[Guidance Overview] New Tax Guidance on Use of Annuities in Retirement Plans (PDF)
"The Obama Administration has in a number of ways previously evinced its intent to facilitate lifetime income solutions in defined contribution plans. This guidance package, which Treasury announced in a press release and which was accompanied by a White House statement, a fact sheet and a report, constitutes a meaningful contribution to that effort. The fact sheet notes that Treasury and the Department of Labor expect to issue further retirement income guidance later this year." (Sutherland)
[Opinion] Treasury and IRS Successfully Lay the Base for Lifetime Income: The '2012-3 Annuity' and the QLAC
"With just a relatively short regulation and a Revenue Ruling, Treasury simply and in a very straightforward way laid out the definitive structure for defined contribution plans (like 401(k) plans) to start providing lifetime income in a market friendly manner. The two pieces of guidance dealing with DB plans which were issued at the same time are very useful, but the meat of the matter is the critical guidance given under the proposed RMD regulation and the spousal consent Revenue Ruling, 2012-3." (Robert J. Toth, Business of Benefits)
Boomers' Retirement Income Prospects
"Our projections show that lower - and moderate-income boomers will continue to rely on Social Security for most of their retirement income. While the projections reflect some good news - women will reap the rewards of working and earning more than previous generations - they also raise alarms. Between 30 and 40 percent of boomers will not have enough income at age 70 to replace 75 percent of their preretirement earnings, a common standard for measuring retirement income adequacy." (Urban Institute)
[Guidance Overview] IRS Proposed Guidance on Simplifying Use of Annuities in Retirement Plans
"Employers generally have been hesitant to offer annuities in their defined contribution plans due to regulatory barriers, which increased costs and were administratively burdensome. Overall, this guidance should allow retirement plans to more easily offer their participants annuity options, which will give participants a wider range of choices in how they receive their benefits. It is still unclear whether this guidance will be enough to entice employers to provide for annuities in their defined contribution plans. Comments on both sets of proposed regulations must be received by May 3, 2012." (Practical Law Company)
Pensions to Cost NYC More Than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed . . . as he made another strong pitch for Albany to enact pension reforms." (New York Post)
Pensions to Cost NYC More than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed yesterday as he made another strong pitch for Albany to enact pension reforms." (New York Post)
Pensions to Cost NYC More Than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed yesterday as he made another strong pitch for Albany to enact pension reforms." (New York Post)
Pensions to Cost NYC More Than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed yesterday as he made another strong pitch for Albany to enact pension reforms." (New York Post)
Pensions to Cost NYC More Than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed yesterday as he made another strong pitch for Albany to enact pension reforms." (New York Post)
Pensions to Cost NYC More Than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed yesterday as he made another strong pitch for Albany to enact pension reforms." (New York Post)
Pensions to Cost NYC More Than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed yesterday as he made another strong pitch for Albany to enact pension reforms." (New York Post)
Pensions to Cost NYC More Than Salaries
"Pensions and fringe benefits for uniformed workers are going to cost the city more next year than their actual salaries, Mayor Bloomberg revealed yesterday as he made another strong pitch for Albany to enact pension reforms." (New York Post)
GAO Report on Federal Employees' Compensation Act: Benefits for Retirement-Age Beneficiaries
"[GAO] examined (1) the characteristics and associated compensation costs of long-term, full-time FECA beneficiaries, for USPS and non-USPS employees; (2) how wage compensation benefits for retirement-age, long-term, full-time FECA beneficiaries compare with federal retirees' annuities (not including USPS employees); and (3) the experiences of states that limit state workers' compensation benefits for workers at retirement age." (U.S. Government Accountability Office)
Employees Denied Subsidized Early Retirement Benefits Because They Were Not Legitimately Retired
"Employees who 'retire' on one day to qualify for benefits under a plan, with the explicit understanding with their employer that they are not separating from service with the employer, are not legitimately retired, according to a private ruling by the IRS." (Wolters Kluwer Law & Business / CCH)
PBGC Faces $17 Billion in Liabilities If AA Terminates Plans
"The PBGC, though, would not be liable for all pension benefits earned by the airline's employees and retirees. The maximum annual benefit -- payable at age 65 -- guaranteed by the PBGC is $54,000 for plans that terminated in 2011, and nearly $56,000 for plans terminating this year." (Business Insurance)
Feds Push New 401(k) Option: A Convenient Way to Get Income for Life
"The federal government has issued new regulations designed to encourage two important changes: Allow 401(k) plan participants to easily convert a portion of their assets to an annuity. Create an option within 401(k) plans for deferred annuities, also known as longevity insurance, which some see as a silver bullet." (Time Inc.)
