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July 31, 2013          Get Health & Welfare News  |  Advertise
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[Guidance Overview]

IRS Opens Door in Private Letter Ruling for Sec. 1035 Exchange by Beneficiary of Fixed and Variable Inherited Annuities
"PLR 201330016 granted the beneficiary of a series of several fixed and variable non-qualified inherited annuities to complete a 1035 exchange of those contracts into a new variable annuity to gain access to more appealing investment returns. In the IRS' viewpoint, the beneficiary-as-inheritor had sufficient ownership and control of the inherited annuity to allow the exchange, and permitted the exchange to occur, as long as the technical requirements for the 1035 exchange were honored, and the beneficiary committed to taking post-death distributions from the new annuity at least as rapidly as were occurring under the old contract." (Michael Kitces in Nerd's Eye View)  


[Advert.]

2013 Advanced Pension Conference in Chicago August 28-30

Sponsored by SunGard's Relius Education

BenefitsLink readers: Too busy with the Form 5500 7/31 deadline and forgot to register for APC? Email us at relius.education@sungard.com with subject "APC Hold my spot," and we'll save you a seat, plus get the early registration fee. Learn more.



[Guidance Overview]

Temporary Relief for 2013 Participant Fee Disclosure Deadline (PDF)
"ING is in the process of preparing the 2013 annual participant fee disclosure and comparative chart for Plan Administrators and intends to post this information to its Plan Sponsor Web site so that Plan Administrators may furnish the required disclosures to plan participants by the date that is 12 months after the date they furnished the 2012 annual fee disclosure to participants. This follows the 12-month deadline in the current regulation. Accordingly, ING will not be taking advantage of the transition relief in the Bulletin, as described above, for the 2013 participant fee disclosure notice. ING is reviewing the transition relief provided in the Bulletin for the 2014 annual fee disclosure notice, as described above, and will provide its position on this at a later date." (ING)  

[Guidance Overview]

Are ERISA Budgets Plan Assets? DOL Sheds Some Light
"[P]lan fiduciaries should: [1] Periodically review and evaluate the plan's arrangement with its recordkeeper. If the plan's compensation structure is asset-based -- including revenue sharing arrangements -- the plan fiduciary should monitor whether plan asset growth may warrant renegotiation of the parties' fee arrangement. [2] To the extent some or all of the recordkeeper's compensation is paid through a revenue sharing arrangement, evaluate whether the plan has or should seek an ERISA budget arrangement to recapture some or all of these payments for the benefit of the plan." (Thompson Hine)  

No Fiduciary Status for 401(k) Plan Service Provider
"John Hancock Life Insurance Company is the most recent 401(k) plan service provider to prevail in a case by the plaintiffs' bar asserting ERISA fiduciary breach claims based on allegations that it charged excessive 401(k) plan fees and received excessive revenue sharing payments.... A federal district court in New Jersey concluded that JHLIC was not acting as a fiduciary in connection with the service provider fees it charged to various 401(k) plans because a service provider 'owes no fiduciary duty with respect to the negotiation of its fee compensation.' The fees were negotiated at arms' length and fully disclosed. The court similarly concluded that JHLIC was not a fiduciary with respect to the revenue sharing payments because service providers 'do not become fiduciaries merely by receiving shared revenue[.]'" [Santomenno v. John Hancock Life Ins. Co., No. 2:10-cv-01655 (D.N.J. July 24, 2013)] (Proskauer's ERISA Practice Center)  

First Circuit Decision May Attach Pension Liabilities to Private Equity Funds (PDF)
"By holding that private equity funds may be trades or businesses depending on various 'investment plus' factors, the First Circuit has increased the potential risk that private equity funds may be liable for certain portfolio company pension liabilities. This is particularly true where a single fund acquires a controlling interest (at least 80%) in a company that has either defined benefit or multiemployer union pension plan liabilities. It is not clear what implication the First Circuit's holding will have for federal income taxes, where the term 'trade or business' is used in various provisions with important implications to private equity funds and their investors." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 12-2312 (1st Cir. July 24, 2013)] (Winston & Strawn LLP)  


[Advert.]

Free online seminar from PenChecks Trust -- August 7 -- Register Now

Sponsored by PenChecks Trust

Improve your organization's approach and create better processes to avoid future liability and costs. Attend "What Every Service Provider Needs to Know About the Risk of Uncashed Checks," a free online seminar for industry professionals. Register now.



