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Employee Benefits Jobs
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Webcasts and Conferences
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[Guidance Overview]
Certain DB Plans May Need to Supplement Annual Funding Notice with Additional Information
"The key test to determine whether an annual funding notice will require a HAFTA supplement revolves around whether a defined benefit plan's funding target (i.e., the value of plan benefits accrued during the plan year), determined using the newly adjusted interest rate, is less than 95% of the plan's funding target without taking the newly adjusted interest rate into account. If the quotient determined by dividing the funding target using the HAFTA rates by the funding target using the non-HAFTA rates is at least 95%, no supplement to the annual funding notice is required."
(Reid and Riege, P.C.)
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[Guidance Overview]
DOL Reproposes Fiduciary Definition for ERISA Plans and IRAs (PDF)
"Most notably, this new definition would remove the requirements from the five-part test that the applicable advice be made 'on a regular basis' and as the 'primary basis for investment decisions.' ... [T]he Proposed Rule could cover a single instance of advice provided that it is Covered Advice and meets the other requirements and the adviser only needs to acknowledge that its advice will be considered by the recipient in connection with investment decisions related to assets of an ERISA-covered plan or IRA."
(Pillsbury Winthrop Shaw Pittman LLP)
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[Guidance Overview]
Proposed Prohibited Transaction Exemption: Best Interest Contracts (PDF)
9 pages. "The Proposed Rule and 'best interest contract' exemption, when implemented, [may] lead to more 'fixed fee' compensation arrangements and other arrangements under which the investment advice fiduciary's fees do not vary based on the particular investments being recommended. Contracts with such types of compensation arrangements arguably would not need to comply with the 'best interest contract' exemption unless the contract could give rise to third-party payments to the investment adviser (or an affiliate) or other potential conflicts of interest."
(Pillsbury Winthrop Shaw Pittman LLP)
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[Guidance Overview]
Proposed DOL 'Conflict of Interest' Fiduciary Rule Will Reach Beyond 401(k) Plans (PDF)
"Although the proposed rule focuses on the defined contribution retirement plan arena, it also has implications for defined benefit plan sponsors and their advisers. In addition, the proposed rule affects a broad range of individual account plans (e.g., 403(b) arrangements), including, potentially, nonretirement programs such as health savings accounts."
(Milliman)
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Expense Recapture: One Issue Leads to Another (PDF)
"There are two types of expense recapture accounts: one where the 'recaptured' money is put in the plan and another where it is held by the provider.... The DOL said the right to use the money was a plan asset. Therefore, it must be included in the financial reports on the Form 5500. And, for larger plans -- i.e., those with 10 or more participants -- the plan's accountants must consider the account in their audits. But what is the value of the contractual right to use the money?"
(Fred Reish, via PLANSPONSOR)
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SEC Chair Links Fiduciary Standard to RIA Exam Initiatives
"Investment advisors and broker-dealers should be held to a common standard of fiduciary care when serving retail clients, and the SEC should increase examinations to ensure that firms are adhering to those rules, says commission Chairwoman Mary Jo White.... She has directed staffers to develop a proposal for how a third-party system might work in practice, tackling questions like how the examiners would be selected, what the exams would cover and which advisors would be subject to third-party reviews."
(On Wall Street)
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Employees Favor Companies Playing More Active Role in Their Retirement Plans
"88 percent strongly or somewhat favor their employers providing tools to help determine if they are saving the correct amount for a financially secure retirement. 80 percent believe employers should encourage employees to contribute to their retirement plan, and 84 percent support employers providing incentives to encourage contributions. 72 percent think employers should provide a viewpoint on contribution amounts. In addition, more than four-in-five employees surveyed said they would consider taking their employer's advice when determining their contribution to a 401(k) plan."
(Northern Trust)
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How Long Is the Journey Through Retirement?
"Uncertainty about the end-point makes planning for retirement particularly challenging. Adding to the problem, more than half of Americans underestimate their life expectancy. Four in ten underestimate their life expectancy by more than five years. Two in ten underestimate their life expectancy by two to four years.... Why is individual longevity so often underestimated? Can more informed estimates be made? And, what are the implications for when to receive Social Security benefits and how to invest retirement assets?"
(J.P. Morgan Asset Management)
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Have We Finally Achieved Actuarial Fairness of Social Security Retirement Benefits, and Will It Last?
"Fair adjustment schedules are increasing at an increasing rate in take-up age and become flatter as longevity rises. [The authors] document that the actuarial fit has improved across generations.... [They] predict that the designated increase in the [full retirement age] to age 67 will have little effect on the actuarial fit. [They] investigate schedules reflecting (further) increases in the retirement ages, as recommended by the President's 2010 Fiscal Commission, and propose alternatives. [They] also discuss results from the analysis of the adjustments to spousal and widow(er) benefits."