Sick Time Payouts Costing Chicago Teachers' Retirement System
"Since 2006, the district paid a total $265 million to employees for unused sick and vacation days, according to an analysis of payroll and benefit data obtained by the Better Government Association under the Illinois Freedom of Information Act, the Chicago Sun-Times reports." (PLANSPONSOR.COM)
An America Built to Last: Strengthening Economic Security in Retirement
"[Treasury] and IRS actions will facilitate the creation of new lifetime income choices to help Americans manage their hard-earned savings in retirement. As life expectancies and retirement periods lengthen, Americans are increasingly confronting the risk of outliving their assets in retirement. Managing this risk is a challenge." (The White House)
Partial Annuities Included in Proposed Rules for Lifetime Income Options
"Providing partial annuities and reducing restrictions on so-called deferred longevity annuities were parts of proposed regulations on lifetime income options in retirement plans announced [last week] by the Treasury Department." (Business Insurance)
[Guidance Overview] DOL and IRS Retirement Security Measures, Including Final Fiduciary-Level Fee Disclosure Regs and Proposed Guidance on Lifetime Income
"In a coordinated effort, the DOL and IRS have announced agency actions that are intended to enhance retirement security. The DOL has announced the release of final fiduciary-level fee disclosure regulations, with an extended effective date of July 1, 2012." (Thomson Reuters/EBIA)
Report of Council of Economic Advisers: 'Supporting Retirement for American Families' (PDF)
Feb. 2, 2012. 'While economic studies have established the benefits of annuitization for retirees -- including both immediate and longevity annuities -- many workers have only limited access to these products. The administrative guidance issued by the Treasury today, easing and simplifying certain regulatory requirements for retirement plans and IRAs, takes an important first step towards a more complete private market offering more attractive lifetime income options." (Council of Economic Advisers, Executive Office of the President)
Is My American Airlines Pension Guaranteed? Yes, But...
"Who gets the haircut? The PBGC has a sliding scale of maximum benefits, depending on age. The most it will pay people who retire at age 65 is $55,841. If your benefit is less than that you have only the long-term health of the PBGC to worry about." (TIME.com)
New Treasury Rules Ease Purchase of Annuity With 401(k)
"J. Mark Iwry, an official at the Treasury department, said the department hoped in particular to foster a workplace market for 'longevity insurance,' something much discussed in policy circles but that employers rarely make available to workers when they retire." (New York Times; free registration required)
Treasury Eases Rules on Annuities in Retirement Plans
"Employers have been reluctant to adopt annuities in retirement plans they sponsor because of concern that fees are too high and that they would be held liable for their choice of insurers. Americans have resisted buying the insurance because they don't want to lock up their assets." (Bloomberg)
New 401(k) Policies Are a Mixed Bag
"Most workers won't see their companies offering annuities anytime soon, concedes David Wray of the Plan Sponsor Council of America, an employer group. He said employers would be concerned about choosing solid insurance companies and reasonably priced annuities for their workers." (Reuters)
[Official Guidance] Rev. Rul. 2012-3: Application of Survivor Annuity Requirements to Deferred Annuity Contracts Under a Defined Contribution Plan (PDF)
"Issue: How do the qualified joint and survivor annuity ('QJSA') and the qualified preretirement survivor annuity ('QPSA') rules, described in ?? 401(a)(11) and 417 of the Internal Revenue Code, apply when a deferred annuity contract is purchased under a profit-sharing plan in the situations described below?" (U.S. Internal Revenue Service)
[Official Guidance] Rev. Rul. 2012-2: Rollover from Qualified Defined Contribution Plan to Qualified Defined Benefit Plan to Obtain Additional Annuity (PDF)
"Issues: [1] Does a qualified defined benefit pension plan that accepts a direct rollover of an eligible rollover distribution from a qualified defined contribution plan maintained by the same employer satisfy ?? 411 and 415 of the Internal Revenue Code in a case in which the defined benefit plan provides an annuity resulting from the direct rollover that is determined by converting the amount directly rolled over into an actuarially equivalent immediate annuity using the applicable interest rate and the applicable mortality table under ? 417(e)? [2] How does the result vary if the defined benefit plan applies different conversion factors for purposes of calculating the annuity resulting from the amount directly rolled over?" (U.S. Internal Revenue Service)
[Official Guidance] Proposed IRS Regs on Longevity Annuity Contracts
"This document contains proposed regulations relating to the purchase of longevity annuity contracts under tax-qualified defined contribution plans under section 401(a) of the Internal Revenue Code (Code), section 403(b) plans, individual retirement annuities and accounts (IRAs) under section 408, and eligible governmental section 457 plans. These regulations will provide the public with guidance necessary to comply with the required minimum distribution rules under section 401(a)(9). The regulations will affect individuals for whom a longevity annuity contract is purchased under these plans and IRAs (and their beneficiaries), sponsors and administrators of these plans, trustees and custodians of these IRAs, and insurance companies that issue longevity annuity contracts under these plans and IRAs." (U.S. Internal Revenue Service)
[Official Guidance] Treasury Fact Sheet: Helping American Families Achieve Retirement Security by Expanding Lifetime Income Choices (PDF)
