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September 27, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

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

Integrated Marketing Retirement Product Development Manager
ASPire Financial Services LLC
in FL

Part-Time Client Care Representative
The Retirement Plan Company, LLC
in ANY STATE

Retirement Service Specialist
Insperity
in TX

401(k) Administrator
Consulting Actuarial Group, Inc.
in IL

Pension and Benefits Specialist
City of Tacoma
in WA

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Seventh Circuit Refines Applicability of Class Action Device in Defined Contribution Challenge
"[The court] rejected the defendants? challenge to the constitutional standing of the sole named plaintiff who was invested in the stable value fund -- and whose account outperformed the index he selected -- holding that there could be harm aside from underperformance with the index. Turning to the class issues, the appellate court held that simply allowing a class definition that makes reference to underperformance of a fund to an index is not tantamount to accepting that the index is the proper measure of harm or breach." [Abbott v. Lockheed Martin, No. 12-3736 (7th Cir. Aug. 7, 2013)] (Goodwin Procter)  


[Advert.]

Don't miss the ASPPA 2013 Annual Conference at Natl. Harbor, MD!

Sponsored by ASPPA

Attend ASPPA's Annual Conference to inform Congress that they can't overlook pension issues! Registration includes: visits to Capitol Hill, 70+ sessions on topics shaping the industry, networking with 1,500+ retirement plan professionals, and more!



Fidelity Investments Changes How It Manages Its $170 Billion of Target Date Funds
"Fidelity explains the surprising shift in its long-held conservative allocation by saying it reflects deep research into the reams of data at its fingertips -- not only as the biggest player in target date funds with $175 billion of assets but also as the 401(k) king. This includes findings that investors have more of a stomach for risk than realized based on 2008 behaviors and that investors start investing sooner and live longer than previously thought." (RIABiz)  

Pension De-Risking: Recent Developments (PDF)
18 slides from presentation to ABA Section of Taxation 2013 Joint Fall CLE Meeting. Excerpt: "ERISA Advisory Council held hearings on June 5 and August 29, 2013, on private sector pension de-risking and participant protections. Certain witnesses expressed policy concerns about appropriateness of lump sum offers to retirees, and concerns about distributions of annuity contracts to settle pension obligations. But other witnesses explained value of lump sum option for retirees' financial planning. PBGC Director Joshua Gotbaum testified that there is no real difference in risk between annuity paid by insurance company with state guarantees, and annuity paid by pension plan insured by PBGC." (Ivins, Phillips & Barker)  

California Teacher Pension Gap Poses High Risk, Auditor Says
"The ratio of funding to obligations for the second-biggest U.S. pension fell to 67 percent in 2012 from 98 percent in 2001 ... California now pays about 5 percent of teacher payroll into CalSTRS. School districts provide 8.25 percent of payroll, while teachers and other employees surrender 8 percent of their pay. The fund's board last year lowered its assumed rate of return on investments to 7.5 percent from 7.75 percent." (Bloomberg BusinessWeek)  

Chicago's Pension Woes Worse Than Detroit's
"Among the 50 local governments with the most debt, the City of Chicago has the most ground to make up on its pensions. The city's pension liabilities were equal to 678 percent of its revenues as of 2011, and Cook County (which contains Chicago and some of its suburbs) comes in next, with pension liabilities that equal nearly 382 percent of its revenue." (U.S.News & World Report)  


[Advert.]

Network, Learn and Sell at the SPARK Forum Retirement Industry Conference

Sponsored by SPARK

Join top record keepers, asset managers, TPAs, advisors, marketing and sales executives for unequaled educational and networking opportunities. Gain insights into the latest market trends, business strategies, regulatory and legislative issues, and product developments.



Two More Agencies Seek to Leave Kentucky Pension System
"Two more quasi-governmental agencies have filed suit to pull out of the state's troubled retirement system, arguing that they should have never been allowed to join the pension plan more than a decade ago.... [The County Employees Retirement System] is the largest of several pension plans at Kentucky Retirement Systems -- the pension program for state and local workers that has $17 billion in unfunded liabilities and administers one of the worst-funded plans in the nation." (The Courier-Journal)  

Kentucky's Successful Public Pension Reform
"In 2013, following a legislative stalemate and facing growing public-sector pension fund liabilities, Kentucky lawmakers passed comprehensive legislation that is projected to improve the fiscal health of the pension system by billions of dollars ... These reforms came about through an open, deliberative process led by a task force of House and Senate legislators from both sides of the aisle.... Key provisions included a commitment to pay down the commonwealth's existing pension debt and policies to keep future costs from growing unmanageably." (Pew Center on the States)  

Why Defined Benefit Plans Are Still Relevant (PDF)
"Employers are always looking for ways to retain long-service employees, and the promise of a secure retirement can be a key to keeping the experienced employees from moving to another employer. A good retirement plan can also be the difference for attracting experienced candidates. DB plans also help stretch the value of retirement dollars. Numerous studies show that, on average, corporate DB plan investment returns exceed those for DC plans." (Milliman)  