(University of Michigan Retirement Research Center)
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Text of Illinois Supreme Court Ruling: State Employee Pension Reform Legislation Violates State Constitution (PDF)
"The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and ... it is a crisis for which the General Assembly itself is largely responsible.... [T]he General Assembly has repeatedly attempted to find ways to circumvent its clear and unambiguous prohibition against the diminishment or impairment of the benefits of membership in public retirement systems. Public Act 98- 599 is merely the latest assault in this ongoing political battle against public pension rights.... [T]hrough that legislation the General Assembly is attempting to do once again exactly what the people of Illinois, through article XIII, section 5, said it has no authority to do and must not do." [In re Pension Reform Litigation, No. 118585 (Ill. May 8, 2015)]
(Supreme Court of the State of Illinois)
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Illinois Justices Overturn State's Landmark 2013 Pension Law
"The cash-strapped state now must again grapple with a $111 billion deficit in what's necessary to cover its employee retirement obligations. The hole is so deep the state has in recent years had to reserve up to $7 billion -- or one-fifth of its annual operating funds -- to keep pace. The plan rejected by the justices was designed to whittle down the monstrous shortfall over 30 years, gradually but significantly slicing back pension benefits by erasing a 3 percent annual adjustment." [In re Pension Reform Litigation, No. 118585 (Ill. May 8, 2015)]
(The Washington Post; subscription may be required)
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Illinois Cities Prepare for Tough Pension Funding Requirement
"Municipal governments are preparing to meet the demands of a 2011 pension law that requires them to fund employee pensions to required levels in 2016 or risk having state grants diverted from their intended purpose into the pension fund. The law is designed to bring pension funds up to 90 percent funded by 2040, and local governments must make payments that will put them on track to do so. The law is not affected by the Illinois Supreme Court's decision [on May 8] to strike down a piece of 2013 pension legislation."
(Rockford Register Star)
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Schools Want Spotlight on Huge CalSTRS Hike in Required Pension Funding
"The push back from schools hit with a huge CalSTRS rate increase, expected to be an additional $3.7 billion a year when fully phased in, is not that it's unaffordable and will hurt students or unfairly lets the state and teachers off the hook. Instead, a coalition of school districts, including the giant Los Angeles Unified School District, is proposing a separate budget item for the CalSTRS rate increase within the Proposition 98 school-funding guarantee.... If there is no separate budget item, a district that gets mainly the base grant might have much of its Proposition 98 increase eaten up as the CalSTRS rate increase is phased in. But a district that gets additional targeted money could still get a substantial increase."
(Calpensions)
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Age 70-1/2? Think Through Your RMD Choices
"The person who thinks that postponing is always a good idea because you defer the taxes a little longer should remember that postponing actually increases the amount of the second year's RMD -- because the age 70-1/2 year RMD that you did not take in the age 70-1/2 year is still part of the account balance at the end of the year! ... If the first year's RMD is postponed, two RMDs are required in the second year, and the two RMDs in the second year will have different deadlines, be based on different account balances, and use different divisors!"
(Natalie Choate, via Morningstar Advisor)
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[Opinion]
What Retirement Savers Need to Know About the Fiduciary Rule
"According to the Labor Department: 'As baby boomers retire, they are increasingly moving money from ERISA-covered plans, where their employer has both the incentive and the fiduciary duty to facilitate sound investment choices, to IRAs (which are mentioned no less than 65 times in the Labor Department's proposed rule) where both good and bad investment choices are myriad and advice that is conflicted is commonplace.' And because of that, the Labor Department wants those providing 'investment advice' to IRA account owners to be 'fiduciaries' as well. And because of that, critics say IRA account owners, especially those with small accounts, will either get less advice or pay more for it if the proposed rule goes into effect as proposed."
(MarketWatch)
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Benefits in General; Executive Compensation
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Text of Third Circuit Opinion Delineating Threshold for Catalyst Theory Recovery of Attorney's Fees (PDF)
"To succeed under a catalyst theory of recovery, evidence that judicial activity encouraged the defendants to settle is not necessary. All that is necessary is that litigation activity pressured a defendant to settle or render to a plaintiff the requested relief.... [A] party is eligible for attorney's fees where his or her litigation efforts resulted in a voluntary, non-trivial, and more than procedural victory that is apparent to the court without the need to conduct a lengthy inquiry into whether that success was substantial or occurred on a central issue." [Templin v. Independence Blue Cross, No. 13-4493 (3d Cir. May 8, 2015)]
(U.S. Court of Appeals for the Third Circuit)
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2015 Workplace Benefits Report: Helping Employees Live Their Best Financial Lives (PDF)
20 pages. "This report provides a clear picture of the data, trends and new ideas related to workplace benefits today. It uncovers new insights related to financial wellness, health care, incentives, the use of total rewards portals and employers' attempts to engage a multi-generational workforce. [Much of the analysis focuses] on trends and perceptions among larger firms, which serve as the incubators of benefits innovation, the trailblazers in implementing new ideas and the bellwethers for the future of benefits. [The report also highlights] where the pattern for the largest employers diverges from their smaller counterparts in order to gain insight into the direction of the benefits industry as a whole."
(Bank of America Merrill Lynch)
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EEOC Memo Indicates Possible Focus on Benefits for Same-Sex Couples
"The instructions discussed in this EEOC post were distributed in February to field offices in an internal memorandum ... detailing how LGBT-related charges should be internally tracked and coordinated. Of particular note for employers, the memorandum lists insurance issues involving benefits for same-sex couples as an issue of particular interest to the EEOC. Employers should be aware that while certain older court decisions have concluded that Title VII does not provide a cause of action for sexual orientation discrimination, case law is evolving, especially in light of this EEOC position, which is not binding on courts but can carry significant weight in court."
(Thomson Reuters / EBIA)
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Press Releases
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