Ninth Circuit Denies Presumption of Prudence and Allows Fiduciary Breach Claims to Proceed in Stock Drop Case
"This opinion is worthy reading as a cautionary tale illustrating how risky behavior with respect to employer stock that violates securities law also can result in ERISA liability for fiduciaries of plans that offer an employer stock fund investment option. It also reminds plan sponsors and their advisors that plan language can be significant in determining fiduciary liability." [Harris v. Amgen Inc., 2013 WL 2397404 (9th Cir. 2013)]
(Thomson Reuters / EBIA)
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CalPERS Loses Lawsuit, Must Pay $52 Million
"CalPERS was ordered to pay about $52 million to a former business partner in a dispute over fees generated by an investment in a string of Florida nursing homes.... The fees were based on independent appraisals of the value of the properties, and on two occasions CalPERS pressured the appraisal firms to revise estimates downward, according to the court's ruling."
(Sacramento Bee)
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Retirement Will Kill You
'Teddy Roosevelt once said "the best prize that life has to offer is the chance to work hard at work worth doing.' Recent research suggests he may have been more right than he knew ... Our common perception is that retirement is a time when we can relax and take better care of ourselves after stressful careers. But what if work itself is beneficial to our health, as several recent studies suggest?"
(Bloomberg)
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Public Sector Pension Reform: Addressing Pressing Fiscal Realities from a Long-Term Perspective (PDF)
"Financial stress in state and local public pensions is widespread, yet the depth and expected duration of the challenges vary greatly.... While financial stress has led many states and localities to change their employee pension plans, governments must consider other values and issues in the process if they hope to devise lasting and effective reforms.... Some state and local governments are considering or have enacted reforms that move from DB to DC designs.... Appropriate DC design incorporating best-practice plan elements can address retirement income objectives, financial constraints, and the allocation of risk."
(TIAA-CREF Institute)
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An Update on 401(k) Plan Investment Issues, and Revenue Sharing in Particular
"In the last year or so, there have been a lot of developments in the law relating to the investment of 401(k) plan assets. There have been several important cases, and the implementation of DOL regulations requiring the disclosure of detailed information on fees, both from third party providers to plan sponsors and from plan sponsors to participants. This seems like a good time to address the question of what issues should be of concern to a plan committee that is charged with reviewing the performance of investments and the compensation of third party providers."
(Shipman & Goodwin LLP)
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Navigating Code Section 72(t): Modifying a 'SOSEPP'
"The IRS recognizes that, if investment performance is poor, fixed payments under the amortization or annuitization method might exhaust the account. Accordingly, the IRS has ruled that running out of money due to taking the payments called for by the [series of substantially equal periodic payments (SOSEPP)] will not be considered a 'modification' of the series."
(Natalie Choate in Morningstar Advisor)
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Uniform Fiduciary Standard Debate Lingers
"The future of a uniform fiduciary standard regulating the broker-dealer and RIA space is unlikely, according to Barbara Roper, director of investor protection for the Consumer Federation of America.... Increased regulatory oversight on RIAs may be in the best interests of wirehouses, which have long been suffering from a talent drain ... The reason? Because it would help level the playing field and reduce RIA competition."
(On Wall Street)
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The Generation Gap in Roth IRA Contributions (PDF)
"[N]early a quarter (23.8 percent) of the Roth accounts receiving contributions were owned by individuals ages 25-34. In contrast, only 8.9 percent of the traditional accounts that received contributions were owned by those in that age group.... 44 percent of Roth owners ages 25-29 contributed to their Roth in 2011, compared with 21 percent of Roth owners ages 60-64."
(EBRI)
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Steps for Electronic Delivery of Retirement Plan Notices
"[In addition to] the four steps required by the DOL Technical Release 2011-03 ... [o]ther best practices for electronic delivery include: [1] Simplicity. Messages that are sent through your electronic delivery system should be written so that they are easy to understand. [2] Confidentiality. The electronic delivery system should be set up to protect the confidentiality of the person receiving the information. [3] Trial run. You may wish to have a trial run of your electronic delivery system 30-90 days in advance of the Notice deadline to make sure you have time to work out any kinks."
(Benefit Resources, Inc.)
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Hedge Fund Manager Pushes Back Against Public Teachers Union
"Daniel Loeb, founder of Third Point LLC, is escalating a battle between hedge-fund managers and American Federation of Teachers [AFT] ... over public-worker pensions. Loeb, who manages $13.6 billion ... donated an extra $1 million to a group of charter schools to show his opposition to the head of the second-biggest U.S. teachers union.... The AFT wants pension trustees to consider fund managers' ties to groups that oppose defined-benefit retirement systems as a reason when hiring or firing them."
(Bloomberg)
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Does Peek v. Comm'r Extend to 'Rollover as Business Start-ups' Arrangements?
"While the Peek case represents a significant development in the tax laws applicable to IRAs, the case should not adversely impact typical [Rollover as Business Start-ups (ROBS)] arrangements, which qualify for a special exemption to certain prohibited transaction rules under ERISA Section 408(e), and are generally subject to different regulatory requirements."
