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August 15, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Retirement Services Manager
for District of Columbia Retirement Board in DC

Senior Operations Leader - Retirement Plan Services (1301925)
for Manulife Financial in MA

Benefit Advocate Member Services Specialist/Benefits Administrator for Client Services
for Gallagher Benefit Services in TX

Defined Contribution Pension Plan Administrator
for The Angell Pension Group, Inc. in ANY STATE

Call Center Manager
for ASPire Financial Services LLC in FL

Distribution Supervisor
for Nova 401(k) Associates in TX

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401(k) Investments Harder to Understand Than Health Care Benefits
"[S]aving in a 401(k) is not enough to ensure confidence for many participants.... More than half (52%) find explanations of their 401(k) investments more confusing than explanations of their health care benefits (48%). Fifty-seven percent wish there was an easier way to figure out how to choose the right 401(k) investments. Nearly half (46%) don't feel they know what their best investment options are and one-third (34%) feel a lot of stress over correctly allocating their 401(k) dollars.... 61 percent want personalized investment advice for their 401(k)." (Charles Schwab)  


What's the Impact of the DOMA Decision on Qualified Plans?

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ERISA Advisory Council to Meet September 23, 2013
"[T]he 168th open meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans [ERISA Advisory Council] will be held as a teleconference on September 23, 2013.... The purpose of the open meeting is to discuss reports/recommendations for the Secretary of Labor on the issues of (1) Successful Retirement Plan Communications for Various Population Segments, (2) Locating Missing and Lost Participants, and (3) Private Sector Pension De-risking and Participant Protections. Descriptions of these topics are available on the Advisory Council page of the EBSA Web site." (Employee Benefits Security Administration (EBSA), U.S. Department of Labor)  

How America Saves: Vanguard 2012 DC Plan Data
"In 2012, Vanguard's plan-weighted participation rate was 76% and has remained basically unchanged since 2003. Across the universe of Vanguard participants, 68% of eligible employees are enrolled in their employer's voluntary savings program. This broader measure of plan participation has begun a modest rise in recent years. This increase likely reflects the adoption of automatic enrollment by larger plan sponsors, predominantly for new hires." (Vanguard)  

Indexing in Defined Contribution Plans, 2004-2012
"[T]he composition of DC plan menus is being transformed by the rapid adoption of target-date strategies. Moreover, the composition of a DC plan's active/passive asset mix and its investment cost structure are being driven by the choice of active versus passive TDFs. Sponsors seeking to lower aggregate plan costs and reduce participants' active risk exposure should consider choosing a passive target-date series. Sponsors choosing active target-date strategies should weigh the long- term effect of that decision on aggregate plan investment costs and aggregate active risk exposure among participants." (Vanguard)  

Social Security Is the Only Reason Most Americans Can Afford to Retire
"Though Americans are increasingly turning to savings in 401(k)-type accounts, Social Security remains the most reliable and equitable system of retirement savings. The expected stream of Social Security benefits for a household at the median is not very much less than for a household in the top 10 percent -- in 2008, the median household age 65-69 had $315,300 of Social Security wealth, while a household at the 90th percentile had $643,100, a little more than twice as much." (Economic Policy Institute)  


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Social Security -- Modest Expectations, an Important Reality (PDF)
"[W]orkers today are less likely to expect Social Security income in retirement (77 percent) than today's retirees are to report having this income (93 percent). They are also half as likely to expect Social Security to be a major share of their income in retirement (33 percent) as retirees are to say that Social Security is a major share of their income (70 percent)." (Employee Benefits Research Institute (EBRI))  

Promises to Keep: Ensuring the Payment of Americans' Pension Benefits in the Wake of the Great Recession
"[I]n a perfect storm, these problems and changes occur just as record numbers of baby boomers reach retirement age, raising the larger question of whether Americans are adequately saving for their retirements. [This article examines] the problem of designing a pension plan within the context of our larger public policy of encouraging workers to save for retirement.... [The article includes a discussion of] policy changes that might be made to improve our pension system and to help ensure that workers receive not only the pension benefits they were promised, but also adequate benefits to sustain them comfortably during their retirement." (Washburn Law Journal)  

Private Equity Fund Liability for Unfunded Portfolio Company Pensions
"[T]he court did not speak to whether the 'brother-sister' controlled group rules could be used to find an unsuspecting entity jointly liable for pension or other tax obligations.... The brother-sister rules could spell trouble for investors where the same five or fewer individuals, estates or trusts invest in two or more companies or funds in similar or in the same percentages." (Mintz Levin)  

Pension Woes Hit Trading in Chicago's Bonds
"Chicago bond prices are falling in the U.S. municipal bond market as investors fret about the city's growing public pension burden.... A financial analysis released by Chicago Mayor Rahm Emanuel on July 31 projects the city's budget gap of $338.7 million for fiscal 2014 will climb to nearly $995 million in fiscal 2015 and $1.15 billion in fiscal 2016. The city's pension payments are expected to grow from $479.5 million in 2014 ... to about $1.07 billion in 2015 and $1.11 billion in 2016[.]" (Reuters)  

