[Guidance Overview]
Additional Action Required by Late Filers of Form 5500 -- Even Those That Have Filed Already
"Administrators who have already obtained relief from the DOL penalties under the DFVC Program must file the appropriate Form 9855-SSA with the IRS before the December 1, 2014, deadline. Those who have not yet completed a filing under the DFVC Program must first do so, and then file Form 8955-SSA with the IRS before the applicable deadline (the later of 30 days after the DFVC filing is complete or December 1, 2014)."
(Spencer Fane)
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Most Fiduciaries Using Target Date Funds Are Inviting Lawsuits
"Fiduciaries, namely plan sponsors and their advisors, unwittingly breach their duty of care because they mistakenly believe that they are protected from litigation by two safe harbors in their selection of target date funds: [1] TDFs are Qualified Default Investment Alternatives (QDIAs) ... [2] There is safety in numbers, so choosing one of the most popular TDF providers is prudent.... These beliefs will not hold up in court."
(Investor Watchdog)
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Strategies to Reduce Single-Employer Defined Benefit Plan Costs (PDF)
"Borrowing money to fund an underfunded pension plan may make economic sense when considering the additional cost of rising PBGC variable rate premiums ... potential tax efficiencies, and reduced annual pension expense and pension liability for organizations required to comply with ASC 715 accounting standards.... [L]ump sum cashouts not only save PBGC fixed rate premiums and other administrative costs but also 'downsize' the plan, hence reducing future pension cost volatility."
(Ekon Benefits via Plan Consultant)
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Presumption of Reasonableness Applied to Plan Fiduciary's Delayed Sale of Employer Stock
"[T]he court relied heavily on the existence of 'hold' recommendations by impartial investment advisors, but it did not discuss the criteria for those recommendations, their relevance to employee plan investors, and when those recommendations ought to be considered sufficiently negative in the aggregate to demonstrate imprudence. Also, how relevant are the actions of large institutional investors when determining what is imprudent for employee plan participants? Finally, how dim must the prospect for a stock's future appreciation be before a fiduciary must give up on it? Answering these questions remains something of an art." [Pfeil v. State Street Bank and Trust Co., No. 2:09-CV-12229 (E.D.
Mich. Apr. 11, 2014)]
(Thomson Reuters / EBIA)
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Winners, Losers as CalPERS Shuffles Risk Pool Rates
"The CalPERS board, responding to a problem caused by the governor's pension reform, approved a rate change last week for about 1,200 local governments that have plans with less than 100 active members. The change reduces the rate increase most employers would get under a dozen old 'risk pools'... But the board action combining all of the plans into two risk pools, including new hires given lower pensions by the reform, gives some plans what will be the fourth rate increase in recent years."
(Calpensions)
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PBGC Director Describes Nationwide Retirement Crisis [Video]
"In his interview, [PBGC Director Josh] Gotbaum addressed issues concerning the existing retirement system, including: The existing retirement system is not covering most people, It doesn't lead to enough saving, And it doesn't lead to lifetime income. People are living longer, healthier lives, which means retirement will cost more."
(PBGC Director Josh Gotbaum, via Fox Business)
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Retirement Fears Don't Inspire Sacrifices (PDF)
"More than half (55%) of the mass affluent fear going broke during retirement -- far more common than other stress-inducing situations and pressures ... Despite their fears about future finances, many mass affluent won't consider cutting back on indulgences today to save for retirement ... More Millennials than any other generation combined would not want to reduce what they spend on coffee (26% vs. 20%) or technology (34% vs. 27%) to save for retirement."
(Bank of America Merrill Lynch)
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Does Retirement Induced Through Social Security Pension Eligibility Influence Subjective Well-Being?
"For both the U.S. and Europe [the authors] find that retirement is associated with higher levels of depression. However, when we use instrumental variables we find the opposite result. Retirement induced through Social Security pension eligibility is found to have a positive effect, reducing depression symptoms, although only marginally significant for the U.S. when considering the depression indicator. Retirement is not found to have a significant effect on life satisfaction measures for either the U.S. or Europe."
(University of Michigan Retirement Research Center)
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Today's Retirement System: Adequacy, Equity, Efficiency, and Stability
8 presentation slides, from 2014 Pension Research Council Symposium. Topics include: [1] Retirement Readiness: Observations from the Papers, Some Levers are Bigger than Others, and Questions the Papers Raise; [2] Participant Perspective: EBRI 2014 Retirement Confidence Survey; [3] Plan Sponsor Perspective: MetLife U.S. Retirement Research; and [4] Retirement Readiness: Predictions & Implications.
(Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)
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Rethinking Traditional Investment Risk Questionnaires
"When it comes to assessing risk tolerance, studies have found that investors usually display a greater tolerance for risks after a rising-market period than a declining-market period. So advisers might consider asking one set of questions after a strong market and a different series of questions after a weak market."
