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BenefitsLink Retirement Plans Newsletter

July 2, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

401(k) Administrator
for Blue Ridge ESOP Associates in ANY STATE, VA

Section Manager: Institutional Retirement Marketing
for T. Rowe Price in MD

Sr. Technical Consultant
for Lincoln Financial Group in ANY STATE

Retirement Planning Consultant
for Transamerica Retirement Solutions in TX

Manager, Family Medical Leave Process Management
for Prudential in ME

ERISA Consulting Associate
for July Business Services in ANY STATE

Senior Benefits Analyst
for Stratford 360 in MN

Enrolled Actuary
for Actuarial Consultants, Inc. in CA

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Webcasts and Conferences

What to Expect from an EBSA Investigation
July 9, 2013 in IL
(ASPPA Benefits Council of Chicago)

Sustaining a Company of Owners Over the Long Term Seminar
September 25, 2013 in CA
(National Center for Employee Ownership)

Free Health Care Reform Seminar
July 17, 2013 in OH
(Cedar Brook Financial Partners)

Free Webinar - "Unraveling DOMA: How the Supreme Courtís Windsor Decision Affects Your Employee Benefit Plans"
August 15, 2013 WEBCAST
(University Conference Services)

2013 Las Vegas Mid-Sized Retirement & Healthcare Plan Management Conference
September 15, 2013 in NV
(University Conference Services)

The DOL's Pending "New" Fiduciary Definition; Retirement Readiness, And Participant & Business Outcomes
July 18, 2013 in CT
(National Institute of Pension Administrators-CT Chapter)

NCSL 2013 Health Summit
August 11, 2013 in GA
(National Conference of State Legislatures (NCSL))

View All Webcasts and Conferences


[Official Guidance]

Text of Proposed Amendment to GASB Statement No. 68: Pension Transition for Contributions Made Subsequent to the Measurement Date
"The objective of this proposed Statement is to address an issue that has been identified regarding application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability." (Governmental Accounting Standards Board)


ftwilliam.com, TAG Data, CCH and Aspen Publisher's Customer Conference

Sponsored by ftwilliam.com

Join us August 4-6 and learn from industry specialists! We'll cover hot topics including Coverage & Testing, TPA Workflow, Advanced Plan Design and much more! Make sure to drop in on our hands-on product training sessions with fellow TPAs.

[Official Guidance]

Text of Disaster Relief Relating to PBGC Deadlines in Response to Flooding in Alaska
"This Disaster Relief Announcement provides relief relating to PBGC deadlines ... [to] any person responsible for meeting a PBGC deadline (e.g., a plan administrator or contributing sponsor) that is located in the disaster area for which the [IRS] has provided relief ... in connection with filing extensions for Form 5500 series returns, or cannot reasonably obtain information or other assistance needed to meet the deadline from a service provider, bank, or other person whose operations are directly affected by the Flooding that began on May 17, 2013, in Alaska." (Pension Benefit Guaranty Corporation)

[Guidance Overview]

Correcting 401(k) Plan Loans Under EPCRS
"In addition to correction of defaulted loans, plan loan failures that can be corrected under Schedule 5 include loans that exceed the maximum loan amount permitted under Code section 72(p), loans that exceed the maximum payment period specified under Code section 72(p), and loans that do not provide for substantially level amortization with payments not less frequently than quarterly. Schedule 5 may not be used to request relief from reporting a deemed distribution with respect to failures involving plan loans to key employees or self-employed individuals although such relief may be requested by filing a detailed written attachment describing the relief requested and the reason why such relief should be granted." (Benefits Bryan Cave)

[Guidance Overview]

Rehired Employees: Traps for the Unwary Retirement Plan Administrator
"As a newly hired attorney for the IRS National Office, [the author] can remember a seasoned IRS instructor spending a good part of a day teaching us about the eligibility and vesting issues regarding rehired employees. At the close of the instruction, the instructor looked at us and stated that if he ever owned his own business, he would refuse to rehire employees for the simple reason that 'he didn't understand the rules regarding rehired employees.' While such a sentiment may be an extreme response to the rehired employee rules, it is understandable considering the complexity of the rules." (SunGard Relius)

Verizon De-Risking Challenge Dismissed
"A few issues make this less than a complete victory for Verizon. On the law, the court did not acknowledge that existing ERISA regulations specifically permit this form of annuitization. (They seem clear to many practitioners.) Procedurally, the court gave plaintiffs 30 days to replead and allege new facts. While it is difficult to envision additional allegations that would ultimately result in this court ruling for plaintiffs, the wrangling at the district court level will continue if plaintiffs replead." (Osler, Hoskin & Harcourt LLP)


Understanding Roth Accounts in 401(k), 403(b), and Governmental 457(b) Plans

Sponsored by Lorman and BenefitsLink

This live webinar will provide you with an understanding of how Roth accounts operate in 401(k), 403(b), and governmental 457(b) plans, including rules regarding in-plan conversions to Roth accounts. Registration discount for BenefitsLink readers.

