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November 18, 2013          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Defined Contribution Client Manager
in OR

Senior Associate, Research, States' Public Sector Retirement Systems
The Pew Charitable Trusts
in DC

Plan Administrator
Benefits of Missouri, Inc.
in MO

Plan Document Specialist
in AZ

Defined Benefit Plan Administrator
Boyce & Associates, Inc.
in AZ

Retirement Plan Analyst
Actuarial Consulting Group
in VA

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[Guidance Overview]

Treasury and IRS Finalize Rules on Suspending Contributions to Safe Harbor 401(k) Plan (PDF)
"[The final rules] changed the 'substantial business hardship' requirement to require that the company be operating at a loss for the plan year.... This requirement does not apply if a notice is given as part of the safe harbor notice at the beginning of the year ... [T]he plan that is a documented safe harbor plan as of the beginning of the year would provide as part of its notice (i.e., before the beginning of the plan year) that the plan might be amended to remove the safe harbor during the year.... Note the differences between the original 'maybe' notice and the 'maybe not' notice:" (Ferenczy + Paul)  


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Solicitor General to Supreme Court: Please Set the Rules for ERISA Stock-Drop Class Actions
"This past March, the Supreme Court asked the Solicitor General to weigh in as to whether two rather technical questions about ERISA stock-drop actions are worthy of the Court's attention.... Sidestepping the technical questions, [the Solicitor General has] asked the Court to intervene on a different (and highly significant) question: whether ERISA plan fiduciaries are entitled to a presumption that they have acted prudently in permitting plan participants to invest in their own company's common stock. With the Solicitor General's recommendation, the Supreme Court is highly likely to grant certiorari. And with the questions reformulated by the Solicitor General, this case stands either to sound the death knell for stock-drop class actions or to start a frenzied wave of such cases." (Mayer Brown)  

Who Is Right for a Plan Committee?
"[T]here must be three critical areas of inquiry in making a committee appointment. [1] Capacity. This is the 'can the candidate do the job' question.... [2] Conflict. The candidate should be free from all conflict with plan interests... [3] Commitment.... The candidate must be able to commit sufficient time and attention to his or her fiduciary duties to perform the job at a high level. The plan sponsor must give the candidate sufficient time and resources to fulfill that commitment." (Fiduciary Plan Governance, LLC)  

PBGC's Deficit Increases to $36 Billion as Multiemployer Risks Grow
"Because more plans will fail within the next decade, PBGC's multiemployer insurance program's deficit rose to more than $8.2 billion, compared with $5.2 billion last year.... The deficit in the program for single-employer pension plans narrowed to about $27.4 billion, down from $29.1 billion in 2012. The program insures the pensions of nearly 32 million workers and retirees in 23,000 ongoing plans sponsored by private-sector employers. The single-employer program's potential exposure to future pension losses from financially weak companies was estimated at about $292 billion compared to about $295 billion last fiscal year." [Text of full annual report (132 pages).] (Pension Benefit Guaranty Corporation [PBGC])  

Value Increase for Dietrich Pension Risk Transfer Index
"The index, which tracks the relative attractiveness of annuitizing pension liabilities, went from a value of 96.19 in October to 97.10 as of November 1. In addition, the index's current annuity discount rate proxy of 3.21% remains the same, despite the price of Treasuries and corporate bonds increasing." (PLANADVISER.com)  


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Judge Dismisses CalPERS Appeal of San Bernardino Bankruptcy
"U.S. Bankruptcy Judge Meredith Jury ... dismissed CalPERS' request that she certify the pension giant's direct appeal to the 9th U.S. Circuit Court of Appeals, a decision that San Bernardino officials have said will save the city time and money in its already sprawling fight with CalPERS.... 'The procedure asserted by CalPERS, in the Court's view, is duplicative and not an efficient use of judicial resources,' she wrote. '... If this court had granted certification, CalPERS has proposed to also file a Motion for Leave in the 9th Circuit. This duplication is inefficient and possibly may lead to inconsistent results.'" (The Sun)  

