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October 11, 2013          Get Health & Welfare News  |  Advertise
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[Official Guidance]

Information for IRS Approved Continuing Education Providers (PDF)
"You must renew your provider status if you intend to offer continuing education in 2014 to Enrolled Agents and Enrolled Retirement Plan Agents.... You don't have to add all of your 2014 programs at the time of renewal, but you must submit at least one program. You can add other programs throughout the year.... If you do not renew by December 31, 2013, you will not be allowed to offer IRS CE programs or market yourself as an IRS-approved CE provider." (Internal Revenue Service)  


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!

[Guidance Overview]

How to Pay IRA Expenses
"Payment of the management fees for an IRA presents planning opportunities -- and pitfalls.... the IRA owner (or beneficiary, in the case of an inherited IRA) should carefully consider which source of funds is most advantageous. He or she needs to ask: Is my IRA too big (so I should try to shrink it in legal and tax-advantaged ways)? Or is it too small (so I should try to grow it in every legal way possible)? This is one case in which size does matter." (Natalie Choate for Morningstar Advisor)  

[Guidance Overview]

IRS Waives 60-Day Rollover Requirement Where Gambling Addict Withdrew IRA Funds Without Knowledge or Consent of IRA Owner
"The IRS has waived the 60-day IRA rollover rule for a spouse whose husband withdrew funds from her individual retirement account (IRA) without her knowledge or consent, according to an IRS letter ruling.... The husband told the IRA trustee that he was acting in his capacity as his wife's power of attorney and that he needed the funds for his wife's medical expenses. After discovering that her husband had a gambling problem, she revoked the power of attorney she had given to her husband." (Wolters Kluwer Law & Business)  

[Guidance Overview]

IRS Approved Continuing Education Providers Top 10 Review Findings (PDF)
"In April of 2013, IRS began conducting provider reviews. We plan to conduct a review of each provider at least every three years... [S]ome providers are including the Enrolled Agent (EA) audience for programs specifically geared towards Enrolled Retirement Plan Agents (ERPA).... Programs should include topics such as: plan document requirements, plan operation and administration, filing requirements (Forms 5500 series and 5300), and IRS programs relating to employee plans[.]" (Internal Revenue Service)  

2014 401(k) Retirement Plan Contribution Limits
"The IRS generally releases the official 401k plan limit numbers for the coming year during the third week of October... [These] projections ... are from multiple sources that are deemed reliable, they are based on the IRS formula, and all sources agree on the probable limits.... Due to continued low inflation and how the increments work, plan limits for 2014 (with several exceptions) are projected to remain unchanged from the 2013 level." (401kHelpCenter.com)  

Evaluation of Target-Date Glide Paths Within Defined Contribution Plans
"Two employers that each offer a DC plan with similar participant demographics and employee benefits may quite rationally select different glide paths because of different preferences.... [H]igher-equity glide paths offer greater efficacy for lifetime income replacement, while lower-equity glide paths offer greater efficacy for stable account balances with lower risk of large capital losses. Directionally, these conclusions hold over a wide range of plan characteristics and assumptions, although the relative magnitude of the trade-off depends on characteristics unique to each plan." (Richard K. Fullmer and James A. Tzitzouris Jr. via SSRN)  

Custom Target Date Funds: Assessing the Best Fit (PDF)
"[T]he wide variation in TDF investment strategies, underlying risk exposure and costs present challenges for Plan Sponsors in performing their ERISA fiduciary responsibilities. Because of those differences, unwary Plan Sponsors could be exposed to potential liability. This paper examines ways in which that risk can be minimized through the use of Custom Target Date Funds (Custom TDFs)." [Supplements include: Guidelines for Prudently Selecting and Monitoring Custom TDFs; Qualified Default Investment Alternatives; Participant Disclosure Rules for Custom TDFs; an Advisor Action List; and Sample Investment Policy Statement Provisions.] (DrinkerBiddle)  

Think Twice Before Investing in MLPs in Retirement Accounts
"Master Limited Partnerships (MLPs) have grown extremely popular in this low-rate environment, as investors seek yield, diversification and steady returns.... MLP income could be considered unrelated business taxable income (UBTI), and investors in retirement accounts will have to pay taxes if UBTI tops $1,000 in a year." (TheStreet.com)  

