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BenefitsLink Retirement Plans Newsletter

June 12, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Client Service Representative
for Associated Pension Consultants in CA

Retirement Plans Administrator
for Vectren Corporation in IN

Defined Contribution Specialist
for United Retirement Plan Consultants in CA

Director Retirement Plan Services
for First Savings - Retirement Services in PA

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Webcasts and Conferences

Countdown to 2014 Offering Health Care Coverage to Employees: Who, What, How, and When?
June 27, 2013 WEBCAST
(Hinshaw & Culbertson LLP)

403(b) Summit: Synergize to (b)uild your (b)usiness
June 23, 2013 in IL
(National Tax Sheltered Accounts Association)

View All Webcasts and Conferences


[Guidance Overview]

Puerto Rico Treasury Department Grants Additional Extension to Adopt Amendments and File Plans for Puerto Rico Tax Qualification (PDF)
"[T]he Puerto Rico Treasury Department made public Circular Letter No. 13-02 formally extending the deadlines for: (i) the adoption of amendments to retirement plans in compliance with the provisions of Section 1081.01(a) of the Puerto Rico Internal Revenue Code of 2011, as amended (2011-PR Code), and (ii) the filing of retirement plans for both qualification under the 2011-PR Code and retroactive qualification under Section 1165(a) of the Puerto Rico Internal Revenue Code of 1994, as amended[.]" (Groom Law Group)


Practical Law Exclusive Offer for BenefitsLink Subscribers

Sponsored by Practical Law Company (PLC)

Whether you're a new or seasoned attorney, PLCEmployee Benefits & Executive Compensation provides resources to help you work smarter and faster. We cover retirement plans, health & welfare plans and executive compensation arrangements. Learn more.

Beware Nondiscrimination Pitfalls for Frozen Pension Plans
"Many defined benefit (DB) pension plans were closed to new entrants over the past several years. Oftentimes, these plan closures were done with a focus on short-term cost control without understanding some of the long-term compliance implications. Then, one day, the plan sponsor gets an unwelcome surprise from their actuary -- their DB plan is failing the IRS' nondiscrimination tests! How can this happen -- particularly if the DB plan is a 'safe harbor' formula that has never needed nondiscrimination testing before?" (Van Iwaarden Associates)

FINRA Investor Alert: 'Alternative Funds Are Not Your Typical Mutual Funds'
"Compared to a traditional mutual fund, an alternative fund typically holds more non-traditional investments and employs more complex trading strategies. Investors considering alternative mutual funds should be aware of their unique characteristics and risks.... Before you invest in an alternative fund, here are some points to keep in mind: Investment Structure ... Strategy Risk Factors ... Investment Objectives ... Operating Expenses ... Fund Manager ... Performance History." (Financial Industry Regulatory Authority (FINRA))

2013 National Cash Balance Research Report (PDF)
"The number of 401(k) plans declined 3% between 2010 and 2011 ... while Cash Balance Plans increased 12%.... In 2001 there were only 1,337 Cash Balance Plans nationwide, and by 2011 there were 7,926, an increase of almost 500% in 10 years.... Cash Balance Plans now make up over 20% of all defined benefit plans, up from 2.9% in 2001." (Kravitz)

401(k) Account Balances Grew 10 Percent in 2012
"Americans with savings in retirement plans have something to celebrate: Average 401(k) account balances rose 10 percent in 2012, to $86,212 ... But only 11 percent of retirement plan participants saved the maximum of $17,000 ($22,500 for those over 50), and they tended to be older, male, high-income workers with already high account balances[.]" (Reuters)

State and Local Pension Fund Governance and the Process of Contracting for Investment Services
"US state and local public employee retirement systems (PERS) [utilize] various models of contract with distinctive features in their form and substantive content in relation to industry norms. These models differ between states, within states, and even between PERS within major metropolitan areas." (Gordon L. Clark and Ashby H. B. Monk via SSRN)

