Retirement Plan Design

[Opinion] Good Option for New Public Employees Is'Half&Half'Defined-Benefit and Defined-Contribution Plan
Excerpt:"The half-and-half approach has been adopted for federal employees nationwide, and by Washington State. The Federal Employee Retirement System pays a fixed pension of 1 percent times years of service, and then matches employee contributions up to 5 percent of pay in a defined contribution plan with a limited menu of indexed investment options."(Governing)

Rethinking the Pension Freeze: The Case for Retaining a Restructured Defined Benefit Plan (PDF)
5 pages. Excerpt:"Today, many defined benefit . . . retirement plans have been frozen or even eliminated altogether and replaced by defined contribution plans. However, for some organizations, an alternative DB plan may still be the best way to provide pension value for employees while ensuring reduced cost and volatility for the plan sponsor."(Milliman)

Conversion Rules Apply to 401(k) Funds Too
Excerpt:"Any amount converted from a 401(k) or a non-Roth IRA to a Roth IRA is treated as a distribution from the 401(k) or non-Roth IRA and converted to the Roth IRA, said Sonzogni. The conversion from a traditional 401(k) or individual retirement plan to a Roth IRA is included in gross income to the extent of the value of the converted assets is in excess of after-tax contributions. The same holds true for conversions from 403(b) or 457 plans."(New Jersey On-Line LLC)

Widespread Automatic Enrollment Feature Takeup, According to Poll
Excerpt:"Some 72% of employers in a recent poll have adopted auto plan features, with 51% using auto enrollment and 71% deferring participants into a target-date fund."(PLANSPONSOR.com)

FASB Proposal to Report Participant Loans As Notes Receivable Rather Than an Investment
Excerpt:"The amendments to Subtopic 962-325 would require that participant loans be classified as'notes receivable'from participants, which are segregated from plan investments and measured at their unpaid principal balance plus any accrued but unpaid interest."(Wolters Kluwer)

Reforming Teacher Pensions for a Changing Work Force
Excerpt:"[T]he problems with teacher pensions are not just financial. And they do not just affect individual teachers and retirees. The way these plans are structured can negatively influence the teaching work force as a whole. At a time when improving the quality of classroom instruction is a national priority, key structural elements in teacher retirement plans impair the ability of schools to recruit, hire, retain, and compensate high-quality teachers and principals."(Education Sector)

Connecticut Governor Puts Forward Benefit Unfunded Liability Reduction Plan
Excerpt:"Connecticut Governor M. Jodi Rell has proposed a sweeping public employee pension and health care benefit reform package in an effort to deal with the state's $34-billion unfunded benefit liability. A news release from Rell's office said Rell wants to invest a'sizable'portion of any resulting savings toward reducing the unfunded liability."(PLANSPONSOR.com)

New Jersey Governor Proposes More Changes to State Workers'Pensions and Benefits
Excerpt:"Christie offered a broad outline but few specifics on his upcoming proposals, except for indicating -- in response to one of about a dozen audience questions -- that one bill would bar retired public workers from receiving a disability pension while working at another job seemingly requiring the same level of exertion."(CourierPostOnline.com/Courier-Post.)

Is Giving IRA Assets to Charity Still OK?
Excerpt:"if the handful of retirement-savings provisions still on the table make it into law later this year, consumers could still make those tax-free donations -- as well as leave assets in their 401(k)s while converting them to tax-free Roth status, among other changes."(The Wall Street Journal)

[Opinion] We Can't Sustain Public Pensions, According to a Pennsylvania County Controller
Excerpt:"The Chester County Retirement Board has struggled with two competing goals: meeting our state-mandated responsibility to provide government employees with defined-benefit pensions, and minimizing the burden on taxpayers. I believe these two goals are no longer compatible."(The Philadelphia Inquirer)

[Opinion] 2010 Pension Funding Relief Legislation: Technical Corrections and Guidance Needed (PDF)
9 pages. (American Benefits Council)

New York State Comptroller's Website Offers Tips on Padding Pension
Excerpt:"[O]n the comptroller's website, under the heading'Maximizing Your Benefits,'DiNapoli provides tips for government employees to pad their pension by stockpiling vacation and sick time or working overtime and holidays."(Rochester Democrat&Chronicle)

Businesses and Unions Planning to Meet on Possible $3 Trillion Pension Disaster
Excerpt:"Labor groups will be invited to the U.S. Chamber of Commerce to talk about an alarming shortfall in state employee pension plans that some believe could lead to a new government bailout."(Capitol Hill Publishing Corp.)

