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November 15, 2013          Get Health & Welfare News  |  Advertise
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Defined Contribution Plan Administrator
San Diego Pension Consultants
in CA

Office Administrator
The Savitz Organization, Inc.
in PA

Retirement Plan Services - Client Services Manager
Charles Schwab
in OH

Retirement Plan Administrator
Katz, Sapper & Miller
in IN

Manager of Technologies, Systems and Innovation
EPIC Advisors, Inc
in NY

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[Official Guidance]

Text of IRS Notice 2013-75: Update for Weighted Average Interest Rates, Yield Curves and Segment Rates, November 2013 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under [Internal Revenue Code section] 430(h)(2) ... [and] provides guidance as to ... the 30-year Treasury weighted average rate under section 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under section 417(e)(3)(D) ... These rates reflect certain changes implemented by [MAP-21]." (Internal Revenue Service)  


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[Official Guidance]

Text of PBGC Submission of Information Collections for OMB Review; Comment Request; Payment of Premiums; Termination Premium (PDF)
"Copies of the proposed collection of information and PBGC's request are posted online .... PBGC is requesting that OMB extend approval of this collection of information for three years, with minor changes. PBGC is eliminating from Form T and instructions the requirement to report the method of payment and making minor editorial changes to the form and instructions." (Pensions Benefit Guaranty Corporation [PBGC])  

[Guidance Overview]

Treasury Issues Final Safe-Harbor Exiting Regulations
"Instead of requiring a safe harbor nonelective plan to have a substantial business hardship ... the plan can exit midyear if either: [1] The employer is operating at an economic loss for the plan year (as determined under Code section 412(c)), or [2] The plan's safe harbor notice, issued before the beginning of the plan year, includes a statement (the 'maybe not' notice) that: [a] The employer may amend the plan during the year to reduce or suspend the safe harbor contributions, and [b] The amendment would not be effective sooner than 30 days after the participants receive a supplemental notice of the amendment. These new standards are retroactively effective to amendments adopted after May 18, 2009. Of course, no one has previously given a 'maybe not' notice, but conceivably a plan could include such a statement in the 2014 safe harbor notice to establish the option to exit a safe harbor nonelective plan without regard to the employer's profitability." (SunGard Relius)  

[Guidance Overview]

Mid-Year Changes to Safe-Harbor 401(k) Plans
"Before this new regulation, an employer maintaining a safe-harbor plan using employer nonelective contributions could not reduce or eliminate those contributions midyear -- such a change could only be made with respect to employer matching contributions. The regulation removes the distinction between the two types of safe-harbor compliance, and allows either type of contribution to be reduced or eliminated during the year, subject to all of the same requirements." (Ford & Harrison LLP)  

[Guidance Overview]

Qualified Retirement Plan Amendments and IRS Filings -- Do You Need to Amend or File in 2013? (PDF)
"'Cycle C' plans ... will generally need to be amended and restated no later than January 31, 2014.... Most governmental plans are Cycle C plans, regardless of the plan sponsor's EIN. However, in this filing cycle, the IRS permits government plans to file under either Cycle C or Cycle E (February 1, 2015, to January 31, 2016) instead. No formal election is needed." (Alston & Bird, LLP)  

[Guidance Overview]

Actuarial Standards Board Revises ASOP No. 27 Regarding Selection of Economic Assumptions
"One of the key clarifications in the revised ASOP is that economic assumptions can be based either on the actuary's estimate of future experience or on observations based on market data, depending on the measurement's purpose. For example, in selecting a discount rate for the purpose of budgeting pension contributions, an actuary may use a discount rate that reflects the anticipated investment return. Alternatively, the actuary may also use a discount rate that is appropriate for market-consistent measurements." (Gabriel, Roeder, Smith & Company)  

The Seven '403(b) Administrative' Sins: The Final Chapter
"[1] Plan investment contracts that don't agree with the plan document.... A typical example of where it is a problem is when a plan does not allow loans, but an investment contract does. Since the plan governs, there should be no loans; however, the service provider of the contract may grant a loan since it's allowed under the contract. This poses a compliance problem for the plan.... [2] Contractual procedures that don't agree with plan provisions.... [3] A lack of understanding of fiduciary duty." (The Principal Blog)  