How to Cope with Dreaded Retirement Distributions
"Although RMDs are calculated for each IRA you own, you don't have to take a separate distribution from every account. You could total up your RMDs and take it all from one IRA -- one that is a poor performer, perhaps, or one that will help you rebalance an account that might be overweight in equities against your overall allocation plan.... If you're over age 70.5, options for minimizing RMDs are few. One that is available -- at least this year ...lets you make cash donations up to $100,000 to IRS-approved public charities direct from an IRA.... The gifts can be counted toward an RMD and are excluded from your taxable income." (Reuters)  

Equivalent Cost for Equivalent Benefits: Primary DC Plans in the Public Sector (PDF)
"The sweeping generalization that defined benefit (DB) plan designs provide benefits at lower cost to public employers than could a DC structure is simply incorrect.... Features producing the purported DB cost advantage, such as annuitized benefit payments and low-fee, professional asset management, can easily be incorporated into the DC model, and in fact, are inherent to the best-practice, risk- managed DC design. In practice, a large number of DC plans already exhibit these features, in particular, 401(a) and 403(b) plans sponsored by public and private colleges and universities." (TIAA-CREF Institute)  

Ohio Supreme Court Orders Rewrite of Pension Referendum, Despite Early Voting
"The ballot currently states [Cincinnati] could be forced to raise taxes or cut services to meet the requirements of the proposed amendment if passed, which was upheld. But the court required new language describing the alternative plan that would be required if the amendment passes be put on the ballot.... [The] court said that 'the board abused its discretion by adopting ballot language that omits two key provisions of the proposed charter amendment.'" (Cincinnati.com)  

IRS Releases 2013 Form 945
"The IRS has released the 2013 Form 945, Annual Return of Withheld Federal Income Tax, and the detailed instructions.... [T]his Form 945 may be completed electronically beginning January 2014. Form 945 is used by entities that have remitted income tax withholding amounts from distributions from employer-sponsored retirement plans and IRAs." (Ascensus)  

The Post-65 Shift in Household Income Sources (PDF)
"For the lowest earners, the predominance of a single ... component remains constant -- but they also experience a fundamental shift in income composition in the sense that their primary source of income changes from labor to Social Security. While this suggests that the progressivity of Social Security works as intended, it also shows that the lowest earners are heavily reliant on Social Security. As for upper-income households, the analysis suggests that they should be prepared to make more adjustments, either spending or other lifestyle adjustments, than the bottom-income group as they cross the age 65 threshold." (Employee Benefit Research Institute [EBRI])  

'Extreme' IRA Allocations More Likely Among Younger Workers with Smaller Balances (PDF)
"Above age 25, the percentage with more than 90 percent in money/cash equivalent funds decreased with age.... [W]hile 37.2 percent of those with account balances of $10,000-$24,999 had 90 percent or more of their assets invested in equities, only about 1 in 10 of those with account balances of $250,000 or more did." (Employee Benefit Research Institute [EBRI])  

Vanguard May Curb 401(k) Trading by Southwest Pilots
"Vanguard Group is ... threatening to prevent Southwest Airlines pilots who subscribe to a monthly newsletter called 401k Maximizer from purchasing the three Vanguard funds in their union's retirement plan, according to officials at Vanguard, the pilots union and the newsletter. Fewer than 1,000 of the approximately 8,000 pilots in the Southwest Airlines Pilots' Association $2.6 billion 401(k) retirement plan subscribe to Maximizer, but they can generate $30 million to $45 million of trades in each fund in the week after the newsletter changes its investment model[.]" (Reuters)  

Vanguard Could Have the Edge in Active ETF Battle
"Vanguard, the largest mutual fund company and third-largest ETF firm, is one of the many companies in midst of applying for approval from the [SEC] to launch actively managed ETFs.... Actively managed Vanguard ETFs may seem like a stretch, considering that the company's rapid rise to the top of the asset management company food chain has come on the back of its index mutual funds and ETFs." (InvestmentNews)  

SEC to Get Serious on Small Violations
"For advisers, the detection of small infractions could spur interest in whether there are more serious violations, such as misleading registration information, inaccurate portrayals of investment performance and philosophy and improper fee disclosure ... For brokers, it could be net capital violations or selling away. 'A logical conclusion from reading [SEC Chairman Mary Jo White's] speech is that the deficiency letter would likely be a blueprint for follow-up by enforcement,' said [Eugene Goldman, a partner at McDermott Will & Emery LLP and] former SEC prosecutor." (InvestmentNews)  

