Retirement Plans Newsletter

February 24, 2015

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Employee Benefits Jobs

Functional Area Manager (Contract opportunity)
MMC Corp
in ANY STATE

401k Plan Specialist
The Aimpoint Group, LLC
in ANY STATE

Retirement Plan Analyst (401(k) Team)
Benetrends, Inc.
in PA

Retirement Plan Analyst
Benetrends, Inc.
in PA

Corporate Reporting Analyst
Benetrends, Inc.
in PA

Enrolled Actuary
United Retirement Plan Consultants
in RI

DB Pension Analyst
United Retirement Plan Consultants
in ANY STATE, RI

Pension Processor
Pinnacle Financial Services
in FL

Certified Pension Consultant
Pinnacle Financial Services, Inc.
in FL

RVP, Group Retirement Plans
Ohio National Financial Services
in LA

401K Plan Administrator
QBI, LLC
in CA

ERISA/Qualified Plan Attorney
Wiggin and Dana LLP
in CT

Associate Attorney Tax
Perkins Coie, LLP
in WA

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Webcasts and Conferences

Fundamental Series 04: Coverage Test [2015]
March 16, 2015 WEBCAST
(SunGard Relius)

401(k) Advisor Symposium
March 17, 2015 in FL
(401k Rekon)

Common Plan Provisions in Prototype and Volume Submitter Documents
March 17, 2015 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

Affordable Care Act in 2015: The State of the Law for Employers, Individuals, and Health Care Providers Five Years After Enactment
March 17, 2015 WEBCAST
(Practising Law Institute)

2nd Annual Evolution(k) Retirement Advisor Conference
March 24, 2015 in NC
(Millenium Investment & Retirement Advisors, LLC)

PPA Pre-approved Plan Workshop (Corbel and PPD)
March 24, 2015 in MA
(SunGard Relius)

Getting What We Pay For: Value Solutions in Healthcare Purchasing & Payment
March 25, 2015 in CA
(Benz Communications)

Annual Population Health Management Forum
April 27, 2015 in FL
(Opal Events)

View All Webcasts and Conferences



[Guidance Overview]

DB Plan Sponsors Beware: Potential Liability Related to Facility Closings and Sales of Business Units
"[Recently revised ERISA] Section 4062(e) ... applies when an employer has a permanent cessation of operations at a facility that results in a reduction in the number of eligible employees equal to 15 percent of all eligible employees of the employer.... Because employees eligible for any employer pension plan (including defined contribution plans) rather than just the subject pension plan are [considered eligible], the denominator for determining the workforce reduction percentage is likely larger. Thus, even though the percentage has decreased [from 20% under prior law to 15% under current law], it may be harder to hit the percentage given the larger base of employees considered.... [Nevertheless,] the PBGC has lifted its enforcement moratorium. As a result, employers with Title IV plans who are contemplating a plant shutdown or selling a division that will result in a substantial cessation should take a close look at whether they will trigger Section 4062(e)." (Drinker Biddle)  


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Who's at Default Here? QDIAs Needed in More DC Plans
"According to [a] survey of over 1,000 plan sponsors (a balanced representation from across the full universe of DC plan sizes), one-fifth of plan sponsors lack a default investment altogether -- more so among the smallest plans (37%) than the largest (13%). Along with that, [the] survey indicates that another 30% of plans still use a stable value or money market fund as their default investment[.]" (AllianceBernstein L.P.)  

401(k) Investors: Avoid These 20 Mistakes
"Plans offered by small employers may be larded with extra administrative fees or high-cost funds, and their lineups may skimp on core asset classes such as international equity or fixed income. Participants can also run into unforced errors -- for example, not paying enough attention to asset allocation when making their investment selection, or cashing out their money when they change jobs.... In short, 401(k) plans invite the potential for plenty of goofs. Here are 20 common ones, as well as tips on avoiding those mistakes." (Morningstar)  

How to Save More Money for Retirement
"Let's look at several hypothetical 401(k) investors and see what happens if they contribute just 1% more of their salary to their 401(k) until retirement at age 67.... Our examples assume that the investors' salaries grow 1.5% a year -- adjusted for inflation -- which will boost their contribution amounts along the way.... Take a look at the chart ... to see what a difference a small increase can make." (Fidelity)  

