Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
April 7th, 2014
Benefit Briefs
Just out of Reish: Plan Committee Agendas III
In his last two columns, Fred Reish, chair of the Financial Services ERISA team at the law firm of Drinker, Biddle & Reath LLP, suggested agendas for quarterly meetings of plan committees. His third column discusses “special” issues that need to be considered from time to time but do not require attention on a regularly scheduled basis. While the list of such potential concerns is long, the article focuses on two important ones: participant complaints and fiduciary education.
Economic Events
Total nonfarm payroll employment rose by 192,000 in March, and the unemployment rate was unchanged at 6.7%, the Bureau of Labor Statistics reports. Employment grew in professional and business services, in health care, and in mining and logging. THE ECONOMIC WEEK AHEAD: Wednesday, the Census Bureau will report about wholesale inventories for February, and Thursday, the Labor Department will issue its initial claims report. Friday, we’ll learn the producer price index (PPI) for March from the Bureau of Labor Statistics.
Market Mirror
Friday, the Dow fell 159.84 points (0.96%) to 16,412.71, while the NASDAQ plummeted 110.01 points (2.60%) to 4,127.73, and the S&P 500 dropped 23.68 points (1.25%) to 1,865.09. The Russell 2000 lost 27.74 points (2.35%) to finish at 1,153.38, and the Wilshire 5000 closed 284.55 points (1.41%) lower at 19,877.60. On the NYSE, 3.2 billion shares changed hands, with declining issues outnumbering advancing issues nearly 2 to 1. On the NASDAQ, 2.7 billion shares traded, with a more than 4 to 1 lead for decliners. The price of the 10-year Treasury note increased 20/32, bringing its yield down to 2.726%. The price of the 30-year Treasury bond increased 27/32, decreasing its yield to 3.586%. WEEK’S WORTH: For the week ending April 4, the Dow increased 0.55%, the NASDAQ fell 0.67%, and the S&P 500 was up 0.40%. The Russell 2000 ticked up 0.14%, and the Wilshire 5000 finished 0.34% higher.
Rules & Regulators
Advocate Health Care Network in Illinois is the latest pension plan sponsor facing a challenge to its plan’s status as a “church plan.”
Another Court Rejects Pension’s Church Plan Status
A federal court refused to dismiss a lawsuit against Saint Peter’s Healthcare System, holding that its retirement plan is not a “church plan” under the Employee Retirement Income Security Act (ERISA). U.S. District Judge Michael A. Shipp of the U.S. District Court for the District of New Jersey determined a church plan must be established by a church per ERISA Section 3(33)(A). Shipp also found case law used by Saint Peter’s in its arguments to be unpersuasive, and said the court could not give deference to a private letter ruling by the Internal Revenue Service (IRS) which determined Saint Peter’s pension plan is a church plan.
The U.S. Department of Labor (DOL) has filed a lawsuit to recover losses to the Cargill Heating & Air Conditioning Co. Inc. Savings Plan in La Crosse, Wisconsin. According to the DOL, the president and majority owner of the company failed to remit $27,812.90 in employee contributions to the plan. Additionally, pursuant to several state and federal contracts subject to the Davis Bacon Act, Service Contract Act, or state prevailing-wage laws, he agreed to pay employer contributions as prevailing-wage fringe benefits to the plan, but failed to do so. Meanwhile, the DOL announced that a federal judge ordered a trustee to restore losses to the Louis & Riparetti Retirement Plan in Scotts Valley, California. The U.S. Department of Labor filed a lawsuit on April 10, 2012, to recover unremitted employee contributions, uncollected employer contributions, and associated lost opportunity costs.
