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August 12, 2013          Get Health & Welfare News  |  Advertise
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Senior Analyst - Health Benefits
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for Sullivan, Ward, Asher & Patton, P.C. in MI

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Webcasts and Conferences

Technology for the Retirement Plan Professional -- Webcast
September 18, 2013 WEBCAST
(American Society of Pension Professionals & Actuaries (ASPPA))

Defined Benefit Plan Half Day Workshop
August 27, 2013 in OH
(ASPPA Benefits Council of Cleveland)

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  LinkedIn   Twitter   Facebook Hand-picked links to the web's best news articles,
official guidance, jobs, webcasts and more.
[Official Guidance]

Text of Discussion Guide and Documents for Focus Groups and Survey on Pension Benefit Statements, as Submitted by EBSA for OMB Approval
Click the "All" checkbox next to "Display additional information" (the page will refresh automatically). Package includes the following items, sent to OMB on August 9, 2013: [1] Supporting Statements and Supplementary Documents; [2] Household survey, including Survey Instrument and Clarifications; [3] Focus Groups, including Discussion Guide, Informed Consent Statement, and three Sample Statements. (Employee Benefits Security Administration (EBSA), U.S. Department of Labor)  


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[Official Guidance]

[Corrected Source] EBSA Moves Forward with Plan for Use of Focus Groups and Survey Regarding Pension Benefit Statements; Seeks OMB Approval
"This new [Information Collection Request under the Paperwork Reduction Act] seeks OMB approval to conduct a survey and an experiment on participants in an existing household American Life Panel (ALP) via the Internet and to conduct four focus groups of non-panel members. The survey and focus groups would explore whether information contained in sample benefit statements can be presented in a way that improves recipients' understanding of the statements and helps them better plan for retirement. Specifically, the EBSA would collect data through four focus groups that will pretest the model benefits statements, each containing slightly different information, and a survey of 2,900 ALP respondents. For additional substantive information about this ICR, see the related notice published in the Federal Register on January 22, 2013 (78 FR 4458)." (Employee Benefits Security Administration (EBSA), U.S. Department of Labor)  

In Detroit, Pensions Prompt Battle of the Actuaries
"Detroit's retirement systems calculate future assets based on the notion that their investments will return 8 percent annually over several decades.... [A]ctuaries [brought in by emergency manager Kevyn Orr] use a 7 percent rate of return on investments, calling it 'more realistic' in part because the financial crisis and recession caused years of poor investment returns. Important as the assumed rate of return may be, Orr's 1 percentage point reduction is not enough to explain the difference between his estimate and the one put forward by the pension funds[.]" (Reuters)  

Federal District Court Finds Contractual Right to Substitute Funds Confers Fiduciary Status (PDF)
"ILIAC cannot bind its fiduciary status to the exercise of its authority to substitute funds without regard for the implications of the possession of that authority.... [T]he contractual right to substitute mutual funds in retirement plans can confer fiduciary status on service providers, regardless of whether they ever actually substitute funds.... Bound by the Second Circuit, which recognizes that subsections one and three of 29 U.S.C. section 1002(21)(A) create distinct avenues for acquiring fiduciary status ... this Court cannot ignore the possibility that ILIAC's contractual authority to substitute funds is the type of 'discretionary authority' that yields fiduciary responsibility under 29 U.S.C. section 1002(21)(A)(iii)." [Healthcare Strategies et al. v. ING, No. 11-00282-WGY (D.C. Conn. Aug. 5, 2013)] (U.S. District Court for the District of Connecticut)  

Seventh Circuit Finds 'Murky' Plan Disclosures Insufficient to Toll Statute of Limitations in Cash Balance Plan Case (PDF)
"The defendant argues that communications that the plan administrator made to plan participants in 1998 put them on notice that the 30-year Treasury rate would be the projection rate, and so, since the suit was filed in 2008, the statute of limitations bars all the claims made in it. We disagree. Those communications were ... too murky to give the participants adequate notice that the projection rate would or could fall short of what the plan had promised.... [P]articipants in the defendant's plan, though told they could 'receive [their] vested account balance as a lump sum' or the 'vested portion of their plan benefit' if they left the company before retirement, were not told how that balance or benefit would be calculated, what exactly had vested, the terms of the applicable whipsaw, or even whether there would be a whipsaw." [Ruppert et al. v. Alliant Energy Cash Balance Pension Plan, No. 12-3067 (7th Cir. Aug. 9, 2013)] (U.S. Court of Appeals for the Seventh Circuit)  

Plaintiffs Win Round Versus Lockheed in Stable Value Fund Case
"A panel of judges in the Seventh Circuit last week reversed a lower court decision that denied class certification to workers and beneficiaries with investments in a so-called 'stable value fund' that Lockheed offered. Among other things, the lawsuit accused Lockheed of imprudent management, saying its stable value fund delivered sub par returns by holding money market funds rather than a better mix of short and intermediate-term investments." (Reuters)  


