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July 26, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Pension Risk Consultant
for OneAmerica Financial Partners in IN

Actuary Apps Systems Engineer 5
for Wells Fargo Bank, NA in MD

Lead Manager, Internal Communications
for T. Rowe Price in MD

Pension Administrator
for Jack A Cross & Associates, Inc. in CA

Manager Transition Services
for OneAmerica in IN

Relius Support Supervisor
for PenServ Plan Services, Inc. in SC

Plan Administrator II
for Verisight, Inc. in MD

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[Guidance Overview]

PBGC Proposed Regs Simplify and Coordinate Premium Rate and Payment Rules
"Under current rules, for a plan terminating in a standard termination, the final premium may be due months after the plan is terminated. The proposed rule creates a new premium due date for terminating plans that coordinates with the final step in a standard termination ... As a practical matter, this accelerates the premium deadline for terminating plans that close out within the first six and one-half months of the final year. However, the PBGC is also proposing to exempt plans from variable-rate premiums for the final year (even if the termination date comes within that year), which reduces the burden of computing a variable-rate premium under this accelerated deadline[.]" (Practical Law Company)  


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[Guidance Overview]

First Circuit Reverses District Court in Sun Capital Case on Private Equity Partnerships
"On July 24, 2013, the U.S. Court of Appeals for the First Circuit reversed a Massachusetts district court in a widely-watched case addressing whether private equity partnerships are 'trades or businesses' for purposes of liability under Title IV of ERISA. The First Circuit held in Sun Capital Partners III, L.P. v. New England Teamsters & Trucking Ind. Pension Fund that where the management company affiliated with the two investing private equity funds engaged in active management of the contributing employer, an investing fund was more than a mere passive investor, and therefore was engaged in a trade or business. This case is significant for private equity investors holding interests in companies with unfunded pension liabilities, since the holding applies equally to single employer plan terminations as well as multiemployer plan obligations." (Littler)  

California Tries to Mandate Retirement Savings for Private Workers
"The idea behind the Secure Choice Retirement Savings Program ... is for it to be a state-run supplement to Social Security, but only for people who don't have traditional workplace retirement plans. For an estimated 6 million working Californians, the benefit of a pension or 401(k) is out of reach ... But critics wonder how the state with a turbulent record of budget keeping and a much-ridiculed public worker pension system can be counted on to protect people's money." (Fox News)  

More ERISA Plan Sponsors Hire Third-Party Fiduciaries
"81 percent of plan sponsors in [a recent] survey reported that their investment advisors acted as the fiduciaries of the benefit plans. Of these sponsors, 63 percent do not know what fiduciary roles their advisors are working on. That is a problem." (James E. Arnold & Associates, LPA)  

IRA Balances Surge
"Average balances on IRA saving accounts Fidelity administers reached over $81,000 at the end of 2012, a 53 percent increase from the end of 2008.... The news was even better for older folks. Those in the 60-to-69 age bracket saw their balances rise 70 percent, to $127,800 from $75,000. It was up 81 percent for those ages 50 to 59, to $75,700 from $41,900." (Investment News)  

Law Changes Official Name for IRA Spousal Contributions
"President Obama signed the Kay Bailey Hutchison Spousal IRA bill (H.R. 2289) into law on July 25, 2013. The bill changes the heading under IRC Sec. 219(c) from 'Special Rules for Certain Married Individuals' to 'Kay Bailey Hutchison Spousal IRA.' ... The law does not change any of the rules associated with spousal IRA contributions." (Ascensus)  

Not Your Ordinary TPA, Part 1 (PDF)
"A retirement service provider firm's clients, referral sources, and employees should be able to clearly articulate the vision of the company. While many TPAs focus on marketing plans and selling their services, they often do so without a written business plan. A business plan identifying who you are, with a mission, values, and measurable goals, should be in place and communicated to stakeholders before tackling the marketing plan." (Sarah L. Simoneaux and Chris L. Stroud in Journal of Pension Benefits)  

Further Analysis of the EBRI DB vs. DC Plan Study
"As anyone who has worked with employment-based retirement plans knows, individual participant outcomes can vary widely based on a complex combination of decisions by both those that sponsor the plans and the individual workers who are eligible to participate in them, as well as a host of external factors (notably the investment markets) that lie outside their control. The EBRI report took pains to not only select but to explain the key assumptions in our analysis. As it turns out, the analysis highlighted a number of circumstances in which traditional pensions (where offered) could produce a higher benefit at retirement -- and some in which 401(k)s were superior in that regard." (Nevin Adams and Jack VanDerhei via EBRI)  

