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A major change to correction procedures provides much needed relief for sponsors

April 20th, 2015 No comments

Jakobe-KariOn April 2, the Internal Revenue Service (IRS) rolled out major changes to the correction methods related to failure to implement automatic enrollment or to having missed participant-elected deferral changes.

Previously, the prescribed correction in the Employee Plans Compliance Resolution System (EPCRS) was for the employer to make up 50% of the missed deferrals and 100% of the match, plus earnings on both. This was often a windfall for participants and penalty for sponsors that deterred many from adopting auto-enroll provisions in their plans.

There are now two new safe harbor corrections: one for plans with auto-enroll provisions, another for faulty elective deferrals. The general guideline of the new correction methods are as follows:

For plans with auto-enroll features:
• If the failure is found within nine months of the plan year-end in which the auto-enroll should have begun:
o Start the deferral immediately
o Send a notice of the failure to the participant
o 100% of any missed match is made up and adjusted for earnings

• If the failure is found outside the nine-month window following the plan year-end, the old procedure remains in place.

For other elective deferral changes that are not completed as requested by the participant, if the failure is found within three months:
• Start the deferral immediately
• Send a notice of the failure to the participant
• 100% of any missed match is made up and adjusted for earnings

If found after three months from the date the change was to be effective:
• Start the deferral immediately
• Send a notice of the failure to the participant
• 100% of any missed match is made up and adjusted for earnings and the participant must receive a qualified non-elective contribution (QNEC) in the amount of 25% of the missed deferral, plus earnings

For a more detailed explanation on the new regulations, see the recent Client Action Bulletin published by Milliman.

March 15 alert: Ides of March is a 409A fateful day for employers’ bonus programs

March 11th, 2015 No comments

Pizzano-DominickJust as ignoring the seer’s warning to “Beware the Ides of March” led to Julius Caesar’s demise on that fateful March 15, employers with calendar fiscal years must be wary of this date. Otherwise, when they distribute their bonuses, they may find the payments falling victim to a similarly highly undesirable outcome—becoming subject to Internal Revenue Code Section 409A. It is true that 409A, the now infamous rule that so strictly regulates the time and form of payment of nonqualified deferred compensation, includes a helpful exemption for “short-term deferrals.” However, to qualify for this “get out of 409A free” card, a payment must be made on or prior to the 15th day of the third month (i.e., March 15 for calendar fiscal years) following the end of the employees’ (or, if later, the employer’s) taxable year in which the bonus amount is no longer subject to a “substantial risk of forfeiture” (SROF).

Payment of the bonus is considered subject to a SROF if the employees only earn the right to payment once they have completed a specified number of years of service and/or met certain performance goals. Once such conditions are met, employees are considered to be “vested” in the benefit (i.e., entitled to the payment when it is made regardless of their employment status on the payment date). Employers sometimes add an extra condition by attaching a noncompete restriction under which employees forfeit the bonus if they terminate employment and enter employment with one of the employer’s competitors prior to the payment date. However, the inclusion of such a restriction is not recognized by the 409A rules as sufficient to create a SROF.

The following two examples illustrate how these rules are applied to employers with calendar fiscal years. Under the first scenario, the employer awards annual bonuses based on both the employer’s financials and the employees’ individual performances. Payment of the bonus is scheduled to be made in the first quarter of 2015 as soon as administratively practicable following the determination of the amounts. Participants must actually be employed with the employer on the payment date to receive the bonus. Because of this “active employment on payment date” requirement, the employees never become vested in the benefit until the actual payment date. Therefore, employers with this design need not be concerned about missing the March 15 payment deadline.

In contrast, assume the same facts as the previous example except that in order to receive the bonus payment made in 2015, the employees must be employed on December 31, 2014, and must not violate a noncompete agreement prior to the payment being made. Because 409A does not recognize the noncompete condition, the vesting occurs in 2014. Consequently, in order to avoid 409A coverage, the bonus must be paid by no later than March 15, 2015, unless one of 409A’s limited late payment exceptions applies: (1) an unforeseen administrative delay, (2) the need to retain such funds because their disbursement would jeopardize the employer’s ability to continue as a going concern, or (3) the employer reasonably anticipating that its deduction of the bonus will be subject to the $1 million Internal Revenue Service (IRS) deduction limit (and the employer did not reasonably anticipate the application of Section 162[m] when the bonus award was originally made). Each of these three exemptions will only be considered valid if the employer promptly makes the delayed bonus payment as soon as the applicable cause for the delay no longer exists.

