September 2014 Archive

IRS issues final regulations on market rates of return for hybrid plans

September 29, 2014

On September 19, 2014, IRS published long-awaited final regulations on a number of issues affecting hybrid plans. The most significant piece of the final regulations is final rules with respect to interest crediting rates permitted under the ‘market rate of return’ standard. The IRS also published a proposed regulation to deal with the transition to the new permitted interest crediting rate rules. In this article we review (1) the final permitted interest crediting rate rules and (2) the proposed transition rules. Read More

Reducing pension plan headcount reduces risk and PBGC premiums

September 10, 2014

In this article we briefly review factors making 2014 a year in which defined benefit plan sponsors may want to consider lump sum payment de-risking strategies if they haven’t already. We then analyze the (in some cases, dramatic) reduction in sponsor PBGC variable-rate premium costs that paying lump sums to terminated vested participants can in some cases produce. Read More

Tatum v. RJR Tobacco: Circuit court reverses district, holds for plaintiffs

September 04, 2014

On August 4, 2014, the 4th Circuit handed down its decision in Tatum v. R.J. Reynolds Tobacco Company. The court reversed the district court's decision in favor of defendant-fiduciaries and remanded the case for further proceedings. The 4th Circuit said the issue was not ‘could have’ but ‘would have.’ That is, the issue was not ‘was it possible’ that a prudent fiduciary could have reached this decision, but, ‘was it probable’ that she would have done so. In what follows, we review the decision in detail. Read More

SEC issues final rules on money market funds

September 03, 2014

On July 23, 2014 the Securities and Exchange Commission adopted amendments to the rules that govern money market mutual funds. In this article we briefly discuss the Amendments and some issues they raise for plan sponsors. We generally focus on the effect of the Amendments on defined contribution plans that provide participants a choice of investments, where one of the choices is a money market mutual fund. Read More

Pension Funding Relief Extended

September 02, 2014

In August, Congress passed, and the President signed, the Highway and Transportation Funding Act of 2014 (HATFA 2014). The legislation includes an extension of 2012's Moving Ahead for Progress in the 21st Century Act (MAP-21) defined benefit plan ‘funding stabilization’ relief. In this article we briefly review the DB funding provisions of HATFA 2014 and consider their significance for plan sponsors. Read More

August 2014 Pension Finance Update

September 02, 2014

Stocks bounced back in August, but lower interest rates offset these gains for pension sponsors, who treaded water during the month. For the year, our traditional ‘Plan A’ remains down 5%, while the more conservative ‘Plan B’ remains down 2%. Download

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