April 2013 Archive

What would a 28% deduction cap mean for 401(k) tax benefits?

April 24, 2013

In our recent article The Administration’s 2014 budget: provisions affecting retirement benefits we discussed the Administration's proposal to "limit the tax rate at which upper-income taxpayers can use itemized deductions and other tax preferences to reduce tax liability to a maximum of 28%." In this article we provide a technical analysis of the effect – in reduced tax benefits – of such a cap. Read More

The Administration’s 2014 budget: provisions affecting retirement benefits

April 24, 2013

On April 10, 2014 the Administration released its 2014 budget. In this article we review sections of the Administration's budget that affect company retirement plans: a proposed PBGC premium increase; a $205,000 annual ‘annuity cap’ on tax-favored retirement savings; a 28% ‘deduction cap;’ implementation of the ‘Buffet Rule;’ and Auto-IRAs. Read More

Entitlement Reform and Retirement Benefits

April 22, 2013

So far this year, Congress has passed a fix to the ‘fiscal cliff’ (on January 2), allowed the ‘sequester’ budget cuts to take effect (on March 1) and passed a continuing resolution to fund the government through September (on March 21). In this article we begin with a brief update on the current timing of coming ‘budget battles’ and then discuss the extent to which possible changes in Social Security rules, intended to reduce entitlement expenditures, may affect retirement plans. Read More

Pensions in 2013 – trends in interest rates and de-risking

April 21, 2013

Over the long-, medium- and short-term interest rates have been declining, precipitously during the period since August 2011, and those declines have put pressure on DB plan sponsors, significantly increasing both the cash and ‘earnings’ cost of their plans. In this article we review recent trends in interest rates and their implications for 2013 DB funding and de-risking decisions. Read More

DOL publishes 'tips' for target date fund fiduciaries

April 17, 2013

The late-2008 financial crisis had a particularly significant impact on some 401(k) plans that offered TDFs. In 2007 the Department of Labor had finalized its qualified default investment alternative (QDIA) regulations. which provided that, where certain conditions are met, plan fiduciaries are relieved from liability for losses resulting from the investment of the participant's account in a QDIA. On February 28, 2013, DOL published its long-awaited target date fund (TDF) ‘tips.’ In this article we review the DOL ‘tip sheet’ and TDF fiduciary issues generally. Read More

October Three Announces Chicago Headquarters Move to Iconic Willis Tower

April 14, 2013

October Three announced today that it has relocated its Chicago office to a larger space to accommodate its rapidly expanding corporate headquarters in the "Windy City." The new office is located in the world-renowned Willis Tower at 233 South Wacker Drive. Download

How Much Does My 401(k) Plan Save Me In Taxes?

April 03, 2013

There's a superficial answer to this question -- just multiply your marginal tax rate times the amount of this year's benefit. So, if you are getting a benefit that is worth, say, $10,000, and your tax rate is 39.6%, then your tax saving $3,960. That is the wrong answer – in what follows we are going to show you how to figure out the right answer. Read More

The Tax Value of 401(k) Plans for Lower Paid Participants

April 02, 2013

In this article we focus on the tax value of 401(k) savings to lower paid participants. We do so not because there is a possibility of legislation that will ‘change the deal’ for them -- such legislation is unlikely at this time -- but because 401(k) plans in fact do provide significant tax benefits for lower paid employees, and that fact is not widely understood. Read More

March 2013 Pension Finance Update

April 01, 2013

The first quarter of 2013 was welcome news for pension sponsors, marked by strong stock markets (the S&P 500 closed the quarter at a record high, surpassing its previous peak from October 2007) and modestly higher interest rates. The two “model” plans we track both picked up ground during the month and the quarter, with traditional “Plan A” improving by 2% during March and 7% for the year, while “Plan B” improved less than 1% last month and is up about 2% for the year. Download

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