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[Guidance Overview]
SSA Issues Final Rule Clarifying Government Pension Offset Exemption for Spouse's Benefits
"The regulations explain how and when the SSA will reduce the Social Security spouse's benefit for some people who receive federal, state, or local government pensions if Social Security did not cover their government work. The final rule becomes effective on July 15, 2015.... The [government pension offset (GPO)] provision was designed to provide parity with workers who earned their own Social Security retirement benefits and who are eligible to receive a spouse's benefits under Social Security as well. These workers have their spouse's benefits offset by their retirement benefits and receive the larger of the two."
(Wolters Kluwer Law & Business)
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Selecting Service Providers, Competitive Bidding, and RFP's Importance in a Fiduciary Investment Process (PDF)
16 pages. "The RFP should test the resources and sustainability of the respondent, particularly where the respondent is to have delegated investment authority, because such mandates are not easily undone, for example, where large pools of assets are involved. Investigation should include the strength of the back office and research capability, whether the respondent has an investment committee to oversee investment decisions, and whether there is a compliance department to oversee regulatory matters, including conflicts of interest, fee disclosures and transparency."
(Cambridge Fiduciary Services, LLC, for InHub)
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Company Stock Still a Corporate DC Plan Staple
"[C]ompany stock accounted for $207.5 billion, or about 19.4% of the aggregate $1.07 trillion in DC plan assets among the 100 largest corporate plans. Company stock is the largest option in the companies' plan menus, followed by domestic large-cap equity ($180.8 billion); stable value ($118.9 billion); balanced funds and target-date funds ($103.9 billion); and all other fixed income ($97.3 billion)."
(Pensions & Investments)
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The Date Debate Revisited: Evidence Continues to Support a Flat Glide Path in Retirement (PDF)
12 pages. "[1] Typical (through) glide path design does not match a participant's exposure to sequence-of-returns risk. [2] A flat glide path makes more sense given both investment and behavioral research. [3] Back-tested results also support the conclusion that flat glide paths are most appropriate in retirement. [4] Common arguments for de-risking in-retirement glide paths do not hold up to scrutiny."
(Russell Investments)
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Designing the Financial Planning Software of the Future -- Calculator, Collaboration Tool, and Client Personal Financial Management
"[T]he evolution of planning software is creating distinct new challenges from a software design perspective, as the tools are increasingly used in three distinct contexts: an interactive collaborative planning tool between advisors and clients in meetings, an ongoing monitoring and personal financial management (PFM) tool for clients, and an advisor support tool for everything from complex analyses to tracking and alerting which clients need assistance. Not to mention the increasing amount of 'meta data' available about the advisory business and its clients as well. In fact, going forward financial planning software designers may need to increasingly view the use of the software through each of these distinct lenses -- advisor, client, and advisor-client interaction, as well as business meta-data -- to advance the efficacy of planning software."
(Michael Kitces in Nerd's Eye View)
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To Take or Not to Take, That Is the Lump-Sum Window Question
"One of the simplest ways to evaluate a lump-sum offer is to find out the extent to which the money compensates you for the loss of your pension. I asked New York Life Insurance how much it would cost me today to buy a deferred annuity that will pay me $423 a month, starting in 14 years. The answer: $45,896, which means my lump sum falls $13,808 short of what I would need to replicate my pension's guaranteed income with an annuity.... Of course, I can always invest my lump sum myself. But is it realistic to think that over the next 14 years I will be able to turn my $32,088 into $127,000? ... The answer: probably not, since I will need to earn 10.35% a year, net of investment fees."
(Milliman Retirement Town Hall)
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IRI Quarterly Newsletter, June 2015
12 pages; articles include: [1] The DOL's proposed fiduciary definition: implications for advisors; [2] Guaranteed income: changing the face of 401(k) plans; [3] Managed volatility strategies: investing for a smoother journey; and [4] Boomers' confidence in secure retirement sinks to five-year low.
