Retirement Plans Newsletter

February 16, 2015

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Employee Benefits Jobs


Webcasts and Conferences

2015 A,B,C's of Employee Benefits
February 18, 2015 WEBCAST
(Ascension)

Savings Fitness Workshop
February 26, 2015 in MA
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

2015 EBP Audit Best Practices & Compliance Workshop
March 3, 2015 in AZ
(CBIZ MHM, LLC)

Retirement Plan Compliance Assistance Seminar
March 5, 2015 in PA
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

Voluntary Fiduciary Correction Program (VFCP) with the Department of Labor (DOL)
March 18, 2015 WEBCAST
(Western Pension & Benefits Council)

12th Annual World Health Care Congress
March 22, 2015 in DC
(World Congress)

2015 NIPA Annual Forum & Expo (2015NAFE)
May 3, 2015 in NV
(NIPA [National Institute of Pension Administrators])

National Conference
June 7, 2015 in DC
(SPARK Institute)

View All Webcasts and Conferences



[Guidance Overview]

Multiemployer Review: Tools for Plans in Critical and Declining Status (PDF)
"MEPRA has made significant changes to the rules that apply to multiemployer pension plans, including the creation of a new status for very poorly funded plans called 'critical and declining status.' The trustees of these plans may apply to the [PBGC] for merger assistance or partitioning the plan, and/or apply to the Secretary of the Treasury to suspend previously accrued and protected benefits if certain requirements are met. This [article] defines this new status and outlines the most significant rules and procedures related to plan mergers, plan partitions, and benefit suspensions. These rules were effective on December 16, 2014[.]" (Milliman)  


[Advert.]

Plan Advisors Can't Miss the NAPA 401(k) Summit -- San Diego, March 2015

Sponsored by ASPPA

Learn from the best and add to your professional skill set by earning ASPPA and CFP CE's, networking with other exclusive financial advisors and TPAs, hearing from leading speakers on topics that matter to you most. The NAPA 401(k) Summit supports your needs!



Unambiguous Plan Terms Defeat Equitable Estoppel, First Circuit Declares (PDF)
"Unlike several of its sister appellate courts, the US Court of Appeals for the First Circuit has never held that promissory or equitable estoppel is a form of relief available under Section 502(a)(3) of ERISA. Each time the issue has confronted it, the court has ruled that the plaintiff failed to allege the elements necessary for an estoppel claim, rendering it unnecessary to decide whether such a claim might in fact be cognizable.... In its latest encounter with the issue, the First Circuit continued on the same path, rejecting a pension plan participant's claim for benefits that allegedly had been promised to him but that were not provided under the terms of the plan." [Guerra-Delgado v. Popular, Inc., No. 13-2065 (1st Cir. Dec. 18, 2014)] (Steptoe & Johnson LLP)  

Santomenno Case Illustrates High Stakes for Brokers If DOL Proposes New Fiduciary Rule (PDF)
14 pages. "In an amicus brief opposing dismissal, the DOL avoided discussion of the current five-part definition of an ERISA fiduciary providing investment advice under section 3(21)(A)(ii) of ERISA. The Department seeks to discard this longstanding test of fiduciary status in lieu of a greatly expanded definition through a rulemaking. The Third Circuit's facts-intensive analysis and an industry brief supporting dismissal also review the proposed and current investment advice definitions. The result is a glimpse into the brave new world facing benefits brokers should the current policy debate over the DOL's fiduciary advice rule move from the abstract to a new litmus test for service providers." [Santomenno v. John Hancock Life Ins. Co., No. 13-3467 (3d Cir. Sept. 26, 2014)] (fi360)  

Performance Starts to Trump Risk Management as Target Date Fund Assets Balloon
"For younger investors, risk is less of an issue. But some target date fund managers are still dangerously stepping on the gas for those in or nearing retirement.... 32 of the 54 target date series use a 'through' glide path strategy. The remaining 22 use a generally more conservative 'to' glide path, which assumes that most investors at retirement age will be rolling over their company-sponsored retirement savings accounts ... That rollover assumption reflects the fact that within three years after retirement, 80% of retirees are, in fact, rolling over those assets, often into individual retirement accounts. That begs the question, then, of why the majority of target date funds use a 'through' glide path when they must know most investors are not staying invested very long after they retire." (InvestmentNews)  

The Future of Outsourcing: ERISA Sec. 3(16) Plan Administration Services
"Unlike [ERISA sections] 3(21) and 3(38), where software can be used to scrub investments based on a preset screen that follows an Investment Policy Statement, 3(16) deals with the actual day to day administrative activities of a plan that must follow not only ERISA regulations but must follow the governing plan document that can be unique to each plan.... Unlike a 3(21) and 3(38) who are regulated by FINRA and the SEC, a 3(16) Administrative Fiduciary is not required to be licensed, tested, or regulated. When hiring a 3(16) Administrative Fiduciary, follow these steps. [1] Check Credentials... [2] Reporting & Monitoring... [3] The fees charged should be consistent with industry standards.... [4] A 3(16) administrative fiduciary should be independent of any other services provided to the plan." (David Donaldson, former EBSA Senior Investigator, via TPAresources.com)  


[Advert.]

11,000 members rely on our key retirement/HR news and analysis

Sponsored by Mercer Select

With a user-friendly website, daily emails, and regular web briefings, Mercer Select members stay informed about retirement and other key benefit, comp and HR issues. Contact us for a free demo or guest membership.



