August 2015 Archive

Funding impact of changes in interest rate and mortality assumptions

August 24, 2015

In this article we consider the effect of changes in interest rate and mortality assumptions on ERISA minimum funding requirements. We then consider, briefly, the effect of possible changes in market interest rates under the optimistic and pessimistic scenarios we used in our prior article. Read More

2016 mortality tables published by IRS

August 20, 2015

On July 31, 2015, IRS released Notice 2015-53, providing static mortality tables for 2016, updated for mortality improvements. The update in the notice is in line with expectations and reflects the current rules. Those rules use the RP-2000 Mortality Tables "adjusted for mortality improvement using Projection Scale AA." Read More

Accounting impact of changes in interest rate and mortality assumptions

August 19, 2015

Two major factors affecting defined benefit plan finance are interest rate and mortality assumptions. We expect significant changes to both these factors in the coming years. In this article we consider the possible effect of these changes on sponsor financial statements. In subsequent articles, we will discuss the effect on ERISA minimum funding requirements and the cost of de-risking transactions. Read More

DOL's fiduciary proposal: significance for plan sponsors

August 18, 2015

The Department of Labor's proposal to re-define who is an ERISA advice ‘fiduciary’ may affect plan sponsors in three ways, directly as fiduciaries, as direct consumers of advice, or as indirect consumers of advice. In this article we review these issues in more detail. As we'll see, treatment of the first two issues under the proposal is relatively straightforward and non-problematic. The third issue – the effect of the proposal on advice (and education) provided to participants – is more complex. Read More

DOL FAB provides guidance on DC annuity fiduciary obligations

August 17, 2015

On July 13, 2015, the Department of Labor released Field Assistance Bulletin 2015-02, providing guidance concerning "the nature and scope of fiduciary responsibilities to act prudently in making, monitoring and reviewing annuity selections under a defined contribution plan." In this article we review the FAB. Read More

The fiduciary duty to monitor – 401(k) plan investments

August 12, 2015

In this article we discuss the application of the basic principles of an ERISA fiduciary's duty to the selection of plan investments and investment managers. We are going to consider this issue exclusively in the context of a 401(k) plan intended to comply with ERISA section 404(c), in which participants choose investments from a fund menu. Read More

The fiduciary duty to monitor

August 11, 2015

The scope and substance of a fiduciary's duty to monitor those persons it appoints to carry out plan-related functions is becoming an issue in several contexts. The law on the duty to monitor is, currently, abstract – we know some basic principles, but how they apply to specific issues is, as yet, not very well articulated. In this article we review those basics, identify some key duty-to-monitor issues for sponsors and some monitoring strategies that sponsors may consider. Read More

The DOL fiduciary proposal: investment education vs. advice

August 10, 2015

The Department of Labor's proposed regulation re-defining who is an ERISA ‘fiduciary’ would, among other things, supersede current rules on investment education. Communications that are advice may trigger fiduciary status; communications that are education generally do not. In this article we provide background on the education vs. advice distinction and on the current rules. We then review the DOL proposal and conclude with a discussion of the issues it presents for sponsors. Read More

July 2015 Pension Finance Update

August 03, 2015

Falling interest rates during July increased pension liabilities, producing losses during the month, although both model pension plans we track remain ahead for the year. Plan A lost 2% last month but remains up 5% for the year, while Plan B dropped 1% during July but remains up 2% so far in 2015. Read More

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