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September 13, 2013          Get Health & Welfare News  |  Advertise
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[Guidance Overview]

The Role of 'Synthetic Equity' in Determining Ownership Interests for S-Corp ESOPs
"Synthetic equity can only cause the person to be considered a disqualified participant and cannot be counted in the total shares denominator when determining whether another person is a disqualified person.... The determination of the number of shares of synthetic equity to be included in the Section 409(p) calculations is based on the type of synthetic equity. If the synthetic equity is payable in shares of stock of the S corporation, then one share of stock to be transferred would equal one share of synthetic equity." (National Center for Employee Ownership [NCEO])  


DATAIR! Smart By Design -- More Choices -- Less Cost

Sponsored by DATAIR Employee Benefit Systems, Inc.

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Includes Graded, 412(e)(3), Cash Balance, Combo Plans
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Understanding Financial Statement Audits of Employee Benefit Plans (PDF)
36 pages. Excerpt: "While this document addresses audits of financial statements that are prepared for purposes of filing with the [DOL] on Form 5500 ... much of the information may be useful in understanding the processes involved in the audits of plans that file a Form 11-K with the [SEC] ... This advisory describes the roles and responsibilities of individuals involved in the plan's financial reporting and audit process, and the purpose, objectives and benefits of a financial statement audit.... This advisory also discusses audit scope, general audit matters common to all audits, the audit process, the auditor's report, and what you can do to assist in the audit process." (Employee Benefit Plan Audit Quality Center, AICPA)  

When Pension Plans Send Checks to Ex-Employees, the Problems Are Just Starting (PDF)
"Over time, plan sponsors have mailed checks to dozens, hundreds, or even thousands of ex-employees who participated in their plans only to have the checks returned, marked 'address unknown,' or they just remained uncashed. Depending on the size of the plan and how long it has been established, these stale dated checks can represent thousands or even millions of dollars.... Plan sponsors have no option but to continue to invest time and resources trying to communicate with these individuals while, at the same time, keeping detailed records of the balance." (Millennium Trust Co. via Bloomberg BNA)  

CFP Board to Set Guidance on Compensation Disclosure
"Differing definitions of 'fee-only' were hashed out by the Certified Financial Planner Board of Standards Inc., NAPFA and the Financial Planning Association earlier this week and while no conclusion was reached, the CFP Board will have the last word.... It's not exactly a negotiation. The groups agree that their aim is to strengthen consumer protection by defining clearly how an investment adviser is paid. The CFP Board, however, is the body that determines the requirements for financial planning certification." (InvestmentNews)  

Raising the Bar on Target Date Due Diligence: How Improved Transparency Can Help Fiduciaries
"Deeming whether target date fund investments are appropriate for a specific participant population is an arduous and imperfect task, made more complicated by a lack of full transparency. Fiduciaries should question whether the underlying securities of target date funds are appropriate to meet the retirement saving needs of plan participants. However, the question itself raises concern about what it would take to examine the funds in such detail." (Manning & Napier)  


Best Practices in Designing Behavior-Changing Financial Wellness Programs - October 10 Webinar

Sponsored by Lorman and BenefitsLink

Learn how to move the needle in your employees' financial wellness, with best practices from successful employer programs, as well as how to make a significant impact on individual employees through applied behavioral finance techniques. Registration discount for BenefitsLink readers.

Lawsuit Sends CFP Board Fee-Only Debate to Court
"A lawsuit brought by husband-and-wife planners in Florida against the CFP Board has brought the federal court system into the debate over 'fee-only' labeling and consequences -- a topic that the industry has been struggling to define.... The definition of fee-only has long caused controversy, and as the industry changes, the associations that advisors have with multiple organizations make it hard to define proper use guidelines clearly." (Financial Planning)  

