Retirement Plans Newsletter

July 22, 2019

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in Kennewick WA

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Plaintiffs Claim Victory in First Ruling Challenging DB Plan Actuarial Assumptions

"[Two plaintiffs'] firms have now filed nine lawsuits, all generally alleging that the mortality table ... that is used to calculate participants' early retirement or optional forms of benefits is not reasonable because it is outdated.... The U.S. district court in Minnesota ... is the first to decide on a motion to dismiss.... The court sided with the plaintiffs in finding that the plaintiffs' claims are for actuarially equivalent benefits under ERISA, and are not claims under the Code or Treasury regulations." [Smith v. U.S. Bancorp, No. 18-3405 (D. Minn. Jun. 27, 2019)]
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Fidelity at Center of New Strategy for ERISA Breach Lawsuits

"The litigation argues that Fidelity violated ERISA through offering competitors' mutual funds to Fidelity clients. The lawsuits by current and former DC plan participants focus on the adequacy of fee disclosure and whether record keepers are considered defined contribution fiduciaries. Plaintiffs alleged that Fidelity is a fiduciary and is charging 'secret' fees; Fidelity responded that it discloses the fees and that it isn't a fiduciary."
Pensions & Investments

Reach for Yield by U.S. Public Pension Funds

"[F]unds on average took more risk when risk-free rates and funding ratios were lower, which is consistent with both the funding ratio and the risk premia channels. Consistent with risk-shifting, [the authors] also find more risk-taking for funds affiliated with state or municipal sponsors with weaker public finances.... [Up] to one-third of the funds' total risk was related to underfunding and low interest rates at the end of [the] sample period."
Lina Lu, Matthew Pritsker, Andrei Zlate, Kenechukwu Anadu, and James Bohn, via SSRN

Why Public Pensions Are Taking More Risk

"The researchers estimated that one-third of public pension funds' total risk was related to underfunded status or low interest rates ... [R]isk-taking behavior related to underfunded status alone was responsible for about 12 percent of total risk taken on by the funds.... [T]hose low-interest rates and underfunded statuses, when combined, increased risky investing strategies."
Institutional Investor

H.R.397: The Rehabilitation for Multiemployer Pensions Act

"H.R.397 ... would establish the Pension Rehabilitation Administration (PRA), an agency within the U. S. Department of the Treasury.... Plans that have been approved for benefit suspensions under MPRA would be required to apply for loans. The loan program is to be established no later than September 30, 2019, although the PRA could make loans prior to this date if the loan would be necessary to avoid the suspension of participants' benefits."
Congressional Research Service [CRS]

Benefits in General

When Is the Right Time for Your Employee Benefit Plan Check-Up?

"A best practice is to schedule a periodic review of your plan, at least annually, to make sure it complies with any changes in laws or regulations. Also, examine the plan provisions to verify they are being applied appropriately in their day-to-day operation."
EisnerAmper

Executive Compensation
and Nonqualified Plans

Companies Must Review Their Anti-Hedging Policies

"The board or compensation committee of nearly every public company should review and consider revising its hedging policy this year ... Every proxy statement filed after June 30, 2019, must contain this disclosure (except for SRCs, EGCs, and BDCs, which have until next year).... The SEC only requires a company to disclose the policy it has. It does not require policies to contain any specific features or provisions."
Winston & Strawn LLP

Selected Discussions
on the BenefitsLink Message Boards

Definition of 'Retirement' Under ERISA or REA

I have a QDRO situation. Participant's employment is terminated. He does not apply for his pension benefits, that is, to enter payout status. Has he "retired"? Does it matter if he has or has not reached early retirement age of 55 at the time of termination?
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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2019 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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