CalPERS Investment Change Unlikely to Raise Rates
"An increase in CalPERS employer rates from switching to a less risky but lower-yielding investment portfolio seemed unlikely after a two-day board workshop last week.... If adopted by the board, a new 'mortality' improvement scale discussed last month could raise rates to cover longer life spans. Action on a new investment allocation originally was scheduled for next month. But to 'integrate' all of the remaining steps, a new allocation may be delayed until February for one big decision on the discount rate and a third employer rate increase." (Calpensions)  

You Are Your 401(k)'s Worst Enemy
"After all the worrying over not getting enough growth out of your retirement investments, it turns out that you might be your 401(k)'s worst enemy-damaging your nest egg by trying too hard to invest.... [E]ven with the rise of the target-date approach, 70 percent of employees still pick their own investments, according to a new analysis ... and that has not been a good decision." (CNBC)  

Passive Management Is Not Equal to Passive Investing
"Is there a way to create a portfolio that delivers truly passive risk? ... The trick is to take a dynamic approach that aims to undo the randomness of volatility. An ideal passive benchmark would convert the waves to a fixed straight line ... The flat lines [in the accompanying chart] reflect equal passive non-varying risk-taking in each sector. So if there are seven sectors in the benchmark, a flat line at about 15% yields equal risk for each sector." (Alliance Bernstein)  

Could Alternatives Fit in Retirement Portfolios?
"[T]here is more to adding alternatives to a retirement plan than just plopping new funds into a 401(k)'s menu. Retirement plan consultants and financial advisers note that plans need to find a happy medium between diversifying the lineup and keeping it easy for workers to understand." (InvestmentNews)  

Cumulative List of Non-U.S. Pension Funds Exempted by FATCA Intergovernmental Agreements, Updated November 15, 2013
"The US is in the process of entering into Intergovernmental Agreements (IGAs) with a number of countries that each list ... specific pension plans of that other country that will be treated as exempt from under the Foreign Account Tax Compliance Act (FATCA) ... [At this link is] a cumulative list of those specific pension-related exemptions for each country that has entered into an IGA with the United States[.]" (Groom Law Group)  

NCEO Employee Ownership Update for November 15, 2013
Articles include: Solicitor General Requests Supreme Court Ruling on Presumption of Prudence; New Survey on Employee Attitudes Toward Stock Plans; Iowa Launches Programs to Encourage ESOPs; and Mondragon's Fagor Cooperative Declares Bankruptcy. (National Center for Employee Ownership [NCEO])  


Snapshot Perspective, Historically Low Interest Rates Skew PBGC Picture of Employer-Based Pension System
"For many years, the Council has urged lawmakers to take a fresh look at the methodology behind PBGC's deficit calculation, to promote a more common-sense approach to funding and premium policy. Many factors in the calculation remain wholly inappropriate, such as aggressive assumptions based on 'distress' terminations and the purchase of annuities for its beneficiaries when, in fact, the PBGC does not do so. Other elements of the methodology are shrouded in secrecy, such as how its annuity survey and modeling are conducted." (American Benefits Council)  


Flaws in Vanguard's Modification of the 4% Withdrawal Rule
" As is the case for most 'safe' withdrawal rate strategies, [the Vanguard approach] defines success as not outliving accumulated assets. It does not adequately address the risk of under spending. It doesn't attempt to provide constant real dollar spendable income in retirement. It doesn't coordinate with other forms of retirement income such as immediate or deferred annuities and it doesn't reflect bequest motives." (Kenneth A. Steiner, FSA Retired)  


Why an All-Roth 401(k) System Is a Bad Idea
"[In] two recent meetings, participants -- who do seemed to be plugged into Washington developments -- suggested the only change in retirement policy we could expect is that all new 401(k) contributions would have to go into a Roth plan rather than a conventional 401(k) plan. If true, such a change is a craven play to increase tax revenues in the short run, without any consideration for long-run revenues or the effect on retirement saving." (Alicia Munnell in MarketWatch.com)  


The Us vs. Them of Public Pensions
"Two of the key principles ... that relate to [the public pension] discussion are: [1] Tailored solutions, achieved by affected stakeholders working through the state and local legislative and regulatory processes. [2] Retention of core, indispensable elements of public plan design, namely mandatory participation, shared financing, benefit adequacy, pooled investment and longevity risks, and lifetime benefit payouts. Rather than 'us versus them,' these principles are what should be dominating pension debates." (PensionDialog)  

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