Pensions, Debt May Have More Weight in Moody's U.S. Muni Ratings
"The proposed changes would reflect just how much pension liabilities affect finances of local governments ... Currently, debt and pensions make up about 10 percent of a Moody's rating of a local government's general obligation bonds, which are repaid with tax revenues and have the government's full faith and credit. Under the proposed change, the weighting of debt and pensions would rise to 20 percent. Moody's said ... that the greater emphasis also recognizes that both pensioners and debtholders have 'enforceable claims on the resources of local governments.'" (Reuters)  

DrinkerBiddle ERISA Newsletter for Retirement Plan Service Providers, August 2013 (PDF)
Articles include: [1] SEC Staff Examination Priorities -- Are There Changes Ahead for Unregistered Plan Recordkeepers? [2] 408(b)(2) Change Disclosures; [3] 'Closing' Thoughts: Practical Tips for Service Providers in Winding Up a DOL Investigation; [4] Retirement Income Projections: The DOL's Notice; and [5] Fiduciary Obligation to Select Appropriate Share Classes. (DrinkerBiddle)  

Beware the 'We're Number One' Trap
"All advisers want favorable publicity, but these so-called 'best of the best' lists raise a number of potential problems.... 'Barron's' disclosure that only those advisors who pay a fee are eligible for inclusion on their lists raises a number of issues for advisors named to such lists.... The [Investment Advisers] Act and the rules created thereunder all stress one point -- full disclosure of all material facts to clients. An advisor simply cannot say that they are a 'Barron's Advisor' of that they are a 'Top 100 Advisor' without making the disclosures required by the [SEC's 1998] Dalbar no-action letter." (The Prudent Investment Adviser Rules)  


Text of SPARK Request to EBSA for Guidance Regarding Implementation of DOMA Decision for Retirement Plans (PDF)
"Following the State of Celebration approach will simplify plan administration by eliminating the need for plan sponsors to change a participant's marital status, as well as the plan features, rights and notices that such married participants are entitled to, if they move to a different state.... We are concerned that following the State of Domicile rule will confuse participants and their spouses, and unintentionally create potentially detrimental traps for unwary individuals." (The SPARK Institute)  


Why There Will Never Be A Successful Financial Advisor Review Site
"'Review' sites of all types rely on a relatively smaller percentage of actual customers/users to leave reviews.... [M]ost advisors will never have more than 1-3 client reviews, which isn't enough review quantity to be credible.... [A]dvisors would not be permitted to direct clients to review sites, as soliciting and referencing testimonials is a violation of industry regulations.... [It] would be almost impossible for an advisor to ever pay for a review site profile without being a violation of the testimonial rules.... [U]ntil the regulators change the rules on testimonials, these advisor review sites are all Dead On Arrival." (Michael Kitces in Nerd's Eye View)  


Guam Must Fix Retirement Debacle; Help Government Employees Prepare
"The old retirement plan, also known as the defined benefit plan, which was overly generous and underfunded, created an unfunded liability of hundreds of millions of dollars. As a result, 23.3 percent of the 28.3 percent contribution rate paid by the government goes toward paying off the liability. Thus, defined contribution members are left with the performance of their 5-percent base salary contribution and the 5 percent matching GovGuam contribution. This isn't enough. It's imperative that elected officials fix this inequity to defined contribution employees." (Guampdn.com)  


How Much Can I Afford to Spend in Retirement? Renaming the Outcomes of a Monte Carlo Retirement Projection
"When explaining outcomes of a Monte Carlo retirement projection for a safe withdrawal rate strategy, Mr. Kitces suggests replacing the phrase 'probability of failure' with 'probability of a mid-course correction' and replacing 'probability of success' with 'probability of accumulating excess assets.' He implies that this 'framing' will help facilitate good decisions. Does renaming the outcomes of such a projection, as advocated by Mr. Kitces, improve the safe withdrawal rate strategy or is he just putting lipstick on a pig?" (Kenneth A. Steiner, FSA Retired)  


The Yale Law Professor Letters: Data and Approach Deserve a Failing Grade (PDF)
"The benchmark groups are poorly constructed, the fee analysis is incorrect and they miss the importance of cost-drivers and value-factors in their analysis.... [T]his makes the letters inappropriate for decision making from a fiduciary standpoint.... [B]eing a fiduciary is the highest duty known under the law. In that regard, any fiduciary initiative to review plan fees requires the use of data and methods that ensure results are accurate and complete." (Fiduciary Benchmarks)  

Benefits in General; Executive Compensation

[Official Guidance]

Defense Department to Extend Benefits to Same-Sex Spouses of Military Personnel (PDF)
"The Department will construe the words 'spouse' and 'marriage' to include same-sex spouses and marriages, and the Department will work to make the same benefits available to all military spouses ... [A]ll spousal and family benefits, including identification cards, will be made available to same-sex spouses no later than September 3, 2013." (U.S. Secretary of Defense)  

[Guidance Overview]