Fury Over Public Pensions Sparks Disclosure Lawsuits
Excerpt:"Several state and local retirement funds have balked at disclosing the pensions of individual government workers, triggering lawsuits that claim taxpayers have the right to such information."(The Wall Street Journal)

New York State Common Retirement Fund Lowers Return Rate Assumption
Excerpt:"A news release from [th State Comptroller] also announced increases in 2011-12 employer contribution rates. The average contribution rate for the Employee Retirement System will increase from 11.9% of salaries to 16.3% while the average contribution for the Police and Fire Retirement System will go up from 18.2% to 21.6%."(PLANSPONSOR.com)

Cash Balance Plans Have Risk Mitigation Challenges
Excerpt:"Plan sponsors who move to a cash balance plan from a traditional defined benefit (DB) program may not always realize they are trading interest rate risk for investment risk."(PLANSPONSOR.com)

Pension Buy-Ins Are a Good Deal
Excerpt:"Q: Is it a good investment to purchase'permissive time'in a government pension plan? . . . . A: Unless you have no other savings, decisions like this are good decisions. It provides you with a 9.4 percent income rate from your $116,000 investment."(The Seattle Times)

America's Retirement Problem: Should We Ditch 401(k) Plans?
Video and transcript available on target page. Excerpt:"Over the past decades, defined-benefit plans have been replaced, for the most part, by defined-contribution plans like 401(k) plans. But the majority of Americans with access to 401(k) plans are not saving the maximum amount they can, and in may cases are not saving at all. Should the government play a greater - or different - role in getting Americans to save more for their retirement?"(Grace Creek Media and The George W. Bush Institute)

[Opinion] Public Sector Pensions: One of the Greatest Ponzi Schemes of all Times
Excerpt:"Public sector pension plans take a series of liberties that create an unrealistic financial scenario that can only be described as one of the greatest Ponzi schemes of all times. These include underestimating the raises that government workers may earn until they retire and overestimating the interest assumptions for funding. This collection of bogus assumptions is hidden away in'off-the-balance-sheet'accounting practices . . . ."(The Free Enterprise Nation)

Top Vernon, California, City Attorneys Get Generous'Public Safety'Pensions
Excerpt:"Vernon's top city attorneys, already among the highest-paid public employees in the state, have received an unusual pension deal under which they would get the same enhanced benefits as police officers and firefighters."(Los Angeles Times)

The Top Ten Major Misconceptions Plan Sponsors Have About Retirement Plans
2 pages. Excerpt:"[T]his list of major misconceptions about retirement plans is just a portion of the wrong advice that plan sponsors rely on, [but represents many misconceptions held by employers]."(The Rosenbaum Law Firm P.C. via JD Supra, LLC)

Avoid the Added Cost of Top-Heavy Retirement Plans
Excerpt:"A plan that tests as top heavy on the last day of the 2010 plan year will be subject to the top-heavy rules for the 2011 plan year."(KraftCPAs PLLC)

Problems With State-Local Final Pay Plans And Options for Reform
Excerpt:"[F]inal pay plans suffer from serious shortcomings: they (1) severely'backload'benefits; (2) treat very differently workers on different career trajectories; and (3) invite mischief in terms of sudden late-career promotions. They are also riskier for workers than they appear..."(Center for Retirement Research at Boston College)

DOJ Sues Adviser Over Pension Plan Fraud
Excerpt:"According to the complaint, Alexander helps small-business owners adopt sham pension plans, falsely advising them that they can claim significant deductions for purported contributions to the plans in order to reduce or eliminate their federal income taxes. The complaint also alleges that Alexander fraudulently re-characterizes his customers??? non-deductible personal expenses as purported deductible pension-plan contributions."(Employee Benefit News; free registration required)

