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[Guidance Overview]
Future DB Plan Costs to Rise (PDF)
"While required funding has declined in recent years, sponsors are simply delaying payments. Continuing to take advantage of funding relief measures will likely lead to higher ultimate plan costs due to heavier PBGC premiums, tax payments, and future plan funding.... By 2019, PBGC flat-rate premiums will increase almost 22% from 2016 levels and variable-rate premiums will increase more than 26% over the same period."
(Lockton)
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PBGC Premium Increases Significance for Funding De-Risking Plan Termination
"Getting the cost of borrowing-and-funding vs. paying the PBGC variable-rate premium on an apples-to-apples basis requires two not entirely intuitive adjustments: Adjusting for earnings on loan proceeds.... Adjusting for ERISA minimum funding.... the key variables are: PBGC variable-rate premium rate.... Cost of borrowing.... Rate of return on assets.... Plan valuation rate."
(October Three Consulting)
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Prudent Process Usually Means Prudent Investment
"Following the example of the Supreme Court, the Sixth Circuit found that, while a presumption of prudence is no longer permissible, it is prudent to rely on market prices of securities barring some special circumstance. Because State Street Bank had performed internal investigations into the prudence of purchasing additional GM shares, and the plaintiffs had not presented sufficient evidence to challenge the defendant's approach, the actions of the fiduciary were sufficiently prudent. The Sixth Circuit noted that the prudence of State Street Bank's decision must be judged at the time the decisions were made, not in hindsight based on the performance of the investments." [Pfeil v. State Street, No. 14-1491 (6th Cir. Nov. 10,
2015)]
(Squire Patton Boggs)
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Duty to Monitor Fiduciaries Does Not Include Duty to Inform
"The plaintiffs in the suit allege that BP and BP America are vicariously liable for their employees' breaches of fiduciary duty under ERISA. They argue that the corporate defendants 'effectively controlled the individual defendants' because the corporate defendants employed the individual defendants and appointed them to plan-related positions. But, U.S. District Judge Keith P. Ellison of the U.S. District Court for the Southern District of Texas said more than an employer-employee relationship is required to meet the vicarious liability test; it requires that the principal have 'participated in the agent's breach.' He found that the plaintiffs failed to tie the corporate defendants in any way to the individual defendants' alleged breach." [In re
B.P. ERISA Litigation, No. 4:10-cv-4214 (S.D. Tex. Oct. 30, 2015)]
(PLANSPONSOR)
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Novant Health Settles with DC Participants on Fiduciary Breach Allegations
"The settlement document contained many provisions that will take effect during a four-year settlement period, including the removal of D.L. Davis and related entities from the employee benefit plans; a review of all current investment options; and the prohibition against offering 'any MassMutual investments in the plans or any other investment that provides compensation to Davis and related entities.'... The agreement also called for the hiring of an independent investment consultant to examine the investment options; an annual review by the consultant of plan management; and issuing RFPs for record keeping, investment consulting and participant education."
(Pensions & Investments)
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What Responsibilities Do Employers Retain After Outsourcing Plan Administration?
"[E]ven if you have properly outsourced these responsibilities, you still must: [1] Carefully monitor how your 'prudent experts' are performing their duties. You are still responsible for their actions being prudent. [2] Retain ultimate decision-making authority for hiring and firing.... It's up to you to make all final decisions. [3] Independently evaluate the suitability of their actions, expenses, and overall performance."
(Fiduciary Plan Governance, LLC)
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Completing the Analysis: ESG Integration (PDF)
"[I]ntegrating ESG criteria into the investment process is a sound strategy as a growing body of research highlights the material impact that ESG factors have on a company's long-term performance.... [It] is critically important to understand that ESG analysis is not simply a screening approach that confines the investment universe and excludes certain investments. Rather, it is an active investment process utilized to provide an additional context for analysis.... [T]his paper provides an overview of ESG factors, while also discussing how investors are incorporating them into the investment process."
(NEPC)
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Deadline for Restating Your 401(k) Plan May Be Around the Corner
"The current cycle for preapproved defined contribution plans ends April 30, 2016.... [M]any employers will want to delay switching to a pre-approved plan until the next deadline for adoption, which under the current rules would appear to be April 30, 2022."
(Jackson Lewis P.C.)
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Retirement Health Care Costs and Income Replacement Ratios (PDF)
10 pages. "Financial advisors, plan sponsors, and millions of investors rely on income replacement ratios (IRRs) -- a percentage of pre-retirement income -- to estimate how much will be needed to maintain desired lifestyles in retirement.... [This] research indicates that current IRRs, which do not include unexpected out-of-pocket medical expenses, accurate health care inflation rates, life expectancy projections, and Medicare means-testing surcharges, will likely fail to produce sufficient income for retirees to afford quality health care and maintain the standard of living they have planned for.... For a 45 year-old as little as $90 per pay period can reduce, or possibly even eliminate, the impact of unplanned medical expenses in retirement."
(HealthView)
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Connecticut Funded/Unfunded Split of Pension System Would Be First in Nation
"Gov. Dannel P. Malloy has proposed splitting the pensions into an essentially unfunded system for state employees hired before 1984 and then a separate fund for those hired after 1984.... Alicia Munnell, a professor and the director of the [Boston College] Center for Retirement Research, said there should be no concerns that Connecticut would be the first to try such a split."
(Hartford Courant)
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Benefits in General; Executive Compensation
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Death and Employee Benefits: How to Prepare for the Worst
"Ensure your life insurance is adequate and your beneficiary designations are up to date. Understand what benefits coverage you and your spouse have through your employers, and read your employee benefit booklets. Record policy numbers and important contact information (such as your employers' HR departments) and store them in a logical place that your partner knows about -- not on your password-protected cell phone. If you have a safety deposit box that isn't jointly held with your spouse, don't forget about that, either."
(Buck Consultants)
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Press Releases
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David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
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