Retirement Plans Newsletter

February 16, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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[Guidance Overview]

What's Safe to Change Mid-Year in Your Safe Harbor Plan?
"Mid-year plan amendments that require updated safe harbor notices and election opportunities: [1] An amendment to increase the amount of nonelective contributions; [2] An amendment to permit in-service withdrawals at age 59-1/2; and [3] An amendment to permit installments as a form of distribution. Mid-year plan amendments that are prohibited: [1] An amendment to change from a QACA safe harbor plan to a traditional safe harbor plan; [2] An amendment to change from immediate vesting to two-year cliff vesting in a QACA safe harbor plan; and [3] An amendment to add discretionary matching contributions to a plan that is adopted on the last day of a plan year." (Drinker Biddle)  


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LDI and Two Real-Life Plan Sponsors: A Study in Contrasts
8 pages. "Over a two-year period (January 1, 2013, to December 31, 2014) that included the 2013 bond market 'crash,' the client who chose the LDI route saw its funded status increase from 73.3% to 90.4% (it also made plan contributions in 2014). The plan of the client reluctant to adopt LDI fell from 100.4% to 89.9%. Had this client taken the LDI route, the funding level drop would only have been to 98.5%." (Vanguard)  

Internally Managed DB Plan Assets Continue to Gradually Rise
"Although internally managed assets have risen for four consecutive years, they are still below their pre-recession and pre-tech bubble levels. Internally managed assets hit an all-time high of $1.23 trillion in 2007." (Pensions & Investments)  

President Proposes Curbs to Retirement-Savings Tax Incentives for Wealthy, Heirs
"Under the provision, a saver would not be able to make tax-deferred contributions to defined-contribution or individual retirement accounts if the account produces an annual benefit of more than $210,000. The current maximum build-up permitted in the accounts is $3.4 million.... 'Such accumulations can be considerably in excess of amounts needed to fund reasonable levels of consumption in retirement and are well beyond the level of accumulation that justifies tax-advantaged treatment of retirement savings accounts,' the Treasury Department states[.]" (InvestmentNews)  

President's Budget Proposal: The Good, the Bad, and the Ugly (PDF)
"President Obama's final budget proposal is largely a political statement with almost no chance of passing. It does include, however, a number of retirement provisions. A good one expands access to multiple employer pension plans. Several bad ones increase insurance premiums for pension plans, force distributions from beneficiary plans, or suggest alternative retirement savings strategies that would create complexity for employers. The worst provision restricts the tax advantages of retirement savings." (Lockton)  


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The Value of Employees' Financial Wellness
"More than six in ten respondents (63%) say that employee satisfaction with benefits is important for their company's success, and 65% believe that employee benefits are critical to attracting and retaining employees. 82% believe that their companies benefit from having workforces that are financially secure." (Prudential)  

Global Pension Funds Prioritizing Governance, Risk Management
"92% of defined benefit and defined contribution plans, both corporate and public, expect to upgrade their governance models, and 45% will increase training and education for board members.... 83% of respondents have at least a moderate interest in environmental, social and governance investments, and more than two-thirds of them are more likely to hire a money manager with ESG capabilities; about 50% plan to increase their investments in hedge funds of funds and real estate ... 45% are looking to derisk their investments, while 36% are ready to take on more investment risk" (Pensions & Investments)  

The World's Biggest Pension Fund Is Switching to Stocks
"The world's biggest pension fund has two good reasons to extend its switch from bonds into stocks: sovereign debt with negative yields and a plunge in equities that cut valuations to a three-year low....[Japan's Government Pension Investment Fund] would have to buy 6.2 trillion yen ($54 billion) of domestic stocks just to achieve its allocation target of 25 percent[.]" (Bloomberg)  

Executive Compensation and Nonqualified Plans


Compensating Executives in a 'Challenging' World
"ConocoPhillips shareholders are asking that the Compensation Committee develop a program to determine which portions of a bonus should be paid immediately, which portions should be deferred, and what adjustments should be made to those deferrals based on performance.... [It's] a bit of a nightmare for people who need to figure out how to make such a plan 409A-compliant and for those who need to administer FICA tax payments.... More than ever, the Compensation Discussion and Analysis (CD&A) will be very key. Explaining why the mix of objective and subjective factors was chosen can go a long way to appeasing large shareholders." (Benefits and Compensation with John Lowell)  

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