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March 4, 2014          Get Health & Welfare News  |  Advertise
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Employee Benefits Jobs

Consultant - Retirement Services
Lockton Insurance Brokers, LLC
in CA

Team Coordinator - Retirement Services
Lockton Insurance Brokers, LLC
in CA

Pension Analyst
Hooker & Holcombe, Inc.
in CT

Cash Balance Actuary
Trinity Pension Consultants, Inc.
in OH

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Webcasts and Conferences

ERISA Compliance for Health & Welfare Plans
May 21, 2014 in MN
(Thomson Reuters / EBIA)

Health Care Reform
May 22, 2014 in MN
(Thomson Reuters / EBIA)

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  LinkedIn   Twitter   Facebook Hand-picked links to the web's best news articles,
official guidance, jobs, webcasts and more.

Growing Number of DOL Audits Makes Preparation Critical (PDF)
"IRS and the [DOL] have improved their data-mining techniques, which is enabling them to conduct more targeted audits.... DOL's Office of the Chief Accountant [OCA] recently contacted by form letter a sample of plan sponsors that filed retirement plan Forms 5500 annual reports but did not file a health-plan Form 5500. The OCA is also auditing independent accounting firms that perform ERISA financial audits, focusing primarily on the 2011 plan year and those firms that do not perform a significant volume of ERISA audits[.]" (ERISAdiagnostics, Inc., via Thompson Pension Plan Fix-It Handbook)  


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Employees Ease Off on Using Investment Advisors
"The use of advisors to dispense retirement-related advice dipped slightly in 2013 for the first time since 2007 as the stock market performed well and volatility eased ... 33 percent of employees with 401(k)s used an advisor, down from 36 percent who used an advisor in 2012. The percentage of employees using an advisor had been rising steadily since 2007, when 24 percent of 401(k) plan participants used an advisor." (InsuranceNewsNet.com)  

What the EBSA Asks for in a 401(k) Plan Audit: Documentation You Will Need
"Plan sponsors of defined contribution plans will likely be required to produce the following [20 items] in response to an audit ... [T]here are certain documents that relate to the plan (like plan documents) and certain information related to the sponsor. Plus there is a lot of financial data ... The time to see if you have this required information is before you receive the audit request. So consider this list as a test. If there is a request here that you could not satisfy if you were undergoing an audit, now is the time to locate that information." (Fox Rothschild LLP)  

ERISA Successorship Test Meant 'Interest' Was Transferred Between Predecessor and Successor Companies
"The appellate court concluded that the facts adopted by the district court, including that the successors retained most of the predecessor's employees, that all entities operated out of the same location, and that there was substantial overlap in customer lists, among other facts, created a clear picture of notice and continuity, satisfying the ERISA test. Thus, the successor companies could be substituted as judgment debtors in a lawsuit to recover delinquent pension fund contributions." [Sullivan v. Running Waters Irrigation, Inc., No. 13-1308 (7th Cir. Jan. 9, 2014)] (Wolters Kluwer Law & Business)  

The End of the Glide Path
"[S]imply knowing that DC assets leave the plan isn't enough information on which to base a decision about 'to' versus 'through' target date funds.... The phase between ages 65 and 70 represents a transitional stage for most investors. Because investors in general do appear to rely on DC assets during this transitional stage, they can bear a bit more volatility than investors after this transitional stage." (Vanguard)  


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GFOA Best Practice: Actuarial Audits of Government-Sponsored Pension Plans
"The GFOA recommends that public pension plan fiduciaries: [1] Gain an understanding of the types of actuarial audits; [2] Provide for actuarial audits at least once every five years and when a 'red flag' appears, such as [a] Significant and unanticipated changes in asset or liability trends or funded ratio, [b] Computed contribution rates change without adequate explanation, [c] The actuarial methods and assumptions used are not consistent with those approved by the plan's board, [or] [d] The actuarial methods and assumptions are not consistent with plan objectives; [and] [3] Determine the level of actuarial audit most appropriate to their circumstance." (Government Finance Officers Association)  

Employee Ownership Update for March 3, 2014
Section titles include: Republican Tax Reform Proposal and Stock Plans; and DOL Officials Say Lawsuits Over ESOPs are High on Their Agenda. (National Center for Employee Ownership [NCEO])  

Next-Generation DC: Designing Plans to Target Income (PDF)
"[T]he majority (96%) of Plan Sponsors do not know how much income their DC plan may be designed to yield.... DC plans should be designed to target a percentage of an average earner's final net pay as an income replacement goal. Plan design is critical to helping participants with the key levers that contribute to better long-term outcomes such as participation, savings rates, and age-appropriate asset allocation." (Fidelity Investments)  

Can the Enrollment Experience Improve 401(k) Participant Outcomes? (PDF)
12 pages. Excerpt: "Can a guided enrollment tool with a limited choice of savings rates and a single specific investment option increase the likelihood that employees would [1] fully complete the enrollment process, and [2] save at a higher rate? Based on the results of our study, we believe the answer is an unqualified yes." (Fidelity Investments)  

Hit, Miss or Backfire? Ayres/Curtis 401(k) Fee Paper Claims Broad-Based Fiduciary Breach
"[W]hile they state their dataset includes 3500 plans, ... nowhere in the heavily footnoted (138 in all) does it explain the source of this data.... [T]he paper also makes the identical mistake [made in a PBS Frontline story entitled 'The Retirement Gamble'] by digressing into the notorious 'passive versus active' debate.... [T]he two law professors seem to have their own sort of naive sense when it comes to the DOL's strategy on 401k fees.... DOL cares only about reasonable costs and not low cost, which is a huge difference since the DOL allows plan sponsors to pay more in fees if they are getting something more in service." (Fiduciary News)  

