Retirement Plans Newsletter

March 25, 2015

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Qualified Pension Services, Inc.
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Webcasts and Conferences

HIPAA Omnibus Compliance: How to be Ready for an OCR Audit
March 26, 2015 WEBCAST
(Aegify Inc)

Re-Thinking Your ESOP Plan Design and Operations
March 31, 2015 WEBCAST
(National Center for Employee Ownership)

Roundtable: Issues Involving Overfunded Defined Benefit Plans
April 1, 2015 in NY
(ASPPA Benefits Council [ABC] of New York)

Help Clients Navigate the Audit Quality Crisis
April 2, 2015 in TX
(ASPPA Benefits Council [ABC] of Central Texas)

ERISA Litigation and Enforcement: The Role of the Independent Fiduciary and Best Practices for Financial Advisors
April 8, 2015 WEBCAST
(fi360)

401(k) Plan Workshop 2015
April 23, 2015 in CO
(SunGard Relius)

Form 5500 Workshop 2015
April 24, 2015 in CO
(SunGard Relius)

Charging for COBRA Coverage: Cadillac Tax Proposals Prompt a New Look
May 12, 2015 WEBCAST
(Thomson Reuters / EBIA)

Getting It Right - Know Your Fiduciary Responsibilities
June 4, 2015 in UT
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

Health and Welfare Benefit Plans National Institute
October 19, 2015 in DC
(ABA Joint Committee on Employee Benefits)

View All Webcasts and Conferences



[Guidance Overview]

IRS Employee Plans News 2015-3, March 25, 2015 (PDF)
Topics in this issue: [1] Expanded annual actuarial certifications for multiemployer plans due March 31 for calendar year plans; and [2] Automatic approval for change in method due to takeovers of single-employer defined benefit plans. (Internal Revenue Service [IRS])  


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[Guidance Overview]

PBGC Requires Plan Sponsors to Report Risk Transfer Activities (PDF)
"For sponsors of plans with calendar year plans, the first filing with the de-risking disclosures is due Oct. 15, 2015. The PBGC's rationale for this new requirement is that there currently is no available comprehensive, detailed, and reliable source for information on risk transfer activities, which can result in substantially reduced premium payments to the agency." (Milliman)  

Calculating Retirement Savings Needs by Age, Gender, and Chance of Success (PDF)
"Given [certain] assumptions ... a single male age 25 earning $40,000 with no previous savings would need a total contribution rate (employee and employer combined) of less than 3 percent per year until retirement (age [65] for a 50 percent chance of success. A 6.4 percent contribution rate would achieve a 75 percent success rate and a 14 percent contribution rate would achieve a 90 percent success rate. But if a male earning $40,000 were to wait until age 40 to begin saving, he would need a 6.5 percent total contribution rate for just a 50 percent chance of success and a 16.5 percent total contribution rate for a 75 percent chance of success; a 90 percent probability of success would be impossible even with a 25 percent contribution rate." (Employee Benefit Research Institute [EBRI])  

Are Retirees Falling Short? Reconciling the Conflicting Evidence
"Federal Reserve data show that retirement preparedness has been declining over time, but studies on the level of preparedness offer conflicting assessments. The National Retirement Risk Index (NRRI) finds half of households are 'at risk,' while studies of optimal savings suggest less than one-tenth will fall short. The optimal savings results depend crucially on two assumptions: households spend less when their kids leave home (the NRRI assumes no decline); and households plan for declining consumption in retirement (the NRRI assumes steady consumption). While the issue remains unsettled, the Federal Reserve data are consistent with the NRRI finding that retirement shortfalls are a growing problem." (Center for Retirement Research at Boston College)  

Perspectives 2015: Defined Contribution Retirement Plan Benchmarks (PDF)
36 pages. "A well-designed benefit package must keep costs in check, but entice current and prospective employees alike to save now, ensuring an income stream upon retirement.... To ensure that your participants are ready, you are encouraged to: [1] Identify goals ... [2] Review your employee demographics ... [3] Review your communication program ... [4] Understand your plan cost ... [5] Fully appreciate your fiduciary responsibilities.... The information and benchmarks included in [this publication] provide a useful comparison for evaluating the current status of your retirement plan program and may help you identify potential changes to consider, including automatic features that make saving easy for employees." (BMO Retirement Services)  