What happens in the case of a bonus plan where the amounts were vested in 2014, the March 15 payment deadline is missed, and none of the three exemptions are available? Does 409A coverage automatically spell doom in the form of noncompliance and the corresponding penalties? The good news is that it’s possible to structure bonus plans so that they comply with the 409A rules. So for any employer that currently has a bonus program that needs to meet the March 15 deadline (i.e., those programs that vest employees in the prior year), it’s crucial to examine their current bonus determinations and delivery processes. Does the employer have any intrinsic procedures (i.e., thereby eliminating the “unforeseen” exemption) that could cause the program to pay bonuses later than March 15 more than just on a one-time accidental basis? If the answer is “yes,” the employer should consult with its employee benefits specialist to review such bonus programs to make sure it is covered by a compliant 409A document so that even if the payment date is missed and the “short-term deferral exemption” blown, the bonus payment does not violate 409A, thereby risking the costly consequences of such noncompliance. One does not need to be a seer to know that to do otherwise would tempt the fates of the Ides of March, which history has shown never to be sound policy whether for emperors or employers.

Putting a stop to retirement plan leakage

March 3rd, 2015 No comments

Moen-AlexThe Center for Retirement Research at Boston College recently published a study that found in-service withdrawals (partial withdrawals and hardships) and cash-outs were the main reasons for leakage from 401(k) plans and IRAs. Leakage refers to the erosion of assets in retirement accounts—approximately 1.5% of retirement plan assets “leak” out every year. This can potentially lead to a reduction in total retirement assets of 20% to 25% over an employee’s working years. The phenomenon is the result of the gradual change in retirement funding vehicles over time from predominantly defined benefit plans to defined contribution plans and, in recent years, IRAs.

The impact of this 1.5% leakage is easier to grasp when the total dollar amount involved is known. The Investment Company Institute’s quarterly reports show the following numbers. Consider the total assets affected and the significance of that annual number.

U.S. assets in retirement plans

401(k) plans have three main sources of leakage:

In-service withdrawals: In-service encompasses one of two options: a hardship withdrawal or a withdrawal at age 59½. Hardships can be taken based on proof of an immediate financial need, but they are subject to an early 10% tax penalty (if applicable) on top of the required 20% federal tax and they force a participant to cease deferrals for six months. Hardships also require participants to use up their loan resources first. By the time a participant is eligible for a hardship, the account has been severely depleted. In-service withdrawals allow an active employee who has reached the age of 59½ to remove funds from the account without the 10% penalty. These age 59½ withdrawals are on the rise and the leakage arises when the funds are not rolled over. It is estimated that only about 70% are, in fact, rolled into an IRA.

Loans: Approximately 90% of actively working individuals enrolled in a retirement plan have access to some type of loan. While loans get a bad rap, they are not the leading offender in terms of leakage, but there is still some asset loss. If loans are repaid in a timely manner, the withdrawal is not taxed, but the employee no longer has the ability for gains on those assets during the repayment period. And while the participant has an obligation to repay, that does not always happen. When the loan has defaulted, it is deemed a distribution and is then subject to tax withholding.

Cash-outs: Cash-outs are the act of automatically paying out terminated participants below a certain threshold; for balances of $1,000 or less, checks are cut, whereas balances between $1,000 and $5,000 require a rollover to an IRA. And while plan sponsors do have a say in the dollar threshold and the timetable for cash-outs, virtually every 401(k) plan has this rule.

Looking at defined contribution plans only, withdrawal activity has increased slightly over the last three years, while hardships have remained steady. These numbers may seem small, but they do not include IRAs, which are considerably harder to track. And because IRAs lack the same rules as defined contribution plans, estimates suggest the percentages are much higher.

Source: Investment Company Institute

Source: Investment Company Institute

The Federal Reserve’s 2013 Survey of Consumer Finance presented some scary results—workers between the ages of 55 and 64 had average assets of only $111,000. What’s more, assets in IRAs have surpassed assets in defined contribution plans. Looking at the numbers above for third quarter 2013 and 2014, IRAs consistently have 2.5% more in assets than defined contribution plans. IRAs can be risky for long-term retirement funding, if not used correctly, which is due to the lower levels of regulations and the lack of education and promotion to “keep assets in.” A recent Department of Labor report expands on this concern that rolling funds to IRAs puts the worker at the mercy of the investment advisor and asks whether all investment advisors take their fiduciary duties seriously or not. The report discusses what they call “conflicting advice” and estimates the leakage due to this is as high as 12% of an account balance.

