[Guidance Overview]
PBGC Simplifies Certain Multiemployer Notice and Valuation Requirements
"[A] compliance determination provides valuable protection from some problematic issues that could arise in a merger. If, however, the trustees ... determine that such protection is not needed, the merger could be executed on a faster timetable. On the other hand, there might be no need to forego the protection of a compliance determination because it appears that, under the new rules, plans that request a compliance determination also may continue to request a waiver of the 120-day period if need be."
(Segal Consulting)
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Supreme Court Rules on Moench Presumption of Prudence (PDF)
"For those wondering how the DOL will interpret this ruling, it is important to note that the Court went to great length to write out (and not simply cite to) the Congressional intent to promote employee ownership through ESOPs.... [T]he Court recognized that if the Sixth Circuit had its way, ESOP fiduciaries could find themselves between a rock and a hard place-sued for selling stock too cheaply or sued for not selling before a collapse. Employee ownership and ESOPs are alive and well." [Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (U.S. June 25, 2014)]
(ESOP Law Group)
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Supreme Court Eliminates Employer Stock Presumption
"The Court's ruling is the 'worst case' scenario imagined by the ESOP community.... [T]he Court went much further and answered a question that no one asked: Whether or not a presumption should exist at all? ... It is difficult to predict how this new standard of prudence for employer stock investments will be reconciled with the requirement that ESOPs be primarily invested in employer stock." [Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (U.S. June 25, 2014)]
(Nixon Peabody LLP)
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Moench-ing on a Bunch of Presumptions
"On its face, Dudenhoeffer is a significantly negative development for employers with (or considering) ESOPs and for ESOP fiduciaries.... If diversification, reliance on market price and possession of inside information cannot stand as bases for successfully arguing that a fiduciary should have caused the sale of ESOP stock, there may well be a reasonable question as to what's left." [Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (U.S. June 25, 2014)]
(Bloomberg BNA)
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Supreme Court Decision Will Lead to Intense Scrutiny of ESOP Fiduciaries
"ERISA does not guarantee a result; it guarantees only a prudent process. Fiduciaries of traditional ESOPs find themselves in a position that their 401(k) brethren have been in for a long time: meeting regularly; hiring an investment advisor; preparing a good record of looking at alternatives; and reviewing a participant's total employer-provided investment portfolio with an eye toward justifying the ESOP as part of a comprehensive program of employer-provided retirement income." [Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (U.S. June 25, 2014)]
(Blank Rome LLP)
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China Securities Regulator Allows Employee Stock Ownership Plans
"Companies listed on China's stock exchanges may offer [ESOPs] under new guidance from China's securities regulator [CSRC], a welcome development for multinationals investing in listed Chinese companies ... Companies wishing to create an ESOP do not need to obtain pre-approval from the CSRC but must disclose information to the market about implementation of the plan. The only exception would be the issuance of new shares, in which case CSRC approval would be required."
(Bloomberg BNA)
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Ten Incredibly Easy Things a 401(k) Fiduciary Can Do to Increase Deferral Rates
"Encourage employees to begin deferral the moment they are hired.... Stretch the matching formula so it continues to match at higher deferral rates.... Adopt auto-enrollment and auto-escalation policies as part of the plan.... Show participants how to reframe goals so they are much more closely aligned to real situations.... Use raw numbers bluntly.... Reduce withholding if participants are overpaying taxes.... Contribute all or most of year-end bonus money to the retirement plan.... Use silly props of lure participants with promises of candy.... Conduct one-on-one participant meetings.... Do something totally outrageous."
(Fiduciary News)
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Are Fiduciaries in the Dark About Dark Pools?
"The challenge and tension revolves around the fact that fiduciaries require transparency, whereas the name dark pools suggests the opposite -- opacity. At the outset, Fiduciaries need to determine whether plan assets were traded through these dark pools. If the answer is yes, then a whole series of questions follow ... Sometimes getting satisfactory answers in this area requires the best of prosecutorial skills. It can be tough going."
(Harrison Fiduciary)
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Your Ideal Retirement Number Is Zero
"The ideal retirement number for liabilities is zero -- no mortgage, no credit card rollover, no unpaid loans. Doing so means that the retiree may be able to fund basic needs (food, utilities, taxes, automobile, insurance, clothing, etc.) solely from Social Security payments (and/or other guaranteed pensions).... [T]he lump-sum at retirement that is required to fund $1,100 of monthly spending, assuming a 4% withdrawal rate, is $320,000. For the millions of households that currently have almost no savings at all, retirement or otherwise, that number will look daunting. But a lot less daunting than what is currently being shown to them."
(John Rekenthaler, for Morningstar)
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The Enrolled Actuaries Report, Summer 2014 (PDF)
Article titles: "[1] Pension Insurance Policy Continues to Pose Challenges; [2] Pension Committee Concerned About Data Elimination; [3] Talking Ethics With EAs; [4] A Preview of Mortality Tables and Projection Scale; [5] The 2014 Gray Book."
(American Academy of Actuaries)
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Benefits and Mechanics of Buy-In Annuity Contracts to Reduce Financial Risk in DB Plans
"[A] buy-in, unlike a buyout, includes an option for the plan sponsor to unwind the contract at a later stage, although surrender options may be restricted and surrender penalties typically apply.... Pricing for a buy-in is generally expected to be similar to that of a buyout, but the additional flexibility of the unwind provision can add a premium over a buyout."
(Mercer; free registration required)
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Mercer U.S. Pension Buyout Index, May 2014
"During May the average cost of purchasing annuities from an insurer decreased from 108.9% to 108.7% of the accounting liability. The economic cost of maintaining the liability remained level at 108.7% of the same liability.... [F]or retirees the costs of maintaining the plan are about the same as the costs to transfer the obligation and risk to an insurer."
(Mercer)
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Putting a Number on Restoring COLAs for New Jersey Pensions
"The virtual elimination of cost-of-living adjustments (COLAs) for New Jersey retirees was the linchpin of the 2011 reforms.... Now that COLAs have been ruled to be a contractual right how much will it cost to make retirees whole? Extrapolating from official proclamations of savings it would be about $100 billion in contributions over 30 years if the plan had another 30 years of existence. It doesn't."
(Burypensions)
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[Opinion]
Automating the Institutional Investing RFP
"The RFP process today is an unreasonable task to place on a fiduciary, let alone to complete every three years. The problems start at the very beginning, when fiduciaries are challenged to identify qualified adviser candidates to vet. Institutional accounts demand a higher level of expertise than your average IRA investor.... The benefits of innovation are obvious to the savvy Wall Street & Technology reader -- lower opportunity costs, less spending, and trackable data for your auditable files. Why isn't it obvious to institutions?"
(InHub)
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[Opinion]
The 'Prudent Person' Is a Bad Investor
"[T]he big problem with prudent-person rules are the perverse incentives they create for pensions to avoid innovation and hold onto convention.... [T]hese rules push investment organizations to hug benchmarks and avoid doing anything that would make them stand out from the crowd.... Consider the example that the Prudent Person Rule makes an explicit case for diversification so as to minimize the risk of large losses. What about the possibility of big gains?"
(Ashby Monk, for Institutional Investor)
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Benefits in General; Executive Compensation
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Press Releases
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