October 2014 Archive

Outsourcing of defined contribution plan fiduciary function

October 30, 2014

With respect to defined contribution (DC) plans, the current trend towards the ‘institutionalization’ of investments has made the DC plan fiduciary's job more demanding, and outsourcing is one solution to meeting those increased needs. Responding to increased benefit plan outsourcing activity, the ERISA Advisory Council this year held hearings on "Outsourcing Employee Benefit Plan Services." In this article we begin with some background on the DC fiduciary outsourcing issue and then briefly consider the issues DC fiduciary outsourcing presents under ERISA. Read More

Roth vs. ‘regular’ 401(k): the math

October 29, 2014

From the point of view of plan participants and plan sponsors, Roth math can be a little confusing. In this article we begin with a discussion of Roth tax benefit math (that is, Roth math from the participant's point of view) – the relative value of Roth tax benefits in different scenarios. We'll then briefly describe Congress's Roth budget math – which is what drives Roth policy generally. We'll conclude with a brief review of possible Roth policy changes. Read More

2015 Increases for Retirement Plans, Social Security

October 28, 2014

The Social Security Administration recently announced benefit increases effective in 2014. Current retirees will receive a cost-of-living increase, beginning in January 2015. In addition, the maximum amount of earnings subject to Social Security tax will increase in 2015. These changes will affect benefits for currently retired individuals, as well as those contemplating retirement. Employers who sponsor retirement plans that are ‘coordinated’ with Social Security in some fashion will also see an impact on benefits earned and payable under such plans. Read More

Information on brokerage windows requested by DOL

October 13, 2014

On August 20, 2014, the Department of Labor released a request for information (RFI) concerning brokerage windows in 401(k) plans. The RFI includes 39 questions covering definitional issues, plan offerings, participation, selection, information available to fiduciaries, costs, disclosure, the role of advisors, fiduciary duties and reporting. In this article we begin by reviewing the brokerage window issue generally and then discuss the RFI. Read More

Proposed changes to ERISA section 4062(e)

October 10, 2014

Last month, the Senate passed a bill (S. 2511), which would significantly revise ERISA section 4062(e). As interpreted and applied by the Pension Benefit Guaranty Corporation, ERISA section 4062(e) is one of those obscure ERISA provisions that can trigger unexpected liabilities at awkward times – such as the middle of a corporate transaction. In this article we review 4062(e) and how it has recently been applied by PBGC and then discuss the proposed Congressional fix. Read More

September 2014 Pension Finance Update

October 09, 2014

Stocks retreated in September, but the impact was mostly offset by higher interest rates, which reduced pension liabilities. Three-fourths of the way through 2014, pension finances remain modestly underwater for the year – our traditional ‘Plan A’ is down almost 6%, while the more conservative ‘Plan B’ is down 2%. Download

IRS finalizes cash balance regulations, adds more flexibility for ReDB® designs

October 01, 2014

On September 19, 2014, IRS published long-awaited final regulations on permissible interest crediting rates in cash balance plans. The new regulations are very good news. They confirm IRS's proposed rules establishing the market-based cash balance design (what we call ReDB®), and they permit significantly increased flexibility in cash balance plan design. In this article we discuss the headlines. Read More

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