Retirement Plans Newsletter

April 13, 2016

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Retirement Services Specialist
Independent Retirement
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Newport Group
in CA, TX, VA, WV

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Goldleaf Partners
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Webcasts and Conferences

Best Practices for Conducting an Advisor Request for Proposal (RFP)
RECORDED
(University Conference Services)

Advantages of Value-Based Prescription Drug Benefit Design for Chronic Conditions
RECORDED
(University Conference Services)

Population Health: Wellness and Employee Engagement
April 21, 2016 in GA
(Worldwide Employee Benefits Network [WEB] - Atlanta Chapter)

Defending Your ACA Decisions to the IRS
April 21, 2016 WEBCAST
(Wallace Welch & Willingham)

New Rules for Retirement Plan Advice
April 28, 2016 WEBCAST
(InvestmentNews)

ACFC Exam Preparation Session 5: Cyber Liability
June 1, 2016 WEBCAST
(ECFC [Employers Council on Flexible Compensation])

ACFC Exam Preparation Session 6: HIPAA/HITECH
June 15, 2016 WEBCAST
(ECFC [Employers Council on Flexible Compensation])

Getting It Right - Know Your Fiduciary Responsibilities
June 16, 2016 in AL
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

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[Guidance Overview]

DOL Issues 'Conflict of Interest' Rule on Investment Advice: Fiduciary Net Will Widen on April 10, 2017
8 pages. "Together, the new rule and the BIC Exemption, along with several other new and amended prohibited transaction exemptions, aim to reshape the marketplace for retirement investment advice. This [article summarizes] the final rule and the BIC Exemption and highlight key substantive changes between the proposed and final packages." [Editor's note: Article includes a flow chart and checklists for identifying fiduciaries and the applicability of various provisions, and a 9-page chart comparing the 2015 DOL proposal to the final package.] (Ropes & Gray LLP)  


[Advert.]

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[Guidance Overview]

The Final Rule: DOL's Expanded Definition of Investment Advice Fiduciary Under ERISA and Revised Complex of Exemptions (PDF)
30 pages. "Model asset allocations and interactive tools will not be considered fiduciary 'recommendations' even if the materials identify specific plan investments. Communications between employees, such as human resource staff communicating information about plan distribution options, will generally be excluded from the definition of 'fiduciary investment advice.' Recommendations regarding term life, health, and disability plans will not be considered fiduciary advice." (Sutherland Asbill & Brennan LLP)  

[Guidance Overview]

Final Investment Advice Fiduciary Rules Mean Work for Employers, Fiduciaries and Advisors
"[W]hether the employer itself retains and directly exercises the discretionary authority to select and retain a service provider or appoints a committee or member of its staff to perform these responsibilities as a designated fiduciary, an accurate understanding of which service providers ... now will be considered fiduciaries and the requirements of the Rule flowing from this status is essential ... to ensure that the Rule and ERISA's other requirements for prudent credentialing, bonding, contracting, compensation [are considered]." (Solutions Law Press)  

[Guidance Overview]

DOL Issues Final Fiduciary Rule
"Changes [from the proposed rule] include: [1] Clarifying when a person has made a recommendation. [2] Clarifying when a person qualifies as a fiduciary. [3] Deleting appraisals from the final rule. [4] Clarifying information that constitutes investment education. [5] Adding a provision on general communications. [6] Substantially modifying the seller's exception." (Practical Law Company)  

[Guidance Overview]

First Look at DOL's Final Fiduciary Rule
"When does the Fiduciary Rule go into effect? ... How does the final Fiduciary Rule change the definition of 'fiduciary' under ERISA? ... Does the final Fiduciary Rule include carve-outs or other exceptions from fiduciary status? ... What is the consequence of becoming a fiduciary? ... What are the conditions of BICE? ... How does the final Fiduciary Rule affect other common class exemptions?" (Mayer Brown)  


[Advert.]

ASPPA's New Retirement Plan Fundamentals Course - Now Available

Sponsored by ASPPA

ASPPA's Retirement Plan Fundamentals course has been redesigned as online, interactive modules. Perfect for anyone new to the industry or who is preparing for an ASPPA credential. Ask your employer to make RPF part of your professional development.



Private Equity Funds, Controlled Groups, and Multi-Employer Plan Withdrawal Liability
"Sun Capital upends much of the conventional wisdom about private equity investments in portfolio companies with multi-employer pension exposure. While it's too soon to know for certain, this could prove to be a seminal case for private equity investments with consequences in areas far removed from pension liability." (Mintz Levin)  

Target Date Funds: Made to Stick
"The retention rate [for target date funds for the five-year period ended December 31, 2015] was 87%. About 3% appear to quit because company stock was added to their portfolios. Did the plan sponsor make a matching contribution in employer stock? Some participants (2%) chose to adopt custom advice during this time frame. Bottom line-only 8% of target-date fund users quit the product and constructed their own portfolios." (Vanguard)  