Expected Retirement Age Continues to Rise (PDF)
"Twenty-five percent of workers ... say the age at which they expect to retire has changed in the past year, and of those, the vast majority (88 percent) report that their expected retirement age has increased. This means that in 2013, 22 percent of all workers planned to postpone their retirement. In 1991, just 11 percent of workers expected to retire after age 65, but now 36 percent of workers report they expect to wait until after age 65 to retire -- and 7 percent don't plan to retire at all[.]" (Employee Benefit Research Institute [EBRI])  

Borzi Says DC Plan Service Providers Need to Do Better Job on Fee Disclosure
"Many defined contribution service providers are not complying with the letter or even the spirit of fee disclosure regulations, said Phyllis Borzi, assistant secretary of labor and head of [EBSA].... Some vendors give their plan sponsor clients 'a laundry list of services they may provide' and a range of fees for those services, Ms. Borzi said. 'This wasn't what we had in mind.'" (Pensions & Investments)  

ERISA Class Action Filed Against J.P. Morgan Over Defunct American Century Stable Value Fund
"J.P. Morgan Retirement Plan Services, and related entities including J.P. Morgan Chase & Co., have been hit with an ERISA class action by participants who invested in the American Century Stable Asset Fund (ACSAF).... The complaint was filed [in the Southern District of New York] by two plaintiffs who are participants in two different 401(k) plans that offered the ACSAF. The plaintiffs invested in that fund and allege losses recoverable under ERISA because of self-dealing by J.P. Morgan." (FRA Plan Tools, LLC)  

Survey of Financial Experience and Behaviors Among Women (PDF)
"Women under 35 have well-defined goals for their financial future. Although they frequently identify themselves as investment beginners and are less likely to say they feel very well prepared to make wise financial decisions than female baby boomers, they are the most likely to see financial decision making as their own responsibility, and they feel empowered to participate in or make decisions on their own. They also show a strong interest in receiving financial advice. Yet, they are not far from baby-boomer women in their perceptions about retirement readiness, with both groups saying they are way behind or haven't started planning for retirement." (Prudential Retirement)  

In Canada, Gap Widens Between Public and Private Pensions (PDF)
"80% of Canadians are employed in the private sector -- two-thirds of them do not have an employer-sponsored registered pension plan. 20% work in the public sector and 87% of them have a workplace pension plan ... The average public sector employee retires at 61 years of age, while a private sector worker retires at 63 and a business owner at 66. To replace 70% of their working income in retirement, a federal government worker currently contributes about 7% of their salary, while a private sector worker would have to contribute up to 21% of their salary." (Canadian Federation of Independent Business [CFIB])  

Poland May Ban Pension Funds from Investing in Foreign Bonds
"Poland may ban private pension funds from investing in foreign sovereign bonds, a deputy minister said on Friday, another step in a pensions overhaul that has bruised Poland's image with investors.... Last week, Poland announced plans to transfer 121 billion zlotys ($38 billion) in local bonds held by private pension funds to the state and write them off to curb the public debt and lower the general government deficit.... By preventing the funds from investing in fixed-income products other than corporate bonds, analysts said their portfolios could become more volatile which would limit the number of Poles keeping their holdings in private hands." (Reuters)  

The Retirement Services Industry Evolution to Smarter Operations
"In the past, the servicing of accounts was a key ingredient to winning business. But with increasing complexity of addressing new regulations and the need to attract and retain talented employees, providers find themselves more open to considering outsourcing than ever before. Increased focus on fee transparency from recent fee disclosure legislation, as well as the need to generate new revenue and product offerings, has prompted providers to find new ways to reduce a company's cost of service." (William Byerly for SunGard)  


Poor Pension Management Helped Land Detroit in the Poorhouse
"One billion dollars. That's how much, over 23 years, one of Detroit's pension funds paid in bonuses to retirees.... [W]ithout question, the bonuses paint a clear picture of the reckless management that led the general pension fund (which covers employees other than cops and firefighters) to this precarious situation, and have increased the burden on city taxpayers, who must make up for the fund's screw-ups." (Detroit Free Press)  


