DATAIR

Defined Benefit - Client Service Analyst
Milliman
in TX

Defined Benefit - Data Analyst
Milliman
in TX

Defined Benefit - Client Service Manager
Milliman
in TX

Account Manager
The Newport Group
in MO, TX

Counsel - Compensation and Benefits
Ameriprise Financial
in MN

Consulting Actuary
Milliman
in GA

Plan Regulatory Services Supervisor
AUL / OneAmerica Financial
in IN

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ERISA Audits: What We All Knew but Forgot
February 13, 2014 WEBCAST
(Lorman Education Services)

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[Guidance Overview]

2013 in Review: ERISA Individual Prohibited Transaction Exemptions and Advisory Opinions
"DOL issued five ERISA advisory opinions -- just under the average of six that DOL has published annually since 2006. (In contrast, during the 10 years preceding 2006, DOL issued on average 17 advisory opinions annually.) DOL issued substantially fewer individual exemptions from the ERISA prohibited transaction rules -- only nine individual exemptions and seven EXPRO exemptions -- as compared to averages of 28 and 12, respectively, during prior years of this Administration." [Article discusses each of the advisory opinions and exemptions.] (Sutherland)  

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Upcoming IRS Phone Forums, January 29 and February 6: Ethical Standards of Employee Benefits Practice -- What to Ask and Say to Clients, and What to Tell the IRS
"We'll discuss an employee benefits practitioner's ethical standards of conduct under Circular 230 for communications with clients and the IRS. We'll include a practical analysis of the ethical rules for a practitioner's duty of diligence in obtaining accurate and complete information, properly advising clients on tax positions and potential penalties, and reporting information to the IRS. Please email [the IRS at ep.phoneforum@irs.gov] your questions by January 22, 2014." [Editor's note: the linked page includes registration information.] (Internal Revenue Service)  

District Court Finds Pension Plan's $725,000 Refund Request for Overpayment Reasonable
"The plan's third-party administrator initially determined that the participant was owed a lump-sum payment of $782,733 upon reaching retirement age and paid out that benefit. However, the plan later informed him of the mistake, notified him of his recalculated benefit of $57,232 and demanded refund of the $725,501 overpayment. [The U.S. District Court for the Northern District of New York] granted summary judgment to the plan, finding that it didn't abuse its discretion in interpreting the plan terms to discredit 20 years of service that the participant spent employed by a separate company that was merged with the plan sponsor less than two years before the participant left his employment with the sponsor." [Baackes v. Kaiser Found. Health Plan, Inc., No. 1:12-cv-00583-FJS-RFT (N.D.N.Y. Jan. 3, 2014)] (Bloomberg BNA)  

Fees: What Everyone Is Not Talking About!
"Fees collected via the investments (revenue sharing), which are not normalized at the fund level, are a major source of inequitable fee allocations at the participant level. Since the revenue sharing varies by fund and since participant investment allocations differ, revenue sharing collected as a fee is not a uniform percentage across participant balances nor is it a fixed dollar amount per participant account." (Milliman)  

Fee Pressure Results in Move by Plans to Passive Investments
"Passively managed investment options are attracting greater interest among defined contribution plans thanks to plan executives' efforts to reduce fees, according to the latest Callan Associates annual survey ... The survey of 107 plan executives -- most of whom represent 401(k) plans -- show that 24.1% expect to increase the proportion of passive funds in their lineup compared to 12.5% who increased the passive-fund proportion last year[.]" (Pensions & Investments)  

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The Costs and Benefits of Investing in Alternatives
"Toward the end of 2013, a bipartisan panel was created to look into criticisms made by Curtis Loftis Jr., South Carolina state treasurer, regarding RSIC's investment fees for the approximately $27 billion fund behind the South Carolina Retirement Systems. But others say that the fees are a cost of using alternative investment strategies, in which the pension has, as of June last year, just under 40 percent." (Institutional Investor)  

Compliance Headaches Coming for 401(k) Plan Sponsors Due to New Fiduciary Regs in 2014?
"2014 [will] be the year of the advisor/adviser from a government affairs perspective because most of the regulatory efforts will focus on that industry. The definition of Fiduciary Rule and the Uniform Fiduciary Standard will impact both fee-based advisers and wire-house advisors.... [T]his is first time that the advisor side of the industry has been squarely in the sites of the regulators. Everyone knows what's coming so most won't be surprised, but sometimes the regulatory process upsets everyone." (Fiduciary News)  

Retirement Trade-Off, Not Crisis
"Improved pension funding is a welcome development after years of concern about widespread shortfalls. Firms have been scrambling to fill the gap, with many directing spare cash and bond proceeds to pension plans instead of growth-oriented endeavors ... Now, thanks to last year's strong stock market gains, firms needn't channel as much capital and energy into pensions, freeing up resources for other, more forward-looking projects and investments. It also frees up another avenue: offloading plans, either by offering participants lump sum buyouts or selling the plans to insurance companies." (Fisher Investments)  

Funded Status of U.S. Corporate Pensions Rises to 95.2 Percent in December
"The funded status of the typical U.S. corporate pension plan in December 2013 improved 1.3 percentage points to 95.2 percent, the highest level since September 2008, as rising equity markets drove assets higher and rising interest rates lowered liabilities ... For U.S. corporate plans, assets increased 0.8 percent and liabilities fell 0.6 percent ... On the public side, the typical defined benefit plan in December achieved excess return of 0.4 percent over its annualized 7.5 percent return target, ISSG said. Public plan assets must earn at least 0.6 percent each month to keep pace with the 7.5 percent annual target." (BNY Mellon)  