There is hope. Some proposals that have been suggested include:

• Raise the age requirement for early withdrawal from 59½ to 62 to match the earliest Social Security retirement age
• Limit balances for in-service withdrawals to only employee contributions
• Tighten hardship rules even more and only allow hardships in case of “unpredictable events,” for both 401(k) plans and IRAs
• Remove cash-outs altogether (this will mostly likely be met with resistance from plan sponsors because small balances can be expensive and burdensome to administer)

Plan sponsors can make many of these adjustments to their individual plans, but these proposals are working to ensure that the goal of preparing workers for retirement stays in sight.

New Year’s resolutions for retirement plan sponsors

January 8th, 2015 No comments

For many, a new year usually means a fresh start. With that thought in mind, Milliman’s Jinnie Olson provides 401(k) plan sponsors 10 ideas that can help them administer their plans more effectively in 2015. Below are her 10 ideas.

1. Create administrative procedures and internal controls—and follow them.
2. Make sure changes to your operating procedures are well documented.
3. Audit your data.
4. Transmit contributions in a timely manner.
5. Establish a retirement committee.
6. Understand plan fees.
7. Audit your service providers.
8. Conduct an annual plan review.
9. Establish success measures.
10. Establish a strategy for the upcoming year.

Read Jinnie’s article “Top 10 New Year’s resolutions for plan sponsors of retirement plans” for more perspective.

ERISA fee litigation: Is my plan at risk?

December 23rd, 2014 No comments

Skow-KevinSome plan sponsors may have wondered, upon reading about the recent $140 million settlement in the Haddock v. Nationwide case and the $1.3 billion settlement in the Lockheed Martin case, if their plans could be susceptible to an ERISA case over excessive fees. Here are a few things to consider in light of these recent settlement announcements:

Vendor transparency. Understanding fees should not be difficult—as long as you have a vendor or advisor that is transparent in the total revenue it expects to receive and as long as you know the expense of the investment products you have available for participants to invest in.

Service provider expenses. Think of anyone who may do work for you—an attorney, a contractor, a cleaning person. They bill you at an hourly rate. That comes to an annual amount. The same idea should be true within your retirement plan: You want to know who is working for you and what you are paying them, and you especially want to know whether it is a flat annual fee, a per-head fee, or a percentage of your plan’s assets. After all, you wouldn’t agree to hire attorneys and then give them access to your bank account to pay what they saw fit. And sometimes, with a better view of total revenue, it becomes evident that a “cheaper” provider may not mean a better provider when you are then able to evaluate the services and level of service you are receiving.

Investment expenses. Investment expenses must be included in your understanding of plan fees. Your investment products within the plan have fees that are required to be disclosed. For example: Fund A charges 76 bps and shares back 25 bps (or 0.76% with a 0.25% paid back to the plan). Do the math and apply their fee to the assets you have in their product—this is their projected revenue for the year—less any revenue sharing if they pay this.

Example Investment Expense Calculation:

Sample Investment Expense - Skow blog

Note, this fee is not deducted from your account balance—it is taken out of what would otherwise be your return. And if you lose money, you still pay this on top of it and so do all of your participants.

Revenue sharing. Revenue sharing should be easy to understand. It should be disclosed to you and should be going back to your plan in the form of an ERISA budget and used for the benefit of plan participants. We help our clients understand this by calculating the expenses for them and forecasting the fees and shared revenue, which may move the client to consider another share class that does not pay revenue sharing (or keeping a class that does because the net effect of the shared amount is financially advantageous). If revenue sharing exists, as it does in most plans to some extent, the discussion should then be about what to do with it. Should you allocate back to those participants in the plan that generated the revenue in the first place—or use it to pay hard-dollar expenses that are allowed under the plan? See my colleague’s recent series of articles with his insight on this issue.

Year-end balances. A note to the wise: Having expensive funds that generate large sums of revenue sharing to pay for these expenses in a given plan year—but that leave a balance carryover to the next plan year—is an issue that will come up in an audit (if it hasn’t already).

Total cost. After understanding the fees, plan sponsors should address how costs may be affected by participation, plan design, usage, or fund allocation.

Answers. Perhaps most importantly, if someone were to call you and ask what exactly he is paying for when participating in this plan, you would have an answer that could help him make an important decision when it becomes time to retire.