Appellate Court Finds Public Pension Age Discriminatory
A federal appellate court affirmed a lower court ruling that Baltimore County, Maryland’s pension plan discriminates based on age. The 4th U.S. Circuit Court of Appeals agreed with a district court’s grant of partial summary judgment in favor of the U.S. Equal Employment Opportunity Commission (EEOC), finding that Baltimore County maintained a retirement plan that was in violation of the Age Discrimination in Employment Act (ADEA), and remanded the case for further proceedings on the issue of damages. The court found Baltimore County’s plan “mandated different contribution rates that escalated explicitly in accordance with employees’ ages at the time of their enrollment in the plan.”
The Department of Labor (DOL) is offering two free seminars about compliance with health benefit laws in Des Moines, Iowa, and Louisville, Kentucky. The “Health Benefits Laws Compliance Assistance” seminars are designed to help employers comply with federal and state laws regarding their company’s health benefits.
IRS to Discuss Plan Terminations in Phone Forum
The Internal Revenue Service (IRS) will hold a phone forum about retirement plan terminations. The one-hour session will feature IRS employees discussing important items to review when a retirement plan terminates, including the different types of terminations for defined benefit plans and what happens if the plan is overfunded or underfunded.
Financial Sense
Detroit Details Benefit Reductions in New Plan
New bankruptcy paperwork filed by city of Detroit includes benefits reductions for the city’s two public pension funds. This week, the city filed an amended plan of adjustment and a related disclosure statement with the U.S. Bankruptcy Court for the Eastern District of Michigan. This paperwork offers clarification for retirees about how much pension benefit reductions would be should the two pension classes involved accept or reject the revised plan of adjustment and the proposed $816 million in outside funding.
Small Talk
ON THIS DATE:  In 1933, Prohibition ended in the United States. In 1947, Henry Ford, the founder of Ford Motor Company, which developed the first affordable, mass-produced car–the Model T–and also helped pioneer assembly-line manufacturing, died at his estate in Dearborn, Michigan, at the age of 83. In 1948, the musical “South Pacific” by Rogers and Hammerstein debuted on Broadway. In 1970, John Wayne won his first and only Oscar for his role in “True Grit.” In 2000, U.S. President Clinton signed the Senior Citizens Freedom to Work Act of 2000. The bill reversed a Depression-era law and allows senior citizens to earn money without losing Social Security retirement benefits. In 2012, broadcast journalist Mike Wallace, a full-time correspondent for the pioneering TV newsmagazine “60 Minutes” from its debut in 1968 until 2006, died at age 93 in New Canaan, Connecticut.
SURVEY SAYS: Tax Refunds
Last week, I asked NewsDash readers if they expected to get a tax refund this year, and if so, what they plan to do with it. The majority of responding readers (57.7%) indicated they file their tax returns on time, but not early or last minute. Nearly one-quarter (24.7%) file their return as soon as they get their W-2(s), while 12.4% wait until the last minute to file. More than seven in ten respondents (71.1%) expect to get a refund this year, and 22.7% do not. Nearly 24% of those who will get a refund reported they will save or invest it. Twenty percent indicated they will use their tax refund to pay on debt, and 15.3% said they will use it for a necessary expense, such as car or home repairs. Nearly 4% will use their tax refund for a discretionary expense, and 1.2% will donate it to charity. More than 16% reported they will use their refunds for a combination of saving, spending or donating. In “other” responses, selected by 20%, responding readers reported they would use their refunds for college tuition or expenses, to offset next year’s taxes or use a refund from state or federal to offset a payment to the other, and “to help cover the premium/tax for my two under-employed college graduates who can’t afford health care.” Many of those who offered comments counseled that getting a refund means you let the government use your money interest-free, but one reader noted “It’s easier to give the government a little extra money each pay period than it is to come up with extra cash by April 15th each year.” Editor’s Choice goes to the reader with some helpful advice about what to do with a refund: “We have a ritual of identifying the debt with the highest interest rate and paying the entire tax refund on that debt. It is liberating! By next year, all we will owe will be student loans. Onward in our quest to be debt-free!!” Thank you to everyone who participated in the survey!
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Editorial: Alison Cooke Mintzer alison.mintzer@strategic-i.com

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