Retirement Plans Newsletter

May 11, 2017

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Employee Benefits Attorney
Graydon
in OH

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TIAA
in CO, NC, Telecommute

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MCF Advisors
in KY

401(k) Compliance Consultant
DWC ERISA Consultants, LLC
Telecommute

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Webcasts and Conferences

Voluntary Fiduciary Correction Program Workshop (Webcast)
May 17, 2017 WEBCAST
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Labor, Employment and Benefits Seminar
May 17, 2017 in ND
Dorsey & Whitney LLP

Get Ready for Paid Family Leave
May 18, 2017 WEBCAST
Strategic Benefit Services

ACA Repeal: Where Things Stand -- And What Lies Ahead
May 24, 2017 WEBCAST
Trucker Huss

Health Benefits Laws Compliance Assistance Seminar
June 7, 2017 in MI
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Second Annual Forum on Employer Sponsored Benefits
June 8, 2017 WEBCAST
Dorsey & Whitney LLP

Getting It Right - Know Your Fiduciary Responsibilities
June 21, 2017 in IL
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Gearing Up in the Era of Increased HIPAA Enforcement and Cyber Security Threats
June 22, 2017 WEBCAST
American Bar Association [ABA]

Utilizing Mobile, On-Site and Remote Medical Providers to Reduce Health Care Costs
July 18, 2017 WEBCAST
Lorman Education Services

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[Guidance Overview]

PBGC Q&As on Rules for Risk Mitigation and Early Warning Program
9 Questions & Answers, updated May 2017. "Did PBGC's December 2016 updated content signify an expansion of the Early Warning Program to include credit deterioration? No. PBGC has not expanded the program or changed the monitoring criteria or the processes involved.... The monitoring criteria reference a participant count of 5,000 or more or an underfunding threshold of $50 million or more. Does PBGC apply these thresholds on a plan-by-plan basis or on an aggregate controlled group basis? PBGC applies the participant count and underfunding monitoring criteria on an aggregate controlled group basis.... Does PBGC use information provided in filings made under section 4010 of ERISA to open an Early Warning Program review? No."
Pension Benefit Guaranty Corporation [PBGC]

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The Advisor's Guide to the DOL Fiduciary Rule

Sponsored by The National Underwriter Company

Authored by ERISA experts at The Wagner Law Group, this Guide delivers a powerful combination of expert explanations and legal analysis along with vital Q&As that provide reliable, direct answers to vital questions before they arise. BENLINK for 10% discount.


[Guidance Overview]

Interesting Angles on the DOL's Fiduciary Rule, Part 46
"How does an adviser know how to satisfy the Best Interest standard? ... [B]roker-dealers and others should look to training and education materials based on ERISA's provisions, DOL regulations and guidance, and ERISA litigation. Those materials should cover the broad concepts and principles, but should also provide detailed education about the information to be reviewed and the processes to be followed, on a step-by-step basis."
FredReish.com

Preparing DC Investment Menus for the Next Evolution
20 pages. "[T]he next evolution of investment menus needs to be driven through four steps: [1] Consider supplementing low cost, broad index positions with additional sources of diversification and return with white label, factor and rules-based smart beta strategies; [2] Expand the fixed income opportunity set to target the potential for stronger returns and income; [3] Reexamine the target date fund as part of the full menu review; [4] Unlock and realign legacy default assets through reenrollment."
BlackRock, via Pensions & Investments

Factoring Investment Costs Into the Prudence/Suitability Equation
"Investors cannot control the performance of the markets. Investment fiduciaries are not held liable for the eventual performance of the markets. However, investors and investment fiduciaries can control certain elements of investing that play a significant role in determining an investor's and/or pension plan participant's success."
The Prudent Investment Adviser Rules

DOL Chief Looks to Deep Freeze Fiduciary Rule
"Labor Secretary Alexander Acosta wants to freeze the fiduciary rule in a way that will 'stick' ... Acosta told Sen. Tim Scott, R-S.C., that the rule is his No. 1 priority and that he recognized the urgency of the situation, according to an email from Scott's aide. Acosta has not spoken publicly about the rule since his confirmation hearing in March."
InsuranceNewsNet.com

[Advert.]

The WBC - Regulatory Rollercoaster: Are You Ready for the Ride?

Sponsored by ASPPA and WP&BC

The Western Benefits Conference is the only Annual, Multi-day, Comprehensive Employee Benefits Conference west of the Rockies. Highly interactive sessions, Thought leaders, Practical industry leading ideas, Networking, Valuable CE credits and more!


Viability of Stock Drop Claims Based on Public Information
"In these cases (and at this point), we have the same question being decided differently by different courts. We have some idea of what the issue is -- is 'impending bankruptcy' a viable basis for a stock drop claim post-Fifth Third? ... One might think that the more cautious approach would be to continue to apply the 'impending bankruptcy' rule, selling company stock when a company's financial condition reaches some critical state. But judging when that critical state has been reached is no easy matter."
October Three Consulting

Global Investor Study 2016: Plan Sponsors
"The average period for which pension fund investors expect to hold their investments is 4.7 years. This is much closer to the widely championed five-year period than private investors, for whom the average expectation is 3.2 years. This longer time horizon means considerations such as liquidity and immediate income -- which are often high priorities for consumers -- are relatively lowly valued by pension fund investors as reasons to choose an investment.... There is an increasing focus on investment outcomes over and above benchmarked returns."
Schroders, via Pensions & Investments

Another Health System Settles Church Plan Challenge
"A preliminary settlement has been reached in a case challenging the 'church plan' status of pension plans for Franciscan Missionaries of Our Lady Health System.... According to the settlement agreement, Franciscan will contribute $125 million to the plans in the next five years, pay $450 to each of the more than 2,000 participants of the plans who accepted a lump-sum buyout of their balance in 2016, and guarantee participants will be paid the pension benefits they were promised for the next 15 years."
planadviser

Funded Status of 100 Largest Corporate DB Plans Drops in April by $10 Billion (PDF)
"The deficit swelled to $257 billion from $247 billion at the end of March due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities. Strong investment returns partially offset the funded status decline. As of April 30, the funded ratio fell to 84.9%, down from 85.3% at the end of March."
Milliman

[Advert.]

