Retirement Plans Newsletter

April 22, 2015

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Employee Benefits Jobs

Defined Benefit Analyst/Administrator
Summit Benefit & Actuarial Services, Inc.
in ANY STATE

Retirement Analyst
Chevron Corporation
in TX

Employee Benefits Paralegal/Pension Consultant
Chang, Ruthenberg & Long PC
in CA

Plan Administrator, Compliance
Verisight
in IL

Manager, Account Management
Lincoln Financial Group
in IN

Pension Case Designer
American National Insurance Company
in TX

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Webcasts and Conferences

ACA Update: Fees and Reporting Requirements
April 23, 2015 in NC
(Employers Association, Inc.)

The New Fiduciary Proposal...It's Out and We're Talking About It
April 30, 2015 WEBCAST
(fi360)

Are You a Modern 401(k) Fiduciary? Important Updates and Guidance for 2015 and Beyond!
May 6, 2015 in CA
(Western Pension & Benefits Council - Orange County Chapter)

First Annual Population Health Web Summit
May 20, 2015 WEBCAST
(Healthcare Web Summit)

Innovations in Health Plans: What in the World are Employers Doing?
May 21, 2015 in NY
(Worldwide Employee Benefits Network [WEB] - New York Chapter)

Health Benefits Laws Compliance Assistance Seminar
June 2, 2015 in AK
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

Equitable Remedies After Rochow: Has Anything Really Changed?
June 16, 2015 WEBCAST
(ABA Joint Committee on Employee Benefits)

View All Webcasts and Conferences



[Guidance Overview]

Details of DOL's New Proposed Rules Defining Fiduciary Investment Advice
"[T]he proposal does not require a meeting of the minds as to the extent to which the recipient will actually rely on the advice, but the parties must agree or understand that the advice is individualized or specifically directed to the particular advice recipient for consideration in making investment decisions.... [T]here is no requirement that the advice be specific to the needs of the plan, participant or beneficiary or IRA owner; rather, the advice only needs to be specifically directed to such recipient.... By requiring the 'best interest' standard to be included within the investment advice contract as an exemption condition, the exemption would provide IRA owners a private right of action for the adviser's failure to comply with such standard, which would not otherwise be available." (Proskauer's ERISA Practice Center)  


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[Guidance Overview]

Limited Relief Provided by Carve-Outs and Exemptions in DOL's New Conflict of Interest Proposal
"The breadth of the general definition makes it vital to come within the terms of a carve-out if one is available. However, the carve-outs are not available to a person who admits to being an ERISA fiduciary.... [E]ven for advisers and financial institutions that undertake the many compliance duties and disclosures necessary to come within the 'best interest contract' exemption, in the end, the exemption only exempts the person from the prohibited transaction rules, including potential excise taxes for IRAs under the Internal Revenue Code.... [T]he exemption does not exempt a person... from the general fiduciary duties under ERISA ... or from potential civil liability to make up any loss to the plan resulting from a breach of those duties." (Dentons)  

[Guidance Overview]

DOL Fiduciary Rule Includes Carve-Out for Investment Education (PDF)
5 pages. "[It] appears possible to avoid fiduciary status when providing participants with [1] the list of plan options, and [2] tools for identifying the type and amount of assets that should achieve desired goals, respectively -- but not when furnishing these two types of material in tandem. The need to separate this information may reduce its value to participants." (Buck Consultants at Xerox)  

[Guidance Overview]

New Deadline for Puerto Rico Reduced Taxation on Retirement Funds (PDF)
"Puerto Rico's Tax System Adjustment Act allowed participants and beneficiaries of retirement plans to pay tax at special rates on their plan benefits during a limited time ... To take advantage of this opportunity, participants and beneficiaries had to either receive a distribution from the plan or pre-pay tax on their plan benefit during that window.... On March 30, 2015, Puerto Rico ... [extended] the end of the window for taking advantage of the special tax rates until April 30, 2015." (Buck Consultants at Xerox)  

Ibbotson Target Date Report 1Q 2015 (PDF)
"Target date funds produced a second consecutive quarter of positive results, posting an average return of 2.4%. Diversification into non-core asset classes continues to be a headwind as large-cap stocks outperformed most equity asset classes and core bonds outperformed most bond asset classes. Over the last 12 months the average target date fund returned 6.2%." (Ibbotson Associates, Inc.)  