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Sixth Circuit Church Plan Case Remanded for Settlement Consideration (PDF)
"The first church plan case to reach the federal appellate courts is being returned to the district court to consider a proposed settlement between the parties ... If the settlement is approved, this case will join the very first case in recent years to test the church plan exemption, Thorkelson v. Publ'g House of the Evangelical Lutheran Church in Am. ... as cases in which the district court ruled on the interpretation of the statute, but the parties settled before the court could rule." [Overall v. Ascension Health, No. 14-1735 (6th Cir. Mar. 17, 2015)] (Bloomberg BNA Pension & Benefits Reporter, via Pension Rights Center)  

Federal District Court Rules that Float Income Is Not a Plan Asset
"The court called into question [DOL] guidance that suggested a trustee's use of float income is a prohibited transaction unless the trustee discloses and negotiates retention of the float income with the plan fiduciary.... This case follows a line of recent court rulings applying ordinary notions of property rights to analyze whether disbursement accounts, and whether income earned on those disbursement accounts, are 'plan assets.' Unless the plan documents impose a property interest on these accounts, the courts are concluding that these accounts are not 'plan assets.' " [In re Fidelity ERISA Float Income, No. 13-10222 (D. Mass. March 11, 2015)] (Proskauer's ERISA Practice Center)  

Designing a Retirement Plan for Phased Retirement
"With some creative plan adaptations, plan sponsors can assist employees as they make retirement a real possibility.... [E]mployers will want to consider how many hours per year they expect partially retired workers to work in order to share in the contribution ... Employers who want to encourage older workers to stay employed may consider changing the company contribution so that it is age-weighted ... Partially retired employees with fluctuating income may need more flexibility on how frequently they can change their deferral elections." (Retirement Management Services)  

Fixed Annuities Post Highest Sales Since 2009
"Industry-wide annuity sales in the fourth quarter of 2014 reached $56.6 billion, a 0.5 percent decrease from $56.9 billion in the previous quarter and a 4.6 percent dip from $59.3 billion in the fourth quarter of 2013. Despite the slight drop during the quarter, industry-wide sales were up for the full year. Industry-wide annuity sales reached $229.4 billion in 2014, a 3.8 percent increase from $220.9 billion in 2013 and an 8.2 percent increase from $212 billion in 2012." (Insured Retirement Institute [IRI])  

Qualified Charitable Distributions from IRAs Have Lapsed Again for 2015 But May Be Reinstated Again: Do Them Anyway!
"[T]he best strategy to handle the uncertainty of whether QCDs will be extended or not is just to do them anyway! At worst, if the rules are not reinstated, the outcome will be no worse than just being forced to take an RMD and making a charitable contribution anyway. However, if the rules are brought back once again, those who make direct charitable distributions from their IRAs will enjoy all the benefits of QCDs... even if the rules are only 'fixed' after the fact!" (Michael Kitces in Nerd's Eye View)  

Developments of Interest to Sponsors of Multiemployer Retirement Plans (PDF)
"[1] As exposure to non-U.S. investments increases, it is important for trustees to understand the effect that currency can have on results.... [2] The economic efficiencies embedded in DB plans enable the delivery of the same retirement income at a 48 percent lower cost than 401(k)-type defined contribution (DC) accounts.... [3] Early election of [PPA] red-zone status may be of interest to trustees of plans currently in the yellow or green zone facing near-term financial challenges.... [4] At their fiduciary liability insurance policy's next renewal date, trustees may want to consider obtaining pre-claim investigation coverage and interview coverage." (Segal Consulting)  

What a New Fiduciary Standard Means for Plan Sponsors
"All retirement plan sponsors should be working with investment advisors who have signed on to their plans as fiduciaries. If your investment advisor is not a fiduciary, either ask him/her to become one immediately or find a more qualified advisor. There are very few plan sponsors that will be impacted by a change in the fiduciary standard." (Lawton Retirement Plan Consultants)  