Maryland's State-Run IRA Bill Heads for Governor's Signature
"[If] the employer meets the requirements in the legislation -- namely that the business adopts or maintains either an auto-IRA program or a full blown employer-sponsored retirement plan -- then their annual reporting fee ($300 in most cases) is waived. The bill, which applies only to employers with 10 or more full-time employees that use an automated payroll system or service, also creates a state-run auto-IRA program that businesses can use as an option to meet the requirements." (National Association of Plan Advisors [NAPA])  

2016 Workplace Benefits Report: Empowering and Encouraging Employees to Plan for Their Financial Futures (PDF)
22 pages. "[E]mployees became less certain about their financial futures between 2013 and 2015.... Employers can help employees better understand their savings needs and make the most of their options by: [1] Adopting plan designs with automatic features, higher default contribution levels and a company match structure to encourage greater saving. [2] Communicating comprehensively around benefits plans. [3] Offering greater access to education, guidance and planning assistance at the workplace, through financial wellness specialists[.]" (Bank of America Merrill Lynch)  

Financial Education for Today's Workforce: 2016 Survey Results (PDF)
80 pages. "Two in five respondents feel a responsibility to educate on pension and benefit options, encourage retirement savings and help participants/employees become financially literate managers of their money.... Among organizations offering financial education, the most common topics are retirement plan benefits, preretirement financial planning, investments and retirement plan distributions.... [T]he most effective methods of providing financial education were: Free personal consultation services; Voluntary classes/workshops; and Web-based/online resources and courses." (International Foundation of Employee Benefit Plans [IFEBP])  

How Do You Measure the Best Retirement Income Strategy?
"[In] framing different retirement income strategies -- and the trade-offs they might entail -- it's important to give serious consideration to the measuring stick that will be used to evaluate the potential retirement outcomes. Because the 'best' retirement income strategy may be very different depending on whether you measure based on wealth, spending, probabilities of success, magnitudes of failure, or utility functions that weigh both the upside and downside risks!" (Michael Kitces in Nerd's Eye View)  

Retirees Prefer Guaranteed Income Over Spending Down Assets
"Half of retirees expect to grow their assets over the next decade, while another three in 10 expect to keep their non-guaranteed assets at a constant level ... Nearly half of study respondents spend at least $3,500 a month from guaranteed sources of income, such as Social Security, pensions and annuities, but nearly as many -- 41% -- do not spend any money at all from their non-guaranteed assets." (PLANSPONSOR)  

Why a Lump-Sum Payment Should Be Part of Social Security
"A group of researchers sought to think of a new way to get people to delay claiming benefits, work longer and have all that happen without Social Security suffering financially. In a nutshell, we set out to design a way to give people the benefit increases they would receive if they delayed claiming, but instead of giving them that increase as part of a monthly payment, we would give it to them as a lump sum at their later claiming date. The money turns out to be quite substantial, from $60,000 to $80,000 to $170,000. And lo and behold, people like this idea. In our experimental survey, we found people would delay claiming benefits for about half a year, and they would work about a third to a half of the extra time. All of that takes place without costing Social Security a penny." (MarketWatch)  

Guaranteed Volatility: Pension Costs and State and Local Staffing Levels (PDF)
14 pages. "If governments' pension costs had stayed flat, relative to general revenues, since 2008, the state and local workforce would now likely total ... about 200,000 more than their current level.... Public pension costs are not rising because benefits are becoming more generous. The problem is the trillions in existing benefit promises that are not backed by assets on hand ... [In] the near term, the challenge for states and cities involves funding benefits that have already been promised: pension reform, by most any definition, will therefore not bring stability to government budgets or workforces." (Manhattan Institute for Policy Research)  

CalPERS State Worker Rate Increase: $602 Million
"CalPERS actuaries recommend that the annual state payment for state worker pensions increase $602 million in the new fiscal year to $5.35 billion, nearly doubling the $2.7 billion paid a decade ago before the recession and a huge investment loss. It's the largest annual state rate increase since CalPERS was fully funded in 2007. And it's the third year in a row that the state rate increases have grown: up $459 million in 2014, $487 million in 2015, and now $602 million for the fiscal year beginning July 1." (Calpensions)  

Benefits in General

Text of Second Circuit Opinion: Extent of Plan's Compliance with DOL Claims Procedure Regulation Determines Court's Standard of Review (PDF)
"[We] hold that, when denying a claim for benefits, a plan's failure to comply with the [DOL]'s claims-procedure regulation, 29 C.F.R. Section 2560.503-1, will result in that claim being reviewed de novo in federal court, unless the plan has otherwise established procedures in full conformity with the regulation and can show that its failure to comply with the regulation in the processing of a particular claim was inadvertent and harmless. We further hold that civil penalties are not available to a participant or beneficiary for a plan's failure to comply with the claims-procedure regulation. Finally, we hold that a plan's failure to comply with the claims-procedure regulation may, in the district court's discretion, constitute good cause warranting the introduction of additional evidence outside the administrative record." [Halo v. Yale Health Plan, No. 14-4055 (2d Cir. Apr. 12, 2016)] (U.S. Court of Appeals for the Second Circuit)  

Press Releases

Snapshot Survey on Student Loan Debt and Retirement
PSCA [Plan Sponsor Council of America]

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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