(Insured Retirement Institute [IRI])
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[Opinion]
Disclosure Is Not Enough: Fiduciaries and the No-Conflict Rule
"As the debate over the imposition of fiduciary obligations upon those providing advice to retirement plan sponsors, retirement plan participants, IRA account holders, and more broadly to any American receiving personalized investment advice, let us first understand that the fiduciary's obligation includes, at its core, the obligation to not put herself or himself into a situation which is in conflict with the client. And, since some conflicts of interest are unavoidable, when such conflicts do occur a series of five important requirements must be met to properly manage the conflict."
(Ron Rhoades)
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Benefits in General; Executive Compensation
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SEC Announces Open Meeting on Proposed Clawback Requirements under Dodd-Frank Act
"How the SEC proposes to resolve various ambiguities, uncertainties and open questions under the language of the Dodd Frank Act rules ... remains to be seen, but in any event certainly will impact how public companies structure their incentive compensation recoupment policies and practices. Although many companies -- especially those in the Fortune 500 -- have adopted some form of an incentive compensation clawback policy, a significant number of companies have deferred the adoption, review and/or update of their incentive compensation clawback provisions and policies pending SEC guidance[.]"
(Proskauer's ERISA Practice Center)
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Eighth Circuit: Plan's Deadline for Filing Suit Controls Litigation
"A plan that does not specify a deadline for filing a lawsuit risks application of state statutes of limitations, which, as seen [in this case], can be quite long. Establishing a plan-specific deadline allows the plan sponsor to impose an earlier deadline and provides uniformity for plan sponsors operating in multiple states. The limitations period should be stated in both the formal plan document and the SPD. And it is advisable to include it in notices of final adverse benefit determination -- otherwise, participants may argue that they were never informed of the deadline." [Munro-Kienstra v. Carpenters' Health and Welfare Trust Fund of St. Louis, No. 14-1655 (8th Cir. June 17, 2015)]
(Thomson Reuters / EBIA)
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Sixth Circuit Rules Plan Terms Are 'Irrelevant' When Considering Equitable Claim
"The decision makes abundantly clear that the Sixth Circuit requires a plan sponsor to toe a very fine line, because it must simplify and summarize complex plan language in an SPD, but it can be strictly liable if its summary fails to include any term that a court later decides was material to a subsequent dispute ... Any provision in a Plan could be material to some benefit dispute that arises in the future." [Pearce v. Chrysler Group, LLC Pension Plan, No. 13-2374 (6th Cir. June 18, 2015; unpub.)]
(Begos Brown & Green LLP)
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High Court Decides Same-Sex Marriage Issue (PDF)
"Public sector employers, such as state and local governments, will be required to recognize same-sex spouses and treat them the same as opposite-sex spouses if spousal benefits are offered. Private employers will not be required to recognize same-sex spouses, nor provide equal treatment, but could face litigation alleging sex discrimination.... [To] the extent state insurance law requires coverage of same-sex spouses when spousal coverage is offered, a plan will not be able to purchase insured coverage that excludes same-sex spouses.... For public sector employers, the ruling will require that plans extend to same-sex spouses the same spousal protection under their retirement plans as they extend to opposite sex spouses."
(Buck Consultants at Xerox)
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Marriage with a Capital 'M': What Employers Need to Know About the Supreme Court's Decision in Obergefell v. Hodges
"Employers navigating this issue should undertake a review of their policies and benefits plans and make sure they are treating all married couples equally. This is true with regard to not only leave policies and non-discrimination provisions, but also benefit plans, retirement plans, and other benefits offered to spouses of employees. Past practices of, for example, requiring differing forms of proof of marriage, depending upon whether the marriage involved same- or opposite-sex couples, likely no longer will be permissible following Obergefell." [Obergefell v. Hodges, No. 14-556 (U.S. June 26, 2015)]
(Littler)
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Financial Planning for LGBT Couples After U.S. v. Windsor and Obergefell v. Hodges (PDF)
12 pages; includes checklist. "As a result of these new rulings, employee benefits and financial planning strategies once available only to opposite-sex married couples are now available to same-sex married couples. This paper highlights several of the changes that have taken place, including changes to Social Security eligibility, and details how same-sex couples may wish to incorporate them into their financial planning."
(Prudential)
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Press Releases
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