Gotbaum Says Lump-Sum Cash-Outs Are Like Cigarettes: Legal But Bad for You
"[PBGC Director Joshua Gotbaum] concludes that more government regulation is needed to prevent you from making the 'bad' lump sum choice. This thinking appears to be shared by representatives of the [DOL] who continue their push to make it more difficult for people to take 'bad' lump sums from defined contribution plans.... Never mind that recent research ... questions the supposed superiority of the annuity choice." (Kenneth A. Steiner, FSA Retired)  

Benefits in General; Executive Compensation

Accounting for Stock Compensation Under FASB ASC Topic 718 (PDF)
"[FASB ASC] Topic 718 creates a more 'level playing field' for equity incentive design that is expected to result in the increased prevalence of full-value and performance-vesting awards, and a corresponding decline in plain-vanilla, tax qualified, and reload stock options, and employee stock purchase plans. This paper summarizes the most pertinent provisions of accounting for stock compensation under Topic 718 and other related FASB and [SEC] Topics." (Frederic W. Cook & Co., Inc.)  

[Guidance Overview]

How the Supreme Court's DOMA Decision Impacts Employee Benefit Plans
"[E]mployers will need to review their various employee benefits (including retirement, health, and fringe benefits) and payroll practices to comply with the new law, to treat same sex spouses as entitled to various spousal protections. A brief look at the key provisions for retirement, health and fringe benefits is set forth in the attached article, along with a review of the appropriate action steps employers (and plan administrators) might take as we await pending guidance from the regulatory agencies." [5-page article includes detailed list of specific effects.] (Groom Law Group)  

TRI-AD Newsletter, September 2013
Articles include: IRS Guidance on the DOMA Court Ruling and the Impact on Benefit Plans; Department of Labor Clarified DOMA Ruling's Impact on FMLA; HIPAA Omnibus Final Rule; Update on Summary of Benefits and Coverage (SBC) for 2014; and Final Regulations Published by IRS for Individual Health Insurance Mandate. (TRI-AD)  

Swedish Retirees Spend More Freely
"New research comparing tight-fisted Americans with more free-spending Swedes found that U.S. retirees tend to hold on to their savings, because they face more risk of having to pay high out-of-pocket costs in the future for their medical and long-term care. U.S. households, by the time they're in their late 80s, have tapped only about one-third of the net worth they held in their late 60s, according to the study. Swedish households in their late 80s have spent more than three-fourths." (Center for Retirement Research at Boston College)  

FASB Considers But Rejects Providing Additional Guidance Regarding the Effect of Clawback Provisions on Equity Compensation Awards (PDF)
"On September 4, 2013 the Financial Accounting Standards Board (FASB) considered whether it should add to its agenda a project to provide guidance on whether the presence of a discretionary clawback feature delays the grant date for equity compensation awards. The grant date is important because it is on that date that compensation cost is measured for equity compensation awards. The FASB decided not to undertake the project at this time because they felt sufficient guidance already exists under Accounting Standards Codification (ASC) Topic 718, which is the accounting standard for equity compensation awards." (Frederic W. Cook & Co., Inc.)  

When Do Shareholders Care About CEO Pay?
"[Results of] two experiments simulating say-on-pay votes ... suggest that investors value shareholder return over CEO pay. As long as company performance was above average, shareholders supported CEO pay regardless of whether it was high or low. However, when the company underperformed relative to the market, then shareholders considered CEO pay, voting 'no' under circumstances when CEO pay was high and company performance was low. The findings suggest that when the probability of a 'no' vote is high (when the recommended CEO pay is high and the firm is underperforming), the board should either reconsider the recommended pay or take steps to mitigate a no vote by educating shareholders on the rationale behind the CEO's pay." (The Harvard Law School Forum on Corporate Governance and Financial Regulation)  

Press Releases

Blue Cross To Offer Marketplace Plans In Every Louisiana Parish
Blue Cross and Blue Shield of Louisiana

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