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July 16, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

DB/DC 401(k) Administrator
for Nicholas Pension Consultants in CA

Retirement Plan Administrator
for Altman & Cronin Benefit Consultants, LLC in CA

Pension Administrator
for Cornerstone Group in RI

Retirement Plan Sales Officer
for Heartland Financial USA, Inc. in AZ, CO, IA, IL, KS, MN, MT, NM, WI

Pension Benefits Specialist
for City of Lakeland in FL

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Webcasts and Conferences

Are You Keeping Your Client's Health Information Secure? -- Recorded Webinar
July 31, 2013 WEBCAST
(Nixon Peabody LLP)

FREE Webinar: "If I Were in Your Shoes: Best Practices for Running a Successful and Compliant Retirement Plan"
August 27, 2013 WEBCAST
(University Conference Services)

Health Care Reform for Employers: Now What? - Liverpool NY
September 18, 2013 in NY
(Lorman Education Services)

Health Care Reform for Employers: Now What? - Gaithersburg MD
September 19, 2013 in MD
(Lorman Education Services)

Health Care Reform for Employers: Now What? - Lexington KY
September 20, 2013 in KY
(Lorman Education Services)

IRS and DOL Corrective Procedures
August 15, 2013 in FL
(ASPPA Benefits Council of Central Florida)

View All Webcasts and Conferences


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[Official Guidance]

Second Circuit Applies Moench, Affirms Dismissal of Lehman Bros. ESOP Stock Drop Case (PDF)
"[T]he fact that Lehman ultimately declared bankruptcy must not be allowed to influence our assessment of whether the Benefit Committee Defendants acted prudently during the class period. Armed with the information available in the months preceding bankruptcy, the Benefit Committee Defendants risked liability for action (violating the terms of the ESOP by limiting Plaintiffs' investment) or inaction (remaining invested and exposing plan-participants 14 to what may have been unintended risk).... Plaintiffs have not rebutted the Moench presumption because they fail to allege facts sufficient to show that the Benefit Committee Defendants knew or should have known that Lehman was in a 'dire situation' based on information that was publicly available during the class period." [Rinehart et al. v. Akers et al., No. 11-4232-cv (2nd Cir. July 15, 2013)] (U.S. Court of Appeals for the Second Circuit)


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[Guidance Overview]

Sixth Circuit Extends Bankruptcy Protection to IRA But Leaves Room for Doubt
"IRAs are protected in bankruptcy only if the IRAs are tax exempt. IRAs are tax exempt only if they do not engage in prohibited transactions. One prohibited transaction is the direct or indirect loan between the IRA owner and a party in interest, such as the bank or other financial institution that holds the IRA assets (IRA Custodian).... Recently the DOL declared that boilerplate provisions in IRA account documents that allow the IRA Custodian to offset amounts in the IRA against debts owed to the IRA Custodian by the IRA owner constitute a prohibited loan.... The Sixth Circuit Court of Appeals ruled that the IRA would be protected. The court concluded that because the debtor had no other account with the IRA Custodian, there was no way in which the improper offset could have occurred." [Daley v. Mostoller, No. 12-6130 (6th Cir. June 17, 2013)] (Leonard, Street and Deinard)

[Guidance Overview]

IRS Issues Guidance on Vesting Standards to Be Followed by Governmental, Church Plans
"[An internal IRS] memorandum states that determination letters will not be issued unless governmental plans include vesting schedules at least as favorable as safe harbors set forth in the memorandum, which appear to be intended to preclude discrimination in favor of employees who are officers, shareholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees. And while the memorandum was primarily directed toward governmental plans, it suggested that the same standards would apply to church plans." (Calhoun Law Group)

[Guidance Overview]

Sharing the Wealth: DOL Clarifies Treatment of Revenue Sharing Under ERISA
"[I]n those cases in which all or a portion of the revenue sharing is agreed to be for the account of the investing plan, the provider may wish to review its arrangements (i) to confirm that, in accordance with a controlling agreement or at the direction of a plan fiduciary, (A) credits are applied to pay plan expenses or (B) amounts equal to the credits are deposited into a plan account, and (ii) to confirm that no segregated or otherwise separate fund is established in connection with any allocation of all or a portion of revenue sharing back to the investing plan." (Dechert LLP)

