July 2013 Archive

Senators target ‘stretch’ payouts of retirement benefits for elimination

July 24, 2013

Senators Reed (D-RI) and Harkin (D-IA) have proposed legislation (the Student Loan Affordability Act of 2013 (S. 953)) that would extend the current low (3.4%) interest rate on student loans (which expired on July 1, 2013) for another two years. To pay for that extension, the proposal (among other things) modifies Tax Code minimum distribution rules to restrict the use of ‘stretch’ benefits payouts under IRAs, defined contributions plans (including 401(k) plans) and defined benefit plans. In this article we discuss the proposed change to the minimum distribution rules Read More

Senator Hatch introduces legislation reforming retirement savings rules

July 23, 2013

Senator Hatch (R-UT) has introduced legislation, the "Secure Annuities for Employee Retirement Act of 2013" ("SAFE"), that includes a number of changes to current retirement plan rules. Most of the changes would affect account based plans (such as 401(k) and other defined contribution plans) and IRAs. In this article we review some key provisions of SAFE, generally focusing on the changes that will be significant for corporate plan sponsors. Read More

Senator Harkin’s USA Retirement Funds Proposal

July 22, 2013

In 2012, Senator Harkin (D-IA), Chairman of the Senate Health, Education, Labor and Pensions Committee, released his USA Retirement Funds proposal. The proposal addresses a number of issues that remain current, e.g., coverage, 401(k) participation by low wage employees and the efficiency of the current 401(k) system. In this article we summarize the proposal and provide a (preliminary) evaluation of it. Read More

Congressman Neal reintroduces retirement savings legislation

July 21, 2013

Congressman Richard Neal (D-MA) has introduced legislation -- the "Retirement Plan Simplification and Enhancement Act of 2013" (H.R. 2117) -- which would make a number of changes to the Tax Code and ERISA. The bill is to a large extent a laundry list of improvements to the current system, addressing such issues as 401(k) participation, retirement income, annuities and simplification of administration. In this article we review the key provisions of the bill affecting corporate DB and DC plans. Read More

DC plan re-enrollment litigation

July 15, 2013

In this article we review litigation coming out of the 2008 global financial crisis that addresses re-enrollment programs. We begin with a brief discussion of what re-enrollment programs are and the authorization of them under the Department of Labor's Qualified Default Investment Alternatives (QDIA) regulation. We then discuss two cases – Bidwell et al. v. Univ. Med. Ctr. et al. and Falcone v. DLA Piper – that address re-enrollment programs that took place in 2008 Read More

DOL mulls ‘lifetime income’ illustrations for DC benefit statements

July 14, 2013

The Department of Labor has released an "Advance notice of proposed rulemaking" (ANPR) describing changes to rules for defined contribution plan benefit statements that it is considering. The new rules would require that DC benefit statements include disclosure of an estimated lifetime stream of payments based on (1) the participant's current account balance and (2) the participant's account balance projected to retirement. In this article we discuss key elements of the ANPR. Read More

PBGC proposes new test for waiver in re-proposed reportable events regulation

July 09, 2013

In April, the Pension Benefit Guaranty Corporation (PBGC) re-proposed reportable event regulations under ERISA section 4043. The major feature of the new proposal is a waiver of reportable event reporting where the plan sponsor meets a "financial soundness" test. In this article we discuss the ‘sponsor financial soundness’ provisions of the proposed regulation. We then briefly review the standards used in the ERISA section 4062(e) enforcement guidelines and PBGC's proposal for a sponsor-risk-based premium structure. Read More

Tatum v. R. J. Reynolds Tobacco Company: Plan Fiduciary Issues

July 08, 2013

In February, the United States District Court For The Middle District Of North Carolina handed down its decision in Tatum v. R.J. Reynolds Tobacco Company, holding that even though the plan fiduciaries violated “procedural prudence” in eliminating Nabisco stock from the R. J. Reynolds defined contribution plan, their decision to do so was “substantively prudent” and therefore did not violate ERISA. Read More

Taveras v. UBS: Court limits "presumption of prudence" in stock drop cases

July 07, 2013

The recent decision by the Second Circuit Court of Appeals in Taveras v. UBS AG et al.(February 27, 2013) limits that presumption to plans which, by their terms, "strongly encourage" investment in company stock or a company stock fund. In this article we review the Second Circuit's decision. Read More

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