EPCRS: Correct Plan Errors and Minimize Penalties

Sponsored by Lorman and BenefitsLink

May 31 webinar will discuss common retirement plan errors and pre-approved methods of correction, as well as tips and practices that can help avoid future problems. Presented by Blake C. MacKay, of Alston & Bird LLP. BenefitsLink discount


Pension Plan Funded Status Increases (PDF)
"During the first quarter of 2017 (Q1 2017), the funded status of the model pension plan ... rose 3 percentage points to 84 percent due to a 4 percent gain in asset value offsetting a 1 percent liability increase.... During the quarter, the yield curve flattened a little, but its general shape remained similar to that of previous quarters: an upward-sloping yield curve that peaks between 20 and 25 years then levels off ... The marginal decrease in yield-curve level resulted in minimal change to the effective interest rate and slightly increased the model pension plan's liability by about 1 percent."
Sibson Consulting and Segal Marco Advisors

Multiemployer Pension Plans: Critical Plans Treading Water, Waiting to Drown
"So far: five applications denied, one accepted.... [E]ach denial comes with a letter. [Here is] a rundown.... [The multiemployer pension plan] program is in fairly bad condition at the PBGC, and is currently projected to have a 50/50 chance of running out of cash by 2025. The MPRA is there not merely to try to get some of the [multiemployer pension plans] to be sustaining, but so that the PBGC itself doesn't run out of money. The Treasury isn't interested in allowing for benefit cuts when the plans are just going to land on the PBGC anyway."
STUMP

What Is Your Strategic Vision for Your ESOP?
"After the ESOP loan is repaid and all the shares have been allocated new issues arise.... [T]he first questions that need to be answered are: What are your long-term plans for your ESOP? Is it short-term ownership strategies to help with ownership transition on a tax-favored basis? ... If employee ownership using your ESOP is your long-term ownership strategy, there are several strategies available to make shares available for allocation after your ESOP loan is paid off."
Principal Financial Group

Planning for a Safe Withdrawal Rate: Introducing the Actuarial Budget Benchmark (ABB)
"Your Actuarial Budget Benchmark is a relatively transparent annual calculation of your recurring spending budget in retirement based on your spending goals and your data, but based on a specific set of assumptions about the future, that may change each year. The calculation is designed to approximate the market value of your future spending liabilities.... The ABB can also help [to balance] a retiree's desires to avoid unnecessary fluctuations in spending and mitigate sequence of return risk."
Ken Steiner, FSA Retired

What We Know for Sure About In-Retirement Withdrawal Rates
"[1] Most retirees don't want huge swings in their portfolio paychecks (and standards of living) determined by outside forces.... [2] But in reality, spending changes throughout retirement.... [3] Over many retirement periods, the 4% guideline has been too conservative.... [4] But many people would rather be safe than sorry.... [5] Lower expected returns put the 4% guideline at risk, especially for bond-heavy portfolios.... [6] New and soon-to-be retirees should be prepared to rein in spending.... [7] Income-centric strategies aren't a shield."
Morningstar

California Officials Move Forward with New Private-Sector Retirement Plan
"California leaders say they will push ahead with their plan for a state-run retirement program -- a move that sets the stage for a legal battle with businesses, trade groups and possibly federal regulators.... One of the key points of contention could be over whether employees who enroll in the California Secure Choice program and similar plans are doing so on a 'completely voluntary' basis."
Los Angeles Times

Benefits in General

Eighth Circuit Jimmies the Lid on Pandora's Fiduciary Duty Box
"In an opinion that may result in increasingly complex ERISA benefits litigation, the Eighth Circuit has allowed a breach of fiduciary duty claim premised on alleged faulty claims handling practices to proceed in conjunction with a claim for benefits.... Given how out of step Jones is with longstanding practice, it is likely that Aetna will seek en banc review, or even file a petition of certiorari with the Supreme Court. Nevertheless, while this case continues to work its way through the courts, it is likely that plaintiffs will rely on Jones in justifying pairing routine claims for benefits with claims for equitable relief." [Jones v. Aetna Life Ins. Co., No. 16-1714 (8th Cir. May 8, 2017)]
Seyfarth Shaw LLP

Executive Compensation
and Nonqualified Plans

ACA Repeal and Replacement, Take Two: Impact on Stock Compensation
"The AHCA would eliminate the Net Investment Income Tax: a 3.8% Medicare surtax on investment income, including capital gains, dividends, and interest. Meanwhile, an amendment to the House bill would delay until 2023 the repeal of the Additional Medicare Tax (0.9%) on ordinary income ... Currently ... companies must withhold the 0.9% additional Medicare tax on any type of pay, including that from stock compensation ... when an employee's wages for the year are more than $200,000. While the legislation would remove that requirement, it would not do so until after 2022."
myStockOptions.com

Further Clarification on Director Independence in Litigation
"During the last five years, while plaintiffs and the Delaware courts have been expanding the litigation risks for the compensation decisions of non-employee directors, the Delaware courts also have been expanding their scrutiny of the disinterested status of directors.... [In] many (and, probably, soon to be more) of the recent cases that involve executive or director compensation, the independence of non-employee directors is at the core of many of the defendants' motions to dismiss."
Winston & Strawn LLP

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2017 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 those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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