Same-Sex Spouse Entitled to Spousal Death Benefits
"It should be noted that the Tobits court's analysis of the term 'spouse' under ERISA, may face challenge by other courts. Windsor did not change how the term spouse is defined for purposes of federal law except to clarify that the definition could not be restricted to opposite sex couples. Windsor did not modify the spousal definitions contained in the regulations that underlie ERISA.... As ERISA is silent on extending spousal benefits to non-spouses, and as the IRS' general rule is to determine spouse based on state of residence not the location of the wedding, a clear reading of ERISA leaves no question that a different court may not find a plaintiff similar to the Tobits plaintiff to be a surviving spouse for purposes of ERISA." [Cozen O'Connor v. Tobits et al., No. 11-0045 (E.D. Pa. July 25, 2013)] (Seyfarth Shaw LLP)  

PBGC Wants to Study Multiemployer Plan Guaranty Program
"The [PBGC] is requesting that the Office of Management and Budget (OMB) approve, under the Paperwork Reduction Act, a voluntary collection of information to assist PBGC in quantifying the effect of policy options on multiemployer pension plans." (Pension Benefit Guaranty Corporation)  

Big Improvements Coming in Handling of Pension Contributions, GM and Ford Say
"General Motors Co. and Ford Motor Co. are getting a grip on pensions that will free up cash to develop future hits. Over the long term, this should allow more spending on the core business and less on retirees.... 'We won't have to allocate as much capital to pensions as we have the last couple of years and certainly this year,' Bob Shanks, chief financial officer of Dearborn, Mich.-based Ford, said. 'That will give us the ability to take the cash that we're generating and invest it in other parts of the business that can support further growth.'" (The Windsor Star)  

BlackRock Rolls Out Index to Make Inroads in Retirement Market
"[BlackRock Inc., the world's largest money manager,] is unveiling ... a new index the firm says will help savers calculate how much they need to have socked away in order to generate a specific lifetime income starting at age 65. At the same time, BlackRock also is filing prospectuses for bond funds linked to the index it says will aim to provide investors the returns needed to meet those goals." (The Wall Street Journal; subscription may be required)  

Retirement Income Strategies or Retirement Savings Plans Are Not Just About Saving Anymore (PDF)
"[A] variety of factors has increased the concerns that defined contribution plans should also focus on plan features that address distributing those accumulated assets as retirement income over time.... The purpose of this paper is to provide plan sponsors and other interested parties with a broad overview of potential retirement income strategies, the considerations of prudent implementation, and general information regarding new and emerging retirement income oriented strategy. It is not intended to portray any particular strategy as superior to any other, but rather to highlight the trade-offs that plan sponsors should consider when reviewing options and provide a basic understanding of the differences that exist." (National Association of Government Defined Contribution Administrators, Inc. (NAGDCA))  

New Brunswick's New 'Shared Risk' Pension Plan: An Alternative to Traditional DB Plan Design for State and Local Governments?
"Under financial pressure, U.S. state and local pension plans have curbed future benefit costs. But these changes have been ad hoc and unexpected. New Brunswick's new Shared Risk model is designed to respond to shocks in a more orderly and predictable way and to help head off trouble in advance. The model's key features are: splitting benefits into 'base' and 'ancillary' components; laying out detailed steps in advance for adjusting benefits and contributions; and creating a risk management framework to help keep plans on track." (Center for Retirement Research at Boston College)  

Minding Retirement Accounts in Estate Planning
"Financial advisers are careful to review retirement accounts because they are so often ignored, even when they comprise a large share of an estate -- sometimes the biggest portion it. A surprising number of clients, for example, forget to even name a beneficiary or change the names after a divorce.... This year, changes to the federal estate tax add a new twist. Spouses need to review whether to name each other as beneficiaries now that they can share their estate-tax exemptions." (The Wall Street Journal; subscription may be required)  

SEC Chief Says Agency Is Moving on Fiduciary Definition But Other Rules to Come First
"Ms. White may have chosen to give herself some wiggle room on fiduciary duty because the controversial issue could split the five-member commission.... 'It hasn't been a front burner issue yet,' SEC Commissioner Daniel Gallagher said in a recent interview. 'It will be. We really need to decide, based on what we've seen, whether it makes sense to move forward.'" (Investment News; free registration required)  

[Opinion]

This is Scary: The Government Now Assumes All Pension Promises Will Come True
"Until Wednesday morning, the Commerce Department pegged America's personal savings rate at 4.1 percent for 2012. An every-five-years revision to how the department measures the components of Gross Domestic Product pushed that savings rate up; now it's 5.6 percent for 2012. The same change makes savings look much stronger before the Great Recession, too: The rate for 2002 was revised up from 3.5 percent to 5 percent. For 2005, it rose from 1.5 percent to 2.6 percent. That money isn't necessarily real. The Bureau of Economic Analysis didn't find hundreds of billions of dollars stuffed in Americans' mattresses. It decided to start counting all pension promises as savings in the bank." (The Washington Post; subscription may be required)  

