Retirement Plans Newsletter

May 29, 2015

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Employee Benefits Jobs

Regional Vice President - Sales
Ascensus
in MN

Sr. Document Coordinator
Great-West Financial
in CO

Benefits Advisor
Zenefits
in AZ, CA

Internal Sales Consultant
Verisight
in IL, NC

Senior Implementation Administrator
Trust Company of America
in CO

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Webcasts and Conferences

IRA Excess Contributions and Recharacterizations
June 11, 2015 WEBCAST
(Ascensus)

Trustees and Administrators Institutes
June 15, 2015 in CA
(International Foundation of Employee Benefit Plans [IFEBP])

Benefits Conference for Public Employees
June 16, 2015 in NY
(International Foundation of Employee Benefit Plans [IFEBP])

IRA Investments and Investment Issues
June 25, 2015 WEBCAST
(Ascensus)

View All Webcasts and Conferences



[Official Guidance]

Text of PBGC Announcement Extending Deadlines Due to Severe Weather and Flooding in Oklahoma
"This Disaster Relief Announcement provides relief relating to PBGC deadlines ... [to] any person responsible for meeting a PBGC deadline (e.g., a plan administrator or contributing sponsor) that is located in the disaster area for which the [IRS] has provided relief in HOU-04-2015, May 27, 2015, in connection with filing extensions for Form 5500 series returns, or cannot reasonably obtain information or other assistance needed to meet the deadline from a service provider, bank, or other person whose operations are directly affected by the Severe Storms, Tornadoes, Straight-Line Winds and Flooding that began on May 5, 2015, in Oklahoma." (Pension Benefit Guaranty Corporation [PBGC])  


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[Guidance Overview]

DOL Has Many Questions About Its Fiduciary Reproposal
"[In its fiduciary reproposal package, the DOL included] more than 170 questions concerning its proposal or matters left open in that proposal.... [T]hat approach both: [1] Constructively solicits input from the regulated community, and [2] Makes that input less informed and useful because significant elements of the proposal are open ended. Because many of the questions involve key issues, particularly under the expanded fiduciary definition and the proposed Best Interest Contract Exemption, they are collected [in a single comprehensive list in this article]." (Sutherland Asbill & Brennan LLP)  

EBSA Report: Assessing the Quality of Employee Benefit Plan Audits (PDF)
193 pages. "EBSA's review found that 61% of the audits fully complied with professional auditing standards or had only minor deficiencies under professional standards. However, 39% of the audits (nearly 4 out of 10) contained major deficiencies with respect to one or more relevant GAAS requirements which would lead to rejection of a Form 5500 filing, putting $653 billion and 22.5 million plan participants and beneficiaries at risk." (Office of the Chief Accountant, Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])  

Target Date Funds: Fiduciary Perspectives (PDF)
22 presentation slides. Topics include: Distinctions Without a Difference: 'To' versus 'Through'; Demographics / Custom; Active vs. Passive; Open vs. Closed (Proprietary); Mutual Fund or Collective; Bundled Service Provider, or Not (DCIO); Risk Control, Reasonable Fees, and Diversification. (Target Date Solutions)  

It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans
"This paper investigates whether mutual fund families acting as service providers in 401(k) plans display favoritism toward their own affiliated funds. Using a hand-collected dataset on retirement investment options, we show that affiliated mutual funds are less likely to be removed from and more likely to be added to a 401(k) menu. In addition, fund deletions and additions are less sensitive to prior performance for affiliated than for unaffiliated funds. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that this favoritism is not information driven." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)  

Wisconsin Court Allows Teachers to Sue over Nonexcludable Post-Retirement 403(b) Contributions
"A Wisconsin appeals court has revived a case brought by retired teachers against their school district and plan vendors for damages incurred as a result of the school district violating 403(b) regulations with respect to post-retirement 403(b) contributions.... The appeals court noted that the retirees allege in their amended complaint that they relied on representations by the Neenah Joint School District and MidAmerica Administrative & Retirement Solutions that the stipends they received in retirement had certain tax advantages; that the district and MidAmerica administered and structured the retirement plan such that it did not meet those representations; and that as a result, the retirees faced immediate demands for payments of federal and state taxes and interest that they would not have faced if the district and MidAmerica had administered and structured the plan according to Internal Revenue Service (IRS) regulations." [Cattau v. National Insurance Services of Wisconsin, No. 2014AP1357 (Wis. Apr. 29, 2015)] (PLANSPONSOR)  

Your 401(k) Has Probably Gotten Better
"[T]he real debate has shifted from a discussion of whether 401(k)s can work for employees -- they definitely can -- to a debate about the best way to maximize the benefits of defined-contribution plans and to bring them to a greater number of workers. Here are a few of the signature developments that have significantly improved the retirement system.... Autoenrollment and autoescalation.... Target-date funds and other professionally managed options.... Immediate eligibility.... Reduced amounts of company stock in plans.... Simplification of options." (Morningstar)  