Recent Studies on Rollovers Identify Emerging Issues
"Two recent reports ... focus on the issue of advisor conflicts of interest, particularly in the distribution/rollover context, and the consequences for retirement savings.... Both reports make an argument for robust regulation of the distribution/rollover process and of advisor conflicts of interest both in the context of a re-proposed re-definition of ERISA fiduciary and more generally.... Many of the changes suggested ... would mandate changes in sponsor practice." (October Three)

Funded Status of U.S. Corporate Pensions Rises to 89.5 Percent in June
"The funded status of the typical U.S. corporate pension plan increased 3.1 percentage points in June 2013 to 89.5 percent, the highest level since June 2011, when it was 91.4 percent ... Year to date, the funded ratio is up 13.2 percentage points ... The improvement was driven for the second month in a row by a jump in the Aa corporate discount rate, which drove liabilities sharply lower[.]" (BNY Mellon)

Funded Status of Plans Improves Sharply in Second Quarter of 2013
"The funding ratio of the typical U.S. pension plan increased sharply during the second quarter of 2013, rising by six percentage points to 88% ... Combined with gains in the first quarter, the estimated year-to-date total improvement in funding ratio is close to 11 percentage points. The improvement in funding ratio for the second quarter was driven primarily by a 6.1% drop in liability values. Asset values are estimated to have increased by a modest 0.4%[.]" (UBS, via BusinessWire)

RICP vs RMA vs CRC -- Choosing The Best Retirement Income Designation for Financial Advisors
"With more than 50 certification programs based on the withdrawal phase of the planning lifecycle, advisors are faced with a paralyzing choice about which designation provides the most valuable curriculum.... Let's look at which programs are best positioned to allow advisors to guide their clients through retirement." (Wade D. Pfau, in Nerd's Eye View)

What Drives a 401(k) to Work So Well
"[T]he 401k plan can best be described as a souped-up IRA. It's not quite the Shelby of retirement savings vehicles (some say that would be the SEP-IRA), but it does qualify as a muscle car.... If 401k investors want to achieve retirement success, they'll want to fully understand the four primary cogs that drive this magical mechanism. Each of them can offer a key component to their own quest for retirement comfort." (Fiduciary News)

More Employers Using Lump Sum Payouts Options to Decrease DB Plan Liabilities (PDF)
"[P]aying a lump sum is less expensive than the alternative of buying an annuity to take the pension obligation off the books [because] the cost discount rate that must be used for lump sums is generally higher than the rate used by the insurers to price an annuity ... [and] insurers ... will build in some profit element ... to reflect their assumption of liabilities.... These 'savings' may not outweigh the real cost of the plan's payment of lump sums -- in effect accelerating the anticipated time of payment." (Steptoe & Johnson LLP, via Employee Relations Law Journal)

Be a Functional Fiduciary Without Doing Anything: Seventh Circuit Rejects DOL's Theory (PDF)
"In ... Liemkuehler v. American United Life Insurance Company, the [DOL] filed an amicus brief [arguing that] an insurer offering investment options under a group annuity contract [should be held] responsible as a fiduciary on the ground that the contract gave the insurer management control over plan assets.... [T]he insurer merely invested plan monies as directed by participants.... In other words, in the right circumstances, a service provider could exercise the requisite authority over plan assets and become a fiduciary by doing nothing. In the view of the Seventh Circuit Court of Appeals, this '"non-exercise" theory of exercise' was not only unworkable, but unsupported by precedent." (The Wagner Law Group, via 401 (k) Advisor)

De-Risking Pension Liability Carries Fiduciary Risks
"The district court's decision affirmed that the principal action involved (e.g., amending a plan to provide for an annuity purchase) is outside the scope of fiduciary conduct. It also recognized that the implementation of an authorizing amendment (e.g., selecting an annuity provider) is considered a fiduciary function, thus putting plan sponsors on notice that any effort to de-risk could be reviewed for prudence in its implementation. In this respect, the retirees were given leave by the court to re-plead certain aspects of their case." (Troutman Sanders)