Directors Should Avoid Activities That Will Subject Them to ERISA (PDF)
"Avoiding ERISA's fiduciary standards does not mean abandoning the board's oversight of a corporation's benefit plans. Rather, the goal is to structure board level oversight of pension and other benefit plans without subjecting directors to ERISA's fiduciary standards. And this can usually be accomplished by careful planning and committee charter drafting and attention to the manner in which the applicable committee of the board engages in plan oversight. Unfortunately, it is all too easy (intentionally or not) to cause directors to become ERISA fiduciaries." (Shearman & Sterling LLP, via Bloomberg BNA Pension & Benefits Daily)  


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Presented by SunGard and the Atlanta-based firm Ferenczy Benefits Law Center, LLP, this program offers general and breakouts sessions covering the current developments, plan design, plan corrections, and more. 15 CE hrs, incl. 2 ethics. Register Now.



Obama Fires Fiduciary Starter Pistol to Mixed Reviews
"[The author] spoke with members of both dugouts to get an assessment of whether President Obama's sudden and highly visible insertion into the fiduciary debate will prove to be a game changer. Granted, his speech at AARP, with Elizabeth Warren riding shotgun, probably wasn't the ideal imagery to inspire Middle America, but it has infused the industry. Unfortunately, all we had to see were a few reports, not the actual proposal." (Fiduciary News)  

Success Strategies for Well-Funded Public Pension Plans
"These case studies examine the public pension systems in four states with a long tradition of being well-funded to determine what successful practices they have in common.... While each of the defined benefit plans has a unique history and legal framework, they share these practices: a commitment to fund the annual required contribution in both good and bad financial times; conservative, realistic assumptions that are adjusted based on experience; and changes to benefit levels and contribution rates as needed. The funded ratio for the plans studied ranges from 87.6 percent to 99.8 percent." (Center for State & Local Government Excellence)  

A Study of the Pension Burden on California Cities
"This study estimates the burden of pension costs on 459 California municipalities. The primary measure we consider is the ratio of required pension contributions to estimated total revenue for each city. We also look at contribution rates per employee and at pension funding levels. We find a wide variation in the impact of pension costs on city finances. While several cities spend more than one-eighth of their revenues on pension contributions, many spend far lower proportions and ten municipalities have no defined benefit pension plans at all." (California Policy Center)  

Stockton Bankruptcy Ruling Cuts CalPERS Down To Size
"CalPERS is not a major creditor of any participating employer because it does not guarantee the funding of employees' pensions.... In evaluating the respective rights and responsibilities of various chapter 9 creditors, it is the employees and retirees of a city who are one of the largest, if not the largest creditor. An insolvent city must negotiate with them to obtain appropriate wage and benefits concessions.... The vaunted 'vested rights' doctrine under both California case law and the state and federal Constitutions does not prevent Congress from enacting a law (the federal bankruptcy act) impairing a state or local government's obligation of contract." (Chang Ruthenberg & Long PC)  


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New Jersey Court Strikes Down Governor's Plan to Cut Pension Contributions
"A New Jersey judge on Monday struck down Governor Chris Christie's plan to cut $1.6 billion of contributions from its public pension system ... Christie had proposed the cuts last May to try to plug a $2.7 billion revenue shortfall projected through fiscal 2015. Superior Court Judge Mary Jacobson said New Jersey could not renege on its obligations to teachers, firefighters and police who sued the governor and state legislature[.]" [Burgos v. New Jersey, No. MER-L-1267-14 (Mercer Cty. N.J. Superior Ct. Feb. 23, 2015)] (Reuters)  

Public Pension Woes Call for Differentiated Municipal Bond Investing
8 pages. "As public pension funding gaps and municipal fiscal challenges continue to make headlines, ... it is more important than ever for investors to take a differentiated view of the municipal bond market ... The potential impact from rising pension costs will not be uniform across the market, and about 65% of the market should see little or no impact from pensions.... The greatest impact from pensions will be on state and local governments, which represent only about 35% of the municipal bond market ... While the pension funding issue is serious and might reduce the amount of revenues available to pay debt service on municipal bonds, [the author] does not believe it will lead to widespread insolvency and defaults in the municipal market." (Standish)  

Chicago Pension Reform Lawsuits Put on Hold
"Lawsuits seeking to void a law aimed at shoring up the finances of two Chicago pension funds have been put on hold pending a ruling by the Illinois Supreme Court on a law affecting state public retirement funds ... City unions and retirees had been seeking a preliminary injunction to stop the law, which took effect Jan. 1, in Cook County Circuit Court. Meanwhile, the [Illinois] supreme court announced last week it will hear lawsuits against the Illinois pension reforms on March 11." (Reuters)  

