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[Official Guidance]
Text of IRS Notice 2015-85: Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates, December 2015 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)."
(Internal Revenue Service [IRS])
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[Advert.]
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[Guidance Overview]
DOL's Recent Guidance on State-Run Retirement Programs, Part II: The Interpretive Bulletin
"What is new here is that the DOL is providing states a different standard for the establishment of an MEP than the 'employment based nexus' standard that the DOL established for private enterprises that wish to do the same. This issue is critical because MEPs can have streamlined regulatory reporting and disclosure requirements, allowing them to provide competitive cost savings to adopting employers. Another issue to watch is the DOL's query (included as a footnote in the bulletin) on whether state sovereign immunity laws need to be reviewed in light of ERISA's remedial provisions."
(Morgan Lewis)
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Top Ten 401(k) Plan Trends For 2016
"[1] Offer at least one professionally managed option ... [2] Online participant investment advice ... [3] Investment menus with active and passive tracks ... [4] Manage leakage ... [5] Hire 401(k) plan-only investment advisors ... [6] Focus on the fiduciary ... [7] Employee education featuring behavioral principles ... [8] Online employee education ... [9] Addition of Roth 401(k) options ... 10. Use of HSA accounts for retirement."
(Lawton Retirement Plan Consultants)
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'Back-Sweeping' to Boost 401(k) Participation
"[A]utomatically enrolling employees in 401(k) plans and matching their contributions are fairly common components of many companies' retirement plan strategies. But another tactic ... could signal employers' adoption of a more aggressive approach to boosting workers' retirement savings. In 2013, [a recent survey] found 8 percent of companies automatically enrolling not just new hires, but all eligible employees -- also known as 'back-sweeping' -- on an annual or one-time basis. This year, 16 percent of organizations indicated engaging in this practice[.]"
(Human Resource Executive Online)
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Investment Returns: Defined Benefit vs. Defined Contribution Plans
"The analysis compares returns by plan type from 1990-2012 using data from the U.S. Department of Labor's Form 5500. During this period, defined benefit plans outperformed 401(k)s by an average of 0.7 percent per year, even after controlling for plan size and asset allocation. In addition, much of the money accumulated in 401(k)s is eventually rolled over into IRAs, which earn even lower returns. One reason for the lower returns in 401(k)s and IRAs is higher fees, which should be a major concern as they can sharply reduce a saver's nest egg over time."
(Center for Retirement Research at Boston College)
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A Closer Look at Target Date Funds
"[It] is easy to skew asset allocations if the participant uses additional investment vehicles. Then consider what happens as participants near retirement. For some, it's appropriate when their asset allocation automatically shifts to more cash/bonds. Yet others may still need both growth and income at that time, so they may need more of an equity component to stay on track. It becomes extremely difficult for one target date fund to meet the individual needs of each investor."
(Pension Consultants, Inc.)
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Class Action Lawsuit Prevails in Cash Balance Conversion
"[T]he court noted that, while participants received notice of the changes in a series of communications, none addressed the possibility of a wear-away period.... The court's remedy was to reform the terms of the plan in accordance with the participants' expectations.... [The court found that] participants reasonably but mistakenly believed that the pay and interest credits under the post-conversion formula would increase their pension benefit.... [and] held that Foot Locker committed equitable fraud by making changes to its plan to reduce costs without disclosing the full extent or impact of those changes to plan participants" [Osberg v. Foot Locker, Inc., No. 07-cv-1358 (S.D.N.Y. Sept. 29, 2015)]
(Towers Watson)
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Moody's: Corporate Plans Could Reach Full Funding in 2018 After Interest Rate Increases
"The aggregate funded status is estimated to remain at 78% at the end of 2015, unchanged from 2014 and only 200 basis points above the 2008 level of 76%.... If discount rates rise to either 5.7% or 6% by 2019, as anticipated, and the pension funds achieve their 7.75% annual assumed rate of return, the pension plans could achieve full funding in 2018, Moody's estimates."
(Pensions & Investments)
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Four Mistakes to Avoid When Tapping an IRA to Pay Education Expenses
"[1] Only post-secondary expenses are considered to be qualified higher education expenses.... [2] A qualified higher education expense must be a required expense ... [3] [T]he education expense and the IRA distribution must occur in the same year.... [4] The exception to the early distribution penalty for higher education only applies to distributions from your IRA, not distributions from your company plan."
(Slott Report)
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Ten Retirement Resolutions for 2016
"Plan for a long retirement.... Avoid emotional attachments to investments ... Prepare for the unexpected.... Find a fiduciary.... Pay off debt.... Open a MyRA.... Create a my Social Security account.... Avoid gaps in health insurance.... Coordinate with your spouse.... Consider pushing back your retirement date."
(U.S. News & World Report)
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[Opinion]
Despite Poor Record, States Eye Private Pensions
"One of the most significant results of states gaining an ERISA exemption is that it would make it difficult for workers to sue states in federal court if they mishandled these funds. Because ERISA only applies to private workers, states already have license to operate free of the law in their own government-employee pension systems, and the results have been catastrophic."
(Investor's Business Daily)
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[Opinion]
Clark Blackman II Says SEC Fiduciary Fix 'Not Tough Stuff', Calls Proposed DOL Fiduciary Rule a 'Band-Aid'
"The public is confused by who is a fiduciary and who isn't (whether they know or understand the term is not the issue -- they do intuitively understand the concept). This is understandable, since the SEC allows anyone with a brokerage or insurance license to call themselves an 'advisor.' How can the public possibly know that their 'advisor' is really less an adviser and more a salesman working first for the employer who pays them based on the advice they give. They do have a fiduciary obligation, but as an agent of the brokerage firm this obligation is to their employer! This is not tough stuff. It is something the SEC could do tomorrow."
(Fiduciary News)
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Benefits in General; Executive Compensation
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[Guidance Overview]
Considerations for Electronic ERISA Disclosures
"Plan sponsors are asking: Can an employer rely on an employee's generalized consent to receive employee benefit materials electronically as consent to receive the Form 1095-C via e-mail? And, with respect to non-personalized disclosures, such as the Summary Plan Description (SPD), updated plan documents, and Summary Annual Reports (SARs), can an employer satisfy the requirements by just posting on the company's intranet or on a TPA's website? The short answer to these two questions is 'no, and no.' "
(Davis Wright Tremaine LLP)
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2016 Compensation Committee Handbook (PDF)
108 pages. "[This Handbook] is intended to help compensation committee members understand and comply with the duties imposed upon them. [The authors] have also undertaken to describe in some detail the concepts underlying a variety of areas within the bailiwick of compensation committees (for instance, the types of equity awards that are commonly granted and their respective tax treatment) and to provide [their] perspective on some of the many decisions that compensation committees must make (for instance, the pros and cons of hiring a compensation consultant and the factors that go into that hiring decision)."
(Skadden, Arps, Slate, Meagher & Flom LLP)
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