Opening the Lump Sum Window Wider
"[O]ffering a lump sum window to existing retirees ... sounds like a simple enough project, but there are a few potential complications that employers should consider ... Don't we have to amend the plan?... Old people have old data... Communication considerations... Manual mailings... Deceased beneficiaries... QJSA requirements... No guarantees." (Retirement Town Hall)  

Pension Regulators from Developed and Developing Countries Seek Comments on Global Good Practices for Governance of Pension Regulators
"The aim of these Good Practices is to provide a list of internationally approved good governance criteria for pension supervisory authorities, including making appeal procedures available for settling disputes arising between supervised entities and the pension supervisory authority, and for the pension authority to be open and transparent and avoid conflicts of interest. Multinational employers and organizations with an interest in forming the basis for pension regulation, particularly in the emerging markets and less developed countries, may wish to comment on the draft Good Practices. Comments are due by August 30." (Groom Law Group)  

Deadline for Service-Provider Fee Disclosures Remains Unchanged
"Covered service providers must still make initial disclosures a reasonable time before entering into, extending, or renewing an arrangement with a plan. Service providers who are required to provide investment information as a part of those disclosures must still update that information for changes at least annually. The DOL has not modified either of those deadlines." (SunGard Relius)  

Cypen & Cypen Newsletter, July 25, 2013
Article titles include: Florida Appellate Court Defines 'Financial Urgency' in Labor Context; The Detroit Bankruptcy Picture; A New Ground for Pension Forfeiture -- Stupidity; The Confidential Witness in Securities Litigation; Prenuptial Agreement Ineffective to Waive Spouse's Right to Funds in Participant Spouse's 401(K) Plan; Dismissal in Lehman Employee Stock-drop Lawsuit Affirmed; Retirement Security Challenges and Prospects for Employees of Small Businesses; 10 Things Newsman Learned Reporting on Obamacare; and Miami Cops Sue City Over Retirement Claims. (Cypen & Cypen)  

Many Employees Haven't Noticed 401(k) Fee Disclosures, Most Haven't Made Changes (PDF)
"While workers are now getting more information about their 401(k) fees, those disclosures don't seem to be making much of an impact.... [A]bout half (53 percent) of defined contribution plan participants report having noticed this information, and only 14 percent of those who noticed this information (7 percent of all plan participants) say they have made changes to their investments as a result of the expanded information about fees." (EBRI)  

The Value in Participant Financial Education
"If participant education encourages individuals to participate who otherwise might not have, or to increase their contribution rates to achieve financial goals they didn't previously understand, paying a reasonable fee for those services will be well worth it to both the plan sponsor and the participant. They key considerations for a fiduciary will be determining what constitutes a successful education program and monitoring that program to ensure positive results are being achieved." (fi360)  

Primerica Slogs Through Onslaught of Retirement Plan Disputes
"[S]o far, the company is holding its own as it works its way through 21 securities arbitration cases and seven court cases all focused on the same issue: Public employees eligible for the State of Florida Public Retirement System say PFS Investments Inc, a Primerica Inc unit, advised them to permanently give up their rights to lifetime pension payments and switch to an alternative plan that subjected them to stock market risks." (Reuters)  


NCPERS Statement on Support for Sen. Hatch's Secure Annuities for Employee (SAFE) Retirement Act: (PDF)
"Public pensions are not part of Detroit's problem. In fact, its public pensions are well funded -- over 96 percent for the Police & Fire plan and over 87 percent for other city employees.... Some ... would exploit Detroit's dilemma to push an ill-considered political agenda to dismantle public pensions and enrich life insurance companies. They should note that during the more than 150 years of public pension history, no public pension plan has ever asked for a federal bailout. But plenty of life insurance companies have failed[.]" (National Conference on Public Employee Retirement Systems (NCPERS))  


