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June 13, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Retirement Services Program Director
for Nationwide Insurance in GA, TN

Senior Defined Benefit Data Analyst
for Transamerica Retirement Solutions in MA

Senior Specialist - Defined Benefit Plan Operations
for Charles Schwab in OH

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Webcasts and Conferences

Northeast Area Benefits Conference - Boston
July 8, 2013 in MA
(American Society of Pension Professionals & Actuaries (ASPPA))

Northeast Area Benefits Conference - New York
July 9, 2013 in NY
(American Society of Pension Professionals & Actuaries (ASPPA))

2013 ACOPA Actuarial Symposium
August 9, 2013 in IL
(American College of Pension Actuaries (ACOPA))

View All Webcasts and Conferences


[Official Guidance]

PBGC Interest Assumptions for Benefits Payable in Terminated Single-Employer Plans and Allocation of Assets, July 2013
"The third quarter 2013 interest assumptions under the allocation regulation will be 2.60 percent for the first 20 years following the valuation date and 3.43 percent thereafter.... The July 2013 interest assumptions under the benefit payments regulation will be 1.25 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status." (Pension Benefit Guaranty Corporation)


DATAIR! More Choices -- Better Guidance -- Less Cost

Sponsored by DATAIR Employee Benefit Systems, Inc.

Documents, SPDs, Amendments, Administrative Forms
401(k)/Profit Sharing, 403(b), DB and Cash Balance Plans
(888) 328-2474    Sales@DATAIR.com    www.DATAIR.com

[Official Guidance]

FASB Indefinitely Defers Certain Disclosures for Nonpublic Employee Benefit Plans
"Rather than define a new term, 'nonpublic employee benefit plan', the Codification will be amended to describe the deferral as applying to 'any employee benefit plan other than those plans that are subject to the Securities and Exchange Commission's filing requirements'.... [T]he scope of investments [will be expanded] to also include the equity securities of nonpublic affiliated entities of the plan sponsor. The deferral will be effective immediately upon issuance of the final Update, for all financial statements that have not been issued." (Financial Accounting Standards Board)

Vanguard's John Bogle Questions Usefulness of Target-Date Funds
"Bogle's contrarian perspective casts doubt on a retirement product employed by a significant portion of the investing public. Target-date funds have grown in popularity, especially among younger investors, and these funds now hold 13% of total 401(k) assets ... Bogle's comments touched on a recurring theme that has emerged at this year's conference -- an investor's entire financial picture, not just investments, should be considered when structuring a portfolio and retirement plan." (Financial Planning)

Senate Bill Would Clarify Tax Rules Applicable to Church Plans
"Bipartisan legislation introduced in the Senate on May 14, 2013 would modify the tax rules applicable to church plans. S. 952 (The Church Plan Clarification Bill of 2013), introduced by Senators Ben Cardin (D-MD) and Rob Portman (R-OH), would clarify a number of rules impacting church plans, including those governing controlled groups, grandfathered defined benefit plans, automatic enrollment, transfers between 403(b) plans and qualified church plans, and '81-100 trusts.'" (Wolters Kluwer Law & Business)

What Private Equity Managers Need to Know to Limit Their ERISA Obligations for Portfolio Company Pension Plans (PDF)
"Although the two [Michigan] cases deal with common [private equity (PE)] structures and ultimately reach opposite conclusions, both hold or suggest that joint and several liability for plan underfunding turns on the extent of the fund's 'investment plus' power over the subsidiary's financial and management activities. At a minimum, the cases suggest that PE funds should consider reducing their ERISA pension risks by: structuring their investments in a manner that moderates the indicia of control over the subsidiary's operations and financial affairs; and splitting the PE fund's ownership of the subsidiary among different funds, so that no one fund owns at least 80 percent." (Paul Hastings LLP via Bloomberg BNA Pension & Benefits Daily)

