Retirement Plans Newsletter

April 14, 2015

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Employee Benefits Jobs


Webcasts and Conferences

Participant Loans
April 17, 2015 WEBCAST
(McKay Hochman Co., Inc.)

Form 5500 Workshop 2015
May 8, 2015 in OR
(SunGard Relius)

Form 5500 Workshop 2015
May 8, 2015 in MN
(SunGard Relius)

401(k) Plan Workshop 2015
May 12, 2015 in VA
(SunGard Relius)

401(k) Plan Workshop 2015
May 12, 2015 in TX
(SunGard Relius)

View All Webcasts and Conferences



[Official Guidance]

Text of PBGC Monthly Interest Update for May 2015
"The May 2015 interest assumptions under the benefit payments regulation will be 0.75 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for April 2015, these interest assumptions are unchanged." (Pension Benefit Guaranty Corporation [PBGC])  


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[Official Guidance]

Text of IRS Notice 2015-31: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for April 2015 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities ... as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate ... The rates in this notice reflect the application of Section 430(h)(2)(C)(iv), which was added by [MAP-21] and amended by [HATFA]." [Also available: Corporate bond yield curve spot rates (XLS)] (Internal Revenue Service [IRS])  

[Guidance Overview]

Guide to Benefit Suspensions Under the Multiemployer Pension Reform Act (PDF)
"Subject to a variety of constraints, including government approval, MPRA provides multiemployer plans that are headed towards insolvency with the option of suspending a portion of participants' accrued benefits. This authority is available only if the plan sponsor and actuary conclude that the suspensions are necessary for the plan to remain solvent and suspending benefits will preserve long-term benefits above the [PBGC] guarantee level. This article discusses some of the statutory requirements for benefit suspension authority, along with the factors that plan sponsors may consider in deciding whether and how to exercise this authority." (Groom Law Group, via Bloomberg BNA Collective Bargaining Bulletin)  

Top Ten Reasons Why 401(k) Participant Fee Disclosure Hurts Employees' Retirement Prospects
"It encourages emotional decision making, a.k.a., the 'I never paid fees before. Why should I pay fees now?' myth ... It gives the appearance of the fees have the 401k equivalent of the 'Good Housekeeping Seal of Approval' ... Disclosure is either ignored or misunderstood ... It can discourage saving ... It can cause the employee to forgo free money ... It encourages the fallacy of 'cheaper is better' leading to worse service ... Fees are not reported with any context ... It takes the 401k plan participant's eye off the ball ... If plan sponsors don't understand 401k fees, how can we expect plan participants to understand 401k fees? ... It emphasizes the wrong thing." (Fiduciary News)  

DOL Set to Propose Tighter Broker Standards
"The proposed rules ... are likely to intensify significant pushback from Wall Street firms which say they already face robust regulation and warn the rules' costs will make it uneconomical for brokers to serve lower-balance accounts.... The Labor Department rules are expected to be more flexible than a 2010 proposal the department withdrew amid an outcry from Wall Street, which complained it would have barred many routine payments to brokers, including commissions." (The Wall Street Journal; subscription may be required)  


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DOL, SEC Tag-Teaming Investment Managers on Enforcement
"Traditionally, [EBSA] has focused on retirement plan sponsors; service providers would come onto its radar screen for specific reasons, such as whistleblower complaints, or during a plan audit. That began to change in 2013, when the EBSA launched its fiduciary service provider compensation enforcement project.... Compensation practices also have caught the eye of enforcers at the [SEC], who say that in 2015 they will focus on money managers with conflicts of interest over compensation and how well they disclose them." (Pensions & Investments)  

Plan Sponsor Trust in Providers Drops
"Retirement plan sponsors ... express deep pessimism about service providers and retirement advisers, with trust in financial institutions at 8% (a slight dip from 2014's 9%) and trust in their current plan provider at 58%, a loss of seven percentage points from last year's 65%.... The top factor for plan sponsors for choosing service provider is trustworthiness, which scores higher than participant customer service, quality of the customer experience, technology, education, administrative service and cost." (PLANSPONSOR)  