Benefits at the Crossroads ... Is it Time to Change Direction? Sept. 15-18 -- Las Vegas

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Ninth Circuit Amends Rationale for Rejecting Participants' Revenue Sharing Claim
"The amendment to the opinion retreats somewhat from the court's broad embrace of the Firestone standard in fiduciary breach cases, distinguishing rather than rejecting the Second Circuit's reasoning. The amendment explains that the claim in the Second Circuit case alleged a violation of ERISA's duty of prudence, where the fiduciary argued plan interpretation as a defense. In this case, however, the claim alleged only a violation of ERISA's duty to administer the plan in accordance with plan documents[.]" [Tibble v. Edison Int'l, 2013 WL 3947717 (9th Cir. 2013)] (Thomson Reuters / EBIA)  

Required Pension Contributions by Employees Become Issue in Labor Strikes
"Pensions are one of the issues in recent strikes by UC hospital workers and San Francisco Bay Area transit workers. The dispute is not over the amount of pensions promised current workers, widely believed to be protected by court rulings. The sticking point is how the cost of the pensions is split between employers and employees. UC patient care workers balked at increasing their pension contributions from 5 percent of pay to 6.5 percent. Bay Area Rapid Transit workers make no pension contribution because the employer pays their CalPERS share, 7 percent of pay." (CalPensions)  

At the Crossroads: Key Considerations for Pension De-Risking Strategies
"Many pension plan sponsors and fiduciaries are confronting perhaps the most important decision in the plan's life -- whether to pursue an internal de-risking strategy or pay an insurer to offload the liability.... This paper aims to provide plan sponsors and fiduciaries with a starting place for addressing these complexities as they attempt to answer the buyout question for themselves. It is, essentially, a list of pros and cons comparing annuity buyouts to holistic LDI solutions from the perspective of a plan currently managed in a more traditional approach." (NISA Investment Advisors; free registration required)  

Look Who's Locking Horns Over Retirement Accounts
"The period for public comment on what an SEC rule should look like officially ended in July. The SEC staff, a spokesman says, is 'carefully considering the comments we received and will coordinate with the commissioners on next steps.' The SEC won't say how long that might take. Meanwhile, the Labor Department is charging full speed ahead -- and raising hackles in the brokerage industry." (The Wall Street Journal; subscription may be required)  

District Court Finds ING to be a Fiduciary Over Revenue Sharing Practices
"[ING Life Ins. and Annuity Co. (ILIAC)] argued that under ERISA section 3(21)(A)(i), its fiduciary status is limited to the extent it actually 'exercises ... discretionary authority' to manage a plan.... [T]he court ... found that such an interpretation of an ERISA fiduciary is too limited ... [and] that ILIAC is a fiduciary under 3(21)(A)(iii) related to its control over the funds.... The second breed of ERISA breach cases involving classes of plans, rather than classes of one plan's participants, are finally progressing to a determination of liability. The potential damages are magnitudes higher, as is the catastrophic harm to a service provider." [Healthcare Strategies et al. v. ING, No. 11-00282-WGY (D.C. Conn. Aug. 5, 2013)] (FRA Plan Tools, LLC)  

Wealth Advisers Pounce on Retirement Nest Eggs of American Airlines Pilots
"When American Airlines dumped about $3.5 billion of retirement money into the laps of its pilots late last month, the winners were the wealth managers who got a piece of the action.... Stockbrokers, financial planners and other advisers who spent much of the year competing to manage the pilots' money, are now celebrating a windfall of fees. The pilots, still reeling from their company's bankruptcy and bewildered by the unanticipated need to manage their money, are still digesting what amounted to a marketing onslaught." (Reuters)  

House Committee Subpoenas Treasury for Documents on Delphi Pension Deal
"House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., [has] subpoenaed Treasury Secretary Jacob Lew for information related to the Committee's investigation into the preferential treatment afforded to Delphi's unionized employees during the bankruptcy and taxpayer-funded bailout of General Motors....Chairman Issa ... noted in a letter to Lew 'Nearly a year after the Committee's last request, the Department still had not fully responded; the Department instead provided only a fraction of the responsive documents.'" (Committee on Oversight and Government Reform, U.S. House of Representatives)  


Open Amortization Methodology Used in Detroit Pension Plan Valuation
"Open amortization is a pernicious funding gimmick designed solely to understate contributions. It is a generally accepted actuarial practice for public plans. Milliman in their report criticizing Detroit's official pension numbers under the heading 'Significant deferral of cost built into amortization methodology' provides a textbook criticism of the process[.]" (Burypensions)  