"[T]he new package of proposed regulations and rulings makes it easier for pension plans to offer workers a wider range of choices as to how to receive their retirement benefits by [1] Making it easier to offer combination options that avoid an 'all-or-nothing' choice, such as the option to take a portion of an individual's plan benefit as a stream of regular monthly income payable for life, while perhaps taking the remainder in a single lump-sum cash payment; [2] Enabling employer plans and IRAs to offer an additional option in the form of 'longevity annuities' -- which permit employees to use a limited portion of their account balance to provide lifelong retirement income beginning at age 80 or 85, protecting those who live beyond average life expectancy from running out of savings; [3] Making clear that employees receiving lump-sum cash payouts from their employer's 401(k) plan can transfer some or all of those amounts to the employer's defined benefit pension plan (if the employer has one and is willing to allow this) in order to receive an annuity from that plan (giving employees access to the defined benefit plans' relatively low-cost annuity purchase rates); and [4] Resolving uncertainty as to how the 401(k) plan spousal protection rules apply when employees choose deferred annuities (including longevity annuities) from their plans." (U.S. Internal Revenue Service)
[Official Guidance] Proposed IRS Regs on Modifications to Minimum Present Value Requirements for Partial Annuity Distribution Options under Defined Benefit Pension Plans
"These proposed regulations would change the regulations regarding the minimum present value requirements for defined benefit plan distributions to permit plans to simplify the treatment of certain optional forms of benefit that are paid partly in the form of an annuity and partly in a more accelerated form. These regulations would affect sponsors, administrators, participants, and beneficiaries of defined benefit pension plans." (U.S. Internal Revenue Service)
[Guidance Overview] DOL Publishes Final 408(b)(2) Fee Disclosure Regs; Treasury Publishes Regs on 'Lifetime Income' Options
"[T]he U.S. Departments of Labor and the Treasury today announced two executive actions designed to help enhance security for millions of Americans saving for retirement. The measures will expand transparency in the 401(k) plan marketplace and broaden the availability of retirement plan options so that Americans can maximize their ability to save responsibly and securely." (U.S. Employee Benefits Security Administration)
Retirement Income in DC Plans: What Our Experience with DB Plans Tells Us (PDF)
"The potential for improvement in DC plans' ability to provide a steady stream of income has caught the eye of the financial services industry. While the marketplace races to deliver an array of possible solutions, employers and regulators are grappling with how these products fit within qualified retirement plans." (Institutional Retirement Income Council)
[Guidance Overview] D.C. Requires Employers to Withhold D.C. Tax on Retirement Plan and IRA Distributions to D.C. Residents (PDF)
"Unlike withholding in some other jurisdictions, the D.C. legislation requires withholding from distributions from IRAs, as well as pension, profit sharing and tax sheltered annuities (403(b) plans); withholding is mandatory, not voluntary." (Saul Ewing LLP)
ERISA Claim Based on Wal-Mart Gender Discrimination Dismissed
"A federal court dismissed a claim that Wal-Mart Stores breached its fiduciary duties in underpaying retirement plan contributions based on wages that were discriminatory against women." (PLANSPONSOR.COM)
PBGC Financial Assistance Payments to Multiemployer Plans, 2005-2012
PBGC updated the data set containing information on multiemployer plan financial assistance payments from 20005 through the first quarter of the 2012 fiscal year. (Pension Benefit Guaranty Corporation)
To Maximize Social Security Retirement Benefits, Know the Rules
"Social Security offers another important incentive to forestall filing until at least 66. Benefits are reduced permanently for every year that is filed before the FRA, and increased for every year that is waited to file beyond it, up till the age of 70." (Thomson Reuters via Employee Benefit News)
The Replacement 'Window' in Retirement Planning
"[T]he replacement rate approach represents, at best, an indirect approach to evaluating whether retired workers can maintain their standard of living in retirement -- because what matters is not how much you have to spend, but how much you need to spend." (Employee Benefit Research Institute)
Federal Retirees Face Confusion, Possibly Payment Delay
"'With OPM's current backlog and the expected significant rise in retirement processing workload, the time frame for OPM to place an annuitant in interim pay may increase to 6-8 weeks after their retirement date,' according to the Army." (The Washington Post; free registration required)
[Opinion] Early Retirement Provisions of West Virginia Local Government Pension Plans Warrant a Review
"To see why, consider the pension plans for Huntington's police officers and firefighters. An analysis by [a Herald-Dispatch reporter] found that at least one-sixth, or $1.21 million, of the $7.3 million total payout to the city's police and fire retirees this year will go to people who are still collecting a paycheck -- and sometimes a second pension -- for other jobs in city, county, state or federal governments." (Herald-Dispatch.com)
Tools for Plan Sponsors to Meet the Retirement Income Challenge
"Around age 50 -- the time they become eligible for catch-up contributions -- participants should be introduced to core income products and strategies. They'll need to prepare for critical decisions, including when to take Social Security, how much they can prudently spend from their savings, and how much they value lifetime income guarantees. The sooner participants know where to find the right resources, the better." (The Vanguard Group, Inc.)