Justice Department Asks Supreme Court to Reverse Circuit Courts' Pro-ESOP Position
"Early in 2013, the Supreme Court asked the Solicitor General to comment on technical questions regarding stock-drop cases and to assess whether these types of cases should be brought to the attention of the Court. In a rather strange move, the Solicitor General asked the Court to focus only on a matter concerning ESOP plan fiduciaries, and whether they are entitled to the presumption that they have acted in the best interests of plan participants by investing in company stock." [Fifth Third Bancorp v. Dudenhoeffer petition for certiorari filed Dec. 2012; Brief amicus curiae of U.S filed Nov. 12, 2013] (The ESOP Association)  

PBGC Premium Rates Increase in 2014 for Single-Employer Plans: Time to Cash-Out Some Deferred Vested Participants?
"[D]oes the potential reduction in PBGC premiums based on a lower participant count support offering a lump sum cash out for deferred vested participants with a lump sum amount less than a certain threshold (i.e., $10,000 or $20,000)? If interest rates continue to rise, the case may be more compelling to reduce the number of deferred vested participants in the plan since a rise in interest rates correlates to lower present value calculations." (Benefits Bryan Cave)  

Payout Options for Retirement Income from Defined Contribution Plans: The Plan Sponsor's Perspective
"[It] is clear that it is to the participant's advantage to have an annuity option available as a retirement risk management tool. For sponsors, however, the question remains: does the annuity option (or do the annuity options) have to be available inside the plan?" (October Three Consulting)  

Closing the Funding Gap: Assessing Whether or Not It Makes Sense to Accelerate Pension Contributions (PDF)
"The pension benefit obligation is a secured claim on the company, similar to bank or bond debt. Any unfunded portion of that liability is a deduction to shareholder equity. If the company was sold tomorrow, that funding gap would most likely necessitate a purchase price adjustment to the extent of that debt. For companies with a relatively large, underfunded plan, closing that gap in some defined time period is, and should be, a corporate objective." (SEI)  

Republican Senators Propose Eliminating Pensions for New Federal Employees
"The Public-Private Employees Retirement Parity Act, introduced by Sens. Richard Burr, R-N.C.; Saxby Chambliss, R-Ga.; and Tom Coburn, R-Okla., would eliminate the defined benefit portion of the Federal Employees Retirement System for all new government workers hired six months after its enactment. New employees would still receive matching agency contributions into their Thrift Savings Plan of up to 5 percent.... The bill would also apply to lawmakers." (Government Executive)  

The Risks of a Workforce Ill-Prepared to Retire
"Employers ... need to understand the hidden costs and take action to protect the organization from unpredictable retirement patterns.... Aggregating data on employees' company-sponsored sources of retirement income and their current behavior patterns regarding plan elections, contributions and so on, company decision makers can get a clear view of what percentage of the workforce will be able to retire at what ages, what percentage is unprepared for retirement, and what actions would best improve retirement readiness given the characteristics and demographic profile of the workforce." (Towers Watson)  

SPX Offloads $800 Million in Pension Risk; MassMutual to Take Portion in Buyout
"SPX also plans to offer a lump-sum option to 7,500 vested former employees. The annuity buyout will cover about 16,000 retirees. The two actions combined are expected to shift about $800 million in pension obligations off SPX's balance sheet.... 'We anticipate it will be the third-largest buyout in recent history, after GM and Verizon,'[said Jason Richards, senior consultant in the retirement risk management group at Towers Watson]." (Pensions & Investments)  

How Some Target Date Fund Designs Continue to Miss the Mark on Providing Retirement Security to Those Who Need It Most (PDF)
"[A] prudent goal is to strive to maximize the number of individual participants who reach at least the minimum level of income replacement at the point of retirement.... [This study] examined the target date fund design most likely to help the most participants reach an annuity funding level sufficient to maintain their lifestyles as they entered retirement ... [B]roadly diversified target date funds -- in which extended and alternative assets made up a significant portion of the portfolio for the entire investment horizon -- combined with a relatively rapid reduction in equity exposure in the years leading up to retirement, may help the largest number of participants reach retirement income security." (J.P. Morgan)  