For example: In the chart above, this $30 million plan has a weighted expense ratio of 54 bps. Let’s assume the total administration expense (all service providers: recordkeeper, trust company, advisor, auditor) is $80,000 (or ~27 bps) and those fees are paid for on a pro rata basis by all plan participants.

This plan’s total annual expense would be estimated as follows:

Investment expense: .54%
+ Vendor expenses: .27%
(-) Revenue sharing: (.22%)
_____________________
Total: .59%

The size of the recent settlements lends perspective on how big of an issue fees can become for a plan sponsor. Sponsors that attend to the principles outlined in this blog—and work with their vendors to build transparency around these issues—can avoid becoming a statistic.

Picturing potential IRS penalties on audit, NDCP sponsors should seek selfies

November 13th, 2014 No comments

Pizzano-DominickAfter taking a selfie, the photographer/subject can examine the resulting image before deciding to share it. If the image is not satisfactory, appropriate adjustments can be made before others have the chance to view it. This same principle applies to nonqualified deferred compensation plans (NDCPs) with all the complex rules governing them and the costly consequences of noncompliance. Why risk the executive or sponsor being subjected to the paparazzi-like blitz of an Internal Revenue Service (IRS) audit, which could capture an unflattering candid shot of the plan’s operation? Wouldn’t it make more sense to take a selfie of the plan (i.e., conduct a self-audit) so that any operational blemishes may be fixed before seen through the unforgiving lens of an IRS audit? Encouraging such selfies, the NDCP operational correction procedures issued by the IRS generally provide that the quicker any errors are caught and corrected, the better the chances are of minimizing or even eliminating negative tax results for the affected participants.

While the sponsor may incur some cost in conducting a self-audit of its NDCPs, failing to find and promptly correct operational errors could potentially be even more expensive. IRC Section 409A violations can result in substantial tax penalties for the affected participants. The nonqualified deferred compensation (NDC) in question becomes fully taxable as soon as the participant has a vested (nonforfeitable) right to receive it. Furthermore, a 20% additional tax penalty on the value of the NDC will be imposed at the same time and, under certain circumstances, an interest charge will be imposed. Beyond the 409A ramifications, there may be other tax penalties for under-withholding if, for example, the applicable Federal Insurance Contributions Act (FICA) tax is not paid when due.

Maintaining operational compliance and correct reporting of amounts deferred to and distributed from their NDCPs poses a significant challenge for many sponsors who, while well-versed in qualified plan administration, do not have the same level of expertise available internally when it comes to the various and sometimes subtle differences presented by NDCPs. Just three of the plethora of potential pitfalls:

(1) Timely distributions: Most distributions from qualified plans do not occur until a participant elects to commence the benefit. The sponsor typically starts the process by sending an election package requesting the participant to make an election on the timing and form of the distribution. If no such election is made, it’s not uncommon for the benefit to be deferred in the plan. In contrast, there’s considerably less flexibility regarding the participant’s ability to choose the timing and form of distribution in NDCPs. Once the distribution triggering event occurs, the 409A compliance clock begins ticking and failure to transfer the applicable funds to the participant on a timely basis produces a 409A failure. It’s essential for sponsors to accurately track these distribution dates and stress to participants the importance of making sure the sponsor always has up-to-date instructions on where to send payments (especially in cases where participants terminate employment long before payment is due). A self-audit can determine if the current procedures are ensuring that all distributions are commencing in accordance with the plan’s terms.

(2) FICA calculation: While federal and most state income tax rules typically permit participants in a 409A-compliant NDCP to defer taxation until distribution, FICA taxation timing rules may require earlier inclusion in income. One of the most common omissions occurs in defined contribution style NDCPs that feature both executive deferrals and employer allocations. FICA rules require amounts deferred under these plans to be taxed when vested. Employee deferrals are 100% immediately vested and thus generally processed correctly (i.e., they are run through payroll and FICA tax procedures at that time). However, because employer allocations are treated separately and often subject to a vesting schedule, they can be overlooked and not properly FICA taxed once vesting occurs. A self-audit ascertains whether or not deferred amounts are being FICA taxed when due.

(3) W-2 reporting and withholding: There are separate, specific instructions and guidance that apply to which boxes need to be completed and what amounts should be entered on W-2 forms in order to properly report NDCP deferrals and distributions. NDCP sponsors must be extremely careful to not only accurately communicate the terms of their NDCPs to their payroll providers but also to review a provider’s initial withholding/report setup for the plan. Failure to address this during the initial stages can result in a wide range of negative tax consequences for participants. In addition to possibly triggering 409A violations, if amounts are not accurately reported, the participant may be overtaxed, under-taxed, and/or have their Social Security benefits adversely affected. A self-audit can compare the amounts currently being reported on W-2 with the supporting plan materials (e.g., election forms, benefit statements, salary information) to assure proper agreement.