The New Retirement Rulebook
"[One retirement industry worker] advocates an approach that takes into account an 'individualized inflation rate' based upon standard of living. A laddered annuity approach can cover baseline expenses to 'give peace of mind for lifetime income that they can never outlive.' 'In theory, they can spend the rest of their money and never run out of income,' he says." (Forbes.com LLC)
Is the 4 Percent Retirement-Withdrawal Rule Viable?
"'Market valuations' -- the relative health of markets at the moment you enter retirement -- are now an important part of calculating withdrawal rates. The thinking: Markets move in cycles (bull markets follow bear markets, and so on), and we can measure (to some extent) whether we're on the cusp of the former or the latter. Why is that important? If you happen to retire at the start of a bear market and withdraw too much too soon, your nest egg might expire before you do." (Dow Jones & Company, Inc.)
[Guidance Overview] Profit-Sharing Plan Must Restore Misplaced Assets Although Not Recovered
"A federal appellate court has found that a profit sharing plan must pay back over $1 million in assets wrongly transferred from a participant's account even thought it has not recovered the misplaced funds." (PLANSPONSOR.COM)
Double-Dipping Common for Public-Sector 'Retirees' Who Take on Additional Work
"Proponents of such contracts argue that taxpayers are getting a good deal. 'Retired' public servants provide expertise and leadership, and their terms of employment can be cheaper for local governments because their compensation often doesn't involve health care or other benefits." (San Jose Mercury News)
[Guidance Overview] Anti-Alienation Rule Did Not Prevent Participant from Enforcing Judgment Against Plan
"The award of funds that were erroneously removed from a participant's 401(k) account and credited to his former spouse incident to a marital dissolution would not violate ERISA's anti-alienation rule, even if the plan has not yet recovered the funds from the spouse, according to the U.S. Court of Appeals in New York . . . . The anti-alienation rule, the court advised, does not prevent plan funds from being used to satisfy a judgment against the plan." (Wolters Kluwer Law & Business / CCH)
At Chicago Transit Agency, Overtime Included in Calculations to Determine Pension Amounts
"The agency estimates that such added pension payments to all union workers cost $9 million a year and about $90 million over the life of the benefits. Among all the public agencies in Illinois, only at the CTA can employees boost their pensions with overtime -- a practice that has been in place since at least 1965, according to CTA officials." (Chicago Tribune)
GM Could Launch Retiree Pension 'Buyout'
"General Motors may launch a program to 'buy out' the pensions of some of its retirees -- in an effort to reduce its unfunded liabilities, an industry analyst said Wednesday." (The Detroit News)
Federal Agencies Tighten Belts with Buyouts and Early Retirements
"OPM uses two tools to help agencies reduce their staffing levels without resorting to pink slips and firings. One is the Voluntary Separation Incentive Payments (VSIP) program, which is government-speak for buyouts. Employees can get up to $25,000 to quit. The other is the Voluntary Early Retirement Authority (VERA), which allows workers to get annuities years earlier than usual." (The Washington Post; free registration required)
[Guidance Overview] Participant's Estoppel Claim Rejected for Failure to Show Pension Calculation Error Was Intentional
"The court also rejected the participant's claim that he'd relied to his detriment on the mistaken calculations when he signed the severance agreement. He undermined this argument by his own admission that he has no current wish to rescind his agreement and renegotiate the terms." (Wolters Kluwer Law & Business / CCH)
[Opinion] ASPPA/ACOPA Comments on Proposed Rule Relating to Benefit Determinations and Plan Valuations for Statutory Hybrid Plans
"ASPPA and ACOPA recommend that proposed regulations regarding ?4022 be temporary, effective only for plan terminations occurring before the effective date of final Treasury regulations regarding market rate of return. PBGC should re-propose these rules in a manner that is consistent with the final Treasury regulations after the final market rate of return regulations are issued." (American Society of Pension Professionals & Actuaries/ASPPA College of Pension Actuaries)
Ohio Public Employee 'Double-Dipping' Debate Resumes in Legislature
"The bill would prevent someone from collecting a pension check and a salary at the same time. So if a retiree returned to a public job, his or her pension payments would be set aside in a separate account. The employee would get those deferred payments when he or she leaves government employment for good." (The Columbus Dispatch)
[Opinion] Pension Padding by Connecticut Public Employees
"Armed with data from the comptroller's office, a recent published report focused on the recent retirement of 172 'hazardous-duty employees' (mostly corrections officer) who by contract may begin collecting their pension and lifetime health benefits at any age after only 20 years of service. That allows them to become pensioners in their 40s." (American-Republican Inc.)