Segmented Fiduciary Roles Emerge Among Plan Sponsors and Different Types of Service-Providers
"[A] survey of 100 randomly selected, non-client plan sponsors conducted by retirement planning and wealth management firm Unified Trust in 2010 found that 50 percent of the sponsors didn't think of themselves as a fiduciary; another 50 percent said they thought obtaining a fiduciary warrant would protect them from a participant lawsuit ... Gregory Kasten, founder and chief executive of Unified Trust ... stressed that it was critical for ... retirement plan service providers to watch for 'improper delegation' from plan sponsor clients that may think, erroneously under ERISA, that they can hand off their fiduciary responsibility." (Thompson SmartHR Manager)  

More Employees Depending on Just One Target-Date Mutual Fund to Grow Their Nest Egg
"One of every three savers with a 401(k) plan administered by Fidelity Investments has their entire account invested in just one target-date mutual fund ... The reliance on target-date funds is even more pronounced among the youngest workers. Some 72 percent of those aged 20 to 24 have their complete 401(k) account balance invested in a single target-date fund. For workers aged 30 to 34, it's nearly half: 45 percent." (The Washington Post; subscription may be required)  

Benefits in General; Executive Compensation

[Guidance Overview]

2013 End of Year Compliance Checklist for Group Health Plans and Retirement Plans (PDF)
"This [9-page] checklist provides an overview of new compliance items that should be addressed before 2014. The checklist also includes important ongoing year end requirements." (Reinhart Boerner Van Deuren s.c.)  

Retired Police, Fire Sue Providence, R.I. Over Pension Changes
"66 retired Providence firefighters and police officers have filed complaints in Rhode Island Superior Court ... over the recent pension reform agreement between the City and police, firefighters, and retirees.... The retirees named are individuals -- or their spouses -- who are contesting the recent changes made to health care benefits, including the Medicare enrollment statute, and Health Benefits Ordinance, which now require all police and firefighter and their spouses to enroll in Medicare, as well as the COLA adjustments made." (GoLocalProv.com)  

Detroit Agreement with EMTs, Paramedics Union Would Freeze Pension Plan, Restructure Health Benefits
"Under the new contract, EMTs and paramedics in the Police Officers Association of Michigan union accept a 10% wage cut, which is imposed on all city employees. The union also accepts a pension freeze and transfer of employee pensions to a defined contribution plan. Employees under the deal also agree to enter the city's restructured health plan. Under that plan, annual deductibles for Detroit's active city workers will rise to $750 annually from $200 and family plans will see annual out-of-pocket costs rise 50% to $4,500 from $3,000." (Pensions & Investments)  

Bad Faith Termination Can Be Good ERISA Interference Claim
"[T]he executive was placed on 'garden leave,' in other words, relieved of all responsibilities and told to stay home.... The court found that the executive had sufficiently alleged that the employer had manipulated the date of termination with the specific intent of depriving the employee of the severance benefits to which he would otherwise have been entitled.... The court said that there could be benign reasons why the company would pay the employee for 30 days after stripping the employee of all responsibilities but that there was also the possibility that the employer had improper motives for the timing of the employment termination given the fact that the garden leave saved the employer over $700,000 in severance pay." [Kirby v. Frontier Medex, No. ELH-13-00012 (D.C. Md. Oct. 30, 2013)] (Leonard, Street and Deinard)  

Global Equity Plans: Issues to Consider (PDF)
"This Note addresses the major legal and other issues that U.S. multinational companies should consider before granting equity awards outside of the U.S. including taxation, social insurance, withholding and reporting, securities law compliance, exchange control requirements, data privacy laws, restrictions on payroll deductions and employee communications. This Note also provides practical tips to aid in implementing a global equity plan." (Jones Day via Thomson Reuters Practical Law)  

Press Releases

AHIP Statement on Consumers Keeping Their Current Coverage
America’s Health Insurance Plans (AHIP)

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