The Plan Sponsor's Guide to Delegating, Part 1: Selecting and Supervising 3(38) Investment Managers (PDF)
"[It] is imperative to vigorously monitor the actions and recommendations of an [ERISA section 3(38) Investment Manager (EIM)]. The importance of monitoring is directly correlated to the level of delegation granted to the EIM. In this article, plan fiduciaries will learn the how-to's, benefits and best practices of selecting and supervising EIMs -- a role that can be transformational for a plan sponsor." (Roland|Criss)

The Plan Sponsor's Guide to Delegating, Part 2: Recordkeeping Made Simple (PDF)
"Because the recordkeeper controls the ease and efficiency with which plan participants can interact with and make changes to their investments, the effectiveness of the recordkeeper is essential in gaining plan participant satisfaction with the overall retirement plan management process. A good recordkeeper can help to build a satisfied employee community, while an underperforming recordkeeper can cause unnecessary issues to brew between a plan sponsor and its participants." (Roland|Criss)

New Tax Increases Make Deferral of Compensation a More Valuable Benefit for Many Employees
"The combination of the new additional Medicare taxes on wages, additional taxes on certain investment income of higher income taxpayers, and the new higher marginal income tax rates on both ordinary income and capital gains[,] make income deferral opportunities a potentially valuable benefit for many employees. Because many taxpayers are likely to be subject to these additional taxes or higher tax rates during some or all of their remaining working lives, yet not subject to some or all of these increased taxes in other years or following their retirement, managing the date of recognition of taxable income by use of available deferral techniques can produce actual tax savings." (Pillsbury Winthrop Shaw Pittman LLP)


14th Annual Hawaii ERISA Seminar

Sponsored by TRI Pension Services

A unique seminar, mixing learning and CE with fun -- ERISA update with a focus on "hot" pension topics and current developments. November 20-22, 2013 -- Outrigger Reef Hotel in Honolulu, Hawaii

How America Saves for Retirement: 2012 DC Plan Data from Vanguard (PDF)
"At year-end 2012, 36% of all Vanguard participants were solely invested in an automatic investment program -- compared with just 17% at the end of 2007. Twenty-seven percent of all participants were invested in a single target-date fund; another 6% held one traditional balanced fund; and 3% used a managed account program.... Because of the growing use of target-date options, [Vanguard anticipates] that 55% of all participants and 80% of new plan entrants will be entirely invested in a professionally managed allocation by 2017." (Vanguard)

QDRO Cannot Change Existing Beneficiary of Joint and Survivor Annuity
"The court held that a survivor benefit irrevocably vests in the beneficiary at the annuity starting date and cannot be reassigned thereafter by a domestic relations order.... And what of [the ex-wife's] waiver of the QJSA [pursuant to a divorce decree]? Not only was this found ineffective against the plan, but the court held that ERISA would preempt any attempt to impose a constructive trust under Texas common law on any survivor benefits received by Melissa under the Plan." [VanderKam v. PBGC, No. 09-cv-01907 (D.D.C. May 7, 2013)] (Calhoun Law Group)

Boomers Looking to Retire Sooner
"While 79 percent of boomers anticipate working in some capacity, even after they retire from their current job, many are planning to make a change. 51 percent plan to work full time either in their current or at an entirely new job; 28 percent anticipate working part-time or having a flexible schedule; and 21 percent anticipate no longer working for a paycheck." (Del Webb)

SEC Charges Chicago Board Options Exchange for Regulatory Failures
"CBOE agreed to pay a $6 million penalty and implement major remedial measures to settle the SEC's charges. The financial penalty is the first assessed against an exchange for violations related to its regulatory oversight.... An SEC investigation found that CBOE failed to adequately police and control this conflict for a member firm that later became the subject of an SEC enforcement action. CBOE put the interests of the firm ahead of its regulatory obligations by failing to properly investigate the firm's compliance with Regulation SHO and then interfering with the SEC investigation of the firm." (U.S. Securities and Exchange Commission)

