Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
September 23rd, 2014
Benefit Briefs
PLANSPONSOR Covers 40 Years of ERISA
Forty years ago this month, Congress passed and President Gerald Ford signed into law the Employee Retirement Income Security Act (ERISA)—a law created to protect employees entitled to benefits in private-sector retirement plans and group welfare plans. PLANSPONSOR offers a timeline of some ERISA developments over the past 40 years, and we spoke to various industry insiders—including one who was present at the act’s signing—about the importance of ERISA and its evolution.Read more >
Economic Events
After four consecutive months of gains, existing-home sales slipped in August as investors paying in cash retreated from the market, according to the National Association of Realtors. Sales increases in the Northeast and Midwest were outweighed by declines in the South and West. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.8% to a seasonally adjusted annual rate of 5.05 million in August from a slight downwardly revised 5.14 million in July. Sales are at the second-highest pace of 2014, but remain 5.3% below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013.
Market Mirror
Yesterday, the Dow was down 107.06 points (0.62%) at 17,172.68, the NASDAQ fell 52.10 points (1.14%) to 4,527.69, and the S&P 500 closed 16.11 points (0.80%) lower at 1,994.29. The Russell 2000 lost 17.56 points (1.53%) to finish at 1,129.36, and the Wilshire 5000 decreased 211.51 points (1.00%) to 21,008.37. On the NYSE, 3.2 billion shares changed hands, with declining issues outnumbering advancing issues nearly 5 to 1. On the NASDAQ, 2.8 billion shares traded, with a near 4 to 1 lead for decliners. The price of the 10-year Treasury note increased 4/32, bringing its yield down to 2.563%. The price of the 30-year Treasury bond was down 2/32, increasing its yield to 3.288%.
Rules & Regulators
Lawmakers Hear Suggestions for DB Plans
Making sure valuations are correct, addressing multiemployer plan problems and providing relief for closed plans were among suggestions made by witnesses for a hearing about defined benefit (DB) retirement plans.Read more >
Ensuring You Have a High-Quality Plan Audit
Retirement plans with more than 100 employees eligible to participate must include a plan audit with their annual Form 5500 filing to the Department of Labor (DOL). According to David M. Kot, partner at Wolf & Company in charge of the firm’s Employee Benefit Plan Sponsors Services Group, the DOL is investigating auditors to make sure they are performing quality audits. But, he noted, the department has no authority over auditors, it can only report them. Kot told attendees of the 2014 Plan Sponsor Council of America (PSCA) Annual Conference that plan sponsors have ultimate responsibility for making sure the audit is performed and is a high-quality audit. “A simple mistake and the DOL could say, ‘This is not a valid audit,’ and the Form 5500 is not complete, and the plan sponsor would be subject to lots of fines,” he said.Read more >
Senators Introduce DB Nondiscrimination Legislation
U.S. Senators Ben Cardin (D-Maryland) and Rob Portman (R-Ohio), both members of the Senate Finance Committee, have introduced the Retirement Security Preservation Act (S. 2855), designed to remove possible incentives for companies to hard-freeze the defined benefit (DB) plans of long-time employees or otherwise refrain from providing compensating benefits for employees whose plans have been frozen. In a letter sent to the Secretary of Treasury last year, Cardin and Portman pointed out that nondiscrimination testing required to qualify a DB plan for tax-deferred status under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) makes it difficult for companies to enact soft freezes on pension plans—even though soft freezes can result in better retirement outcomes for employees than simply closing a pension plan outright. The problem is that, over time, grandfathered employees in the old system typically build seniority and become more highly compensated than younger workers entering into a company’s defined contribution (DC) plan. This widens the income gap between the two groups and inadvertently increases the likelihood that the DB plan will fail to meet nondiscrimination standards.Read more >
IRS Issues Guide for Retirement Plan Reporting
The Internal Revenue Service (IRS) has created a guide for retirement plan sponsor reporting and disclosure responsibilities.Read more >
Small Talk
ON THIS DATE: In 1642, the first commencement at Harvard College, in Cambridge, Massachusetts, was held. In 1846, German astronomer Johann Gottfried Galle discovered the planet Neptune at the Berlin Observatory. In 1962, “The Jetsons” premiered on ABC-TV. It was the first program on the network to be carried in color. In 1972, “Baby Don’t Get Hooked On Me” by singer-songwriter Mac Davis reached the top of the American pop charts. In 1998, Jamie Lee Curtis received a star on the Hollywood Walk of Fame. In 1999, the magician team Siegfried & Roy received a star on the Hollywood Walk of Fame.   TUESDAY TRIVIA: Siegfried was performing magic shows on a cruise ship when one night, after deciding he needed an assistant, he grabbed a steward boy on the stairwell as he was running down to start the show. And, the duo Siegfried & Roy began.
TRIVIAL PURSUITS: Who was the first woman to run for U.S. President?Read more >
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