[Opinion]

Target Date Fund Performance: The Impact of Rising Interest Rates
"Rising equity markets helped generate strong returns during 2012 and early 2013. Experiencing more volatility, TDFs with equity rich glide paths, tactical overweighting, emerging market and real estate exposure fared particularly well last year. The defensive funds and those focused on real returns lagged, but it is important to review these funds on a risk-adjusted basis over a longer time period." (Center for Due Diligence)  

[Opinion]

The Failure of Target Date Funds
"Most investors are uncomfortable with even a 10% loss near retirement, but in 2008, most 2010 target date funds lost much more than that -- even up to three times that. In 2008, the Morningstar target-date 2000-10 category average was down 22.46%.... However, it's wrong to say that a retirement plan provider on either end of that spectrum did a poor job or failed those participants.... Was the philosophy of taking above-average risk in an effort to mitigate longevity risk and lack of adequate retirement savings wrong? Not necessarily. Was that philosophy misunderstood by some fiduciaries and investors who experienced above-average 2008 losses? Absolutely." (Jim Lauder in RIABiz)  

[Opinion]

Comments of SPARK Institute to DOL on Benefit Statement Lifetime Income Illustrations (PDF)
"We support guidance from the Department that will encourage plan sponsors and service providers to voluntarily provide lifetime income illustrations to participants on benefit statements and through other available means, including web-based tools.... we believe that any guidance, requirement or safe harbor should avoid endorsing or appearing to endorse particular approaches, methodologies, variables or assumptions over any others that are reasonable." (The SPARK Institute)  

[Opinion]

Saving Workers Retirement: First Steps Toward Public Pension Reform in Oklahoma (PDF)
"Oklahoma's public employee retirement liabilities are staggering, $11.5 billion, and exceed the state appropriated budget by 69 percent ... Implementing a defined-contribution retirement plan for all new employees eligible for the OPERS: [1] will help government keep its promises to current and retired government employees and allow for adequate funding of core services; [2] can be accomplished and will fairly compensate state employees; [3] will help employees have control over their own retirement[.]" (Oklahoma Council of Public Affairs)  

[Opinion]

Social Security is Healthy Compared to Public Sector Pensions
"Not only are the financial adjustments necessary to fix Social Security far easier to implement than what it's going to take to rescue public sector pensions, but the sheer size of the public sector pension liability is actually bigger than the total liability for the entire Social Security fund. It is imperative that American voters understand this fact." (California Public Policy Center)  

[Opinion]

Text of ASPPA's Recommendations to IRS for Improvements to the Employee Plans Compliance Resolution System (EPCRS)
10 pages. Recommendations include: [1] provide that non-elective contributions made to correct missed matching contributions be permitted to retain all plan characteristics associated with matching contributions; [2] provide that no penalty will be imposed for a failure to timely provide certain notices provided that such notices meet certain requirements; [3] provide that the missed opportunity for making a designated Roth contribution is 50% of either the employee's missed designated Roth contribution (if known) or the average deferral percentage for the employee's group (either highly or non-highly compensated); [4] update the voluntary correction program submission rules for situations involving more than one plan of a plan sponsor; and [5] provide for correction by retroactive plan amendment under self-correction where the plan, in operation, covers a broader class of employees than is permitted in the plan document. (American Society of Pension Professionals & Actuaries (ASPPA))  

Benefits in General; Executive Compensation

BLS Employment Cost Index, June 2013
"Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending June 2013, following a similar 3-month percent increase in March ... Wages and salaries (which make up about 70 percent of compensation costs) rose 0.4 percent in the June quarter, similar to the 0.5 percent increase for the previous period. Benefits (which make up the remaining 30 percent of compensation) increased 0.4 percent, compared to a 0.6 percent increase for the 3-month period ending in March." (U.S. Bureau of Labor Statistics)  

Despite Scrutiny, Perks Remain a Key Component of Executive Rewards
"From 2008 to 2013, the number of perquisites offered to executives has declined, although they remain a fairly prevalent -- albeit shrinking -- component of the total rewards package. As various stakeholders have increasingly called for more emphasis on performance-based pay, the percentage of companies offering executive perks has fallen from 95% in 2008 to 85% in 2013." (Towers Watson)  

Press Releases

NASRA Names New Executive Director
NASRA (National Association of State Retirement Administrators)

New Wellness & Health Promotion Programs Raise the Bar
National Committee for Quality Assurance (NCQA)

Cash Balance/401(k) Software Suite from DATAIR
DATAIR Employee Benefit Systems, Inc.

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