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Hand-picked links to the web's best news articles,
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[Guidance Overview]
IRS Expands Guidance on In-Plan Roth Conversions
"[T]he [Dec. 11, 2013] guidance explains that an amount must be vested to be eligible for an in-plan Roth conversion. In-plan Roth conversions of nondistributable amounts, as permitted under ATRA, can only be accomplished by a direct in-plan Roth conversion and not by a 60-day 'indirect' rollover. A Section 402(f) notice (which describes rollover options) only needs to be provided when a participant converts an otherwise distributable amount to Roth. No withholding is required or permitted on an in-plan Roth conversion of a nondistributable amount."
(McDermott Will & Emery)
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Text of IRS Fact Sheet Describing MyRA Program (PDF)
"MyRA s will be Roth IRA accounts available to anyone who has an annual income of less than $129,000 a year for individuals and $191,000 for couples. MyRA will be for savers who either do not have access to an employer-sponsored retirement savings plan or are looking to supplement a current plan. They will be designed for savers who want an investment with a low opening amount."
(U.S. Department of the Treasury)
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Changing the Savings Culture by Executive Fiat: The New myRA
"In many respects, it looks like a payroll reduction Roth account for small savings amounts.... [T]he voluntary nature of myRAs may undermine their usefulness in increasing savings, as research shows (and the President's fact sheet agrees) that automatic enrollment has a more significant effect on encouraging participation than merely sponsoring a plan."
(Benefits Bryan Cave)
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How Obama's 'MyRA' Plan Will Impact The U.S. Economy
"Instead of investing in the myRA, workers who contribute $1,000 in a low-cost, S&P 500 index fund that is expected to have a total return of 8% annually, as a conservative estimate to the 10% normal expectation, will benefit much more over the 30-year horizon. With a 3% annual inflation rate estimate, the real return would be 315%, or 4.85% annually.... The question that remains is very simple. Do workers that make under $50,000 per year have incentive to open a myRA account, if it existed, versus a traditional or Roth IRA? Without further information, the answer is no."
(Seeking Alpha; free registration may be required)
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Finance Industry Pros Say MyRA Misses the Point
"While there's general agreement on the main problem -- lack of savings -- most aren't clear why MyRA is needed to address that problem.... There's even disagreement on whether a perceived problem the MyRAs can fix is really a problem at all.... [S]tudies show people don't necessarily do what's in their own best interests, and the lack of full participation in existing 401k plans -- that offer free money to savers in the form of corporate matching -- remains the best proof the problems goes beyond the mere availability of a savings vehicle."
(Fiduciary News)
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MyRA: Finally, a Retirement Plan Friendly to Smaller Savers?
"There are a lot of good things about these new accounts ... They're fee-free; therefore, solving the problems that small savers have when they open an IRA only to have much of their balance eaten up by expenses. And, like 401(k)s, contributions will be made through payroll deductions ... Perhaps the best thing, though, is that they give us a shot of creating a larger culture of saving -- and a greater number of savers -- in America."
(Fortune)
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The 'California Rule' for Public Pensions: Is It Good Constitutional Law?
"[In] California (and some other states), the courts give constitutional protection not only to the amount of public employees' pensions that has been earned by past service, but also to employees' right to keep earning a pension based on rules that are at least as generous for as long as they stay employed.... [This article reviews] what California courts have held, and discuss[es] whether this constitutional doctrine is consistent with federal constitutional law."
(The Washington Post; subscription may be required)
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Funded Status of U.S. Corporate Pensions Falls During January
"U.S. corporate pension plans in January 2014 gave up all of the gains they had achieved in the fourth quarter of 2013 as the funded status of the typical plan slid 4.2 percent to 91.0 percent ... [F]alling interest rates sent liabilities higher and declining stocks sent assets lower."
(BNY Mellon)
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401(k) Tax Credit Helps Low-Income Individuals
"Workers meeting the agency's income requirements can receive a Saver's Tax Credit equal to as much as half of their total deposits into a 401(k) or IRA. The lower one's income, the bigger the credit. The program, which the agency made a permanent in 2006, gives a nice boost to the nation's lowest-paid workers, who are also most vulnerable in retirement. And not taking advantage of the credit, said [one] financial planner ... 'is a lot like giving up an employer match for a 401(k).'"
(Center for Retirement Research at Boston College)
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Four Forces Compel Action for Pension Management Strategies
"While higher interest rates and an increase in the funded status of U.S. pension plans are very positive, these developments are offset by an increase in [PBGC] premiums and new mortality assumptions, which reflect that people are living longer."