Upcoming June 27 IRS Phone Forum to Address FICA Replacement Plans
"During this 60 minute presentation we will cover: Social Security Coverage laws; Qualified Employer's Retirement systems; Defined Benefit and Defined Contribution Plan; Revenue Procedure 91-40; FICA replacement plans." (Internal Revenue Service)

California on the Brink: Pension Crisis About to Get Worse
"The pension changes from Moody's, and separately [from the GASB], scheduled for this month, could result in Los Angeles, San Francisco, San Jose, Azusa and Inglewood joining fiscally troubled Stockton and San Bernardino, among others, as severe credit risks.... A growing number of Senators also now warn these pension costs could result in a taxpayer bailout of the states." (FoxBusiness.com)

Text of H.R. 2171: Lifetime Income Disclosure Act (Introduced Version)
This bill would amend ERISA to require that annual participant benefit statement include a 'lifetime income disclosure' which joint and survivor annuity amount that could be provided by a participant's current accrued benefit. The DOL would be required to establish assumptions to be used for this calculation, along with a model notice; no plan sponsor, fiduciary or 'any other person' would have any liability under ERISA for provision of this information in accordance with the DOL's prescribed assumptions. [Also introduced as S. 1145 on June 12, 2013.] (U.S. House of Representatives)

Participants Search for Direction on the Retirement Savings Journey
"About half of respondents say they would like to retire before the age of 65, but only 20% believe they will realistically be able to do so.... [P]roviding retirement income projections during the working years -- in combination with customized communications that take into account participants' ages, incomes and engagement levels -- may help participants develop more realistic expectations and spur them to save more." (J.P. Morgan)

Small Business Owners' Views on Retirement Security (PDF)
"Fifty percent of businesses with 20 or more employees offer a plan, while 77% of businesses with 2-4 employees do not.... In addition to the 33% that offer a plan, 27% are interested. Thirty-nine percent are not interested in offering a plan or don't know.... Small business owners perceive cost as the biggest barrier to offering a plan by more than 5 to 1 over other options." (American Sustainable Business Council)

Redesigning Your Self-Directed Retirement Plan's Core Menu
Questions include: 'Why offer a tier of asset class options at all? Why not offer a plan design that consists solely of target date funds and a brokerage window? Why offer as many as six to 10 options on a core menu? Aren't two or three enough? I have more than 20 options available today. Collapsing that menu down to six options seems drastic. What should I do?' (Russell Investments)

Core Menu in Self-Directed Retirement Plans: What Is It Good For? (PDF)
"Many plan sponsors are looking at the role the asset-class fund menu plays. Typically representing anywhere from six to 20 individual options, individual asset-class funds -- traditionally referred to as the 'core' menu -- are where the bulk of the assets have historically resided ... This paper discusses the role asset-class options can still play in the DC plans of today and tomorrow. Then it lays out a three-step plan we advise sponsors to consider as they migrate their asset-class options." (Russell Investments)

CalPERS to Consider Cuts to Bond, Inflation-Linked Expected Rates of Return
"Staff members are calling for a 174-basis-point drop in fixed-income return expectations and a 305-basis-point drop for inflation-linked investments.... Another option, sources said, would be for the board to project returns over a 30- or 40-year period instead of the current 10 years, which would allow more optimistic returns assumptions." (Pensions & Investments)

House Panel Hears Multiemployer Pension Reform Ideas
"One of the most controversial ideas ... calls for allowing distressed plans to reduce benefits for retirees and possibly current workers.... Benefit cuts are opposed by the $8.4 billion International Association of Machinists and Aerospace Workers National Pension Fund and the Pension Rights Center[.]" (Pensions & Investments)

Are Public Pensions Keeping Up with the Times?
"Most states assume that they will earn an average rate of return of 8 percent a year on their pension funds ... This unrealistic assumption still produces a staggering unfunded liability: $0.9 trillion in 2011. Using a more reasonable assumption of a 5 percent return increases the unfunded liability to $2.7 trillion ... which implies that the average state has only funded half of its pension promises." (Brookings)

