[Guidance Overview]
DOL Issues Final Regs on Annual Funding Notices
"[T]he final regulations do not address much of the guidance related to annual funding notices that came after the proposed regulations. The DOL explains this by providing that much of the intervening information is temporary and it appears that the DOL wanted model notices and regulations that will not require changes as the temporary information expires."
(Thompson Coburn)
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Ninth Circuit Denies Rehearing, Amends Opinion, and Sends Long-Running Stock-Drop Case Back for Trial
"The court's opinion and strong dissent represent dramatically different interpretations of Dudenhoeffer and conflicting views about the information that plan fiduciaries must disclose to be in compliance with ERISA and securities law. As other courts weigh in, a split among the circuits seems possible, and -- as predicted by the dissenting judge -- the Supreme Court may well have the last word." [Harris v. Amgen, No. 10-56014 (9th Cir. May 26, 2015)]
(Thomson Reuters / EBIA)
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CalPERS to Cut External Money Managers by Half
"The pullback would take place over the next five years and is expected to save CalPERS hundreds of millions of dollars in management fees.... Fees paid to outside managers have ballooned over the past decade as many public retirement systems followed CalPERS into hedge funds and private equity in an attempt to boost long-term returns and meet their mounting obligations to retirees."
(The Wall Street Journal; subscription may be required)
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Initiative Alters CalPERS 'Poison Pill': Big Exit Fees
"A pension reform initiative filed last week requires voter approval of termination fees, the big upfront payment demanded by CalPERS when a plan is closed to new members.... The initiative filed last week by a bipartisan group is a constitutional amendment that requires voter approval of a 'defined benefit pension plan' for new state and local government employees hired on or after Jan. 1, 2019."
(Calpensions)
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Text of Solicitor General's Brief Recommending Supreme Court Deny Review of Stock Drop Case (PDF)
"Petitioners contend that review is warranted to address which party has the burden of proof on the issue of causation once a plaintiff has established a breach of fiduciary duty under ERISA and a prima facie case of related plan losses, and to address what standard should be used to assess causation when the fiduciary breach is a failure of process. The court of appeals correctly decided both issues, and contrary to petitioners ' contentions, there is no clear circuit split on either question. This case would in any event be a poor vehicle for consideration of the questions presented, because resolution of those questions may not affect the outcome on the causation question. Further review is therefore unwarranted." [Tatum v. RJR Pension
Investment Comm., No. 13-1360 (4th Cir. Aug. 4, 2014; cert. pet. filed Dec. 1, 2014)]
(Office of the Solicitor, U.S. Department of Labor)
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Improving Outcomes with Electronic Delivery of Retirement Plan Documents (PDF)
54 pages. "The [DOL and IRS] have issued extensive guidance governing the manner in which plans can distribute retirement plan information electronically. But depending on the nature of the information, any one of four different IRS or DOL standards can apply... Besides reducing costs (with savings significantly passed through to plan participants), electronic delivery provides an efficient and reliable means of communicating important plan information, which facilitates superior participant outcomes."
(Quantria Strategies, via The SPARK Institute)
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Rahm Emanuel Rolls the Dice to Pay Chicago's Pension Bills
"Hiking Chicago's property taxes, which have increased by about half over the past five years, is politically unpopular. Ditto raising the city's 9.25% sales tax, which is among the highest in the state and Midwest. And Illinois Republican Gov. Bruce Rauner has thrown cold water on a state bailout. Opinion Journal Video Independent Institute Senior Fellow Lawrence McQuillan on his new book, 'California Dreaming,' and how to right the state's finances. Photo credit: Getty Images. So how does Mr. Emanuel plan to pay the city's pension bills? Gambling. The mayor wants state lawmakers to authorize a city-owned casino whose revenues would exclusively fund pensions. He says the casino would be a win-win for workers and taxpayers."
