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July 19, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Benefits Director (Personnel Director)
for Municipality of Anchorage in AK

Retirement Services Consultant
for CUNA Mutual Group in WI

Sr. 401K/DC Plan Administration Specialist
for CUNA Mutual Group in WI

Director, Account Management - Large Market
for Lincoln Financial Group in IL, IN

Pension Actuarial Analyst
for Cammack LaRhette Consulting, Inc. in NY

Communications Specialist for Defined Contribution/401(k) Plans
for Hays Companies in MN

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Webcasts and Conferences

Health Care Reform for Employers: Now What? - Washington, DC
September 27, 2013 in DC
(Lorman Education Services)

Health Care Reform for Employers: Now What? - Eugene, OR
September 25, 2013 in OR
(Lorman Education Services)

The Importance of Good Internal Controls Phone Forum
August 8, 2013 WEBCAST
(Internal Revenue Service (IRS))

Retirement Due Diligence Conference is coming to Chicago on Wednesday, August 14th.
August 14, 2013 in IL
(401(k) Rekon)

View All Webcasts and Conferences

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[Official Guidance]

Text of PBGC Request for OMB Approval of Multiemployer Plan Data Request
"PBGC is researching the effects of potential changes to its multiemployer program. PBGC's objective is to quantify the effect of potential policy proposals on multiemployer plans that are or could enter critical status with respect to projected dates of insolvency, amount of financial assistance that PBGC would be required to provide, and the benefit changes plan participants would experience. To assist in this research, PBGC is requesting that OMB approve an information collection request of multiemployer pension plans, their actuarial service providers, and their stakeholders, including unions and relevant professional and trade organizations.... PBGC is requesting that OMB approve this collection of information for three years." (Pension Benefit Guaranty Corporation)


Don't miss the ASPPA 2013 Annual Conference at Natl. Harbor, MD!

Sponsored by ASPPA

Attend ASPPA's Annual Conference to inform Congress that they can't overlook pension issues! Registration includes: visits to Capitol Hill, 70+ sessions on topics shaping the industry, networking with 1,500+ retirement plan professionals, and more!

[Guidance Overview]

ERISA Recapture Account Guidance, Finally!
"If the financial institution establishes a bookkeeping account, amounts in the bookkeeping account are not plan assets. However, if the plan has a contract with the financial institution to pay certain plan expenses from the account and the institution fails to make such payments, the plan would have a claim against the financial institution and that claim would be a plan asset. If the plan establishes a plan account to receive the revenue sharing payments from the financial institution, the amounts in the plan account are plan assets. Furthermore, if the plan has a contract with the financial institution to transfer the funds to the plan, and the financial institution fails to make the payments, the plan would have a claim and the claim also would be a plan asset." (SunGard Relius)

[Guidance Overview]

DOL Clarifies Revenue Sharing Fiduciary Responsibility Issues
"The DOL's disclosure initiatives over the last four years, including the 408(b)(2) service provider disclosure regime, and recent informal comments from DOL officials highlight a focus on 'indirect' sources of compensation, which the DOL views as having the potential to give rise to conflicts of interest and excessive fees. While the initial burdens of the 408(b)(2) disclosure rules were on the service providers, which were required to provide the disclosures, the burden is now on plan fiduciaries." (Morgan Lewis)

Defining ERISA Plan Expense Accounts
"What IS a Plan Expense Account, also known as an ERISA Account, ERISA Budgets Account, or Revenue-Sharing Account to name a few? Simply put, it's an account to which your plan provider/recordkeeper deposits the excess revenue sharing dollars they collect from the investment products used by your plan. The plan sponsor can use these funds to pay eligible plan operating expenses. Eligible plan operating expenses can be any non-settlor fees permitted by the plan, including but not limited to, communications and education costs, adviser fees, nondiscrimination testing and plan audits. Anything that is allowed to be paid by plan assets can be paid out of the expense account because these accounts are typically considered plan assets." (Multnomah Group)

Designing the Cross-tested 401(k) Safe Harbor Plan
"In general, for a cross-tested plan to pass the nondiscrimination test, the covered NHCEs should be younger than the HCEs, since younger NHCEs will have a longer time horizon for their benefits to accrue relative to the older HCEs.... In many cases, adding a younger HCE to a cross-tested calculation will cause it to fail. For that reason, employers interested in this type of design should consider excluding their children from the plan." (McKay Hochman)