NDCP sponsors would need a photographic memory to retain every nuance of the 409A rules, the FICA tax implications, and the reporting/withholding requirements. The preceding information represents just a very small snapshot of some of the issues that illustrate the need to self-audit. However, it is important to note that if the sponsors do not have the internal expertise in these areas, they should strongly consider seeking consulting advice to identify any and all imperfections so as to make sure that their selfies produce a pretty plan picture.

Nondiscrimination testing: Minimum allocation gateway

November 11th, 2014 No comments

Peatrowsky-MikeA defined contribution (DC) plan can test on a benefits basis if it meets any of the following criteria:

• Provides broadly available allocation rates
• Provides age-based allocations
• Provides a minimum allocation gateway to non-highly compensated employees (NHCE)

A plan satisfies the minimum allocation gateway test if each NHCE has an allocation rate, which is determined using Internal Revenue Code (IRC) Section 414(s) compensation, that is at least one-third of the highest allocation rate of any highly compensated employee (HCE) participating in the plan.

Alternatively, a plan is deemed to satisfy the gateway test if each NHCE receives an allocation of at least 5% of the employee’s IRC Section 415 compensation. Therefore, a DC plan designed to provide a minimum allocation of at least 5% to NHCEs will always be eligible to be cross-tested for nondiscrimination testing.

Aggregated DB/DC plans
To satisfy the minimum gateway for an aggregated defined benefit (DB)/DC plan, each NHCE must have an aggregate normal allocation rate (ANAR) that meets the following requirements:

Nondiscrimination testing graph

Instead of using each NHCE’s equivalent allocation rate under a DB plan in calculating the aggregate allocation rate, it is permissible to use the average of the equivalent allocation rates of all NHCEs benefiting under the DB plan.

Who must receive the minimum allocation gateway?
Employees who receive a safe harbor nonelective contribution, a top-heavy minimum contribution, or a qualified nonelective contribution (QNEC) must receive a minimum allocation gateway contribution, unless they are separately tested under 401(a) as part of a disaggregated group.

If you have questions regarding the minimum allocation gateway, please contact your Milliman consultant.

The Supreme Court, Tibble, fees, and the statute of limitations

October 24th, 2014 No comments

Smith-SuzanneEarlier this month, the U. S. Supreme Court decided that it will review a case relating to retirement plan fees. Although it is a case about fees, the issue before the Supreme Court is really about ERISA’s six-year statute of limitations.

Background about the case. Plan participant Glenn Tibble brought a lawsuit against his employer, Edison International, and the company’s benefits and investment committees as fiduciaries and administrators of his defined contribution (DC) plan. Tibble claims the plan fiduciaries managed the plan imprudently by selecting retail mutual funds as retirement plan investments when institutional shares were available at a much lower cost to participants.

The lower courts found that the fiduciaries were imprudent in selecting retail-class shares and failing to investigate alternative institutional-class mutual funds.

The problem for Tibble is that some of the retail-class funds were added to the retirement plan more than six years before Tibble filed the lawsuit.

The courts have held that although the fiduciaries were imprudent with the selection of the retail-class shares, Tibble’s claim with respect to funds selected more than six years before the lawsuit is barred by ERISA’s six-year statute of limitations.

Current issue for the Supreme Court review. Now the Supreme Court has agreed to review the statute of limitations issue.

Tibble’s argument, which is supported by the U.S. Department of Labor, is that there is a continuing duty to monitor the plan investments. As a result, Tibble thinks his claim should not be time-barred under the theory that there is a restart of the six-year period with the ongoing failure to monitor the plan’s investments. This is a frightening thought for employers!

Prior court decisions have sided with the fiduciaries and found that the six-year period runs from the initial selection of the investment. While there is a duty to monitor the plan’s investments, the courts have been reluctant to permit a new limitations period for a continuing violation. The Ninth Circuit said it would lead to an “unworkable result” where present fiduciaries could be liable for decisions made by their predecessors decades before.

So what are the takeaways for plan fiduciaries? On the fee issues, if you are selecting retail type mutual funds, you need to consider alternative institutional-class mutual funds and document your decision.