University of California Retirement Funds Face a Shortfall of More Than $20 Billion, Report Says
Excerpt:"A panel recommends increasing contributions by employees, raising the retirement age for new hires and reducing some benefits."(Los Angeles Times)

[Opinion] Public Employee Pension Reforms Recipe for Disaster
Excerpt:"While many of the people, including the Daily News, calling for reform are acknowledging that private-sector workers have lost tremendous value on their retirement plans, incredibly they present that as a model for public-sector employees!"(Paul Weber in the Los Angeles Daily News)

Disparities in Automatic Enrollment Plan Availability
Excerpt:"Savings and thrift plans have become a popular retirement savings alternative to traditional pension plans; the inclusion of an automatic enrollment feature is gaining traction and is especially prevalent in certain worker and establishment groups."(U.S. Bureau of Labor Statistics)

[Opinion] 10 Signs Your 401(k) Plan Is a Clunker
Excerpt:"High costs . . . . No investment advice . . . . Revenue-sharing and hidden mark-ups . . . . The plan adviser is not a'real'fiduciary . . . ."(Daily Finance)

[Opinion] Only Thing Worse Than Not Telling 401(k) Participants How Much to Save Is Offering Reckless Target Date Funds
Excerpt:"[T]he biggest problem with target date funds is that they mislead 401(k) participants into thinking that the most important component of retirement adequacy is the investments you choose when it's the actually the size of the contribution to retirement savings relative to income along with the investment time horizon."(Jane White of Retirement Solutions)

[Opinion] Public Pensions and Our Fiscal Future
Excerpt:"Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account [guaranteed] to many government employees."(Arnold schwarzenegger via The Wall Street Journal)

[Opinion] Pension Time Bomb: The Shadow Hanging Over GM's Turnaround
Excerpt:"The net effect is that the pension time bomb is still ticking. If GM earns robust profits, . . . the bomb won't detonate. Otherwise -- well, in a worst-case scenario, GM winds up back in bankruptcy, with PBGC intervention both unavoidable and more expensive than it would have been last year. And that could necessitate a bailout from Congress, because of the PBGC's own deficits."(The Washington Post; free registration required)

FASB Proposed Accounting Standards Update Re: DC Plan Loans (PDF)
16 pages. Comments due by September 7, 2010. (FASB via The SPARK Institute)

States Watching Minnesota Pension Lawsuit
Excerpt:"A legal battle in Minnesota next month will test the ability of states to change benefits of current retirees. The outcome could prompt other cash-strapped states to follow suit or grind a fleeting movement to a sharp halt."(Franklin Center for Government&Public Integrity)

IRS Handout on Abusive Tax Avoidance Transactions and Emerging Issues Presentation (PDF)
17 pages. Excerpt:"The [August 27, 2010 phone] Forum will focus on potential abusive schemes and new emerging issues including insurance funded plans, schemes involving defined benefit pension plans, S Corporation ESOP abuses, ROBS compliance issues, reversion and distribution schemes, management company promotions, abuses involving union plans and other issues of concern. IRS EP will also discuss strategies to proactively detect and deter abuse, including the use of Promoter Investigations."(U.S. Internal Revenue Service)

Caterpillar to Move Non-Union Workers to 401(k) Plan
Excerpt:"Caterpillar Inc. . . . will switch more than half its 50,000 U.S. employees to 401(k) accounts from defined benefit plans to save the company money."(Pensions&Investments; registration may be required)

[Guidance Overview] Technical Questions and Answers Regarding 403(b) Plans Information Sharing: Minimum and Comprehensive Data Elements, Updated August 25, 2010
Excerpt:"The SPARK Institute created a standing panel, made up of representatives from various member companies that played a significant role in developing the Data Elements. The SPARK Institute and the panel review questions that are submitted and develop answers which are posted . . . . Answers are made widely available in order to assist all organizations that are adhering to the Data Elements Best Practices and to the Remittance and Census Data Elements."(The SPARK Institute)