Closing Pension Plans in Bankruptcy
"When Detroit's emergency manager was quoted proposing to close and freeze the city's defined benefit plans effective December 31, putting defined contribution plans in their place, many observers perceived it to be a commonsense suggestion: cut the losses, stem the money drain... Taking such an action is likely to increase administrative costs associated with establishing a new plan, as Rhode Island and other states have discovered. More importantly, closing a pension [plan] does nothing to lower the cost of the plan or reduce the pension obligation -- the pension's unfunded liability." (Pension Dialog)  

Public Pension Funds in New York to Get Greater Scrutiny
"The state Department of Financial Services says it will investigate salary spiking in the state's pension funds and potential conflicts of interest among consultants used to oversee the funds -- which are among the largest in the country.... [The agency] released a scathing audit in August that accused the Comptroller's Office of using a computer system for the $160 billion pension fund that dates back to 1959[.]" (pressconnects.com)  

How to Avoid a Devastating Retirement Planning Mistake
"Think you have reached the holy grail of retirement? ... Not so fast! That thinking can spell disaster. The assumptions that go into those programs are just that, assumptions. They are educated guesses at best, but they could be plain wrong. Your math isn't the problem, and neither is your financial planner... it's the faulty assumption that Social Security, your government pension, or even your 'guaranteed' private pension is guaranteed." (Gold Seek LLC)  


How Can 401(k) Advisers Use ERISA Section 3(16) Administrators to Advance Their Practices
"We have reached a tipping point. Plan sponsors have had enough. This is most strikingly evidenced by the movement to professional plan management under section 3(16) of ERISA.... Under this model most key functions that are now with plan sponsors as 'named fiduciaries' and as plan administrators under section 3(16) of ERISA will be shifted to professional plan administrators." (Fiduciary Plan Governance, LLC)  


Pensions Preparing for a Rough Landing?
"Large institutional investors are worried about the effects of ultra easy monetary policy on fixed income assets and they are shifting their attention to equities which they see a source of positive returns. In terms of asset allocation, the basic theme remains the same. Lower fixed income exposure and increase public and private equities exposure, as well as exposure to real estate, infrastructure and hedge funds. But the perverse effects of quantitative easing are hitting all asset classes, including alternative investments." (Pension Pulse)  

Benefits in General; Executive Compensation

The Government May Be Shut Down, But Your Form 5500 Is Still Due!
"Many regulator functions will halt during the federal government shutdown, but plan sponsors shouldn't snooze. For those sponsors that may have filed an extension for their Form 5500, the tax filing for qualified retirement plans, the October 15th deadline is looming just ahead.... [P]lan sponsors can still make submissions and electronic systems are still running." (Fragasso Retirement Plan Consulting Solutions)  

Third Circuit: Proper Documentation Saves the Day for an ERISA Plan Sponsor
"The court emphasized: 'We have said that a participant's reliance on employer representations regarding benefits may never be "reasonable" where the participant is in possession of a written document notifying him of the conditional nature of such benefits.' The Court also rejected the plaintiffs' assertion that extraordinary circumstances required judgment in their favor, concluding that there was no misrepresentation about the benefits at issue, let alone a network of misrepresentations that would give rise to such extraordinary circumstances." [Jenkins et al. v. ULLICO, No. 12-4310 (3rd Cir. Sept. 10, 2013)] (Seyfarth Shaw LLP)  

Illinois Supreme Court Rejects Petition for Leave to Appeal in Restrictive Covenant Case
"[In July, the Illinois Appellate Court for the First District] ruled that there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant where no other consideration is provided.... [The] Illinois Supreme Court [has now] denied the employer's appeal ... For employers whose restrictive covenant agreements are or may be governed by Illinois law, choices will have to be made about how to account for the Appellate Court's ruling. What may constitute adequate consideration to support restrictive covenants of an at-will employee other than two years of employment is unsettled under Illinois law." (Vedder Price)  


Text of Comments by International Brotherhood of Teamsters to SEC on Proposed Pay Ratio Disclosure Rule (PDF)
"We believe that the SEC's proposed CEO-to-worker pay ratio disclosures will help investors evaluate CEO pay levels in the context of a company's internal compensation system; monitor how the ratio changes over time; and, provide a basis for comparing compensation practices within peer groups.... We commend the SEC for balancing concerns of compliance costs for companies without sacrificing the benefits of the disclosure to investors." (International Brotherhood of Teamsters)  

Press Releases

Shutdown Closes IRS Health Care Program
Pension Benefit Guaranty Corporation (PBGC)

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