(The Wall Street Journal; subscription may be required)
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Don't Just 'Tap Your Retirement Savings'; Develop a Reasonable Spending Budget
"[B]ecause the 4% Rule is just an accumulated savings withdrawal strategy (and not a budget setting strategy) that ignores the existence of [the] Pension and Life Annuity, ... [it] would result in too much withdrawn from [this example's] essential budget accounts and too little withdrawn from [the] non-essential budget account ... Using the Guyton Decision Rules with a 5% initial withdrawal rate would make things even worse in terms[.]"
(Ken Steiner, FSA Retired)
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Is a 401(k) Loan Always a Bad Idea?
"In a few key respects, borrowing from a 401(k) beats other forms of emergency financing, such as credit card debt or even a home-equity line of credit. After all, the interest rate on a 401(k) loan may be lower than other types of financing. And even more important, you pay that interest back to yourself rather than to a third party.... But numerous respondents in a recent Morningstar.com Discuss Forum conversation said they're positively allergic to borrowing from a 401(k)."
(Morningstar)
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Feng Shui of Defined Contribution Menu Construction (PDF)
25 presentation slides. "Feng Shui is the simple interaction of humans and their environments. Changing your environment changes your energy and changes your thoughts and behaviors. Similarly, investment menu construction has an impact on the thoughts and behaviors of participants and therefore their outcomes."
(Multnomah Group)
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Five Myths About Millennials and Retirement Saving (PDF)
"[1] They don't think about saving for retirement -- they don't view it as important ... [2] They just want an app, and they get all their information from social media ... [3] With 'helicopter parents,' they expect other people to solve their problems... [4] They don't trust their employers or think of them only as a 'pit stop'... [5] They 'know it all'."
(Fidelity Investments)
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PBGC Report: State-by-State Pension Plan Information
"In 2014 PBGC paid $5.4 billion to 842,000 retirees to participants in terminated, single-employer plans. 547,000 more Americans will get their pension from PBGC when they're eligible to retire. How does PBGC protect benefits in your state? Just click on the map to find out."
(Pension Benefit Guaranty Corporation [PBGC])
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What to Do When Your Employer Stops Matching 401(k) Contributions
"Even if your employer has stopped matching, your best course of action is to continue your monthly contributions. In fact, you would be wise to make up the difference lost in your employer matching! You can continue these larger contributions to your 401(k) or you might set up another account outside of your 401(k) ... A ROTH can make sense if you believe your tax rate is likely to be higher in retirement than it is now."
(Certified Financial Planner [CFP] Board of Standards, Inc.)
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[Opinion]
Crowdfunded Rhode Island State Pension Investigation Finds $2 Billion in Preventable Losses
"40 percent ... of the pension's assets have been allocated to secretive, high-risk, high-cost alternative investments.... The willingness of Rhode Island pension officials and others (such as the Governor, Attorney General and Auditor General) to agree to an unprecedented secrecy scheme proposed by Wall Street that effectively eviscerates the state Access to Public Records Act, today fosters potential pilfering from the pension and lawlessness -- such as charging bogus fees, tax fraud, insider trading, front-running and engaging in self-dealing."
(Forbes)
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Benefits in General; Executive Compensation
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Ninth Circuit Extends ERISA Deadline, Revives Untimely Appeal
"The majority ... missed a significant issue. As argued by the dissent, the court was simply interpreting the unambiguous terms of an ERISA plan; there were no terms in the plan that extended the time if the deadline landed on a Saturday, Sunday, or holiday.... The opinion will not be hugely significant if it is limited to its specific facts. However, it will be far more problematic if it is a signal by the Ninth Circuit that the express and unambiguous terms of a plan can be changed or modified through the application of federal common law." [LeGras v. Aetna Life Ins. Co., No. 12-56541 (9th Cir. May 28, 2015)]
(Ogletree Deakins)
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SEC Mulling Tweak of Pay-Ratio Disclosure Rule
"Public comments on the proposal have suggested excluding segments of a company's workforce in calculating the ratio of the median of the annual total compensation of all employees of the issuer to the annual total compensation of the chief executive officer of the issuer. According to an SEC staff analysis that was made available [on June 4] for public comment, such an exclusion could cause variations in the pay ratio of 3.4% to 15%. Public comments are due by July 6."
(CFO)
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Press Releases
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