(InvestmentNews)
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Tell a Graduate to Start Saving Now
"New graduates probably don't enter their careers already thinking of retirement. Saving now for an event taking place in 40 plus years is a tough sell, but there are two important details new graduates should understand: People who start saving sooner rather than later set themselves up for financial success.... Saving can be really easy if they automate the process now."
(Smart401k)
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Life Insurers Show Their Hands with New Variable Annuity Filings
"[The variable annuity (VA)] industry is at a crossroads. Many carriers who were previously big sellers of annuities with living benefits have sought to moderate their volumes, as VAs not only expose them to equity market risk but their living benefits are sensitive to low interest rates. Enter the latest product innovations over the last couple of years: Investment-focused variable annuities that are free of living benefits and hybrid annuities that use structured products to protect principal. The latter product also tends to come without living benefits."
(InvestmentNews)
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A Primer on 'MINT7' (Modeling Income in the Near Term, Version 7)
"Modeling Income in the Near Term (MINT) is a dynamic microsimulation model developed ... to facilitate analysis of proposals to change Social Security benefits and payroll taxes. This primer describes MINT's development history. It then details the model's starting sample and the specification of its demographic and economic aging modules, including the calculators that compute various benefits and taxes. It also provides information about previous analyses that have relied on MINT."
(Urban Institute)
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[Opinion]
Disney: Big Media and the Pension Albatross
"Disney has a market cap of $144 billion and is responsible for $9.5 billion in pension assets (at FYE 9/28/13). Half of the pension costs are tied to the Parks and Resorts business. When competing for customers and employees, Disney has a competitive disadvantage. More recently formed media companies do not have a pension albatross around their neck."
(Seeking Alpha; free registration may be required)
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[Opinion]
The Retirement Apocalypse That Isn't Coming
"No one argues that building a solid financial future is easy ... Innovative retirement plans and new policies and products point to a future richer than many workers imagine.... If Social Security survives, or even expands, that covers only the barest necessities. The rest will need to come from savings invested in a market that just loves surprises, often unpleasant ones. Again, the long view provides comfort."
(InvestmentNews)
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[Opinion]
Accumulating Savings for Retirement of 8x or 10x Pay Is Better Than 4x or 6x
"[U]nder current law, future age 65 Social Security replacement rates will be somewhat lower than the rates used by [Pang and Schieber] for individuals born after 1954 (reaching about 7% lower for anyone born after 1959). In addition, because of Social Security's financial difficulties, future benefit reductions of something like 25% may be required sometime in the 2030s when the OASDI trust fund is projected to be exhausted if tax rates are not increased."
(Kenneth A. Steiner, FSA Retired)
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[Opinion]
Dissenting Views: Retirement Planning and Jack Bogle
"Tinkering with Bernstein's spreadsheet, it seems that those willing to settle for a silver (or perhaps bronze) retirement can get there by saving 10% to 12% annually. That remains well above what Americans are now doing, though, so at least some of [Pang and Schieber's] anticipated consumption-model catch-up savings had better come true."
(John Rekenthaler, for Morningstar Advisor)
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[Opinion]
The Proposed Fiduciary Rule and the Selling of Fear
"[A recent] poll claims that if the Department of Labor (DOL) changes the fiduciary rule, small employers will stop sponsoring retirement plans and will suspend employer contributions. It's absolute nonsense.... More than 40 percent of small businesses without a plan say the regulation would be at least somewhat likely to cause them to charge participants higher fees or not offer matching contributions. What does the fiduciary rule have to do with matching contributions or affect the plan sponsor's capacity to make one?"
(The Rosenbaum Law Firm P.C.)
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Benefits in General; Executive Compensation
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[Official Guidance]
IRS Announces Meeting of Advisory Group to the Tax Exempt and Government Entities Division
"The Advisory Committee on Tax Exempt and Government Entities (ACT) will hold a public meeting on Wednesday, June 11, 2014.... Reports from five ACT subgroups cover the following topics: Employee Plans: Analysis and Recommendations Regarding the Pre-Approved and Determination Letter Programs ... Federal, State and Local Governments: The Affordable Care Act and Government Employees."
(Internal Revenue Service [IRS])
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As Predicted, Shareholder Proposals on Executive Compensation Return
"The most common shareholder proposals relating to executive compensation continue to be requests for the company to: [1] Adopt (or improve) a compensation clawback policy, including a requirement that the company disclose whether and when it has recouped compensation from any employees; [2] Remove or prohibit the accelerated vesting of equity awards upon a change in control; and [3] [Adopt] a stock retention policy[.]"
(Winston & Strawn LLP)
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