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July 17, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Manager, Retirement Plan Administration
for SchoolsFirst Federal Credit Union in CA

Financial Planner
for New York Life Retirement Plan Services in MA

Retirement Educator 2
for Wells Fargo in VA

Sales Administrative Coord
for The Standard in CA

Benefit Services Specialist
for Northwestern Benefit Corporation of Georgia in GA

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Webcasts and Conferences

401(k) Plans: Beyond the Basics 2013 - A 2-day seminar, 6 Cities, September - October
September 11, 2013 WEBCAST
(SunGard Relius)

"Advanced Cross-Tested Plans: Adding More Tools," 12 Cities, September - October
September 11, 2013 WEBCAST
(SunGard Relius)

EPCRS: Correcting 401(k) Plan Mistakes -- Phone Forum
July 25, 2013 WEBCAST
(Internal Revenue Service (IRS))

Capturing IRA Rollovers & "Money in Motion"
October 17, 2013 in MA
(Financial Research Associates)

Workplace Wellness That Delivers - Webinar
July 30, 2013 WEBCAST

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[Guidance Overview]

Litigation Over DC Plan Re-Enrollments: A Review of Cases to Date
"The timing of the finalization of the QDIA regulations, and the implementation of re-enrollment plans in connection with it in 2007-2008, could not have been worse. In many plans, significant numbers of participants were defaulted out of capital preservation vehicles and into QDIAs that included significant equity exposure (and thus capital risk). More or less right after that, the global financial crisis hit, and some major TDFs, for instance, sustained losses in the 25% range. If any set of facts would test whether re-enrollment was legal, 2007-2008 would." (October Three)


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.

[Guidance Overview]

The Wide-Ranging Impact of ERISA Section 408(b)(2) (PDF)
"Many plan sponsors lack the time, expertise or commitment to collect and analyze 408(b)(2) disclosures even though they are required to do so. However, 408(b)(2) compliance is no less important than annual testing requirements, filing a Form 5500 or required participant notices. It is increasingly obvious that many plan sponsors will need the help of experienced professionals to assemble and analyze fee disclosures from each plan's [Covered Service Providers]." (Alliance Benefit Group via ASPPA Plan Consultant Magazine)

[Guidance Overview]

When Changes to 404a-5 Participant Fee Disclosure Data Requires Additional Participant Notifications (PDF)
"[T]his article [focuses on] what to do if the information disclosed within the mandatory annual notice changes. If you haven't asked yourself this question yet, you should. Why? Because certain changes require not only the issuance of additional notifications but also that such notice be issued well in advance of the effective date of the change." (Legacy Retirement Solutions)

Harkin, Roberts Introduce Bipartisan Legislation in Senate to Liberalize Funding Rules for Charities and Cooperatives
"The Cooperative and Small Employer Charity [CSEC] Pension Flexibility Act of 2013 would ensure that charitable and cooperative associations are not swept into the Pension Protection Act of 2006 funding rules, which would require them to divert funds from critical services and jeopardize their ability to provide pension benefits to their workers.... CSEC plans would have the flexibility to opt into PPA in 2014 if they want, and importantly, the Act imposes additional transparency requirements on CSEC plans so that participants have access to accurate information. The Act also provides for a 'time out' from scheduled increases to PBGC premiums." (Committee on Health, Education, Labor and Pensions, U.S. Senate)

Plan Sponsors Say New Fee Disclosures Have Little Impact on 401(k) Participants
"[P]lan sponsors believe the added regulations -- designed to educate American workers and help them more prudently contribute to their 401(k) retirement plans -- did not change participant behavior or their perception of their retirement savings benefit. In fact, only one percent of plan sponsors participating in the survey reported seeing positive or negative changes in participant behavior. Similarly, just one percent of respondents felt an increase in ill will toward either themselves or the plan's recordkeeper." (The Wall Street Journal; subscription may be required)

Hiring an ERISA 3(16) Fiduciary: Buyer Beware (PDF)
"[E]ven if a 3(16) fiduciary agrees to assume full plan management responsibilities as both named fiduciary and administrator, it cannot fully eliminate the plan sponsor's fiduciary oversight responsibilities.... It is important to plan sponsors to understand that their decision to appoint a 3(16) fiduciary is itself an affirmative fiduciary act ... Moreover, plan sponsors ... have an ongoing duty to monitor the performance of its 3(16) fiduciary firm at reasonable intervals.... Plan sponsors should be wary of any arrangement in which the 3(16) fiduciary has the discretion to appoint itself to serve as the plan's investment manager." (The Wagner Law Group via ASPPA Plan Consultant Magazine)

First Data Corp. to Suspend 401(k) Contributions
"First Data Corp. will suspend 401(k) contributions to employees and replace cash bonuses with stock as part of its new chief executive's strategy to return the credit-card processor to profitability.... Stock-based compensation is more common at new companies, where employees often are willing to forgo cash in hopes their stock will surge in value." (The Wall Street Journal; subscription may be required)