Deadline Approaching for 2013 Participant Fee Disclosure Notice
"The 2013 notice is generally due within 12 months of the date the 2012 notice was provided. For example, if you provided the 2012 notice on August 30, 2012, you should provide the 2013 notice by August 30, 2013.... Third Party Administrators (TPAs) and recordkeepers often assist in preparing this notice, but plan sponsors are ultimately responsible for providing an accurate notice to participants." (Hawley Troxell)

Pension 'Smoothing' Option Flops in New York
"A recent survey by the [New York state] Association of School Business Officials found that less than 10 percent of respondents planned to use the option, which allows for slightly lower payments in the short term but could cost more in the long run.... 'The reasons for not participating range from "postponing the inevitable" and "shifts burden onto the backs of future taxpayers" to "not a very fiscally sound way to operate" and "district does not want to push current costs onto future years,"' said Michael Borges, the association's executive director[.]" (TimesUnion.com)

U.S. Companies Need Solutions to Pension Plan Volatility
"[F]unded status has come roaring back so far during 2013. Despite recent run-ups, pension volatility remains top of mind for plan sponsors. U.S. companies are looking at multiple strategies, including investment allocation, lump sum programs, and annuity buyouts to manage pension risk.... The question at hand for 2013 is whether plan sponsors are positioned to capitalize on the dramatic funded status improvement we have seen so far this year and make moves to reduce the balance sheet risk by the time year-end 2013 rolls around." (Mercer)

DOL Considers Lifetime Income Illustration for DC Benefit Statements
"[T]his is not a proposed regulation. It's a description of a proposal DOL is 'considering.' Thus, the goal ...'is to provide an early opportunity for interested stakeholders to provide advice and input into the policy development of future proposed regulations.' ... DOL believes concerns on both these issues -- cost and litigation risk -- are 'overstated.' It is, however, asking for information and comments on the cost issue. DOL believes that concerns about litigation may be addressed by a clear disclaimer and use of the safe harbors." (October Three)

Upcoming August 8 IRS Phone Forum: 'The Importance of Good Internal Controls'
"Learn how effective internal controls are essential to preventing costly mistakes that could jeopardize a retirement plan's tax-favored status. During this forum, we'll share the importance of good internal controls, provide examples of controls and show how they can prevent certain recurring errors. We'll also discuss how we evaluate the sufficiency of a plan's internal controls during an audit." (Internal Revenue Service)


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Detroit's Emergency Manager Reaches 'Important Settlement' with Some Creditors
"Detroit has pledged money from casino revenue as collateral to avoid defaulting on past pension debt payments. The swaps are backed by insurer Syncora Guarantee Inc., which acts as a trustee and makes payments from casino revenue to parties involved in the swaps. The settlement ... primarily involves Bank of America Merrill Lynch and some other entities[.]" (The Washington Post)

The Employee Ownership Update, July 15, 2013
By NCEO Director Loren Rogers. Articles include: In Memoriam: NCEO Co-Founder Karen Young; Iowa Legislature Approves an ESOP Formation Assistance Fund; SEC Makes It Easier to Advertise for Investors in Entrepreneurial Companies; Cuba Continues Shift from State to Cooperative Ownership; A Hotel in Cambodia Where Employees Think and Act Like Owners; Acquiring Companies May No Longer Get Deductions for Options and SARs Held by Target Company Employees. (National Center for Employee Ownership)

Investment Strategy Implications of a Pension Risk Transfer (PDF)
"To effectively transition this amount of money in a prudent manner, plan sponsors and investment committees will be faced with many long- and short-term asset allocation and strategy decisions.... [1] Considerations in preparation for pension risk transfers: [a] Estimating the size of the transaction; [b] Examining the liquidity of the pension plan's assets; [c] Investing in the risk-reducing asset relative to a pension risk transfer. [2] Considerations for managing the plan after the pension risk transfer: [a] Change in the duration of the plan's liabilities; [b] Change in the plan's liquidity profile; [c] Change in the asset allocation after a pension risk transfer; [d] Implications of decreased plan size on investment strategy." (Russell Investments)

