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[Guidance Overview]
How the EPCRS Changes Might Impact 403(b) and 457(b) Plans
"EPCRS applies to 403(b) plans in a similar fashion as it does to qualified plans, with some variations.... [T]echnically EPCRS does not apply to 457(b) plans at all.... [T]he last revision of EPCRS prior to the current update opened the door to governmental 457(b) plan submissions to the IRS outside of the EPCRS program. These applied on a provisional basis, utilizing standards that are similar to those of the EPCRS. The door to private tax-exempt 457(b) plans, meanwhile, remains closed, and no such submissions are permitted at all."
(Cammack Retirement Group)
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401(k) Participants Allowed to Pursue Profit Disgorgement Claim Arising from Transfer of Assets to Pension Plan
"The court determined that the participants could assert a claim under ERISA Section 502(a)(3) for appropriate equitable relief to redress a violation of ERISA's anti-cutback rule....The bank argued that the participants suffered no 'financial loss,' and thus no injury sufficient to establish standing.... The court then concluded that the participants experienced an invasion of a legally protected interest because they suffered a loss, measured as the spread or difference between the profit the bank earned by investing the retained assets and the amount it paid to the participants." [Pender v. Bank of America Corp., No. 14-1011 (4th Cir. June 8, 2015)]
(Wolters Kluwer Law & Business)
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Cash Balance Plans 2015 Update
"If the issue is no longer surplus but risk, why establish (or convert to) a cash balance plan at all? Why not simply freeze the DB plan and establish a DC plan? ... DC plans do not present the preservation of capital, accounting and funding issues that market-return cash balance plans do. And in some respects they are more flexible -- unlike a 401(k) plan, participants in a cash balance plan cannot choose their contribution level or asset allocation. There are, however, still some reasons why some sponsors may prefer a cash balance plan solution."
(October Three Consulting)
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An Actuarial Perspective on the 2015 Social Security Trustees Report (PDF)
"The combined Social Security trust funds are projected to deplete during 2034, one year later than projected in last year's report. If changes are not implemented by that date, only about 79 percent of scheduled benefits would be payable, declining to 73 percent in 2089.... To bring Social Security into actuarial balance for the next 75 years ... changes equivalent to either an immediate increase of 2.62 percentage points in the payroll tax rate, or an immediate decrease of 16.4 percent of benefits for all current and future beneficiaries, or some combination thereof, is required."
(American Academy of Actuaries)
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Governmental 403(b) and 457(b) Plan Sponsors: Don't Forget the Tax Code Requirements
"[S]ome governmental plan sponsors often misinterpret the fact that their plans are not subject to ERISA and some of the Internal Revenue Code to mean that they are not subject to any rules at all. Conversely, some public school districts and public higher education organizations misconstrue the retirement plan rules, by assuming those of their private school colleagues equally apply to them. This article provides an overview of the important sections of the Code that do and do not apply to governmental plans[.]"
(Cammack Retirement Group)
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How Safe from Creditors Is Your 401(k) Money If You Roll It to an IRA?
"What happens ... if you move those ERISA-protected 401(k) funds to an IRA? Does the protection you had in your 401(k) follow along? Here's where it can start to get a little complicated, because we actually have to split out your creditor protection into two distinct categories: creditor protection in bankruptcy and creditor protection in a non-bankruptcy event."
(Slott Report)
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Retirement Plans Developments, Summer 2015 (PDF)
"Highlights include DOL's controversial fiduciary rule, changes to IRS determination letter and correction programs, an abrupt change to retiree cashout rules, an extension of nondiscrimination testing relief for closed defined benefit plans, guidance for multiemployer plans under the new Multiemployer Pension Reform Act, and legal challenges for church and public plans. [The authors] also include some overtime and independent contractor guidance that may indirectly affect retirement programs."
(Buck Consultants at Xerox)
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Market Gains Drive Retirement Balances Higher But Too Much Stock Could Put Savings at Risk
"While a rising stock market is one reason the average 401(k) balance is up 50 percent in the last five years, this has led to an increased percentage of equities within many 401(k) accounts, which can add increased exposure to the negative impact of a market downturn.... 18 percent of people 50-54 had a stock allocation at least 10 percentage points or higher than recommended, and for people ages 55-59, that figure increased to 27 percent. An additional 11 percent of people ages 50-54 had 100 percent of their 401(k) assets in stocks, while 10 percent of people ages 55-59 had all of their 401(k) assets in stocks."
(Fidelity)
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Global Equity: Are Prospectus Benchmarks the Correct Barometer?
"When evaluating the performance of an active manager, investors often assume that the benchmark used to compare performance is an accurate reflection of the goals, risk posture, or opportunity set of the strategy. But it isn't always the case that an appropriate benchmark will be selected as active managers may shift their exposure to more risky segments in an attempt to generate better long-term returns for investors.... [This research paper explains] why custom-created benchmarks may be a more reasonable proxy of active performance than a fund's prospectus benchmark."
(Vanguard)
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Massachusetts Pension Commission Urges Legislators to Override Governor's Veto
"The Massachusetts Public Employee Retirement Administration Commission [PERAC] is requesting the state House and Senate not override Gov. Charlie Baker's veto of a provision added to the fiscal year 2016 budget that would roll back part of a state pension reform law. Under the provision, retirement systems could make follow-on investments with venture capital, private equity and real estate funds where they had already invested in the prior 10 years, without putting the matter through a rigorous proposal process."
(Pensions & Investments)
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