Statement of Rep. Phil Roe at Hearing: 'Strengthening the Multiemployer Pension System: What Reforms Should Policymakers Consider?'
"The first graphic shows the deficit the [PBGC] expects its multiemployer insurance program will accumulate in less than 10 years -- a deficit that is projected to climb from $5.2 billion to more than $26 billion.... While PBGC is not funded by the U.S. Treasury, insolvency of this program would raise tremendous public pressure for a taxpayer bailout of the agency. We cannot allow this to happen. The second graphic illustrates the stakes in this debate. Nearly five million individuals participate in a multiemployer pension plan that, because of its funding condition, is in either yellow, orange, or red zone status." (Committee on Education & the Workforce, U.S. House of Representatives)


Louisiana Public Pensions Sue Over Their 'Best Investment'
"The three pensions invested a combined $100 million in [Fletcher Asset Management], which promised a guaranteed 12 percent return. Sound fishy? If the fund returned less than 12%, an unnamed financial backer would make up the difference. How could three public funds have fallen for a preposterous investment scheme involving a 12% guaranteed return backed by a mystery investor? The answer: The investment consultant used by the three pensions, Consulting Services Group[,] recommended it." (David Shaywitz in Forbes)

Benefits in General; Executive Compensation

BLS Report of Employer Costs for Employee Compensation, March 2013
"Wages and salaries averaged $21.50 per hour worked and accounted for 69.1 percent of these costs, while benefits averaged $9.59 and accounted for the remaining 30.9 percent.... Private industry employer costs for paid leave averaged $2.01 per hour worked (6.9 percent of total compensation), supplemental pay averaged 81 cents (2.8 percent), insurance benefits averaged $2.40 (8.2 percent), retirement and savings averaged $1.06 (3.6 percent), and legally required benefits averaged $2.39 (8.2 percent)." (U.S. Bureau of Labor Statistics)

Senator Portman, Representative Boustany Introduce Enrolled Agents Credential Act
"U.S. Senator Rob Portman (R-Ohio) and Congressman Charles Boustany (R-La.-03) today introduced the Enrolled Agents Credential Act, legislation to ensure that individuals, families, and businesses across the country are able to identify and access trained specialists to assist them in filing their taxes.... This bill would clarify that Enrolled Agents may use and display their credential when advertising their services and representing their clients." (U.S. Rep. Charles W. Boustany, R-La.)

Has Another Wave of 'Say-On-Pay' Litigation Come to an End?
"As the 2013 proxy season kicked off, there was a great deal of speculation among public companies, their counsel, and commentators over whether the say-on-pay injunction challenges would continue.... There remained the possibility that alleged say-on-pay disclosure deficiencies might be tacked onto subsequent complaints over these equity incentive provisions. However, not only did this not occur, but no injunctive lawsuits materialized -- challenging say-on-pay or equity incentive plans. Indeed, no companies appear to have been targeted for say-on-pay injunctive suits in advance of annual meetings during the 2013 proxy season." (Haynes and Boone, LLP)

New York State Regulations Restricting Provider Executive Compensation Finally Become Final
"The Final Regulations make only minor revisions to the proposed regulations ..., retain the same basic limits on executive compensation, and do not change the effective date (July 1, 2013) or the implementation date of the regulatory limits (for most providers, January 1, 2014).... [The] latest Assessment of Public Comments provides no other guidance on the following, still outstanding issues: [1] exactly what types of government funding will be considered 'State funds' or 'State-authorized payments'; [2] what will be the format and content for the EO#38 Disclosure Form; and [3] what will be the format and content for waiver applications." (Cadwalader via Mondaq; free registration required)

Sixth Circuit Tentatively Rejects Agreement with Acquirer to Cancel Top-Hat Plan Benefits
"After the sale closed, Metaldyne informed the participants that it had invalidated the Plan. The participants filed multiple lawsuits against Heartland and the two Metaldyne board members who were Heartland principals, including this one in Michigan state court.... [T]he court did not decide the merits of the participants' claim that Heartland and two of its principals had tortuously interfered with the plaintiff/participants' contractual relationship. It only decided that the claim was not preempted by ERISA and, therefore, the participants could continue with their state court claims at trial." [Gardner v. Heartland Industrial Partners, LP, No. 11-2327 (6th Cir. May 10, 2013)] (Winston & Strawn LLP)

Press Releases

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