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Asset Location for Stocks in a Brokerage Account Versus IRA Depends on Time Horizon
"[W]hile the traditional 'rule of thumb' for asset location is that tax-inefficient bonds go into an IRA, while equities eligible for preferential tax rates go into a brokerage account, the reality is that for investors with long time horizons the optimal solution may be the opposite. Once stock dividends and portfolio turnover are considered, the ongoing 'tax drag' of the portfolio can be so damaging to long-term returns that placing equities into an IRA may be more efficient, even though they are ultimately taxed at higher rates! ... [In] the end, good asset location decisions depend not only on returns and tax efficiency, but an investor's time horizon as well!" (Michael Kitces in Nerd's Eye View)  

Advisors Urged to Help Clients Rethink Retirement Savings
"Jan Scott Gundersen, managing director of advisory services at TIAA-CREF, noted that many investors are actively seeking out information on how to prepare for retirement ... He argues that advisors can help their clients think through their retirement needs by moving away from the focus on a lump sum savings total, and instead presenting their retirement picture in terms of how much income their savings would generate. Then he counsels advisors to talk to their clients about their goals for retirement, and to explain how spending patterns can change throughout those years." (Financial Planning)  

Five Frightening Retirement Statistics That Demonstrate Baby Boomers Are in Serious Trouble
"[1] Approximately four-in-10 baby boomers have nothing saved for retirement.... [2] 36% of boomers plan to rely on Social Security as their primary source of income.... [3] Early boomer households are facing average shortfalls of $71,299 per individual in a family.... [4] 19% of baby boomers who are offered a 401(k) or similar retirement plan don't participate.... [5] Full-time workers have a Retire Ready Index Score of just 4.1 out of 10, while retirees scored 5.5 out of 10." (Motley Fool)  

Teamsters Mount Grassroots Campaign to Block Pension Cuts
"A dozen meetings around the Midwest and South over the last month have attracted 100 to 200 angry members apiece, as activists and local retiree clubs learn their benefits are in danger. The meetings are likely to grow in size and number: Central States has just sent out notices to every member warning that cuts are coming.... [T]he average Central States pension is $1,230 a month ($14,760 a year).... For those with decent pensions -- some make $36,000 a year -- the cuts could be as high as 65 percent." (LaborNotes)  

Defined Contribution Pension Plans for State and Local Government Employees in the Financial Accounts of the United States
"This note provides some background information on the DC pension plans available to [state and local (S&L)] government workers, briefly discusses the methodology used to construct the estimates of assets held by S&L DC pension plans, and presents the estimates currently reported in the Financial Accounts. Finally, it discusses the impact of the introduction of S&L DC pension assets on the balance sheet of the household sector." (Matthew Hoops, Irina Stefanescu, and Ivan Vidangos, members of the Board of Governors of the Federal Reserve System)  

Recent Developments for Public Employee Pensions, April 16, 2015
Topics include: [1] CalPERS responds to DB FOE; [2] Exclusion of attendee from meetings of municipal pension board violated Florida sunshine law, thus voiding all actions taken at such meetings; [3] Why is 69-1/2 the IRA owner's most important age? [4] The single most obnoxious retirement fund fee...and how to dump it; and [5] New survey conforms outliving money is top retirement concern. (Cypen & Cypen)  

[Opinion]

Watered-Down Fiduciary Rule May Be the Best Case Scenario for Investors
"While a clean fiduciary standard offers brokers and insurance agents a straight-forward path for delivering conflict-free investment plan advice, a 'best interest contract exemption' makes that path fuzzy and subject to attack in court. That may not be a bad thing.... [R]etirement plan lawsuits, brought by lawyers like Jerry Schlichter, have been more successful in driving down excessive 401k fees than DOL fee disclosure regulations. Maybe a fuzzy fiduciary standard will fuel more suits that drive the cost of advice lower than a clean fiduciary standard would?" (Employee Fiduciary)  

Benefits in General; Executive Compensation

[Guidance Overview]

IRS Approves Transfer of 401(h) Surplus Assets to Provide Retiree Medical Benefits After Pension Settlement
"A recent IRS private letter ruling (PLR 201511044) addressed whether a Section 420 transfer of surplus pension assets to a Section 401(h) account could be used to provide medical benefits to retirees following a settlement of their pension obligations.... [The] result is consistent with a 1991 IRS information letter on surplus transfers, which indicated that surplus pension assets could be transferred for any employee who received a pension distribution, is receiving a distribution or is entitled to such a distribution in the future, including those who received a lump sum distribution many years earlier." (Towers Watson)  

Press Releases

Blue Prairie Group is Certified for Fiduciary Excellence
Centre for Fiduciary Excellence [CEFEX]

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