Second Circuit Rules for Lehman Brothers in Participants' Stock Drop Lawsuit
"[T]he court held that the participants' imprudent investing claims could not be based on material, nonpublic information. Rejecting the position taken by the [DOL] in an amicus brief, the court ruled that fiduciaries of [ERISA] plans 'are under no obligation to either seek out or act upon inside information in the course of fulfilling their duties under ERISA.'" [In re Lehman Bros. ERISA Litigation, No. 11-4232-cv (2d Cir. July 15, 2013)] (Bloomberg BNA)

Medical Group Ordered to Restore $225,000 to ESOP After DOL Investigation
"The [DOL] has obtained a consent judgment requiring Robert S. Caputo and Glenn M. Bankert to restore $225,000 to an employee stock ownership plan.... [The suit alleged] that the plan owned virtually all of the stock in Caputo's medical practice, and that between 2000 and 2006, Caputo used assets of the medical practice as if they were his personal property.... It further alleged that the defendants violated ERISA by allowing the plan to purchase stock from participants at inflated prices; failed to allow older workers to diversify their account balance, as required by law; failed to keep accurate records; and failed to take action as the plan's fiduciaries to remedy Caputo's misuse of company funds." (Employee Benefits Security Administration, U.S. Department of Labor)


ERISA Litigation Congress -- September 9-10 -- New York, NY

Sponsored by Momentum Events

A forum for counsel for plan sponsors, plan administrators and insurance companies to network with peers and leaders of ERISA bar, this event will focus on all the current litigation trends and ERISA compliance challenges facing companies today.

Will You Outlive Your Retirement Savings?
"With no real bond returns, retirees today face a one-in-three chance of running out of money after 30 years ... [A] 2.5% withdrawal rate may now be 'safe.' Investors who hold 70% in stocks could withdraw around 4% but they would face more volatility and would still face some risk of eventually running short. Moreover, these estimates don't account for management fees or taxes, which would erode your actual returns." (Fidelity.com)

U.S. Public Pensions Weaken, But Deterioration Slowing
"[L]osses related to the 2007-09 recession have persistently hurt pensions' funded levels, [the ratings agencies] said. Recent stock market gains will likely bolster improvements, but the agencies warned that public pensions still face large obstacles, namely state budget strains, an aging population, accounting rule changes and legal challenges to reforms. The average funded ratio for all 50 states' pension plans was 72.9 percent in 2011, a drop of 1 percent from the previous year, and the median ratio was 69.8 percent, 2.2 percent lower than the year before[.]" (Reuters)

Women Working: How Do They Affect Social Security Replacement Rates?
"As women go to work, replacement rates decline. They have dropped from 47 percent for those born early in the Depression to 42 percent for Early Boomers. By the time that Generation Xers retire, replacement rates are projected to fall by an additional 5 percentage points." (Center for Retirement Research at Boston College)

The Role of Pre-retirement Disability in Retirement Security (PDF)
"[In] the shift to DC plans, the disability provisions [in defined benefit plans] that protected retirement security after disability have often been lost, so that there is a significantly increased risk that mid- or late-career disability will derail retirement security. The protection of retirement income for DC participants during extended periods of disability involves two goals: participants must continue saving for retirement during disability, and participants must refrain from using accumulated retirement funds to replace income lost during disability rather than saving those funds for their retirement years." (Groom Law Group)

GAO Report on Retirement Security: Challenges and Prospects for Employees of Small Businesses
"About 42 million workers, or about one-third of all private-sector employees, work for employers with fewer than 100 employees, and recent federal data suggest many of these workers lack access to work-based retirement benefits. Despite efforts by the federal government to develop new plan designs and to increase tax incentives, plan sponsorship remains low among small employers. [Multiple Employer Plans (MEPs)] ... have been suggested as a potential way to increase coverage. This testimony describes (1) the challenges small employers face in helping ensure that their workers secure retirement income, and (2) types of MEPs and their potential to address these challenges." (U.S. Government Accountability Office)

Maryland State Retirement Posts Fiscal Year Gains, Lowers Assumed Rate of Return
"Maryland State Retirement & Pension System, Baltimore, returned a preliminary 10.6% for the fiscal year ended June 30, net of fees ... The investment return exceeded the pension fund's 8.6% benchmark and represented a $3.2 billion gain for the retirement system, which reached $40.3 billion in assets.... The fiscal year returns also exceeded the pension fund's 7.75% assumed rate of return, which the board voted to lower to 7.55%[.]" (Pensions & Investments)

Pension Annuitization Attractiveness Still Increasing
"The Dietrich Pension Risk Transfer Index, which tracks the relative attractiveness of annuitizing pension liabilities, once again increased considerably from June's value of 88.92 to settle at 93.54 as of July 1, 2013. The 4.62 point gain was fueled by rising interest rates and pension funding levels. The index's current annuity discount rate proxy of 3.07% raised nearly 70 basis points since May." (Dietrich & Associates)


