternative can be adopted by itself without requiring money market funds to float their NAVs." (SEC Commissioner Troy A. Paredes)

[Opinion]

Statement by Commissioner Aguilar: SEC Strives to Restructure Money Market Funds to Address Potential Systemic Risk
"[T]hese amendments acknowledge the value of these products to retail investors and that retail investors did not constitute the 'hot money' in 2008 that contributed to the perceived systemic risk and panic. As such, the proposing release recognizes the distinction between retail and institutional investors.... [T]hese proposed amendments increase the diversification of fund portfolios, enhance funds' stress testing, and increase transparency by requiring greater disclosure of registered funds. While today's release is a vast improvement over past efforts, much remains to be decided." (SEC Commissioner Luis A. Aguilar)

[Opinion]

Statement by Commissioner Gallagher on SEC Proposed Rules for Money Market Funds
"Floating the NAV should better inform investors about the risks associated with investing in MMFs and will enhance the transparency of these products, thus reducing the incentive to run. But the only way to ensure that a run is stopped in its tracks is to permit gating.... [T]he combination of floating NAV and gating, which is one of the regulatory options we are proposing today, is the most robust plan for strengthening these important investment products." (SEC Commissioner Daniel M. Gallagher)

[Opinion]

ICI Statement on Proposed SEC Rulemaking for Money Market Funds
"We are particularly pleased that the Commission recognized the effectiveness of liquidity fees and gates in addressing risks that might arise in a widespread crisis. We also welcome the inclusion of fees and gates as a standalone option in the proposal." (Investment Company Institute)

Benefits in General; Executive Compensation

[Official Guidance]

DOL Releases Retirement Toolkit (PDF)
"This retirement toolkit is brought to you by the three federal agencies involved in key elements of your retirement planning and security: [DOL, SSA and CMS]. The toolkit includes a list of publications and interactive tools to help in your planning, plus information on how to contact us with your specific questions. It is important to start early and be well informed so you can make timely decisions and, if necessary, make changes while you still have time before retirement. The timeline below can help you plan for the kind of retirement you want." (Employee Benefits Security Administration, U.S. Department of Labor)

U.S. Airways, Inc. v. McCutchen: A Win for 'Unambiguous' Plan Terms, but What About the Rest of Them? (PDF)
"While the Court's holding allows employers to feel secure in administering their plans and calculating their costs as prescribed by the terms of the plans, McCutchen also cautions plan sponsors to carefully consider the terms that they include in their plans -- every phrase, word, comma and period. Plan documents should be given the same care and consideration as a multi-million -- or multibillion dollar merger agreements because the financial consequences can be just as significant." (Morgan Lewis, via Bender's Labor & Employment Bulletin)

DOL Worker Classification Survey May Lead to 'Right to Know' Disclosures
"The [DOL] is asking for comments on a proposed Worker Classification Survey, which would be the agency's first survey to examine worker classification issues. According to the notice, the survey would 'collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification'.... The notice has fueled speculation that this could be the first step toward resurrecting a 'Right to Know' disclosure requirement under the Fair Labor Standards Act (FLSA), which the agency first raised in 2010 but never formally proposed." (Towers Watson)

Panel Discusses Developments in Executive and Director Pay
"The trend is for Boards to consider the realizable/realized pay numbers for internal purposes, however, whether or not related disclosure is included in the company's annual proxy is another question.... Many companies have included shareholder engagement on executive compensation and related corporate governance issues as a standard annual exercise.... With the economic downturn, there is a restored interest in and use of mandatory deferred compensation programs.... Directors have a fiduciary duty to protect the interests of all shareholders, provide expertise, and serve as advisors to management. Directors are often paid using a mix of cash and equity, but what forms those take and how equity vests is often up for debate." (Steven Hall & Partners)

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