The Blue State Reckoning: Liberal Pension Excesses Are Now Jeopardizing Liberal Priorities
"Chicago's four pension systems are only 36% funded, with an overall unfunded liability of $19.5 billion this year and growing. One reason [Chicago Mayer Rahm] Emanuel can't afford these pension contributions is because he's locked into unaffordable union contracts for city workers. Personnel costs currently make up 78% of Chicago government expenditures, and base salaries alone make up two-thirds. Between 2003 and 2012, the city cut its workforce by 20% but personnel costs have still gone up 15%." (The Wall Street Journal; subscription may be required)  


401(k) Reform Movement Growing: Three Major Gamechangers
"Instead of harping on the evils of entitlements, give Americans more ways to save. Set up a universal savings account with tax-free withdrawals for any purpose. The government could add matching grants to get people started. You wouldn't be tied to an employer's inadequate 401(k). Even consider an automatic component that forces people to save[.]" (John Wasik in Forbes)  

Benefits in General; Executive Compensation

Department of the Treasury 2013-2014 Priority Guidance Plan, August 9, 2013 (PDF)
"The 2013-2014 Priority Guidance Plan contains 324 projects that are priorities for allocation of the resources of our offices during the twelve-month period from July 2013 through June 2014 (the plan year). The plan represents projects we intend to work on actively during the plan year and does not place any deadline on completion of projects.... Some projects that were on the 2012-2013 Priority Guidance Plan have not been included on the 2013-2014 plan because they are no longer considered priorities for purposes of allocating resources during the 2013-2014 plan year." [Employee Benefits projects start at page 5; they include 40 Retirement Plan projects, and 26 involving Executive Compensation, Health Care and Other Benefits.] (U.S. Department of the Treasury)  

College and University Benefits Study: 2012 Results and Strategies for 2013
"[P]ublic institutions are more likely than private institutions to offer retiree health benefits to new hires (87 percent vs. 66 percent), and private institutions are more likely than public institutions to offer an account-based defined contribution (DC) retiree health plan to new hires (29 percent vs. 7 percent).... All private institutions offered DC retirement-income plans and only 5 percent offered defined benefit (DB) pension plans. In contrast, 79 percent of public institutions offered both DB and DC plans." (Sibson Consulting)  

District Court Case Shows Difficulty of Administering Windsor Decision
"[If] Illinois does not recognize same-sex marriages, how could the court come to a conclusion that there was no doubt that the women were married under Illinois law? The court addressed this issue in a footnote by noting that, while Illinois does not issue marriage licenses to same-sex couples, Illinois can recognize same-sex marriages solemnized in other jurisdictions, such as Canada, by virtue of its civil union statute. Seemingly, because Illinois' civil union statute provides individuals with the obligations, responsibilities, protections and benefits afforded or recognized by the law of Illinois to spouses, the issue is really one of semantics[.]" [Cozen O'Connor v. Tobits, No. 2:11-cv-00045-CDJ (E.D. Pa. July 29, 2013)] (Bloomberg BNA)  

Federal Life Insurance Rules Preempt State Law
"The Supreme Court recently decided ... that the federal laws governing a life insurance program for federal employees preempt a state equitable remedy. The decision suggests that a state law ownership claim, whether based on domestic relations law (other than one complying with plan terms), contract law, property disposition on death law, a court order, or other equitable principles, is preempted if it attempts to limit the ability of a participant in a plan governed by [ERISA] to choose beneficiaries, or the right of a beneficiary chosen by the participant under the plan terms to receive and keep those designated benefits.... These ERISA and FERS conclusions are supported by the ringing endorsement of [this case] and its reasoning in the Court's majority opinion of United States v. Windsor." (Albert Feuer in Bloomberg BNA Tax Management Weekly Report, via SSRN)  

Is Your Compensation Arrangement Subject to These 409A Rules? [Video]
"The 409A rules do not provide a clear roadmap to determine what compensation arrangements are subject to their regime of requirements and restrictions. [This video] provides a description of the approach you should take to evaluate whether your compensation arrangement should be structured to comply with the 409A rules regarding deferral elections, timing of payments and other requirements." (Benefits Bryan Cave)  

California Superior Court Dismisses Say on Pay Case
"The court found: None of the compensation-related information was rendered materially misleading by omission of information about the financial performance of Symantec or the other companies in the peer group. It was not substantially likely that disclosure of the comparative TSR information would have significantly altered the total mix of information available to the Symantec shareholders. The proxy adequately disclosed what the pay targets were based on, as well as the fact that compensation may be above the positioning benchmark based on consideration of factors other than performance." [Gordon v. Symantec, No. 1-12-CV-231541 (Cal. Super. Ct. for Santa Clara Cty. Aug. 2, 2013)] (Dodd-Frank.com, a blog by Leonard, Street and Deinard)  

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