Joint Letter of 21 Trade Associations to Senate Finance Committee on Preserving the Employer-Provided Retirement System (PDF)
"Eliminating or diminishing the current tax treatment of employer-provided retirement plans will jeopardize the retirement security of tens of millions of American workers, impact the role of retirement assets in the capital markets, and create challenges in maintaining the quality of life for future generations of retirees. While we work to enhance the current system and reduce the deficit, we must not eliminate one of the central foundations -- the tax treatment of retirement savings -- upon which today's successful system is built." (SPARK Institute, ASPPA, American Benefits Council and 19 other trade organizations)


The Lessons of First Data Corp.'s Suspension of 401(k) Contributions
"First Data has gone one step beyond simply the transitioning of employee retirement risk to employees by means of 401(k) plans, by removing the certainty -- and cost to the company -- of cash contributions in favor of [stock] awards that do not increase the employees' current retirement assets. There are multiple problems with this step, viewed from the prism of retirement policy.... [T]he stock grants ... may not be made as part of an ESOP or otherwise within the context and confines of an ERISA governed plan. If this is so, then the plan sponsors will avoid the obligations and potential liabilities that come with fiduciary status, when it comes to the granting of the stock and company decisions that impact the value of the employees' stock holdings down the line[.]" (Stephen Rosenberg of The McCormack Firm, LLC)


Statement of Sen. Harkin at HELP Committee Hearing: 'Pooled Retirement Plans: Closing the Retirement Plan Coverage Gap for Small Businesses'
"[T]he 42 million people working for small businesses are not getting the retirement plans they deserve. Most small employers don't even offer a 401(k), let alone a pension. When they do offer a plan, studies consistently show that participants pay higher fees, which can profoundly reduce retirement savings over the course of a career. The plans also are not typically designed to produce retirement income. They are savings plans that help people build up a nest egg during their working years but do nothing to help convert savings into a secure source of retirement income." (Committee on Health, Education, Labor and Pensions, U.S. Senate)

Benefits in General; Executive Compensation

[Guidance Overview]

Ding Dong, DOMA's Dead ... Or Is It? (PDF)
"How will plans, particularly those that have participants in multiple states, treat same-sex partners for purposes of the beneficiary and QJSA rules, hardship distributions, spousal rollovers, controlled group aggregation, HCE determinations? Is it reasonable that a married couple will get certain benefits or limitations in one state, and that participants residing in other states will be denied those benefits or limitations? How does that affect nondiscrimination testing, particularly with regards to benefits, rights, and features? Does a plan need to be amended to clarify who constitutes a spouse?" (Ferenczy + Paul LLP)

[Guidance Overview]

Nonqualified Deferred Compensation Distributions in Corporate Transactions
"In corporate transactions, it is often not clear whether nonqualified deferred compensation (NQDC) can be or must be distributed to employees, especially when the NQDC plan requires payments upon a participant's separation from service. Whether such a separation takes place under Internal Revenue Code section 409A, which governs the tax treatment of NQDC, depends on the nature of the transaction ... A sale of assets of a business constitutes a separation from service for employees who go to work for the buyer ... A corporate transaction that involves a sale or spin-off of stock generally does not create a separation from service for employees of the entity whose stock is sold or spun off.... An IPO does not cause a separation for employees of the corporation whose shares have been sold to the public.... A transaction that is not a separation may be a [change in control (CIC)] under section 409A. In a CIC, the plan sponsor may provide for accelerated payment of the deferred compensation to affected employees." (Towers Watson)

BLS Report of Employee Benefits in the U.S. in March 2013 (PDF)
"Employer-provided medical care was available to 85 percent of full-time private industry workers in the United States in March 2013 ... [O]nly 24 percent of part-time workers had medical care benefits available. Access, or availability, also varied by employment size: 57 percent for all workers in small establishments (those with fewer than 100 employees), compared with 85 percent in medium and large establishments (those with 100 employees or more).... In private industry, 74 percent of full-time workers had access to a retirement plan, significantly higher than 37 percent of part-time workers. Retirement benefits were available to 49 percent of workers in small establishments and 82 percent of workers in medium and large establishments." (U.S. Bureau of Labor Statistics)

DOL and Treasury Publish Update to 2012-2013 Regulatory Agendas for Employee Benefits (PDF)
"Projects added to the agendas since they were last published are shown in [this article]. There are two new DOL initiatives and three new tax initiatives. We also anticipate upcoming guidance regarding the recent U.S. Supreme Court decision holding that Section 3 of the federal Defense of Marriage Act is unconstitutional, but those guidance projects have not yet been announced." (Sutherland)

Press Releases

IRS Cancels July 22 Furlough Day
Internal Revenue Service (IRS)

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