(Latham & Watkins)
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Reps Willing to Bear 'Substantial Costs' of Fiduciary Duty
"Kevin Carroll, managing director and associate general counsel of the Securities Industry and Financial Markets Association [SIFMA], said that the benefit of a higher standard is 'self-evident'.... He acknowledged that imposing a uniform fiduciary standard would make compliance more expensive for brokers. 'We're largely willing to accept a certain cost, probably a substantial cost, in order to establish this uniform standard,' Mr. Carroll said."
(Investment News)
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Bogle Says U.S. Facing Three Retirement 'Train Wrecks'
"The U.S. is facing three retirement 'train wrecks': the growth of social security entitlements, 'grotesquely underfunded' pension funds, and the structure of defined contribution plans, Jack Bogle, founder of the Vanguard Group, said ... Mr. Bogle also argued the need to 'clamp down on withdrawals' from defined contribution plans."
(Pensions & Investments)
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A Million Over-65s in Britain Are Still in Work As Pension Crisis Hits Home
"Official job figures on Wednesday showed that nearly one-in-ten 'pensioners' [was] still employed -- 615,000 men and 388,000 women. The total of 1,003,000 is an increase of nearly 100,000 in the past 12 months alone and almost double the levels of a decade ago. Experts said the marked rise was partly down to changing demographics and the fact that many over 65s -- the post war baby boomers -- wanted to stay on in the office. But others said tens of thousands of older workers simply had no choice but to carry on trying to top up their savings given the holes in their pension plans."
(The Telegraph)
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French Citizens Should Pay Into Pensions for Longer, Panel Says
"The French should pay contributions for longer to get a full pension and well-off pensioners should pay more taxes, a much-awaited advisory report to President Francois Hollande's government said ... The study does not propose a radical overhaul of the pay-as-you go scheme but calls for measures that ask more of workers and pensioners. It also recommends a fractional increase of employers' pension contributions."
(Reuters)
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[Opinion]
Going Off the Rails: The Multiemployer Plan As We Know It
"Multiemployer plans have simply run out of road down which to kick the can. How did they get to this place? Industry apologists will talk about trucking deregulation, demographics, disappointing investment returns, two 'once in a century' market crashes.... What really happened is they didn't put enough money into these plans in the first place and tried to compensate by betting on high investment returns."
(Michael Barry in PLANSPONSOR.com)
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[Opinion]
It's Not Your Father's 'Indexing'
"Today, certain investment companies are ... rebranding various investment strategies as a new kind of indexing. Called alternative indexing, fundamental indexing, and, in some cases, smart beta -- these terms are being widely used to describe any kind of index that follows an alternative to the traditional method of market-capitalization weighting of components. These strategies are nothing new."
(Vanguard)
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Benefits in General; Executive Compensation
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[Official Guidance]
Text of DOL Compliance Guidance for Employee Benefit Plans in Wake of Oklahoma Tornado
"The guidance provided in this statement applies to employee benefit plans, plan sponsors and service providers to such employers, located in one of the counties that have been identified as covered disaster areas because of the devastation caused by the Oklahoma tornado that occurred on May 20, 2013.... The relief provided under this announcement is in addition to the Form 5500 Annual Return/Report filing relief already provided by the IRS [and includes] Participant Contributions and Loan Repayments... ERISA Disclosures... ERISA Group Health Plan Compliance Guidance[.]"
(Employee Benefits Security Administration, U.S. Department of Labor)
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Retirees and City of Stockton Reach Tentative Agreement on Pension and Health Benefits
"Under the deal with some 1,100 retired employees -- Stockton's largest group of unsecured creditors -- the city will pay a lump sum of $5.1 million to reflect the loss of their health benefits in retirement and leave their current pension benefits intact.... Details of how the money will be divided weren't immediately available. Nothing is final until the city settles its bankruptcy in total, which also includes striking deals with a majority of its Wall Street creditors."
(Recordnet.com)
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Government Asks Supreme Court to Reject Quality Stores Ruling that Exempts Severance Pay from FICA Taxes
"The 26-page petition sets forth the IRS' long standing position that severance payments are subject to employment taxes, following the broad definition of 'wages' ... IRS emphasized the importance of getting a 'final answer' on the proper tax treatment of these payments that employers have struggled with for decades -- with 11 substantial similar cases pending, 2400 administrative refund claims pending, and over a $1 billion at stake, not to mention the impact on Social Security benefits, which are contingent on the outcome as well."
(Groom Law Group)
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Cypen & Cypen Newsletter for June 13, 2013
Article titles include: [1] BNY Mellon Pension Summary; [2] 2013 Income Study Is Bad News for Most Americans; [3] Implications of Long-term Pay Freezes for States, Localities; and [4] Status of the Social Security and Medicare Programs.
(Cypen & Cypen)
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Press Releases
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