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Pension Funding Index Jumps 25% for 2013, to Five-Year High
"December capital market results were mildly favorable, and the Towers Watson Pension Index moved up for the fourth consecutive month. The 1.4% increase for December moved the index value to 78.2, a five-year high. The index surged up 25.5% for 2013 -- the largest annual increase in the history of this series." (Towers Watson)  

Detroit's Emergency Manager Opts to Delay Pension Freeze
"Despite the delay, [Detroit Emergency Manager Kevyn] Orr said he reserves the right to retroactively freeze the General Retirement Fund, which covers non-public safety workers, retroactive to Jan. 1 if mediation fails to produce an agreement on a $3.5 billion unfunded pension liability the city 'cannot afford to pay.'... The pension freeze called for closing the pension fund to any new or rehired employees and stopping benefit accruals for current workers. It also stopped worker contributions to the pension and annuity savings funds and ended cost-of-living adjustments for pension payments made to retirees. As of Jan. 1, the order created a 401(k)-type defined contribution plan for affected workers." (Reuters)  

Understanding the Basics About Derisking Becomes First Step to Decisionmaking (PDF)
"Derisking can involve both plan design and asset strategies. Plan design strategies can include converting a traditional DB plan to a cash balance plan.... Other plan-design changes available include closing the plan to new entrants, freezing the plan; or, ultimately, terminating the plan. Changes made to pension assets strategy generally are thought of as either internal (those in which assets are managed to limit risk but remain within the plan) or external (when assets leave the plan). Each method is complex and requires careful evaluation in light of a plan's particular demographics." (ERISAdiagnostics, Inc., via Thompson Pension Plan Fix-It Handbook)  

Florida State Board Moves to Target-Date Funds for Pension Plan
"The restructuring includes dropping the plan's three risk-targeted balanced funds, mapping the assets into the 10 target-date funds. In addition, actively managed investment options will be reduced to eight from 13. With 44.7% of the plan's assets directed by participants into the 401(a)'s three balanced funds, the board hopes to steer participants to more age-appropriate target-date funds to better align their risk tolerances with their career time horizons[.]" (Pensions & Investments)  

Text of EBRI Statement to Senate Finance Subcommittee on the Role of Social Security, Defined Benefits, and Private Retirement Accounts in the Face of the Retirement Crisis (PDF)
"An EBRI analysis in 2011 showed the tremendous importance of defined benefit pension plans in achieving retirement income adequacy for Baby Boomers and Gen Xers that have access to such programs. Overall, the presence of a defined benefit accrual at age 65 increases the probability of not running short of money in retirement by 11.6 percentage points. The defined benefit plan advantage is particularly valuable for the lowest-income quartile but also has a strong impact on the middle class." (Employee Benefit Research Institute [EBRI])  

[Opinion]

Text of Statement by ICI, ACLI and American Benefits Council to Senate Finance Subcommittee on the Role of Social Security, Defined Benefits, and Private Retirement Accounts in the Face of the Retirement Crisis (PDF)
"America's retirement system has grown to better serve each successive generation. Innovations in plan design and various improvements, including automatic enrollment, automatic escalation, and lifecycle investing, help improve retirement security. In addition, there are numerous other enhancements that can further promote retirement security for more Americans. Accordingly, policymakers should seek to build and expand on the existing system, rather than eliminate or destabilize it." (Investment Company Institute [ICI], American Council of Life Insurers [ACLI] and American Benefits Council)  

[Opinion]

Detroit's Deep Pension Freeze?
"[S]hifting public or private sector workers into a defined-contribution plan is effectively condemning them to pension poverty. Politicians recommending such reforms are absolutely clueless on the benefits of defined-benefit plans. They're basically appealing to the masses who are equally clueless on what consists of good pension and economic policy." (Pension Pulse)  

[Guidance Overview]

DOL and Treasury Update 2013-2014 Regulatory Agendas for Employee Benefits
Article contains a chart that lists all benefits-related items in the Agendas for these two agencies, along with the date each item was added to the agenda, and, for DOL items, the projected completion date. There are three new DOL initiatives and no new tax initiatives. Projects relating to the U.S. Supreme Court decision on Section 3 of the federal Defense of Marriage Act are not listed on the agendas. (Sutherland)  

When Do Severance Payments Constitute 'Wages'?
"Quality Stores thus presents the Court with questions of varying breadth and implication. Most immediately, the Court must resolve whether these disputed SUB payments are 'wages' under FICA -- a legally narrow issue, but one with substantial revenue implications.... But the case also presents broader questions about the Court's approach to statutory interpretation: Should its analysis effectively start and end with the statutory text actually at issue[?]" [United States v. Quality Stores, Inc., Supreme Court Docket No. 12-1408; oral argument scheduled for January 14, 2014.] (SCOTUSblog)  

Fiduciary Liability Insurance: Am I Protected?
"If you have directors' and officers' coverage, are you sure that coverage extends to your acts as an ERISA fiduciary? ... Are the limits on the extent of that coverage separate from the D&O limits [or] within those limits? This can be a big problem when the carrier tells you reach the limits of what it is contractually obligated to pay. When does the coverage begin? ... Who is insured? ... Do you understand who is not insured?" (Fiduciary Plan Governance, LLC)  

As Healthcare Law Affects Insurance Rates, 401(k) Saving Drops
"While participants in general are more optimistic about the economy, they are planning to save slightly less over the next 12 months, and those over the age of 50 have lowered their expected savings amounts by about 18%.... Participants clearly see trouble ahead in achieving a comfortable retirement. Nothing exemplifies this better than a retirement concern that was barely on the map a few years ago: paying for health care in retirement." (CPA Practice Advisor)  

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