Pension Finance Update, June 30, 2013 (PDF)
"2013 has been the best first half for pension sponsors this century, hands down. Higher stock prices and higher interest rates have improved funded status by more than 10% this year for a typical sponsor.... [T]he impact of lower stock prices in June was more than offset by the impact of higher interest rates on pension liabilities." (October Three)

Boomers May Be Two Separate Generations When It Comes to Retirement Planning
"[N]ew research [chronicles] how different workplace experiences and employee benefit histories are causing a great divide among early and late Baby Boomers regarding their financial security and outlook on retirement.... [T]hose on the tail end of the Boomer cohort will be confronted with added challenges and are less prepared financially to overcome them." (Insured Retirement Institute)

Bank Does the Unthinkable: HSBC Moves Its Financial Advisors from Commissions to Salaries
"HSBC made the switch to align the compensation structure for advisors in the U.S. with those in the rest of the bank ... But observers suspect that there are other reasons for the shift. Some say the desire to more closely align client and advisor interests may have prompted the change. Without commissions, the fear or perception that advisors are 'spinning accounts' or suggesting products and services merely to increase their production is removed[.]" (On Wall Street)

Optimal Life Cycle Portfolio Choice with Variable Annuities Offering Liquidity and Investment Downside Protection
"[This study evaluates] lifecycle consumption and portfolio allocation patterns resulting from access to Guaranteed Minimum Withdrawal Benefit variable annuities, ... [which] offer access to equity investments with downside protection, hedging of longevity risk, and partially-refundable premiums. Welfare rises since policyholders exercise the product's flexibility by taking withdrawals and dynamically adjusting their portfolios and consumption streams. Consistent with observed behavior, differences across individuals' cash out and annuitization patterns result from variations in realized equity market returns and labor income trajectories." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

Think Twice About Social Security for Early Retirement
"[T]wo in three Millennials expect to retire by the age of 65, but almost 70% of them have yet to take any steps in planning or saving for it ... Whereas Millennials more commonly cite employee-sponsored retirement savings plans (64%) and bank savings accounts, money markets and CD plans (63%) as a top source of retirement income, 65% and 61% of Boomers cited those sources, respectively, far below the expectations for Social Security." (The Street)

The Employee Ownership Update, July 1, 2013
By NCEO Director Loren Rogers. Articles include: [1] U.K. to Celebrate Employee Ownership Day; [2] The Supreme Court, Gay Marriage, and ERISA; [3] Support for Employee Ownership in Colorado; and [4] Oxford Offers Online Course on Employee Ownership. (National Center for Employee Ownership)

Text of Amicus Brief to Ninth Circuit Court of Appeals in Stock Drop Case (Harris v. Amgen) (PDF)
"ERISA stock drop lawsuits are undermining employers' commitment to the voluntary employment-based retirement system -- and particularly to offering company stock as an investment option. If fiduciaries will be sued no matter what action they take, so long as the stock price drops, and if companies continue to face million-dollar settlements (or legal bills) from these cases, then employers may stop offering company stock as an investment option and, even more concerning, may scale back their plan benefits. The panel's decision here exacerbates these trends." (American Benefits Council and U.S. Chamber of Commerce)

Measuring Employee Savings and Investing Behavior in Defined Contribution Plans: 2013 Benchmarks (PDF)
"Participation is at an all-time high, but there is still work to be done. To improve participation, many plan sponsors have harnessed the power of inertia by utilizing automatic enrollment. The impact has been profound as 81.4% of individuals subject to automatic enrollment participate in the plan, but only 63.5% of employees participate if they must enroll on their own.... Plan sponsors who wish to have higher rates of return should consider offering ... [1] Target-date funds ... [2] Online guidance or investment advice/managed account features ... [3] Seminars, personal financial planning and lifetime income solutions." (Aon Hewitt)


Text of Comments by AALU to SEC on Duties of Brokers, Dealers and Investment Advisers (PDF)
"[We] believe the Commission's pursuit of a fiduciary duty for broker-dealers is a solution -- a label -- in search of a problem, when the most effective way to address the Commission's concerns would be to identify the harm the Commission believes results from the different standards applicable to broker-dealers and investment advisers and offer targeted reforms to directly address such harm. We suggest that precious time and scarce SEC resources could have been better spent." (Association for Advanced Life Underwriting (AALU))


Text of Comments by The Family Firm to SEC on Duties of Brokers, Dealers and Investment Advisers (PDF)
"The relationship between the broker's 'financial interest' in the transaction and the customer's 'cost' is indirect and confusing, even to the most sophisticated investment professionals... There are several damaging consequences of this situation." (The Family Firm,Inc.)