With respect to the statute of limitations, we should have the Supreme Court decision by the end of June 2015. For plan fiduciaries, the decision will be an important ruling on the meaning of ERISA’s six-year statute of limitations and the future liability for plan sponsors.

Tibble vs. Edison: What will it mean for plan sponsors and fiduciaries?

October 16th, 2014 No comments

Conkel-DouglasThe U.S. Supreme Court has agreed to rule on the Tibble vs. Edison case, the first case in front of the Supreme Court dealing with excess fees within a qualified defined contribution (DC) plan, e.g., a 401(k) plan. In this case the plaintiff contends there was a fiduciary breach of duty by Edison because the plan continued to use retail share class funds when lower-cost share classes became available to the plan as it grew. However, the focus of the ruling may not focus on the excess fee component but more on the six-year statute of limitations under ERISA (the U.S. law that regulates qualified retirement plans and fiduciary responsibilities). The statute of limitation under ERISA is designed to prevent fiduciaries from never-ending risks arising from historical decisions. Congress specifically added this limitation to try to minimize the burden of a 401(k) plan to plan sponsors. For this reason, the scope of the ruling may be limited to the statute of limitations rather than specifics on the fee issue. However, this ruling will be significant in light of the $4.2 trillion in 401(k) plan retirement assets.

Ultimately, the Supreme Court’s ruling and comments could have a large impact on future litigation concerning participant grievance against plan sponsors—we will have to wait and see. Regardless of the ruling, this increased attention will hopefully promote more education and development of best practices when it comes to plan sponsors truly understanding their fee arrangements within their qualified plans. As an active relationship manager ensuring that my clients completely understand their “total” fee structure, there has been a focused effort on my part toward that end the last several years. I have written a couple of white papers discussing elements of qualified plan fees, which often are overlooked or not discussed in detail at the fiduciary/advisor/provider level:

Fees: What everyone is NOT talking about!

Fees: What no one is talking about, round 2

One of the fee elements I discuss in detail is the administrative fees (revenue sharing) embedded in the plan’s investment options. It often feels as if sponsors focus on implicit administration fees when usually 70% or more of the plan’s total cost comes from the expense ratios of the plan’s investment options. One important best practice is to ensure that any revenue sharing embedded in a fund’s expense ratio is used to benefit the participants invested in that fund (not at the plan level but to benefit the participants who actually pay that revenue-sharing amount via the expense ratio). This is referred to as “fee-leveling” and while it is becoming a best practice there are still a large number of sponsors who don’t understand the issue and simply don’t know the solutions.

Assuming that a plan levels fees by giving the participants in a fund the benefit of that fund’s revenue sharing, then once an investment option is chosen for a plan’s fund lineup selecting the share class of that fund becomes an easy choice. The sponsor simply needs to select the share class that provides the lowest net cost to the participant. In the example below, assume that a plan sponsor levels fees by taking any revenue sharing paid by an investment option and crediting that back to the participants in that fund as a revenue-sharing expense reimbursement (a credit).

Figure 1: Fund A, Various Share Classes

Expense Ratio Revenue Sharing Net Cost to Participant
Share Class A 0.75% 0.30% 0.45%
Share Class I 0.50% 0% 0.50%

In the example above, for this plan at its current provider, the lowest net cost to participants (once the revenue sharing is allocated back to participants in this fund) would be the Share Class A. This is not always the result, depending on the fund family and share classes. Sometimes, there is no difference in net cost so the conclusion would be to go with the zero revenue-sharing class so the plan doesn’t have to do a revenue-sharing credit allocation.

As this case progresses we will post more comments and updates, but, for now, I encourage sponsors to study up on their plan’s fee arrangements, fee-leveling, and other best practices within the industry. Sponsors should not rely too much on their current providers or advisors if some of the topics discussed above have never been mentioned in a retirement committee meeting, as they might lack the insight required to do a complete evaluation.

Facts sponsors need to know about reducing pension risk

October 8th, 2014 No comments

Many companies are looking for ways to reduce the risk and volatility associated with defined benefit (DB) pension plans. Factors such as low interest rates, increases in Pension Benefit Guaranty Corporation (PBGC) premiums, and new mortality tables have sponsors considering de-risking measures.

In a recent Institutional Investor webcast (registration required) Milliman’s John Ehrhardt hosts a panel discussion with Prudential consultants Scott Kaplan and Rohit Mathur addressing five common misconceptions that may deter sponsors from reducing their pension risks.

This webcast was sponsored by Prudential Retirement.

For more Milliman perspective on de-risking DB plans, click here.