Beneficiary Designation FAQs
"Is spousal consent required if a beneficiary other than a spouse is named on an IRA? ... ERISA's requirement that written spousal consent be provided when a person other than the spouse is named as beneficiary applies only to qualified plans and not to IRAs.... Note that certain states have community property laws that may require the spouse to be the beneficiary of an IRA unless the spouse consents in writing to the naming of another beneficiary." (McKay Hochman)  

Are You Covered? (PDF)
"The last several [service provider] agreements that [the authors] have reviewed from bundled providers indicated that coverage testing was not a service they perform. Should you care?" (Ferenczy + Paul)  

Auditors' Report Questions Fiduciary Responsibility of Detroit Pension Board of Trustees
"An investigative report from the city's internal watchdogs found Detroit's municipal pensions exceeded their legal limits in real-estate investments and awarded retirees in some years more than a 20% return on their annuities even as the funds lost value.... The [report] could provide ammunition for [Detroit Emergency Manager Kevyn] Orr to justify removing pension board trustees or appointing a single trustee to run a fund. Mr. Orr has also indicated he is exploring a move to a 401(k)-style retirement plan to replace a traditional pension for active workers, possibly as soon as 2014." (The Wall Street Journal; subscription may be required)  

Dismal Decade Offers Cautionary Lessons
"Retirees need to develop a sound retirement income strategy for a retirement that may last 30 years or longer. However, as the recent decade of 2000 through 2010 has shown, the stock market is capable of upending even the best-laid strategies." (T. Rowe Price)  

U.K. Watchdog Lambasts Pension Fees
"A scathing report into the United Kingdom's 275-billion GBP ($441 billion) defined contribution pension sector by national watchdog the Office of Fair Trading that lambasts high charges and complexity could have gone further say modern, low-cost pension providers. The OFT has agreed a range of reforms to the workplace pension market after its study found millions of savers weren't getting value for money." (top1000funds.com)  

[Opinion]

Thoughts on 'Looting the Pension Funds'
"The one consistent fact that holds true across all of the competing narratives, however, is this: public pensions are in a whole lot of trouble, and truly are, as a general rule, facing a fiscal crisis. The narratives vary on who is to blame for this, on how to fix it, and who should bear the costs of fixing it, but they don't vary on that basic fact.... [W]hat's done is done, and the question becomes what to do now: absent some sort of massive federal bailout of underfunded public pension plans, the choices become reduce benefits below what was promised or tax the living heck out of current taxpayers to make up the difference." (Stephen Rosenberg of The McCormack Firm, LLC)  

[Opinion]

Looting the Pension Funds?
"[Matt Taibbi] brings up excellent points but he fails to delve deeper into a topic that is far more complex than his article [in Rolling Stone] leads you to believe. He points fingers at 'ambitious' politicians who fund 'greedy' hedge fund and private equity managers in exchange for political contributions, but fails to see the bigger problem is the lack of proper pension governance which has literally crushed the U.S. public pension system over the last 30 years. And when you focus on governance, you will quickly see that everyone is to blame for the great retirement heist: governments, unions, pension funds, corporations, and all the financial intermediaries in between." (Pension Pulse)  

[Opinion]

DOL May Require Retirement Income Estimates to Be Provided to Participants
"[P]lan sponsors and providers should have flexibility to present a variety of income projections, as long as they are reasonable and based on generally accepted investment theories.... [T]he requirement for plan sponsors to estimate an annuity income stream based on current account amounts (in addition to projected account amounts) does little to help most participants[.]" (Vanguard)  

[Opinion]

How to Rid Your 401(k) Plan of Costly Conflicts
"According to a recent study, mutual fund companies that act as trustees for plans tend to favor their own funds.... Ultimately, this conflict is an albatross for 401(k) investors.... How much return is sacrificed by these conflicts? The study says from 3 to 3.6 percent annually. And that's before sales charges and middlemen fees are subtracted.... There's no reason why 401(k)s have to maintain these embedded conflicts other than to perpetuate Wall Street's greed." (Forbes)  

Benefits in General; Executive Compensation

Text of Initial 60-Day Report on the City of Detroit Employee Benefit Programs (PDF)
"[We] uncovered several inconsistencies in the General Retirement System, such as questionable interest rates applied to annuities, the probability of bonuses being included in annuity account holders balances and ultimately included in their refund/disbursement, and overtime pay included in their average final compensation calculation.... [We] question the wisdom of these policies along with the fiduciary responsibility of the Pension Board of Trustees.... Our review of the City's administration of employee benefits for health care underscores published reports, in that the process is poorly documented, highly transactional and extremely labor intensive." (City of Detroit Auditor General and Inspector General)  

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