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State Court Rules California Can Trim Current Public Employees' Retirement
"In a potential game-changer for pension reform advocates, the state Court of Appeal has ruled that the Legislature can trim public employee retirement benefits for workers who are still on the job. The unanimous decision ... rejects widely held assumptions that benefits cannot be reduced once employees start working. That constraint has hindered attempts statewide, and in charter cities such as in San Jose, to meaningfully stem soaring taxpayer costs for pensions." [Marin Assoc. of Public Employees v. Marin County Employees' Ret. Assoc., No. A139610 (Cal. Ct. App. 1st Dist. Aug. 17, 2016; certified for pub.)]
Daniel Borenstein, via East Bay Times
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This 401(k) Default Rate May Soon Be the New Standard
"Nearly a third (29%) of defined-contribution plans currently auto-enroll participants at a 6% salary deferral rate, a significant jump from the 17% of plans that did so in 2011.... Nearly a third (29%) of defined-contribution plans currently auto-enroll participants at a 6% salary deferral rate, a significant jump from the 17% of plans that did so in 2011."
HR Benefits Alert
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Ten Strategies for Using a Reverse Mortgage to Help Fund Retirement
"[S]trategic planning identifies and answers the larger problems first (What do I want to achieve? What do I want to protect? What do I want to leave to my heirs?) and only then considers the best tactics to achieve those objectives (Should I use a reverse mortgage, equities or an annuity?). Once you have identified your strategic goals, some of these [Home Equity Conversion Mortgage (HECM)] strategies might help you achieve them."
The Retirement Cafe
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Why You Should Do An IRA Rollover When You Leave Your Job
"If you keep your money in an old employer's 401(k) plan, you will continue to be limited to the 10 to 15 funds it has selected for you. These funds may not be top-performing funds, and they may have higher-than-average fees.... In many 401(k) plans, roughly half of the options available are target-date funds, which can come with extra fees."
NerdWallet, via Nasdaq
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Can Dallas Police and Fire Pension Fund Be Saved?
"The pension system ... is hurtling toward insolvency by 2030. The fund has $3.27 billion in unfunded liabilities and less than $2.7 billion in assets -- a funding ratio of 45 percent.... [T]he Deferred Retirement Option Program [DROP] ... gave recipients an 8 percent to 10 percent annual return even while the system earned significantly less.... That makes up $1 billion of the fund's money.... The plan will trim cost-of-living increases, base payments on a five-year highest-salary average rather than three years, and raise all members' contributions to 9 percent."
The Dallas Morning News
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The 401(k) Is Wreaking Havoc on Retirement
"The shift from pensions to 401(k) plans is making retirement inequality much worse ... Among workers who hold similar jobs with the same pay and who both contribute to 401(k) plans, a college graduate tends to save 26 percent more than a worker with just a high school diploma ... Workers with college degrees aren't only far more likely to hold jobs that offer retirement plans. When offered the plans, they're also far more likely to sign up and to contribute enough to retire comfortably."
Bloomberg
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Uber Drivers Aren't Employees, But They Have a Retirement Plan
"They may not have a 401(k) plan, but drivers working through Uber Technologies Inc.'s platform will soon be able to open a retirement account right in the app.... While fighting a pitched court battle to prevent drivers from being classified as employees, Uber has simultaneously joined forces with Betterment LLC ... to offer them IRAs.... [T]he option will be fee-free for the first year."
Bloomberg
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Possibly the Biggest Small Business 401(k) Fee Study Ever!
"Generally, brand name insurance and payroll company 401(k) providers are the expensive, while lesser-known, 'open architecture' providers are the least expensive.... Nearly all of the insurance company 401k plans use variable annuities in their fund line-up. Variable annuities are basically mutual funds wrapped in a thin layer of insurance with additional fees and redemption restrictions. A 'wrap' fee can be 1% or more, turning low cost mutual funds into costly variable annuities." [Includes a chart summarizing the fees for 121 plans having less than $2M in assets.]
Employee Fiduciary
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Text of Federal District Court Opinion Dismissing ERISA Claims Related to Foreign Currency Price Fixing (PDF)
20 pages. "Because the Complaint does not allege any indicia of control over Plan assets or an ongoing contractual relationship between any Plan and any Defendant in which the Defendant bank unilaterally decided when to enter into FX transactions and at what prices, the Complaint does not adequately plead Defendants' authority over Plan assets." [Allen v. Bank of America Corp., No. 15-4285 (S.D.N.Y. Aug. 23, 2016)]
U.S. District Court for the Southern District of New York
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[Opinion]
How the DOL Fiduciary Rule Is Disrupting the U.S. Advisory Landscape
"With nearly 7,500 no-load mutual funds making up the investment landscape that mirror the performance of their more expensive counterparts, there's simply no reason for an advisor to recommend the load variety to a client other than to pocket a profit from the transaction."
Kurtosys
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[Opinion]
Chile and the Failure of a Privatized Pension System
"In 1981... Chile radically reformed its pension system. It changed from a traditional public pension system to a system of mandatory individual retirement accounts.... The reformers who created Chile's privatized pension system promised that everyone would achieve 70 percent income replacement in retirement; the reality has been closer to 38 percent. The average monthly pension benefit is a meager $400, but many workers only have between $160 and $260 per month, hardly enough to sustain a dignified retirement."
National Public Pension Coalition
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[Opinion]
An Open Letter to the Plan Adviser Industry
"The product sponsors want us to focus on relationships. Meanwhile our clients, the plan sponsors and fiduciaries, have a very important responsibility. In the purest sense, they are charged with dispassionately, expertly, at an arms-length distance, managing the retirement plan on behalf of the plan's participants and beneficiaries. From their perspective, our relationship (or friendship) is not very valuable. From their perspective, our value is based (or should be based) upon the outcomes we produce for the employer, fiduciaries and plan participants. Stated another way, our value is based upon our performance for the plan."
Pension Consultants, Inc.
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Executive Compensation and Nonqualified Plans
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[Guidance Overview]
Non-Qualified Deferred Comp Plans: Don't Forget FICA
"In a typical NQDC arrangement, a senior executive is provided with a right to a payment or series of payments upon retirement, death, or disability. Generally, the executive vests in these payments ... many years before they are actually paid. If the plan is properly set up, which includes complying with the intricate requirements of Section 409A, income taxation can be deferred until the amounts are paid. However, while proper care can defer income tax, FICA is subject to different rules."
Baker Newman Noyes
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BenefitsLink.com, Inc.
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Winter Park, Florida 32789
(407) 644-4146
Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016 BenefitsLink.com, Inc. All materials
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