Retirement Plans Newsletter

April 25, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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Webcasts and Conferences

Target Date Funds ó The Looming Liability of Misfit Risk
(University Conference Services)

Rising Cost and Concern: Catastrophic Medical Claimants
May 10, 2016 in GA
(ISCEBS - Georgia Chapter)

Employer Forum on Pharmacy Benefits & Specialty Drugs
June 29, 2016 in IL
(Midwest Business Group on Health)

Employer Forum on Pharmacy Benefits & Specialty Drugs
June 29, 2016 WEBCAST
(Midwest Business Group on Health)

Creative Uses of HSAs
July 13, 2016 WEBCAST
(Lorman Education Services)

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[Guidance Overview]

A Plan Sponsor Overview of the Fiduciary/Conflict of Interest Rule (PDF)
"The final rule is not applicable until 2017, and a new presidential administration or courts could modify the final rule before it goes into effect. In the meantime, however, in response to the final rule, it may make sense for plan sponsors to review their investment education material. Investment fiduciaries' attendance at fiduciary training with a focus on selection and monitoring duties could also be helpful as the rule's impact becomes more clear under various factual scenarios." (Xerox HR Services)  


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District Court Applies Dudenhoeffer 'More Harm Than Good' Standard to Closely-Held Corporation
"In Dudenhoeffer, the Supreme Court held, in a case involving a publicly traded employer stock fund, that in order to state a claim for breach of fiduciary duty on the basis of inside information, a plaintiff must plausibly allege (among other things) an alternative action that could have been taken by the plan fiduciaries that would have been consistent with its obligations under securities laws and that a prudent fiduciary would not have viewed as more likely to harm the fund than to help it. The district court agreed that this standard applied to the allegations against the closely held corporation and dismissed the complaint upon finding that plaintiffs had failed to plead such an alternative course of action." [Hill v. Hill Brothers Construction Co., No. 14-213 (N.D. Miss. Mar. 28, 2016)] (Proskauer's ERISA Practice Center)  

FINRA's Report on Robo-Advisors: Fiduciary Implications
"The report implicitly raises the question of whether robo-advisors meet the fiduciary standard of care applicable to broker-dealers and investment advisers. The report suggests that, on a stand-alone basis, robo-advisors do not meet a fiduciary standard when they advise individual investors. The report supports the view that human judgment by a trained financial professional is a necessary element of the fiduciary standard. This paper analyzes the findings and implications of the FINRA report in light of the fiduciary standard of care and poses questions that need to be answered by regulators concerning the fiduciary standard to which robo-advisors -- as well as investment advisers and broker-dealers -- will be held in the future." (Melanie L. Fein, via SSRN)  

Dear Agents: This is Your Life Under 'Best Interest'
"Performance incentives, bonuses, contests, special awards, trips, appraisals and sales quotas -- favorite levers of insurance companies to spur their armies of distributors are going to change ... Who decides what programs to keep, what to drop and how incentive programs change? The insurance carriers and broker-dealers themselves and there's going to be a lot of pressure on broker-dealers to re-evaluate compensation practices." (  

Fiduciary Rule Highly Manageable, Says SunTrust CEO
"The team has been thinking about the rule for a long time in terms of structural changes and being ready and is now 'diving through' the voluminous new order, [SunTrust chairman and CEO William H. Rogers Jr.,] said. 'We've been fiduciaries for over 100 years. It's a concept that we're certainly comfortable with,' he said. Rogers described any potential impact of the new rule as marginal and noted that it might also offer opportunity." (On Wall Street)  


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Adding Risk to the Retirement Income Model, Part 2
"[If] you are willing to take more risk of a lower standard of living in late retirement, of not reaching late retirement, or of not encountering many large, unexpected expenses, you can increase your spending in early retirement. Spending won't depend solely on your income and expenses, it will also depend on your risk tolerance." (The Retirement Cafe)  

How a Bestseller Helped Change the Rules of Retirement
"Inside a bold green cover, Get What's Yours explained the many ways retirees could squeeze more out of Social Security. The authors' basic advice was patience. Social Security rewards Americans who wait as long as possible to claim their benefits.... [The book] explained some obscure strategies that even many Social Security employees weren't aware of.... For better or worse, Washington policymakers were apparently among the many readers of Get What's Yours. In a budget deal reached in October, Congress killed the file-and-suspend and lump-sum options, calling them unintended loopholes." (Bloomberg)  

Kentucky Retirement Systems Board Ignores Governor's Order to Remove Chairman
"Disagreeing with governor's authority to remove Mr. Elliott, the KRS board decided to 'move forward with business as usual,' on Thursday, with Mr. Elliott continuing as chairman, and to seek Kentucky Attorney General Andy Beshear's opinion on the situation, said William A. Thielen, executive director of the $15 billion retirement system." (Pensions & Investments)  

Benefits in General

Cybersecurity Concerns for ERISA Fiduciaries
"When establishing cybersecurity procedures, plan fiduciaries and plan sponsors should consider the type of data they store along with plan assets, and impose privacy and security measures on all third party vendors that have access to or access the plan's data. They also should consider educating and training all personnel who access or have access to plan data.... [If] the DOL does not act in this area, ERISA plan fiduciaries may be required to implement cybersecurity initiatives as a result of SEC regulations on investment managers." (Morgan Lewis)  

Employee Benefit Plans and Data Security Issues
"As fiduciary standards continue to evolve and differences in privacy protection laws appear from jurisdiction to jurisdiction, there are a host of laws and regulations to keep in mind. A short list of legislation that touch on the area includes: the Health Insurance Portability and Accountability Act, the Gramm-Leach Bliley Act, the Federal Trade Commission Act, the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, along with numerous state laws relating to 'personally identifiable information' and 'protected health information.' ... [E]ven though the scope of a fiduciary's duty under ERISA with respect to data protection has yet to be addressed by the courts and the DOL, there are still a number of practical steps that plan sponsors and other fiduciaries can take in the hope of preventing problems." (Jackson Lewis P.C.)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

FASB Simplifies Accounting Rules for Stock-Based Compensation
"Current accounting standards provide that an equity award will qualify for equity classification (i.e., resulting in fixed accounting treatment) if the fair market value of shares withheld to cover an employer's withholding obligations upon settlement of the award do not exceed the minimum statutory withholding requirement. If an equity plan permits share withholding in excess of this withholding requirement, equity awards granted under the plan currently would be subject to mark-to-fair value accounting (i.e., variable accounting).... Under the Amendment, an equity plan may now allow share withholding up to the maximum statutory withholding requirement while still avoiding variable accounting." (Meridian Compensation Partners, LLC)  

[Guidance Overview]

New FASB Rules on Equity Compensation Withholding: Issues
"Most equity compensation plans have the minimum statutory tax rate withholding requirement 'hardwired' into the plan, thus requiring a plan amendment to effect this change. Whether such an amendment will require shareholder approval for public companies under NYSE or NASDAQ rules is unclear, however, previous interpretive guidance suggests that shareholder approval may not be required ... Company officers and directors subject to section 16 under the Securities Exchange Act would not appear to experience an issue with the adoption of an increased withholding rate for tax purposes." (Morgan Lewis)  

New Proposed Rules for Incentive Compensation Under Dodd-Frank Act Section 956, Part 2
"If you are a lawyer, compensation committee member, or other executive compensation professional, you may need to learn a new language, as the proposed rules create a series of new definitions -- many of which do not match with professionals' common understanding of the meaning of those terms. For example, the new definition of 'significant risk-taker' in the proposed rules is 20 pages long." (Winston & Strawn LLP)  

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016, 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, 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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