(Mercer)
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Text of Amicus Brief by Employer Organizations in Support of Presumption of Prudence for ESOP Fiduciaries (PDF)
"Employer stock funds are unique investment vehicles in that they have the additional purpose of facilitating employee ownership in their employer. As such, these funds serve different goals from other investment funds, which exist purely to maximize or preserve retirement dollars. It is therefore prudent to give employees the option to invest in a stock fund so long as the fund provides investing employees with a viable share of their employer." [Fifth Third Bancorp v. Dudenhoeffer, petition for certiorari filed Dec. 2012]
(Chamber of Commerce of the United States of America, the ERISA Industry Committee [ERIC], the American Benefits Council, the Plan Sponsor Council of America [PSCA], and the National Association of Manufacturers)
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Target-Date Funds Dodge a Bond Bullet
"With their heavy concentrations in fixed-income investments, target-date funds for people in or near retirement have often been thought of as vulnerable in the event of a bond-market tumble. But in 2013, the bond market suffered its worst year since 1994 ... Near-term target-date funds, meanwhile, posted across-the-board gains."
(The Wall Street Journal; subscription may be required)
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What's Happening to the Compensation Package for Local Government Employees?
"[R]etirement benefits for newer workers are less generous than they have been for prior generations.... [N]ewer workers are somewhat older than might be expected. As local governments began to modestly increase employment in 2012 and 2013, the average age of those who entered the workforce within the year prior to March 2012 was 43.... If local government retirement benefits start to look more like private sector benefits, salaries for some positions may need to increase to attract and retain qualified candidates."
(International City/County Management Association [ICMA])
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Ibbotson Target-Date Fund Report 4Q 2013 (PDF)
"During the fourth quarter of 2013, the average target-date fund gained 5.4%, falling between the returns of the S&P 500 and the Barclays U.S. Aggregate Bond Indexes.... For the full calendar year 2013, target-date funds experienced very strong performance with the average target-date fund ending the year with an impressive 16.3% return ... [By comparison,] U.S. equities, as represented by the S&P 500, experienced a whopping 32.4% return while their bond counterparts struggled with a 2.0% loss for the year."
(Morningstar Investment Management)
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Employee Ownership Update for February 3, 2014
Topics include: [1] Bureau of Labor Statistics National Compensation Survey says 8% of private sector employees have stock options or are in ESPPs; [2] DOL settles with People Care Holdings over valuation and indemnification issues; and [3] New EBRI data on company stock in 401(k) plans.
(National Center for Employee Ownership [NCEO])
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[Opinion]
MyRA Won't Close the Nest Egg Gap, But Maybe the States Can
"MyRA probably is the best that gridlocked Washington can do to address the yawning retirement savings gap. Obama was able to put it in motion through an executive order.... Outside of Washington, people are thinking bigger. Plans have been floated in 13 states for government-sponsored retirement plans aimed at offering savings plans to more workers, although California is the only state where legislation has been approved."
(Reuters)
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[Opinion]
Washington's Big New Retirement Proposal: The USA Retirement Funds
"When PBS attacked 401(k)s last spring in its 'Frontline' documentary, 'The Retirement Gamble,' all three [major financial] websites brandished that story on their home pages. Now, when the chair of the Senate Pensions Committee puts together a proposal that addresses many, if not all, of the criticisms made in that 'Frontline special,' his announcement is met by ... silence.... The bill would establish a nationally available 401(k) plan, populated with USA Retirement Funds. Unlike the president's myRA plan, which would offer the single option of U.S. government bonds, there would be many USA Retirement Funds, from many providers."
(Morningstar Advisor)
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Benefits in General; Executive Compensation
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Readability Still a Major Challenge for Compliance Documents
"Compliance document readability continues to be a struggle for government agencies, payers and employers alike, emphasizing the demand for and importance of clear benefits communication.... Here are some helpful tips for writing clear, easy-to-understand compliance documentation: Be a Communicator, First and Foremost.... Here are some helpful tips for writing clear, easy-to-understand compliance documentation: Be a Communicator, First and Foremost.... Write SPDs at a Sixth-Grade Level.... Don't Assume Level of Knowledge.... Avoid Jargon."
(HighRoads)
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ERISA Lessons in the Supreme Court's Heimeshoff Decision
"Serious consideration should be given to adopting a reasonable limitations period for each ERISA plan.... Plan claims procedures should comply with DOL regulations and expeditiously adjudicate benefit claims in accordance with those regulations.... Plan sponsors should regularly review and update each plan document to be sure the document is current and compliant....The Supreme Court has continued its skepticism in recent years regarding ERISA arguments advanced by the DOL." [Heimeshoff v. Hartford Life & Accident Ins. Co., No. 12-729 (S. Ct. Dec. 16, 2013)]
(McGuire Woods LLP)
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Equity Compensation Update for February 3, 2014
Topics include: [1] Challenge to stock option award in excess of maximum allowed in plan can proceed; [2] Marriott employees do not qualify as a class in stock award suit; [3] New study on trends in M&A, private equity activity; and [4] New surveys on employee attitudes toward stock plans.
(National Center for Employee Ownership [NCEO])
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Final IRS Guidance Issued on Additional Medicare Tax on High Earners
"The final rules ... are nearly identical to the proposed regulations and FAQs IRS issued back in June ... Notably, commentators requested various relief provisions which were denied -- such as [1] more flexible correction of overpayments and underpayment for inadvertent errors, [2] waiver of penalties for de minimis errors, [3] allowing corrections within a certain period without penalty, and [4] applying certain wage repayment rules."
(Groom Law Group)
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Press Releases
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