Safe Harbor 401(k) Eligibility Issues to Consider
"[T]esting issues can arise when employees enter the plan immediately as highly compensated employees (HCEs) due to ownership or family attribution rules. While safe harbor contributions only need to be made to NHCEs, the plan can be designed to allocate them to HCEs as well. However, if the plan allocates safe harbor contributions to HCEs, newly hired HCEs cannot receive them unless the newly hired NHCEs do as well." (McKay Hochman)

Detroit's Workers and Retirees Face Big Cuts
"While the details of Detroit's historic bankruptcy filing Thursday continue to unfold, one thing is clear: Tens of thousands of current and retired city workers face the risk of significantly smaller pension checks.... Detroit has long struggled to afford the retirement benefits it has promised to workers. And as of June 30, the pension funds currently had an estimated shortfall of about $3.5 billion, a number far larger than was previously estimated[.]" (CNNMoney.com)

FINRA's Lobbying Expenses Drop Over Last Year But Still Dwarf Adviser Groups
"The Wall Street regulator of broker-dealers has decreased its spending on lobbying federal lawmakers substantially over the past year, in part because it's not pushing for legislation that would allow it to expand its reach to investment advisers. [FINRA] recorded $220,000 in lobbying expenses for the second quarter, ... [bringing] its total expenditures for Capitol Hill advocacy to $450,000 so far this year. At the halfway point of 2012, FINRA had spent $550,000. Last year, the organization was spearheading support for a measure that would establish a self-regulatory organization for investment advisers." (Investment News; free registration required)

Putting Social Security Back Into the Plan
"The primary planning issue concerning Social Security was usually only 'how much'? ... In today's planning environment, the question of when to begin Social Security payments is the real issue. For people born in 1955 and later, the actual Full Retirement Age (FRA) gradually increases from 65 to 67 years old. Another important planning point is how to optimize Social Security for couples, widows, and divorced spouses." (Morningstar Advisor)

Yale Professor's Letter to 401(k) Sponsors: Much Ado About Nothing -- or Is It?
"Recently, Yale Law School professor Ian Ayres mailed what could amount to thousands (if not tens of thousands) of letters to retirement plan sponsors informing each of them that they have 'a potential high-cost plan.' ... Professor Ayres' disclosure, based on 2009 plan data, may well provide an enterprising plaintiffs' attorney sufficient time under ERISA's statute of limitations to identify putative class members interested in shaking down their employers.... Ayres' study might well attract the attention of our friends at the [DOL], raising the specter of a potential audit. Fortunately, Ayres is providing plenty of advance warning of his intent to go public." (Nixon Peabody LLP)

Lump Sum Interest Rate Update, June 2013
"[1] If you're in the process of implementing a 2013 lump sum payout window for terminated vested participants, you may want to consider the potential savings of waiting until 2014 to pay benefits. [2] There's no guarantee that interest rates will remain higher until your plan locks-in its lump sum rates later this year. Rates could go up or down, so you'll need to consider whether you can handle the risk and cost if interest rates go back down and lump sum values increase. [3] Even if you've started the process of preparing for a 2013 lump sum window, it's not a wasted effort if you decide to wait until 2014." (Van Iwaarden Associates)

For a Long and Healthy Life, It Matters Where You Live
"It's not just how long you live that matters. It's healthy life expectancy -- the additional years of good health you can expect once you hit 65. And by that measure, a new analysis shows it makes a lot of difference where Americans live.... Seniors [in Hawaii] can expect a little more than 16 years of healthy life after 65. Women in Hawaii can expect more than 17 years. At the other extreme, Mississippi's seniors have less than 11 years of healthy life. Older black Mississippians have only eight years, lower than anywhere except, oddly, African-Americans in Iowa, with seven years." (National Public Radio)

2013 Survey of Governmental Defined Contribution Plans
"The National Summary provides a narrative overview of the key areas involved in administering governmental 457, 401(k), 401(a), and 403(b) plans. The survey also provides a PDF of the Overall Survey Results, which offers a look at the survey through charts and responses from all participating entities." (National Association of Government Defined Contribution Administrators)