Social Security Reform Options (PDF)
40 pages. Excerpt: "There are numerous potential reforms that could address Social Security's financial problems. Options within the current defined-benefit structure include increasing the tax rate, reducing benefits by changing the benefit formula, reducing benefits by changing the way they are automatically adjusted for inflation, reducing benefits to dependents, changing the way trust fund assets are invested, and raising the age at which unreduced benefits are paid. Alternatively, the system could be fundamentally changed so that all or some of the benefits are paid from individual accounts. This report presents the committee's analysis of these and other options, without the endorsement of any particular change." (American Academy of Actuaries Social Security Committee)  

The U.K.'s Ambitious New Retirement Savings Initiative
"The United Kingdom is rolling out a low-cost retirement system for workers who lack pension coverage. The new system has three core elements: [1] Employers auto-enroll their workers at a 4-percent contribution rate, matched by the employer and government combined. [2] A new non-profit provides the infrastructure to keep costs low. [3] The plans' target date funds start young workers with low-risk investments to avoid losses that could discourage saving. The U.S.'s new 'myRA' program includes two similar design features -- low-risk investments and government infrastructure -- but it lacks auto-enrollment." (Center for Retirement Research at Boston College)  

[Opinion]

The High Marginal Cost of the Social Security Benefits Tax
"[W]hen retirees earn $1.00, they must pay taxes on $1.50. As a result, the marginal tax rate on their income is 50 percent higher than for young people with the same income.... [B]ecause there is a limit on the proportion of benefits that are taxed, the marginal tax rate peaks for middle-income seniors and then declines for more wealthy seniors. Simply put, the Social Security benefits tax really sticks it to the middle class." (National Center for Policy Analysis)  

[Opinion]

Some Good, Much Questionable in Camp's Tax Reform Proposal
"Despite advance warning of what Camp's tax reform might look like, it was still a jolt to actually see in print the proposed dismantling of key elements of the retirement saving infrastructure as we know it.... Understandably omitted from this committee's summary is the fact that guiding so many contributions into Roth IRAs and Roth accounts in employer plans will result in less tax revenue in the future.... Perhaps the most indefensible of Rep. Camp's tax reform elements would lock down IRA and employer plan contribution and testing limits, without cost-of-living adjustments, for a full decade." (Todd Berghuis, for Ascensus)  

Benefits in General; Executive Compensation

Does Your Company Need to Seek Shareholder Approval of Your Incentive Plan in 2014?
"If the corporation's equity or annual incentive plan was last approved by shareholders in 2009, the plan(s) must be submitted to the shareholders for re-approval in 2014 in order to ensure that future awards qualify as performance-based compensation under Section 162(m).... Corporations should carefully review their proxy disclosures to ensure that they do not suggest or imply that the corporation's plan and awards will qualify as performance-based compensation under section 162(m). The use of language such as 'may comply' or 'is intended to comply' may protect the corporation from allegations of false or misleading statements in the proxy materials.... [C]orporations should establish and/or update grant procedures to ensure that awards are made in compliance with the plan's terms and that award limits are properly monitored." (Bloomberg BNA)  

IRS Confirms That Few Transfer Restrictions Will Delay Taxation of Equity Compensation
"The new final regulations add another potential opportunity for IRS scrutiny of the particular facts involved by stating that, in determining whether a substantial risk of forfeiture exists based on a condition related to the purpose of the transfer (i.e., a performance-based vesting condition), both the likelihood that the forfeiture event will occur and the likelihood that the forfeiture will be enforced must be considered. This seems intended to help the IRS prevent the use of vesting tied to financial hurdles that are likely to be attained to delay taxation." (Towers Watson)  

Section 83 and the 'Substantial Risk of Forfeiture'
"IRS took pains to emphasize that it did not intend the new regulations to change the law only to clarify it. Indeed, the new regulations mostly state settled law and common understanding.... The regulations reemphasize the IRS' long-held position that a provision or clause that may result in forfeiture of property transferred to an individual must be sufficiently likely to actually result in forfeiture in order to prevent taxation of the property upon transfer (or vesting)." (Winston & Strawn LLP)  

The Plan Sponsor's Role in Form 5500 Reporting: Not Just a Bystander
"[W]hat plan sponsors can do to facilitate the filing of clean/problem free returns: Establish with the preparer of the return a timetable for completion of the return.... Make sure you timely comply with responses made the return preparer.... If you are working with a CPA because your plan is subject to the [Independent Qualified Public Accountant (IQPA)] requirement, establish timetable with the CPA, too.... Make sure you review the report thoroughly and that you get it from the CPA with sufficient time prior to the filing date to do this review and discuss with the CPA and legal counsel, if necessary.... Review every line of the return and schedules." (Fiduciary Plan Governance, LLC)  

Employee Benefit Cases in the Supreme Court: A Review and Look Ahead
"2013 Supreme Court Decisions: [1] Section 3 of DOMA Unconstitutional ... [2] Welfare Plan Reimbursement Clauses... [3] Statute of Limitations... [4] Class Certification... Supreme Court Decisions Expected by June 2014: [1] Presumption of Prudence in Employer Stock Litigation... [2] Contraceptive Mandate... [3] Applicability of FICA to RIF-Related Severance Pay." (Proskauer's ERISA Practice Center)  

Press Releases

DOL Sues Radford, Va.-based Employer, Pension Plan Trustees to Recover Assets
Employee Benefits Security Administration (EBSA), U.S. Department of Labor

Free Presentation of Latest Software from DATAIR
DATAIR Employee Benefit Systems, Inc.

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