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Would’ve, Could’ve, Should’ve

Would’ve, Could’ve, Should’ve

August 29, 2014

Authored by: benefitsbclp

Tatum v. RJR Nabisco Investment Committee, decided by the Fourth Circuit on August 4, involved the divestiture of the Nabisco stock funds following spin off of Nabisco.  Some 14 years after Nabisco and RJ Reynolds merged to form RJR Nabisco, the merged company decided to separate the food and tobacco businesses by spinning off the tobacco  business.  Following the spinoff, the RJR 401(k) plan, which was formed after the spinoff, provided for the Nabisco stock funds as frozen funds, which permitted participants to sell, but not purchase, Nabisco stock.

Although the Plan document provided for the Nabisco stock funds, RJR decided to eliminate the funds approximately 6 months following the spinoff.  The decision was made by a “working group” of several corporate employees and not by either of the fiduciary committees appointed to administer the Plan and review its investments.

Phased Retirement: Another “Do As We Say, Not As We Do” Moment

Retire at 65This recent Reuters article paints a rosy picture of the phased retirement offering that the federal government is extending to its employees.  It sounds like a great win-win.  The government saves money; employees get to continue to save for retirement, but also get to cut back on hours.

However, the article goes on to lament the “slow” employer response:

Worker interest in a flexible glide path to retirement is strong, and it’s not limited to the federal payroll. A survey this year by the Transamerica Center for Retirement Studies found that 64 percent of workers – of all ages – envision a phased retirement involving continued work with reduced hours….

The Society for Human Resource Management reports that 11 percent of employers provide some version of phased retirement, with only

Hobby Lobby Fallout, Part 2 (With An Expanded Non-Profit Twist)

August 27, 2014

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Hobby Lobby Fallout, Part 2 (With An Expanded Non-Profit Twist)

August 27, 2014

Authored by: benefitsbclp

The so-called “contraceptive mandate” saga continues.  Since the passage of the ACA in Spring 2010, its preventive care requirement mandating coverage of all FDA-approved contraceptive drugs, devices, and related services – and at no cost to women – has been a point of controversy for non-profit religious organizations and closely held businesses, as we have discussed previously.

Although the government attempted to settle the matter for religious institutions by creating an  “accommodation” in final regulations issued in July of 2013, certain entities – both non-profit and for-profit – continued their challenges.  The final regulations provided non-profit group health plan sponsors that hold themselves out as religious organizations and that have religious objections to contraceptive coverage (called an “eligible organizations”) an alternative to offering the contraceptives to which it objects.

However, the alternative required completing and mailing a “self-certification” to the sponsor’s insurer that acts as a

Something Else to Concern Plan Fiduciaries – The Floating NAV Rule

Floating DollarAccording to the Investment Company Institute, approximately 18%% of all mutual fund assets are invested in money market mutual funds.  An even higher percentage reflects the investment in money market mutual funds held by participant-directed defined contribution plans.  Many of these plan participants believe that their retirement money is “safe” in a money market mutual fund since these funds are thought to be “guaranteed” to maintain a fixed target value of $1.00 per share.  Plan participants do not, as a rule, appreciate the risks inherent in money market mutual funds that in certain market conditions might “break the buck.”

On July 23, 2014, the SEC promulgated a rule (the “MMF Rule”) addressing what it believes could be heavy redemptions of money market mutual funds in the event of

Upcoming Equity Plan Proposal? ISS Invites U.S. Companies to Verify Equity Plan Data

Institutional Shareholder Services, or ISS, invites U.S. companies to verify the data it uses to evaluate proxy statement equity plan proposals.  ISS previously announced a move to a “balanced scorecard” approach for its evaluation of equity plan proposals.  Data verification is included as a key feature of this approach.

Data verification allows companies to preview, and if necessary update, the data used by ISS in its vote recommendation.  Some companies have been frustrated when reviewing ISS vote recommendations that include inaccurate or misconstrued data.  This program is designed to improve the quality of information used by ISS.  See “FAQs:  Equity Plan Data Verification” for details about the program.  Below is a summary of some key features:

How to Participate

  • The data verification program is optional.
  • It is open to U.S. companies who have filed definitive proxy materials after September 8th, 2014 with an equity plan proposal (new

Have Missing Participants? The DOL Says, “Google Them!”

Missing PersonsLast week, the DOL released Field Assistance Bulletin 2014-01 which updated its 10-year-old guidance on how to deal with the accounts of missing or unresponsive participants and beneficiaries in a terminating defined contribution plan that does not have annuity options.  The 10-year-old guidance was largely rendered moot because of the discontinuance of the Social Security Administration and IRS letter forwarding programs, which were prominent features of that guidance.

The DOL takes this seriously.  As the FAB notes:

Some search steps involve so little cost and such high potential for success that a fiduciary should always take them before abandoning efforts to find a missing participant, regardless of the size of the participant’s account balance. The failure to take such steps would violate the fiduciary obligations of prudence and loyalty, as

Smoothing Pensions to Smooth Highways

Last Friday, the President signed the highway trust funding bill.  One part of the debate over the bill was how it would be funded.  Ultimately, the bill was paid for using  so-called “pension smoothing” that some decried as a “gimmick.” But what is it and might it be beneficial?

Pensioners Driving on the HighwayTo understand smoothing, we have to first understand how pension plans are funded.  Pensions are typically funded with company contributions.  Put simply, the amount of these contributions are determined by an actuary based on the expected future benefits to be paid (i.e., the future liability) relative to the amount of assets already in the plan.

Because actuaries don’t have crystal balls, they have to make certain assumptions in making these calculations. The assumptions center around the anticipated

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