Is Your 401(k) Plan Up to Snuff? Watch Out for These DOL Audit Red Flags
"Four emerging potential 401(k) trouble spots are becoming a greater focus at the [DOL]. One involves self-directed brokerage accounts, or 'brokerage windows,' that allow participants to purchase individual securities. The DOL worries that participants with limited investing experience will jump on the hottest stock or market sector at its high-water mark, watch it tank, then sell at the bottom. Sponsors need to have robust investment education plans in place to try to prevent that from happening. The other three trouble spots involve administrative procedures to address: [1] Lost participants.... [2] Uncashed distribution checks.... [3] ERISA spending accounts." (Lindquist Solutions)  

Automatic Enrollment, Employer Match Rates and Employee Compensation in 401(k) Plans
"A significant negative correlation exists between the generosity of the employer match structure and the automatic enrollment provision. However, [the authors] find no evidence that total compensation costs or DC costs differ between firms with and without automatic enrollment, and no evidence that DC costs crowd out other forms of compensation." (Barbara A. Butrica and Nadia S. Karamcheva, via SSRN)  

QLACs 'Pension-ize' Defined Contribution Plans
"Qualifying lifetime annuity contracts in July 2014 became another option for defined contribution plan sponsors to offer to assist with retirement income security when the U.S. Treasury Department and IRS issued final regulations allowing them. Now, plan sponsors and participants near retirement age face some confusing choices when considering whether QLACs are right for their plans or retirement savings strategy." (Thompson SmartHR Manager)  

SEC Commissioner Pushes for TDF Warnings
"Securities and Exchange Commissioner Luis Aguilar on Thursday called on the agency to do more to warn anyone saving for retirement about the 'inherent risks' in target-date funds and to require better disclosure rules in municipal bonds. The 'relentless' growth in TDFs is 'troubling,' Aguilar said, especially because Americans saving for retirement lack a full appreciation for their inherent risk. Also, a lack of transparency in municipal bonds, he said, is leaving investors 'vulnerable.' " (BenefitsPro)  

Build Your Own Pension Plan: An Interactive Tool for Public Pension Policy
"You choose the plan benefit rules and make some underlying assumptions about how the economy will perform. The tool then tells you how many retirement benefits plan members will receive at age 75 and over their lifetime, how their retirement incomes will compare with their pre-retirement earnings, and how much these benefits will cost employers. Fiddle with the benefit rules to find the combinations that give the best outcomes." (Urban Institute)  

CalPERS Paid Lawyers $7 Million in Bankruptcies
"CalPERS has paid two law firms more than $7 million in the Vallejo, Stockton and San Bernardino bankruptcies, even though a federal judge doubts that it has the legal standing to object to city pension cuts.... In the Vallejo bankruptcy, CalPERS from 2008 to 2012 paid $526,356 to the law firm of Felderstein Fitzgerald Willoughby & Pascuzzi. Then CalPERS switched law firms and from 2012 through last November paid K&L Gates $3.2 million for the Stockton bankruptcy and $3.3 million for the San Bernardino bankruptcy. Peter Mixon, the CalPERS general counsel for 11 years, left CalPERS in 2013 and became a partner in K&L Gates last October." (Calpensions)  

Benefits in General; Executive Compensation

[Official Guidance]

Text of IRS Notice 2015-15: Proposed Requirements for Employee Consents Used to Support a Claim for Refund of Employment Taxes (PDF)
"Questions have arisen concerning what information must be provided in an employee consent and whether an employee consent may be requested, furnished, and retained in an electronic format. The proposed revenue procedure clarifies that, in addition to providing the relevant name, address, and taxpayer identification number, a valid employee consent must identify the basis of the claim for refund and be signed by the employee under penalties of perjury. The proposed revenue procedure also provides guidance as to what constitutes 'reasonable efforts' to secure an employee consent when a consent is not obtained. The proposed revenue procedure permits, but does not require, the employee consent to be requested, furnished, and retained in an electronic format, as an alternative to a paper format." (Internal Revenue Service [IRS])  

[Guidance Overview]

SEC Proposes Hedging Disclosure Rule (PDF)
"The proposed rule is aimed at providing more information and transparency to investors about whether employees and directors are able to skirt company requirements to hold stock for the long term by entering into hedging contracts that would allow them to receive their compensation even if the company does not perform well." (Alston & Bird LLP)  

[Guidance Overview]

SEC Proposes New Rules Requiring Issuer Disclosure of Hedging Policies for Employees and Directors (PDF)
"The SEC's stated intention is for the proposed disclosure to be more 'principles-based' so that the disclosure obligation covers all transactions that establish downside protection of equity securities, whether by purchasing or selling a security or derivative security or otherwise, in which employees, officers, directors or any of their designees are either prohibited or permitted to execute." (Fried, Frank, Harris, Shriver & Jacobson LLP)  

[Guidance Overview]

SEC Proposes Rules for Hedging Disclosure
"The proposed rules come on the heels of efforts by the major proxy advisory firms in recent years to have companies adopt hedging policies (by treating the absence of such a policy as a basis for recommending 'against' votes for sitting directors). In response to these efforts, many companies have begun disclosing in their proxy statements that they have anti-hedging policies for executive officers. If the SEC's proposed disclosure requirements are adopted in their present form, companies likely would need to reexamine the terms of their existing policies and assess whether changes or clarifications would be appropriate." (McGuireWoods LLP)  

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