Union Employees Reportedly Reject Rhode Island Pension Settlement
"Two people familiar with the result [said] that members of Local 400 of the International Federation of Professional and Technical Engineers voted Monday to reject the proposed settlement.... Local 400 represents workers at the R.I. Departments of Transportation and Environmental Management and is one of 205 plaintiffs suing to overturn the pension law.... The deadline for current employees to finish voting on the settlement is Friday." (WPRI.com)  

[Opinion]

American Benefits Council Letter to IRS on Use of New Mortality Tables for Pension Funding (PDF)
"A significant number of actuaries consider the methodology used to calculate rates of mortality and the mortality projection scale to be problematic both procedurally and substantively. In fact, some critical assumptions used by the SOA with respect to the construction of the base tables have turned out to be materially incorrect, based on data from prior years. These problems have resulted in assumptions that can significantly overstate pension liabilities." (American Benefits Council)  

Benefits in General; Executive Compensation

Health, Wealth and Happiness in Retirement: The Impact of Health on Retiree Lifestyles and Satisfaction with Life (PDF)
"Healthcare expenses are higher than what retirees had expected. Pre-retirees are worried about encountering health problems in retirement. Retirees share pre-retirees' sentiment, and they are acutely aware of the increasing cost of healthcare. Retirees are concerned about their ability to manage healthcare expenses in the case of chronic and debilitating illness, including the cost of long-term care.... Retirees are concerned about the potential for health declines in the future and they indicate wanting to avoid placing any burden on their family, particularly their children." (MassMutual)  

Disgorgement of Profits Not Available for Arbitrary and Capricious Benefits Denial -- This Time
"The decision leaves room, however, for an award of equitable relief under Section 502(a)(3) where the restoration of benefits alone is not sufficient to make the claimant whole or where there is an injury separate and distinct from the denial of benefits. By way of example, the court pointed to its [2005] decision in Hill v. Blue Cross and Blue Shield of Michigan, where it found a separate and distinct injury beyond the mere derivation of benefits necessitating equitable relief under 502(a)(3). There, the court ordered other equitable relief (injunction), in addition to payment of benefits due, to redress an alleged improper plan-wide claim-handling methodology, which the court found to be a separate injury affecting the entire plan." [Rochow v. LINA, No. 12-2074 (6th Cir. Mar. 5, 2015)] (Wilson Elser)  

Longer CEO Lives Spur Pay Growth as Companies Cushion Pensions
"Standard & Poor's 500 Index companies that have filed proxy statements for fiscal 2014 contributed an average $1.5 million to their CEOs' pensions, compared to an average of about $550,000 in 2013 ... Pensions comprised about 11 percent of total CEO pay at those companies, compared to 4 percent in 2013. The ballooning pensions were often triggered by preset agreements on CEO retirement pay, rather than new decisions by boards to give their executives more. Longer lifespans and lower discount rates are forcing companies to add more to their CEOs' pensions to meet return expectations and support future payouts[.]" (Bloomberg)  

Ten Myths of Executive Compensation
"[1] The board and CEO cannot be supportive partners in designing compensation plans.... [2] More pay results in better performance.... [3] We cannot afford to hire or recruit that executive.... [4] We should constantly adjust our compensation plans.... [5] Our compensation plan should look like that of our peers.... [6] Disclosing executive compensation always will backfire.... [7] There is nobody like us, so comparisons don't work.... [8] It is too difficult to set reliable, measurable long-term goals.... [9] Employment agreements are restrictive and will tie our hands.... [10] Compensation is the only reward that matters." (Meridian Compensation Partners, LLC)  

Ninth Circuit Decision Illustrates Importance of Clearly Designating Beneficiaries Under a Nonqualified Plan
"[T]his decision provides two takeaway items for plan sponsors. One is to make sure that the plan document and communications with the participants clearly explain how participants may designate beneficiaries. The other is that plan sponsors should consider periodically sending reminders to participants to make sure that their beneficiary designation forms are up-to-date." [E & J Gallo Winery v. Rogers, No. 13-55327 (9th Cir. Feb. 23, 2015; unpublished)] (Porter Wright Morris & Arthur LLP)  

Press Releases

NAPA Welcomes Joseph F. DeNoyior as President
National Association of Plan Advisors [NAPA]

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