Verizon Earnings Boosted by Pension Plan Actuarial Remeasurement
"The earnings-per-share number includes a 5-cent boost from increasing the discount rate from year-end 2012.... [T]he company is not disclosing the discount rate change. According to the company's 2012 10-K filing, the discount rate used to determine the net periodic cost was 5% as of Dec. 31, down from 5.75% in 2011." (Pensions & Investments)

New York City Pension Funds See 12.3% Return for Fiscal Year Ended June 30
"[F]ive public pension funds ... make up the $137 billion retirement system. For the previous fiscal year, ended June 30, 2012, the pension system had assets of $122 billion and an investment return of 1.4%." (Pensions & Investments)


Major Disconnect in Survey on Impact of Fund Fees on 401(k) Participants
"The problem is that these surveys are aimed at the same people (plan sponsors) who necessitated the DOL to enact the new regulations in the first place. Unfortunately, many of these industry surveys ask the same people who are already clients to review their own performance.... [T]he same report also noted that over one-third (36%) of the plan sponsors surveyed believe that their Baby Boomer employees enrolled in their company retirement plans will work past the age of 65.... [But] if fees were reduced over the working careers of these employees, there is a good chance these same workers would not have to work past age 65 since their 401(k) accounts would be significantly larger." (MutualFundReform.com)


Indefensible Decisions by Pension Fund Managers
"Ask your plan administrator to provide you with inception-to-date data comparing the returns of your plan to a benchmark index of comparable risk. If your plan is underperforming, start asking pointed questions like: Could you explain why our plan would not likely achieve higher returns if you fired all the active fund managers and replaced all of them with low management fee stock and bond index funds?" (Daniel Solin in U.S.News & World Report)


Comments by Prudential Retirement to DOL on Lifetime Income Illustrations in Pension Benefit Statements (PDF)
11 pages. Excerpt: "While we believe lifetime income illustrations represent an important tool in assisting participants in assessing their retirement readiness, we are concerned that far too few of today's participants have access to guaranteed lifetime income options in their retirement plan to achieve what will be illustrated.... [We] encourage the [DOL] to take steps to remove impediments to plan sponsors offering both guaranteed lifetime income solutions as part of their plan design and programs and materials designed to prepare plan participants for retirement.... [W]e believe modifying the safe harbor applicable to the selection of annuity issuers to provide clarity and certainty for plan fiduciaries and expanding Interpretive Bulletin 96-1 to encompass retirement-related programs and materials are a necessary complement to your lifetime income illustration initiative." (Prudential Retirement)

Benefits in General; Executive Compensation

[Guidance Overview]

Transcript and Video of IRS Phone Forum: 'When is a Government Entity and Their Employees Excluded from Participating in Social Security: FICA Replacement Plans'
"[In this recording of the phone forum, we] discuss those other circumstances Government Employers and Employees don't participate in Social Security; namely FICA replacement plans. We will discuss Revenue Procedure 91-40 that sets forth rules relating to the minimum retirement benefit requirement prescribed under Employment Tax Regulations.... Let's take a look at our decision tree or flow chart for Social Security and Medicare Coverage of State and Local Government Employees. This can also be found in IRS Publication 963 'Federal-State Reference Guide'[.]" (Internal Revenue Service)

SEC Said Near Proposal on Disclosure of CEO-to-Worker Pay
"Public companies would be required to disclose how much more their chief executives are paid than rank-and-file workers under a rule to be proposed next month by U.S. securities regulators, according to two people familiar with the matter.... The SEC could vote to introduce the regulation as soon as Aug. 21[.]" (Bloomberg)

2013 Director Compensation Study Summary
"Total compensation paid to non-employee directors rose +4.5% over 2011 levels, to a median of $261,333.... Pay mix for non-employee directors has remained relatively unchanged since 2007. Directors continue to receive just over half of their total compensation in the form of equity (55% in 2012), in accordance with governance best practices.... Annual Cash Board Retainer increased $5,000 in 2012 to a median of $85,000 and the median Annual Equity Board Retainer increased $10,000 to $140,000 ... Equity compensation is delivered predominantly in full value shares while the prevalence of options continues to sink, reaching the lowest level observed over the last five years." (Steven Hall & Partners)

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