Boston's Pension Action Center Helps Participants and Beneficiaries Get Their Pensions
"[P]ersistence is the hallmark of the Pension Action Center, a nonprofit that for more than 20 years has helped people find and claim the benefits due them. Since its founding in 1994, the center has helped recover more than $50 million owed to 7,500 retirees. They include people like a merchant seaman whose initial benefit was sharply lower than it should have been, and a widow denied survivor benefits under her husband's pension plan. For many, the monthly check has meant the difference between living on the edge and finding security in their later years." (The Boston Globe)  

[Opinion]

Radioshack Workers Will Lose Their Jobs and Their Retirement
"While most employers make matching contributions in cash, too many large companies still make a stock match. According to a survey by Deloitte & Touche, 13 percent of employers use their shares to make matching contributions. Contrary to the advice of retirement experts, employees at some of the largest U.S. corporations have as much as 70 percent of their retirement savings invested in company stock ... What should you do if you're one of the more than 9 million Americans whose employers match in company stock? Limit it to 10% of your assets ... And you might want to consider looking for a new job at an employer that values compensating their valuable employees over artificially boosting their company's share price." (Jane White, via 401kHelpCenter.com)  

[Opinion]

How 401(k) Accounts Widen Racial and Ethnic Wealth Disparities
"In so many ways, 401(k) accounts are basically designed for upper-middle-class and affluent people. This system works reasonably well for us, because (a) we have money to contribute, (b) we have other money we can use for short-term emergencies; (c) we face high marginal tax rates that provide strong incentives to contribute to tax deferred accounts, and (d) we possess basic comfort and familiarity with the general world of mutual-fund investing. Most of us are also guaranteed a pretty decent Social Security benefit when we retire. With these floors in place, we're free to take reasonable risks making long-term investing for our eventual retirement. Outside this top economic layer, this system works much worse." (The Washington Monthly)  

[Opinion]

Pension Rights Center Applauds DOL's Release to OMB of Proposed Rule on Conflicted Investment Advice
"[We] hope and expect that, after five years of deliberations, the [DOL] has made much-needed and sensible improvements to ensure that those who give professional investment advice about retirement assets will do so in the employees' best interests. With 401(k) plans and IRAs increasingly the only retirement plan option available to workers, there is a dire need to ensure that all professional advisers and brokers who recommend investments for retirement money put their clients' interests first." (Pension Rights Center)  

[Opinion]

New Rule Would Stop Financial Advisers from Misleading Clients
"Working-class and middle-class families lose $17 billion a year in hidden fees and sales commissions that do nothing but line the pockets of unscrupulous advisers, according to a report from the White House Council of Economic Advisers.... [We] expect that Wall Street's lobbyists in Washington will do everything they can to stop [the new rule] from being finalized, but Main Street shouldn't lose out on savings just because Wall Street wants to continue misbehaving." (Public Citizen)  

[Opinion]

Wall Street's Complaints About DOL Fiduciary Rulemaking Don't Withstand Scrutiny
"While the text of the proposed rule is not even yet known, Wall Street knows that their best shot at stopping the DOL's proposed rule on conflicts of interest is that the rule never even sees the light of day. Of course, these same lobbyists have previously stated that they embrace a 'new federal fiduciary standard.' Hence, why are they objecting? Let's examine the three major arguments of these dozens of paid lobbyists and ascertain if they have any validity." (Ron Rhoades)  

Benefits in General; Executive Compensation

Who Is a 'Participant' in a Nonqualified Plan? Second Circuit Case Highlights Importance of Plan Definitions
"The Company had tried to argue that retired participants should be viewed as a 'subset' of participants, and thus subject to the lump sum cash-out provision upon a change in control. In fact, many employers often view 'participants' as covering both active employees as well as former employees or retirees who have not received full payment under the plan. The court rejected the Company's argument, however, stating that the Plan clearly defined a 'participant' as an active employee and a 'retired participant' as a retiree. Even if the Company never intended to distinguish active and former employees in this manner, the court concluded it could not ignore the clear text of the Plan." [Gill v. Bausch & Lomb, No. 14-1058 (2d Cir. 2014)] (Porter Wright Morris & Arthur LLP)  

Press Releases

ICI Statement on Fiduciary Standard Rule
Investment Company Institute

President Obama Names Joyce Mader to Chair PBGC Advisory Committee
PBGC [Pension Benefit Guaranty Corporation]

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