July 2014 Archive

Should we save more or spend more? An economic exploration

July 29, 2014

In the media, in think tank research papers and in Congressional hearings experts testify that the baby boom generation is ‘unprepared’ for retirement – has not saved enough and needs to save more for retirement. There are a variety of policy initiatives aimed at increasing retirement savings. In this article we consider the question: what does it mean for the broader economy to pursue policies that increase retirement savings? Read More

Legislative and Regulatory Update – July 2014

July 28, 2014

In this Current outlook we review the finalized regulation for longevity annuities, the defined benefit plan funding stabilization proposal in the House transportation bill and the Pension Benefit Guaranty Corporation's moratorium on ERISA section 4062(e) enforcement. Read More

Fifth Third Bancorp et al. v. Dudenhoeffer decided by Supreme Court

July 25, 2014

On June 25, 2014 the Supreme Court handed down its unanimous decision in Fifth Third Bancorp et al. V. Dudenhoeffer. In this decision, the Court rejected the rule applied by many courts that ESOP fiduciaries had a "presumption of prudence" with respect to company stock investments. In this article we review the Court's decision. Read More

Update on pension de-risking

July 24, 2014

In this article we discuss recent developments with respect to de-risking. In at least two states, Connecticut and New York, legislation has been introduced that, if adopted, would significantly restrict de-risking transactions. Read More

Actuarial group raises questions about proposed RP-2014 mortality tables

July 23, 2014

The Society of Actuaries (SOA) is advocating the use of mortality tables that recognize significantly increased life expectancy. The Academy of Actuaries (the Academy) is raising questions about that and, by implication, questioning whether the proposed tables might not overstate life expectancy. In this article we review the issues raised by the Academy. Read More

IRS guidance on de-risking transactions involving retirees

July 22, 2014

IRS recently released four Private Letter Rulings holding that in certain circumstances the payment of lump sums to retirees currently receiving annuities does not violate Tax Code minimum distribution rules. The rulings deal with an important issue in de-risking transactions involving retirees. In this article we discuss the rulings in detail. Read More

Rubio’s federal Thrift Savings Plan proposal for the ‘uncovered’

July 21, 2014

In a speech on May 13, 2014, Senator Marco Rubio (R-FL) proposed "giv[ing] Americans who do not have access to an employer sponsored plan the option of enrolling in the federal Thrift Savings Plan." With this proposal Senator Rubio joined a growing group of policymakers and employee-advocates calling for ‘doing something’ to help the 75 million (Senator Harkin's (D-IA) number) American workers not currently covered by a retirement plan. In this article we are going to consider what "[o]pening Congress' retirement plan to the American people" would mean. Read More

How state Auto-IRA legislation may affect employers

July 21, 2014

Several states are considering adopting legislation that would require private employers that do not provide a retirement plan for their employees to adopt some sort of retirement program – typically, an ‘auto-IRA.’ In this article we review three such initiatives – the National Conference on Public Employee Retirement Systems (NCPERS) Secure Choice Pension (SCP) proposal, the California Secure Choice Retirement Savings Trust Act and the Illinois Secure Choice Savings Program Act. We generally focus only on issues that directly affect employers. Read More

Analysis of Ayres and Curtis critique of 401(k) plans

July 09, 2014

In our previous article we reviewed Professors Ayres and Curtis's paper, "Beyond Diversification: The Pervasive Problem of Excessive Fees and 'Dominated Funds' in 401(k) Plans." In what follows, we begin with a discussion of issues with Ayres and Curtis's methodology and then go on to discuss their policy proposals. Read More

New analysis of 401(k) plan performance and fees

July 08, 2014

Law professors Ian Ayres (Yale) and Quinn Curtis (University of Virginia) recently published a much-anticipated article. The paper builds on work they have done on a database of more than 3,500 401(k) plans. They conclude that 401(k) plan participants suffer significant losses from (1) sponsor-fiduciary fund menu construction decisions, (2) participant asset allocation mistakes and (3) high fees on plan investment options. To remedy this problem they make several innovative proposals for changes in the rules for 401(k) plan fund menu construction. In this article we review their paper in detail. Read More

June 2014 Pension Finance Update

July 01, 2014

Pension sponsors got a boost in June, due to stock market gains and slightly higher interest rates, although both ‘model’ plans we track remain modestly underwater halfway through 2014. Our traditional ‘Plan A’ gained 1% last month and is now down 4% during 2014, while the more conservative ‘Plan B’ is up fractionally in June and is down less than 2% on the year. Download

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