Cumulative List of Non-U.S. Pension Funds Exempted by FATCA Intergovernmental Agreements
"The US is in the process of entering into Intergovernmental Agreements with a number of countries that each list ... specific pension plans of that other country that will be treated as exempt from under the Foreign Account Tax Compliance Act (FATCA), i.e. will be treated as 'exempt beneficial owners' rather than Foreign Financial Institutions subject to FATCA's reporting and withholding regime.... [T]his page [links] to a cumulative list of those specific pension-related exemptions for each country that has entered into an IGA with the United States, [which will be updated] for new IGAs from time to time." (Groom Law Group)

The Economics of Providing 401(k) Plans: Services, Fees, and Expenses in 2012 (PDF)
"In 2012, the average expense ratio on equity funds offered for sale in the United States was 1.40 percent. 401(k) plan participants who invested in equity mutual funds paid less than half that amount, 0.63 percent.... In 1998, 401(k) plan participants incurred expenses of 0.74 percent of the 401(k) assets they held in equity funds. By 2012, that had fallen to 0.63 percent, a 15 percent decline. The expenses 401(k) plan participants incurred for investing in hybrid and bond funds have fallen even more, by 19 percent and 23 percent, respectively, from 1998 to 2012." (Investment Company Institute)

Text of Enrolled Actuaries Pension Examination EA-2, Segment L (PDF)
Text of questions and answers from the May 2013 exam. (American Society of Pension Professionals & Actuaries; Joint Board for the Enrollment of Actuaries; Society of Actuaries)

Social Security and the 2001 Reform of the Railroad Retirement Program (PDF)
"The experience of the reformed Railroad Retirement program has lessons for initiatives that would invest Social Security assets in equities ... The adjustment mechanism should address surpluses as well as shortfalls, and cannot be expected to provide a complete solution to the problem of risk.... While introduced in response to the use of equity investments, the adjustment mechanism would respond to any shock, not just financial shocks. Had such a mechanism always been in place, it would have raised taxes or cut benefits, in response to the demographic shocks that created the program's current long-term funding shortfall." (Center for Retirement Research at Boston College)

Today's Engaged Investor: An Approach to Investing, Borrowed from Life (PDF)
"The majority of investors surveyed who are highly driven and motivated in their lives are also highly engaged in investing. A smaller but significant portion of investors surveyed are much less engaged in investing despite being highly engaged in many other aspects of life. Less engaged investors may want to reexamine their current approach to investing with respect to their engagement in other important aspects of life to confirm that level of involvement is right for them." (Charles Schwab & Co., Inc.)

Fees for Mutual Funds in 401(k) Plans Continue to Fall
"The average expense ratio for each of three mutual fund categories -- equity, bond and hybrid -- fell to their respective lowest levels in 2012 as measured against the last 15 years of data compiled by ICI ... The average expense ratio for equity funds dropped to 63 basis points from 65 in 2011, and the average expense ratio for bond funds fell to 50 basis points from 52 in 2011. The average expense ratio for [target-date funds and balanced funds] declined to 59 basis points from 61 basis points." (Pensions & Investments)


A Positive Retirement Solution for Public and Private Workers
"Proponents of public pension reform insist that improving the state balance sheet is a priority for all state residents, but this position overlooks the more pressing issue of private sector retirement security.... States can adopt a California-type private sector retirement plan to help increase retirement security for private sector workers, and use these accounts to improve their public sector retirement account balances. Following a plan like this will result in a net positive for states. Illinois, which has the worst funded public sector pension plan, serves as a great example of this retirement solution." (Georgetown Public Policy Review)


Father of the 401(k) Would Tear It Up and Start Over
"Has the system failed us? ... Ted Benna [has] thought a lot about it. It's almost like his creation got overtaken by events. He never meant for the explosion in confusing investment choices. The original plans offered two. It was never Benna's idea for do-it-yourself to replace pensions. It just kind of happened.... Benna says the 401(k) was never meant to take care of everyone. It was simply a financial product that took off." (American Public Media Marketplace)