[Opinion] The Roth Plan is Wrong for Some People
Excerpt:"The proper way to evaluate Roth versus regular deferrals is to estimate the point at which the marginal tax rate at the time of the deferral is the same as the marginal rate on the distributions. In other words, you want to pay taxes at the lowest rate, comparing actual taxes at the time of deferral to estimated taxes at the time of distribution."(PLANSPONSOR.com via Reish&Reicher)

NAGDCA 2010 Survey of Defined Contribution Plans: Stable Value
Excerpt:"This report contains two sections. The National Summary provides a narrative overview of the key areas involved in administering governmental 457, 401(k), 401(a), and 403(b) plans. The survey also provides a pdf of the Overall Survey Results, which offers a look at the survey through charts and responses from all participating entities."(National Association of Government Defined Contribution Administrators)

IRS Official Clarifies When Forfeitures Can Be Used as Plan QNECs
Excerpt:"Employers will no longer be permitted to use forfeitures, or nonvested amounts left in employee accounts, for correcting certain kinds of retirement plan qualification errors, an IRS official says. Forfeitures can be a source of qualified nonelective contributions for some corrections but not others . . . ."(Tax Management Inc.)

[Opinion] Letters to the Editor: Let Congress Fix the Multi-Employer Pensions It Broke
Excerpt:"Your editorial'The Next Pension Bailout'(Aug. 16) ignores the real issue: equity and fairness for small employers. Sen. Robert Casey's bill is not a bailout, it simply addresses a problem Congress created."(The Wall Street Journal)

Schwab 401(k) Survey Says Automatic Features, Advice Continue to Gain Ground
Excerpt:"According to data collected from 401(k) plans serviced by Schwab Retirement Plan Services, Inc. through the first half of 2010, nearly three-quarters (74%) of employers make 401(k) advice available to plan participants, as compared to 42% in 2005."(PLANSPONSOR.com)

How to Tell if You Have a Good 401(k) Plan
Excerpt:"A generous employer contribution and low-cost investment options coupled with the tax deferral will help your savings grow. Conversely, an expensive 401(k) plan with poor investment choices will make it more difficult to save for retirement. Here's how to tell if your company has a competitive 401(k) plan . . . ."(U.S. News&World Report)

PBGC Data Book Expands Coverage on Growing Multiemployer Liability
Excerpt:"The PBGC report notes that the multiemployer program has a smaller scope (it insures only 1,500 plans, about one-twentieth as many as the 27,600-plan single-employer program), and it covers only about one-third as many participants (10.4 million versus 33.6 million). However, insured multiemployer plans are about six times as large, on average, as insured single employer plans."(PLANSPONSOR.com)

Text of Pension Insurance Data Book 2009 (PDF)
120 pages. Excerpt:"The new edition features a detailed article on the smaller of the agency's two pension insurance programs, which provides financial assistance to insolvent multiemployer pension plans."(Pension Benefit Guaranty Corporation)

[Official Guidance] Post April 30, 2010, Issues Impacting Adopting Employers Who Use IRS Pre-Approved Plan Documents
Excerpt:"This article is separated into two parts. Part I discusses the actions that need to be taken if an EGTRRA pre-approved DC restated plan document was not timely adopted by April 30, 2010. Part II addresses determination letter processing issues that apply to Form 5307/5300 determination letter applications made after April 30, 2010, in regard to pre-approved DC plans."(U.S. Internal Revenue Service)

[Opinion] Hardship Withdrawals from 401(k) Plans and Reduced Employer Contributions Indicative of Trend?
Excerpt:"These 401(k) withdrawals are a result of the increasing unemployment in the country as well as companies cutting back on'overtime or overall hours'of their workers."(American Thinker)

Key Votes in 1996 and 2002 Boosted Top 20 Pensions for San Diego City Workers by 176 Percent
Excerpt:"The deals struck by labor leaders and city officials in 1996 and 2002 created a financial windfall for thousands of city workers, some of whom enjoy double or triple the pensions they would have under the previous program, according to an analysis of pension records by The Watchdog."(The San Diego Union-Tribune, LLC)