Minneapolis Pension Plans Go to State, Legal Battle Ends
"Minneapolis' closed police and firefighters' pension funds have merged into the statewide public safety pension plan. A judge's signature on a pension lawsuit settlement resolved the last snarl between the city of Minneapolis and the pension funds which have been closed to new members for 31 years. For the first time in more than five years of fighting the city's legal claim that they were overpaid, pensioners don't have to worry about refunding part of their past pensions and know they'll get a major increase in benefits, according to the Minneapolis Star Tribune." (PLANSPONSOR.COM)
[Guidance Overview] Sham 'Early Retirements' Could Disqualify Pension Plan, IRS Cautions
"Employees under age 62 who 'retire' with the explicit understanding that they will immediately return to service with the same employer do not qualify for early retirement benefits, according to a recently released IRS private letter ruling." (Mercer LLC)
Retirees Accept Pension Cuts in Rhode Island Town's Bankruptcy
"In a landmark agreement, retired police and firefighters in Central Falls, Rhode Island, have accepted pension cuts as part of the town's historic bankruptcy filing. If the bankruptcy trustee accepts the proposed deal, Central Falls' public employees would represent the first workers to ever accept pension cuts during a municipal bankruptcy, according to a recent report from the New York Times." (TotalBankruptcy, LLC)
Oregon Public Employees Retirement System Allowed to Recoup $156 Million in Overpayments
"The court stood by its earlier decision in the Robinson case, which upheld PERS' right to recoup an estimated $156 million in overpayments from 28,042 people who retired from public service between April 2000 and April 2004. In a second opinion released Friday, the court also ruled that PERS did not violate its members' rights by entering into the settlement agreement that resulted in the move to recoup the overpayments." (www.statesmanjournal.com)
[Guidance Overview] A Participant Lawsuit Against Employer Crosses State Lines
"An employee sued her former employer, alleging it had failed to pay her for unvested shares earned through the company's profit sharing plan." (PLANSPONSOR.COM)
401(k) Loan Defaults: Who Is at Risk and Why?
"Based on a large dataset from Vanguard, this study is the first of its kind to quantify how many people take out loans and, of those, how many default. It proposes changes in retirement policy to reduce the financial risk posed by these loans, particularly for vulnerable groups." (RAND)
State Taxation of Former Residents' Retirement Income (PDF)
"Recently, the New York State Department of Taxation and Finance issued an Advisory Opinion . . . regarding whether New York State may impose income tax on distributions from a nonqualified deferred compensation plan made to a former resident. The opinion, consistent with federal law, concluded that New York State may not impose income tax on these retirement payments. Similar reasoning should apply to other states. Plan sponsors and former New York State residents that participate in nonqualified deferred compensation plans should be aware of the tax implications of this law." (Bryan Cave LLP)
States Try to Fix Their Miscalculations Over 'Air Time'
"[States] are finding that air time can be costly even when they set a price that is expected to cover the higher pension benefits. That's because when workers . . . buy 'air time' -- credit for work they never did -- states make an educated guess about how much to charge. The guess is based on projections about when a worker will retire and die, what her pension will be and how successfully a retirement fund will invest its money. Any of those can turn out wrong." (USA TODAY)
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