Roth 401(k) Usage on the Rise Among Younger Participants
"[I]n the first quarter 2013, 10 percent of all participants in Wells Fargo-administered defined contribution plans chose to contribute to a Roth 401(k), when available, up from 8.9 percent reported in the first quarter 2012. Notably, 16.9% of participants under age 30 contributed to a Roth 401(k) (up from 15.2% one year ago) as compared to 4% of participants in their 60s. In addition, the number of people with access to a Roth 401(k) increased by 5.3%." (Wells Fargo)

CalPERS Reports Preliminary 2012-13 Fiscal Year Performance of 12.5 Percent
"CalPERS' 12.5 percent return is well above the Fund's discount rate of 7.5 percent, the long-term return required to meet current and future obligations. CalPERS 20-year investment return is 7.6 percent, while its return since 1988 is 8.5 percent." (CalPERS)

Both Genders Are Saving More for Retirement But Men Are 'Paying More Attention'
"Only 28% of respondents [to a survey conducted by MassMutual] currently have, or have had in the past five years, a relationship with a personal financial advisor. However, many more men have one (31%) compared to women (24%), and the gender difference here has increased since 2011 when 30% of men had an advisor vs. 27% of women. Significantly, retirement as a major savings objective is 20 points higher among participants with a professional financial advisor than for those without one (77% vs. 57% respectively)." (PR Newswire)

[Opinion]

401(k) Fee Disclosure One Year Later: What We've Learned
"With twelve months of DOL's mandatory 401k Fee Disclosure behind us, is it too early to call the brave initiative a flop? ... [A]lmost 70% of the respondents in a recent impromptu survey ... rate the new rule a failure." (Fiduciary News)

[Opinion]

Are Hedge Funds Really for Suckers? Yeah, Kinda.
"Business Week is out with an, er, memorable cover announcing that 'Hedge Funds are for Suckers' ... It cites a range of data that shows that after hedge funds have performed worse than the market as a whole in recent years, and that while some fund managers indeed generate excellent risk-adjusted returns, you won't have much luck identifying who those managers will be in advance. And last week, the SEC approved new rules that will allow hedge funds to advertise to the general public ... So, just as there is broader recognition that you're probably not going to win outsized returns from handing your money over to hedge funders ... there also is the possibility of a new wave of advertising that will likely aim to bring in new and less savvy investors." (The Washington Post)

[Opinion]

The Winner of the Latest Fiduciary Debate is ... the Moderator
"According to one letter submitted by the Securities Industry and Financial Markets Association, the main trade group representing Wall Street firms, under a fiduciary rule for brokers, the cost of a new disclosure form would average $5 million per firm along with $2 million in annual maintenance and training costs. Estimates on new compliance costs for RIAs under the SEC's assumptions reached into the billions according to other letters.... As moderator of this latest round in the fiduciary date, and notwithstanding the sometimes highly commendable and good-faith efforts by those involved, the SEC was the true winner. Since industry remains hopelessly divided on the costs and benefits of a fiduciary standard for brokers, the Commission is now free to develop a rule of its own." (fi360)

Benefits in General; Executive Compensation

[Guidance Overview]

Top 10 Summary Plan Description Issues Beyond the ERISA Regs
"[1] Firestone Language.... [2] Exhaustion Requirements.... [3] Forum Selection Clause.... [4] Modification of the ERISA Rights Statement.... [5] Time Limit for Filing a Lawsuit.... [6] Subrogation and Reimbursement Language.... [7] Incorporation of Securities Filing.... [8] SPD Disclaimer.... [9] Allocation of Fees.... [10] Circular 230." (Proskauer's ERISA Practice Center)

[Guidance Overview]

Upcoming Deadlines for Puerto Rico Retirement and Welfare Plans (PDF)
Topics in this article include: Due Date to Comply with PR Treasury Annual Filing Requirement for Trusts Funding Calendar Year Puerto Rico Tax Qualified Retirement Plans is July 31st -- Automatic Extension is Available; Puerto Rico Retirement and Certain Welfare Benefit Plans Must Also File IRS Forms 5500 and 8955-SSA; and Puerto Rico Plans are Subject to ERISA's Fee Disclosure Notice Requirements. (Groom Law Group)

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