What You Need To Know About 401(k) Money Market Fund Changes
"It would appear that it does not make sense for any 401(k) plan to continue to offer a prime money market fund after October 2016.... Government money market funds are exempt from these new changes ... However, their yields are even lower than non-government money market funds.... Plan participants may value their money market or stable value option more than any other fund in your plan. It is likely that you will see a high level of plan participant interest in these changes." (Lawton Retirement Plan Consultants)  

Detecting Target Date Series' Biases
"Target-date funds' equity glide paths map the predetermined asset-allocation course that investment managers plan to use over the course of investors' working years and beyond.... In addition to the overall equity exposure, target-date managers also make decisions -- some of which appear to be more deliberate than others -- for multiple subasset classes. Examining series' sub-asset-class glide paths sheds light on the fallout of managers' decisions." (Morningstar)  

Corporate Pension Funds Pile Into Bonds
"For the first time in more than a decade, large pension funds hold more bonds than stocks. Their increased appetite is fueling demand for highly rated debt issues, pushing up prices and driving down yields. That, in turn, could make it cheaper for companies to borrow money for years to come." (The Wall Street Journal; subscription may be required)  

Plans in the Towers Watson Pension 100: Funding, Discount Rates, Allocations and Contributions
"Falling interest rates coupled with updated mortality assumptions significantly increased liabilities, thus wiping out most of the previous year's gains. Average funded status was 82.2% at year-end 2014, down considerably from 90.2% for 2013 but still up from 77.1% for 2012. Plan sponsors using liability-driven investment strategies had good results in 2014." (Towers Watson)  

Amping Up DC Participant Outcomes Through Financial Wellness Initiatives (PDF)
"[P]lan sponsors speculate about the extent to which defined contribution (DC) plan automatic contribution and escalation features create savings that are maintained until retirement or are offset by greater debt elsewhere. This article explores how financial wellness initiatives and automatic features may interact in DC plans and the potential for financial wellness initiatives to boost participants in plans with auto features." (Benefits Quarterly, published by the International Society of Certified Employee Benefit Specialists [ISCEBS])  

[Opinion]

All Fees, No Beef?
"[If] you're a public pension, you should be held accountable to the highest level of disclosure and provide detailed information on all investments and fees paid out to external money managers and service providers. The same goes for all internal investment activities, we need a lot more transparency on costs and performance. Period." (Pension Pulse)  

Benefits in General; Executive Compensation

Settling Disputes with the Department of Labor (PDF)
107-page outline of presentation for American Law Institute. Topics include: [1] Do you really want to settle? [2] Settling litigation brought by the DOL: Section 502(l), Indemnification complications, and PTE 79-15; [3] Prohibited Transaction Exemptions when not settling with DOL: PTE 2003-39; Is a release of claims against a Party in Interest a Prohibited Transaction? [4] Whether to use VFCP: Covered transactions eligible for VFCP; Transactions eligible for PTE 2002-51; [5] Settling with parties other than DOL: Settling litigation, particularly class action litigation; Plan as plaintiff in class action litigation; and [6] EBSA website excerpts. Appendices include sample notices, settlement agreements, and closing letters, along with EBSA Examination Referral Checklists. (Utz & Lattan, LLC)  

Which State Law Reporting, Recordkeeping and Disclosure Mandates Does ERISA Permit that Relate to State Criminal, Insurance, Healthcare, Tax, Domestic Relations, Labor or Other State Laws?
71 pages. "ERISA permits a state-law reporting or disclosure mandate directed at an ERISA plan, a plan participant or beneficiary, a plan sponsor or contributing employer, or a third party interacting with an ERISA plan, such as a service provider, that implements a state law that ERISA does not otherwise preempt, but only to the extent the mandate is needed for the effective administration of such state law.... Preemption is unaffected by whether the mandate arises from a law that explicitly refers to ERISA. Plan sponsors must comply with all state-law mandates that ERISA does not preempt regardless of plan terms. On the other hand, plan administrators must comply with all state-law mandates with which plan terms require compliance." (Albert Feuer, via SSRN)  

Final 162(m) Regs Clarify Certain Exceptions (PDF)
"The clarifications included in the final regulations primarily focus on two areas: [1] The need for equity plan documents to contain per-employee limits on equity awards in order to qualify the grants of such awards for the qualified performance-based compensation exception (QPBC Exception); and [2] The treatment of restricted stock units (RSUs) and phantom stock arrangements with regard to the transition period afforded to newly public companies." (Exequity)  

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