AARP and U.S. Chamber of Commerce Call for Action to Improve Retirement Saving
"AARP and the U.S. Chamber of Commerce jointly urge action to: [1] Expand access for workers to tax-deferred payroll deduction retirement saving plans at their place of work, while recognizing and minimizing any additional burden these plans place on employers.... [2] Keep and enhance incentives to save for individuals at all income levels while targeting in particular those low- and moderate-income earners who have fewer opportunities and resources to save.... [3] Increase education efforts regarding the need for working Americans to save sufficient amounts for retirement and how to most effectively do so." (U.S. Chamber of Commerce)  


401(k) Plans, Retirement Readiness, and the Love Letter from Yale (PDF)
"The obvious question that immediately arises is: If costs are competitive, can one assume that the fees are not excessive? The answer is: No. Knowing cost is not the same as knowing value. After all, two items can have the same price tag, but their quality can vary considerably. An understanding of the value that is actually being delivered to participants can only be gained after assessing (and monitoring on an on-going basis) whether or not the 401(k) plan is making progress in helping participants achieve a financially secure retirement that they won't outlive. After all, that is, at least from the employees' perspective, the purpose of the plan." (Investment Horizons, Inc.)  


New 401(k) Fee Controversy Goes Viral: What Should Fiduciaries Really Be Looking At?
"[H]as the professor used the right criteria to select his targets? Here are some of the shortcomings of [his] methodology ... 1. Old Data ... 2. 5500 Data is Flawed... 3. ERISA Requirements Are Distorted... The Philadelphia office of the DOL has announced that it will be investigating 401(k) plans who appear, based on its internal data, to be paying high fees. This project may be expanding within the DOL. Hopefully, the DOL's data will not share the flaws of the professor's methodology, and won't import the professor's results." (Osler, Hoskin & Harcourt LLP)  


Fund Managers Should Go Into the Closet When Markets Drop
"During up years, a strong relationship exists between fund performance and net flows. However, during down years, outperforming or underperforming a benchmark does not have a significant impact on the subsequent year's flows.... Closet indexing, or mirroring the asset composition of a benchmark index, is the opposite of active fund management -- the type of vigorous oversight for which investors are willing to pay top dollar." (Investment News; free registration required)  

Benefits in General; Executive Compensation

[Guidance Overview]

Supreme Court DOMA Decision: Potential Wage Overstatements and Tax Refunds
"Pending guidance from the Internal Revenue Service (IRS), employers should consider making same-year income tax and FICA withholding adjustments with respect to benefits provided to same-sex spouses in 2013. Employers should also consider whether to file for a FICA tax refund or adjustments for benefits provided to same-sex spouses in 2010, 2011, and 2012, as well as whether to perfect any protective FICA tax refund claims that may have been filed for tax years before 2010.... [E]mployers are not required to apply for a refund or adjustment of FICA taxes that they paid and the employee portion of FICA taxes that they withheld.... However, employers may be required to provide affected employees with a Form W-2c showing the amount of taxable wages for income and FICA tax purposes so that the employees can obtain an income tax and FICA refund on their own behalf." (Ogletree Deakins)  

[Guidance Overview]

The DOMA Decision: Impact on Fringe Benefits and Other Tax Implications
"Employers will have to reprogram payroll systems so that they no longer withhold income tax and FICA tax for these benefits provided to same-sex spouses residing in states where same-sex marriages are recognized.... [P]ayroll systems may have to be reprogrammed again so as to not withhold taxes for benefits provided to all same-sex spouses who were married in a jurisdiction that recognizes same-sex marriage, regardless of their state of residence. This leads to the question of whether employers have adequate data to make these changes for affected employees or whether they have to request their present (and past) employees in same-sex marriages to identify themselves (and whether future guidance will require certifications or other proof of marriage from employees with same-sex spouses)." (Ogletree Deakins)  

French Court Holds U.S. Parent Liable for Employee Benefits of French Subsidiary (PDF)
"A French court recently held that a U.S. corporate parent of an insolvent French subsidiary was a joint employer with the subsidiary and therefor liable for employee benefits payable upon redundancy of the employees.... [T]he court's finding relied heavily on the involvement of the U.S. management in the closure of the French subsidiary." (Groom Law Group)  


Managing HR Risk: Micro Versus Macro
"Benefits were not always as generous as they are today. But, they creep up. In good times, they are enhanced. Look, we have a surplus this year, we can afford to enhance this benefit. Each time this is done, there is a new, albeit small, risk added to the total risk pie." (Benefits and Compensation with John Lowell)  

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