Upper-Income Taxpayers Plan for Tax Hike
Excerpt:"It is hard to determine how many people are converting to Roth IRAs for this reason, however. While conversions are up this year, this was also the first year in which taxpayers earning more than $100,000 annually could take advantage of the Roth, so some people might have converted even without the threat of tax increases next year."(The Wall Street Journal)

In Pennsylvania, Philadelphia City Council Members Weigh in on DROP
Excerpt:"DROP has become one of the most contentious political issues in the city. This month, a report commissioned by Mayor Nutter said the program had cost the city an extra $258 million in pension expenses over the last 10 years."(The Philadelphia Inquirer)

CalPERS Committee Approves Policy Change to Lower Pension Costs
Excerpt:"A key committee of the California Public Employees'Retirement System [has approved a] recommendation that would change the pension fund's policies to immediately recognize benefit changes. A CalPERS news release said the shift in policy, requested by the employer and some unions, could save the State's General Fund budget up to $500 million this fiscal year if the Governor and Legislature enact higher contributions for existing members and new hires."(PLANSPONSOR.com)

DC Plans Shouldn't Classify Participant Loans As Investments, According to FASB
Excerpt:"According to the proposal,'If a participant were to default, the participant's account would be reduced by the unpaid balance of the loan, and there would be no effect on the plan's investment returns or any other participant's account balance.'"(Pensions&Investments; registration may be required)

Colorado Pension Program on Way to Recovery After Landmark Legislation, According to Auditors
Excerpt:"Colorado's pension fund is back on track toward solvency after state lawmakers became the first in the nation to cut retiree benefits to prevent its pension system from going broke, auditors said Monday."(Huffington Post, Inc.)

Issue Brochure: Evolution of the Government Deferred Compensation Plan Market (PDF)
4 pages. (National Association of Government Defined Contribution Administrators)

Supporters of Reforming California Public Pensions Say Bill Would Not Be Effective
Excerpt:"Pension reform advocates said that amendments added to the bill have weakened the bill's overall purpose. The amendments, which are supported by unions, would allow negotiations on issues such as education incentives and shift changes to determine a final pay figure."(California HealthCare Foundation)

Bills to Require Automatic Employer-Provided IRAs Proposed in House and Senate
Excerpt:"Both bills would provide incentives for the establishment of qualified retirement plans. These would include increasing the maximum start up credit for qualified plans from $500 to $1,000 (which would be available for the first three years, instead of only the $250 credit available for first two years for providing the Automatic IRAs)."(Deloitte via BenefitsLink.com)

Colorado PERA Cutbacks Bolstering Plan's Finances
Excerpt:"A move by Colorado's state pension fund to cut retiree benefits to avoid going broke has apparently returned the system on a path toward solvency, according to a new audit."(PLANSPONSOR.com)

[Guidance Overview] The Impact of Mergers, Acquisitions and Dispositions on Your Retirement Plan
20 pages. Excerpt:"A slight variation in details surrounding a purchase or sale transaction may present different legal and regulatory issues for your retirement plan(s). Use this white paper to guide and enhance discussions about your retirement plan(s)."(The Principal Financial Group)

Auto-IRA Legislation Introduced in Both Houses of Congress
Excerpt:"The bills set the stage for serious work on the proposals in the next Congress. Auto-IRAs are a key plank in the Obama administration's retirement policy agenda, and the bills may draw support from Republicans who have backed prior auto-IRA bills."(Mercer)

What the Experts Are Doing With Their Own Roth IRAs
Excerpt:"Three [experts] say they have either made Roth conversions or plan to do so soon, and the fourth says he will do so if the market tanks. Thus, all believe their own tax rates will be the same or higher in the future, and they aren't worried that Congress will curtail Roth benefits enough to make them rue the move. In addition, all say they will use non-IRA funds to pay any conversion taxes."(The Wall Street Journal)

Public Pensions and Its Retirees
Excerpt:"Illinois is hardly the only state to put retirees'teeth on edge. Pew found that as of fiscal 2009, only 4 states had pensions that were'fully funded,'with enough money on hand to pay future benefits. Many states are legally barred from reducing payments to current retirees, but some are breaking that mold."(SmartMoney)