New York Regs Limiting the Use of State Funds for Administrative Expenses and Executive Compensation Go Into Effect
"[A] 'covered executive' includes directors, trustees, managing partners, officers and key employees, all as defined in the Form 990 instructions, whose compensation in whole or in part is an administrative expense. This limitation on compensation for 'covered executives' applies to covered executives of service providers as well as covered executives of a related organization with which a service provider contracts for administrative program services, if at least 30 percent of that executive's compensation is derived from state funding from the service provider." (Proskauer Rose LLP)  

Employers Using Technology to Enhance Management of Employee Benefits Programs
"Fifty-three percent of those using an administrative platform say it is integrated for all employer-paid and voluntary benefits, 21% have only employer-paid benefits on the platform.... Fifty-two percent of employers have an enrollment platform and more than half (59%) are integrated for all employer-paid and voluntary products. Integration is most common among companies with more than 10,000 employees at 73%." (Prudential)  

Changes in Insurance Brokerage a Cautionary Tale for Mutual Fund Wholesalers
"'Creative destruction' is coming to the $2.8 trillion health care industry, changing everything from eligibility requirements to coverage options, but the changes also are fundamentally affecting a small, but power group unknown to consumers: insurance brokers. However, as this small, but lucrative profession of insurance brokers undergoes major changes, they also may indicate the future of another group of lesser-known professionals -- mutual fund wholesalers[.]" (Paladin Research & Registry)  

Did The Supreme Court Flunk Constitutional Law When It Permitted Discretionary Review Of Insured ERISA Benefits Cases? (PDF)
"Beginning with Firestone Tire & Rubber Co. v. Bruch, and its affirmance in Metropolitan Life Ins. Co. v. Glenn, and most recently in Conkright v. Frommert, the Supreme Court permitted District Courts to treat insured ERISA welfare benefits cases as summary review proceedings. In each case, the court focused on trust law, but never addressed whether the regulatory scheme it set up by these cases satisfies the requirements of Article III of the Constitution. The authors argue that discretionary review, without a full trial on the merits, violates Article III." (Health and Disability & Life Insurance Law Committees, American Bar Association)  

Text of DOL Amicus Brief to Sixth Circuit Supporting Application of Section 510 to Unsolicited Employee Inquiries
"The district court aptly recognized that section 510's application to 'any inquiry' includes both employee- and employer-initiated inquiries, but stated that employee-initiated inquiry must include a question for section 510 to apply -- so that inquiries in the form of a complaint do not trigger the statute's protections. Such hair-splitting is unsupported by the statute and does a disservice to the purposes of anti-retaliation provisions in general and section 510 in particular." (Employee Benefits Security Administration (EBSA), U.S. Department of Labor)  

DOMA Decision Answers One Question But Raises Many More (PDF)
"[P]lan sponsors may want to postpone actual changes to documents until the IRS and other regulatory agencies provide guidance. In addition to identifying which state's (state of celebration, residence, or work) law determines marital status, there is also the big question of the effective date of this change, as it could be retroactive to the enactment of DOMA in 1996, which preceded all of the state laws allowing or recognizing same-sex marriages. The first state to legalize same-sex marriages was Massachusetts in 2004." (Prudential)  

Federal District Court in Ohio Orders Recognition of Same-Gender Marriage Legally Performed Outside Ohio (PDF)
"Throughout Ohio's history, Ohio law has been clear: a marriage solemnized outside of Ohio is valid in Ohio if it is valid where solemnized.... How then can Ohio, especially given the historical status of Ohio law, single out same sex marriages as ones it will not recognize? The short answer is that Ohio cannot ...... By treating lawful same sex marriages differently than it treats lawful opposite sex marriages (e.g. , marriages of first cousins and marriages of minors), Ohio law, as applied to these Plaintiffs, likely violates the United States Constitution[.]" (U.S. District Court, Western District of Oklahoma)  

North American Employers Not Expecting to Fully Fund Annual Bonuses in 2013
"North American employers do not expect to fully fund their annual employee bonuses this year, marking the third consecutive year and seventh time since 2005 that their bonus pools for annual incentives will be below target ... Additionally, one in four employers will pay bonuses to workers who fail to meet performance expectations, raising questions as to whether employers are receiving a good return on their investment in these plans." (Towers Watson)  

Pay-Wise, CFOs Gain a Bit on Their Bosses
"Total direct compensation for CFOs ... grew by just 1.4 percent last year, compared to 7.5 percent in 2011 and 20 percent in 2010. CEO pay, which had climbed by 3.6 percent last year, actually declined by 0.3 percent in 2012. CFOs fared all right in salary, which rose 3 percent, just a half-point less than the prior year and six times the growth CEOs saw. But the value of long-term incentives fell off a cliff for both groups. That value, which had grown about 10 percent for both roles in 2011, grew only 2 percent last year for CFOs and not at all (0 percent) for their bosses." (CFO)  

Press Releases

ACOPA Announces 2013-2014 Leadership
American College of Pension Actuaries (ACOPA)

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