How to Tell if Your Employer Provides a Lousy 401(k) Plan
"Here's how to tell if your employer is providing a subpar 401(k) plan: No immediate eligibility.... No employer contributions.... A very small match.... A match that is difficult to take advantage of.... Long vesting schedule.... Poor investment choices.... High fees." (U.S.News & World Report)


Fixing the Public Sector Pension Problem: The True Path to Long-Term Reform
"While governments confront very steep legal obstacles to extricating themselves from obligations already incurred, they can free themselves from the political pressures, crystal-ball gazing, and monumental financial risks that defined-benefit plans make almost unavoidable. They should take a page from the private sector and shift to defined-contribution plans." (Manhattan Institute for Policy Research)


Text of Comments by Investment Horizons, Inc. to DOL on Proposed Regs for Participant Benefit Statements (PDF)
27 pages. Excerpt: "While simply adding annuity projections to existing benefit statements would certainly be a step in the right direction, such information by itself will be of little help to most participants since they will not understand how to interpret the projections or how to go about remedying any problems the projections point out. If the DOL really expects 401(k) plans to be meaningful retirement programs for American workers, the regulations must also include a requirement to show simple action steps that the participants can take." (Investment Horizons, Inc.)

Benefits in General; Executive Compensation

[Guidance Overview]

What Does the DOMA Decision Mean for Employer-Sponsored Benefit Plans? (PDF)
"Employers will certainly need to amend their plans' definition of 'spouse' where the definition is based on federal law under DOMA. We do not yet know whether a single definition of spouse will be permitted or required, or whether the definition will depend on the employee's state of residence, or on the state in which the marriage was performed, or some other standard. In addition, plan procedures ... will need to be changed to incorporate the relevant provisions for same-sex spouses in the case of a state-recognized marriage." (PricewaterhouseCoopers)

[Guidance Overview]

DOMA's Demise Requires Immediate Action by Benefit Plan Sponsors (PDF)
"Applying two separate benefit administration schemes -- one for states that recognize same-sex marriage and one for states that do not -- may seem easy at first blush. However, problems arise when an employee is married in a state that recognizes same-sex marriage but resides in a state that does not.... Using the state of residence is particularly problematic as today's workforce is highly mobile. Under this rule, an employee who was legally married and resides in the District of Columbia would lose all of the benefits listed ...if the employee moved only a few miles away to Virginia." (Paul Hastings LLP)

Employers Should Respond to DOMA With Steps That Offset Risks
"The DOMA ruling raises the question of 'to what extent does a plan administrator have the obligation to make these determinations versus putting the burden on the participant or the claimant?' said Louis T. Mazawey, a principal at Groom Law Group in Washington. The court's decision on DOMA also might cause some employers to reconsider their offer of same-sex benefits to domestic partners, at least in those states that recognize same-sex marriages." (Bloomberg BNA)

DOL Investigations: What Plan Sponsors and Service-Providers Can Expect (PDF)
"Sometimes the DOL's initial letter will request that documents be provided on-site for inspection by the DOL investigator. It is often more efficient and less disruptive to the ongoing business operations of the entity being investigated to provide documents directly to the investigator, rather than have the investigator on-site for the initial document review.... Some service providers are contractually limited from disclosing client information. These limitations may include requiring prior notice to the client and/or responding only to a subpoena (rather than an information request). It is important to keep these limitations in mind when considering the steps necessary to address a request for information." (Groom Law Group, in Bloomberg BNA Pension & Benefits Daily)

Surprising Victory in Delaware for Plaintiffs Alleging Excessive/Improper Compensation
"The Court's decision came down to a relatively narrow issue of whether the Company's amendment of its stock incentive plan to allow a slightly different type of award required stockholder approval. However, the transcript of the bench ruling includes several hints of the possibility of a dramatic shift in Delaware courts' attitudes toward executive compensation lawsuits." (Winston & Strawn LLP)


Text of Comments by U.S. Chamber of Commerce to IRS on the $500,000 Deduction Limitation for Remuneration Provided by Certain Health Insurance Providers (PDF)
"The Chamber has serious concerns that the caps on compensation deductibility, as required under the PPACA will have an adverse impact upon the operation and competitive position of health insurance providers.... [T]he section 9014 cap places health insurance providers on a different level than every other public company in the United States who can deduct up to $1 million in executive compensation. While compensation deductibility caps for public companies only apply to the Chief Executive Officer and the top four executives, section 9014 is much broader ... [C]ompensation deduction caps have not achieved their intended purpose and have led to other forms of compensation at higher levels." (U.S. Chamber of Commerce's Health Care Solutions Council)

Press Releases

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David Rhett Baker, J.D., Editor and Publisher
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