Baby Boomers and Millennials: Two Generations Prepare for Retirement
"One notable difference in the generations is technology preferences and usage. Millennials are used to communication through employer websites, email, texting, and even social media sites such as Facebook. While these concepts certainly aren't foreign to older generations, Millennials are more likely to expect their employers to communicate with them electronically rather than through traditional methods such as regular mail. Another difference between the two groups is whether or not they expect to be able to rely on Social Security." (Milliman Retirement Town Hall)  

Are Your Employees Retirement Ready?
"In order to be more prepared [for retirement], employees should be educated about their options. Employers should consider: [1] Providing information early and often to help address factors such as longevity, expenses, healthcare costs, inheritances, and uncertainties that may arise with changes in the market. [2] Encouraging participation in retirement-related meetings during work hours. [3] Reinforcing financial literacy and foster understanding by utilizing a financial professional for big picture and retirement advice. [4] Assisting employees in creating personalized plans for retirement." (The Principal Financial Group)  

Model Notices and Plan Sponsor Education on Lifetime Plan Participation
"In order to be effective, communications and notices to employees must have a consistent message that regularly appears throughout an employee's career. No single notice, no matter how effectively worded or how timely it is provided, will be as effective as a regular series of messages.... An effective participant education plan for lifetime plan participation and effective withdrawal options should have at least three separate parts ... These include effective information contained in the quarterly statement; notices at the time an employee leaves the plan due to a job change, and a pre-retirement education campaign." (The Brookings Institution)  

[Opinion]

American Academy of Actuaries Testimony to the ERISA Advisory Council on Model Notices and Disclosures for Pension Risk Transfer (PDF)
"The [Academy] offers the following recommendations ... [1] Develop consumer information material to be made available on the DOL website, or another appropriate government or government-sponsored web portal, to provide objective information to plan participants being offered a lump sum distribution, either through a pension risk transfer transaction (i.e., lump sum window) or in the course of regular plan administration.... [2] Consider additional mandatory disclosures to be made by plan providers to assist plan participants in evaluating a lump sum offer.... [3] Review the current relative value disclosure requirements to ensure they are adequately addressing the needs of today's plan participants." (American Academy of Actuaries)  

[Opinion]

American Benefits Council Testimony to the ERISA Advisory Council on Model Notices and Disclosures for Pension Risk Transfer (PDF)
"[T]he Council strongly supports disclosures that help participants make informed and prudent choices.... [It] is critical that any new guidance be clearly prospective only.... To do otherwise would undermine a fundamental premise of our voluntary system: the ability to rely on the law in effect at the time a transaction occurs.... [A]ny new guidance needs to provide flexibility for plan sponsors to fulfill their disclosure obligations in a way that fits their circumstances and their workforce." (American Benefits Council)  

Benefits in General; Executive Compensation

Text of Ninth Circuit Opinion: Deadline for Appeal of Benefit Claim Denial Extended to Monday When It Falls on a Weekend (PDF)
"In a letter denying LeGras's application for continued long-term disability benefits, AETNA informed LeGras that he could file an internal appeal of the decision within 180 days. The 180-day period ended on a Saturday. Although LeGras mailed his appeal the following Monday, AETNA denied it as untimely ... We hold that because the last day of the appeal period fell on a Saturday, neither that day nor Sunday count in the computation of the 180 days. As LeGras mailed his notice of appeal on Monday, it was timely. This method of counting time is widely recognized and furthers the goals and purposes of [ERISA]. We therefore adopt it as part of ERISA's federal common law." [LeGras v. Aetna Life Ins. Co., No. 12-56541 (9th Cir. May 28, 2015)] (U.S. Court of Appeals for the Ninth Circuit)  

Economists Have Figured Out Who's Really to Blame for Increase in Income Inequality
"[I]f CEOs really are gobbling up a bigger and bigger slice of the profit pie, then inequality within society at large should have increased because inequality within companies increased. But that's not what happened.... [Researchers] were able to look at what had previously between private earnings data for every company between 1978 and 2012 -- the best data we have so far -- and found that the pay gap between executives and their own workers had barely changed during this time. What had changed, though, was the pay gap between every worker at the highest-paid firms and everyone else. In other words, inequality exploded because the top 1 percent of companies were making more and paying all their employees more. This was true across the country and across industries." (The Washington Post; subscription may be required)  

The Changing Landscape of Golden Parachutes in a Say-on-Pay World
"Facing pressure from shareholders, many companies have modified their parachute arrangements to require both a [change in control (CIC)] event and corresponding termination of employment by the company before payments are triggered. Such double-trigger requirements have continued to rise, with 95% of agreements now having them, a 10-percentage-point increase for CEOs and an 11-point increase for other [named executive officers (NEOs)] since 2010. The involuntary termination must take place within a specified length of time, called the 'protection period,' which is typically two years following the CIC event." (Towers Watson)  

Press Releases

Court Appoints Independent Fiduciary to Distribute Assets of I.Q. Marketing Inc. 401(k) Plan in Minneapolis
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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