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[Official Guidance]
Text of EBSA Temporary Prohibited Transaction Exemption for Deutsche Bank
"This document contains a temporary exemption issued by the [DOL ... which] permits certain entities with specified relationships to Deutsche Bank to continue to rely upon the relief provided by Prohibited Transaction Class Exemption (PTE) 84-14, for a period of nine months, following the criminal conviction of Deutsche Securities Korea Co. (Deutsche Securities Korea Co. or DSK) for spot/futures-linked market price manipulation."
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
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[Guidance Overview]
Who Cares About the BIC Exemption for IRAs? (PDF)
"[If] it is true that section 4975(d)(10) provides all the relief needed for a fiduciary to receive reasonable compensation for IRA services, why did the [DOL] spend more than 5 years working on its massive fiduciary proposal and corresponding ' Best Interest Contract' (BIC) Exemption, and why of the more than 3,000 comments filed did no one ... point out this obvious fact? Of course, the question is rhetorical; section 4975(d)(10) does not exempt fiduciary self-dealing ...or does it?"
(Groom Law Group, Chartered)
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[Guidance Overview]
Multiemployer Plan Benefit Suspension Voting Procedures Released (PDF)
"The IRS administers the vote, but they can choose to delegate distribution of the ballots and tabulation of the votes to one or more service providers.... The DOL has a role to play in the process as well. The IRS allocated the responsibility to the DOL to compose the statement in opposition to the proposed suspension compiled from comments received on the proposed suspension."
(Buck Consultants at Xerox)
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[Guidance Overview]
Recent IRS Guidance Prohibits Lump-Sum Windows for Pension Retirees
"Presumably, future regulations will continue to permit annuitants to commute annuity payments to a lump sum in the case of a plan termination, but the notice is not clear on this point.... Some plan sponsors have considered excluding deferred vested participants older than the plan's normal retirement age because they interpret the notice to prohibit offering lump sums to 'retirees' entitled to actuarial increases after normal retirement age. However, this interpretation is not clearly supported by Notice 2015-49, and excluding participants above a certain age who otherwise are in similar circumstances (e.g., not in pay status) could raise age discrimination concerns."
(McDermott Will & Emery)
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Text of District Court Opinion Denying Class Certification in Challenge to 401(k) Plan Fees
"[F]ees charged to individual plans must be compared to the expense of providing services to those plans. These individualized inquiries would be significantly more complex than Plaintiff's proposed inquiry into a single fee whose reasonableness (Plaintiffs argue) could be straightforwardly determined as to all plans equally.... [A]lthough Plaintiffs have plausibly alleged that Defendants have violated the fiduciary duty of honesty, and specifically the duty to honestly describe its fee structure for the benefit of participants, any proceeding under that theory would require individualized inquiries that would quickly come to predominate over the common questions.... The Court finds that individualized inquiries would predominate over common questions as to the claim that TLIC should have invested in lower-cost share classes.... [P]lan-by-plan analysis would be necessary to determine
whether the plans and participants invested in the relevant separate accounts at a time when a lower-cost class was available." [Santomenno v. Transamerica, No. CV 12-0278 (C.D. Cal. Aug. 28, 2015)]
(U.S. District Court for the Central District of California)
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The Fiduciary Duty to Monitor Non-Fiduciary Service Providers
"With respect to any given service (e.g., a call center), there will be differences in the quality of services offered by different providers, e.g., high touch versus a more DIY approach. But those differences themselves can generally be defined and measured. In this context, differences in fees come to the foreground."
(October Three Consulting)
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Service Cost and Interest Cost for Retirement Plans
"[The SEC stated] they would not object to registrants moving from using a single weighted-average discount rate to an approach that applies individual spot rates to each year's cash flows. Depending on the nature of the plan and demographics, such an approach could reduce the sum of a plan's service cost and interest cost by as much as 10% to 20%. The change in approach would not change the benefit obligation."
(Towers Watson)
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Moody's Says Use of Older IRS Mortality Tables May Save DB Plan Sponsors $18 Billion Next Year
"The IRS announced July 31 it will use its current assumptions until 2017 while officials study the SOA tables.... Based on a combined benefit obligation of $2.1 trillion, Moody's analysts calculated that the new tables would cause those obligations to increase 6%, or $126 billion, under new mortality assumptions. 'Allocating $126 billion over seven years results in $18 billion of contributions deferred until 2017,' wrote Moody's analysts[.]"
(Pensions & Investments)
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Asset Purchasers May Acquire Multiemployer Plan Withdrawal Liability as 'Successors'
"The Seventh Circuit ... found that the purchaser was aware of the seller's potential withdrawal liability owed to the plan because it engaged in due diligence and prepurchase negotiations and addressed withdrawal liability responsibility through an indemnification clause in the asset purchase agreement. The court reasoned that 'equity' mandated imposing common law notions of successor liability to multiemployer pension plans for the seller's withdrawal liability; otherwise, a 'liability loophole' would exist in this context if the notice requirement excluded contingent liabilities." [Tsareff v. ManWeb Services, Inc., No. 14-1618 (7th Cir. July 27, 2015)]
(Morgan Lewis)
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Annuity Sales Report, 2015 Q2
"Variable annuity total sales rose sharply in the second quarter of 2015 to $35.6 billion ... This was an 11.7 percent increase from $31.8 billion in the first quarter of 2015 and virtually unchanged from the second quarter of 2014. Meanwhile fixed annuity sales totaled $22.8 billion in the second quarter of 2015 ... This was a 9.5 percent increase from $20.9 billion during the previous quarter, but a 5.9 percent decline from $24.3 billion in the second quarter of 2014, when sales reached their highest level in five years."
(Insured Retirement Institute [IRI])
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Calculating Neutral Increases in Retirement Age by Socioeconomic Status
"This paper finds that age-65 life expectancies have increased for all levels of educational attainment but that the gains have been much greater for those in the top quartile.... The findings suggest that all educational groups can work longer today than in the past, while spending a similar fraction of their lives in retirement; those in the top quartile of educational attainment can work a full one to two years longer than those in the bottom quartile and still maintain their 1979 ratios."
(Center for Retirement Research at Boston College)
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How Should a Homemaker Plan for Retirement?
"[This report] examines the retirement preparedness of homemakers in the United States and 14 other countries around the world. The research report is drawn from a survey of 1,600 homemakers, and 16,000 workers and retirees in 15 countries spanning Europe, North and South America and Asia. Findings are compared to workers and retirees."
(Transamerica Center for Retirement Studies)
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How Much Income Does a Retiree Really Need?
"When we plot out median spending as a percentage of gross income among pre-retirees, we see that those in the middle, fourth and especially the fifth quintile of income aren't spending anywhere close to their income. In fact, the median household in the top income quintile is spending 36% of their gross income each year. Even the 90th percentile spendthrift in the top income quintile is spending just 63%."
(ThinkAdvisor)
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Markets' Wild Moves Make Public Pension Funds Vulnerable
"Since the financial crisis, many public pension funds have increased their exposure to hedge funds and other higher-risk assets to meet ambitious investment return targets. Most funds assume a rate of return of 7-8 percent a year ... At the same time, they have cut back on safer assets, such as U.S. government debt and other lower-risk fixed income investments, which are not expected to provide big returns in the next few years."
(Reuters)
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