For Your SEC Comment Letters: Favorite Fiduciary Law Quotes
"The deadline of July 5, 2013 is fast approaching for submitting comments to the [SEC] ... To aid pro-fiduciary advocates in submitting their comments [the author provides] these quotes from various cases and administrative rulings and pronouncements.... As can be seen, there are many, many observations in support of applying the fiduciary standard of conduct to the delivery of personalized investment advice, and which further explain the fiduciary standard itself." (Ron Rhoades)


ACLI Endorses Lifetime Income Disclosure Act, Says It Would Help Boost Retirement Security
"ACLI is proud to endorse the Lifetime Income Disclosure Act. It represents a major step forward in helping workers address their retirement security needs. More and more Americans can look forward to spending 20, 30 or more years in retirement. Careful planning is necessary to assure that retirees enjoy the peace-of-mind and dignity they deserve when their working days are over." (American Council of Life Insurers)


Statement of the Pension Rights Center at Hearing: 'Strengthening the Multiemployer Pension System' (PDF)
"[The Pension Rights Center is] deeply troubled by ... suggestions for deeply-troubled plans, which endorse the unprecedented and dangerous step of allowing plans to slash the benefits of men and women already in retirement and who have no opportunity to replace lost benefits. This proposal would surprise the 1974 Congress that wrote ERISA and thought that in doing so had put a permanent end to broken promises and disappointed expectations for retirees." (Pension Rights Center)


How the SEC and FINRA Can Strengthen the Fiduciary Standard Now
"[T]he Commission could utilize its longstanding amicus program to bring important issues involving brokers and advisers before the courts now, similar to the [DOL]'s active amicus program.... [S]ince 2001 the SEC has filed only one of 45 amicus briefs on a fiduciary issue. In stark contrast, over the same time period the [DOL] has filed 67 of its 316 'friend of the court' briefs on fiduciary conduct related to investment issues ..., evidence of the DOL's unflagging support for a strong common-law fiduciary standard under ERISA." (fi360)

Benefits in General; Executive Compensation

Text of Enrolled Actuaries Basic Examination, EA-1 (PDF)
Text of questions and answers from the May 2013 exam. (American Society of Pension Professionals & Actuaries; Joint Board for the Enrollment of Actuaries; Society of Actuaries)

[Official Guidance]

IRS To Be Closed June 14 Due to Budget and Sequester; Filing and Payment Deadlines Unchanged
"[A]ll IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency's nearly 400 taxpayer assistance centers nationwide, will be closed.... No tax returns will be processed and no compliance-related activities will take place. In addition, the online preparer tax identification number PTIN system for tax professionals will also be shut down." (Internal Revenue Service)

Hot Topics in Employee Benefits (PDF)
62 presentation slides. Topics include: The PCORI fee plan and headcount issues; Play, pay, or both: approaches straddling the divide; DOL's proposed regulations for life annuity illustrations on defined contribution plan participant benefit statements; Withholding and Form W-4 issues triggered by the 2013 Medicare and income tax increases; and The differences between S corporation and C corporation ESOPs. (Morgan Lewis)

A Practical Response to the McCutchen Case
"While not written, what may have been at least as important ... were these less conclusive elements: [1] Where plan documents are not unambiguous ..., the plan document may or may not be able to control. [2] In Firestone, Glenn, and Frommert, deference was given to the plan administrator's interpretation of the plan document, but what happens when the plan administrator either has not interpreted the provisions of the document or has not consistently interpreted them?" (Benefits and Compensation with John Lowell)

Press Releases

DOL Files Suit To Remove Fiduciary From Investment Group Inc. 401(K) Plan in Chicago
U.S. Department of Labor, Office of Public Affairs, Chicago

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