Compliance May 2, 2008

DoL Offers Free Web Cast on Plan Filing Requirements

May 2, 2008 (PLANSPONSOR.com) - If you're confused about the 5500 reporting requirements, the Department of Labor is ready to offer you some free help.
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The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) will host a free webcast on May 8 to help employers and plan administrators understand and comply with the Form 5500 Series reporting requirements under the Employee Retirement Income Security Act (ERISA).  

According to a press release, this second in a series of webcasts will help employers and plan administrators meet their obligations under ERISA to file timely and accurate financial reports on the operations of pension, health and other benefit plans.   The webcast will address:

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  • ways to avoid common filing errors,
  • how to select the accountant best qualified to audit your plan,
  • what to be aware of when reporting alternative investments, and
  • rules on “blackout notices.”   

The Web cast will also provide important information to 403(b) plan sponsors to help them prepare for expanded filing requirements, and preparing for an audit of the plan.   The Internal Revenue Service will participate in the event to discuss its late and stop-filer program.

The series is being offered as part of EBSA's compliance assistance program - Getting It Right - Know Your Fiduciary Responsibilities - to help employers and plan administrators meet their fiduciary responsibilities and avoid potential civil penalties under the law.

              Webcast on Form 5500 reporting requirements

                Employers and plan administrators

             May 8, 2008

                        Noon to 2 p.m. EST

Registration is required and available on a first-come, first-served basis  HERE

Editor's Note:  If you have trouble accessing the above link, visit EBSA's Web site atand click "Plan Filing Update Webcast" under "Compliance Assistance Seminars." 

Administration May 1, 2008

Should Government Pension Valuations Follow Corporate Pensions' Path?

May 1, 2008 (PLANSPONSOR.com) - While some believe public pension plans should continue their current actuarial methods for calculating liabilities and funding, others argue that the current methods do not give a true picture of a plan's financial status as market-based calculations would.
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Andrew D. Wozniak, CFA, ASA, Director of Research and Analysis with BNY Mellon Pension Services, and Peter S. Austin, Executive Director of BNY Mellon Pension Services, explained in a report issued by BNY Mellon that “many financial economists believe that public pension plan liabilities should be valued the same way financial markets value the debt of governments.” These critics of the current actuarial methods of public pension funds believe the use of a discount rate, asset smoothing, and varied cost methods – actuarial methods eliminated in the valuation of private pension plans by recent regulations  – understates public funds’ liabilities, distort real asset and liability values, and make comparisons with other plans challenging.

However, advocates of the current system point out that unlike corporations, governments exist permanently, do not have the threat of bankruptcy, and have an unlimited ability to tax or print money to fund obligations, according to the report. These advocates claim market-based valuations are irrelevant and would be challenging or misleading because:

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  • Certain actuarial cost methods do not define and accrued liability,
  • Estimated future benefit payments are not known with certainty due to uncertainty of actuarial assumptions (e.g. mortality, future salary increases, future cost of living increases, and withdrawal and retirement assumptions), and
  • A lack of matching assets for a pension commitment, such as a 50-year inflation-indexed bond.

Advocates of the current public pension valuation methods warn that the disclosure of a market-based liability could result in unfavorable changes in the public plan landscape as has been experienced in the private defined benefit plan world. Stakeholders could notice a 20% – 40% increase in liability values, leading to reports of serious funding deficiencies, leading policy-makers to freeze benefits or switch to defined contribution plans, and ultimately leading to a less secure retirement for public employees, the report said.

Wozniak and Austin suggest a compromise between the old valuation methods and those similar to what private pension plans are moving to. In their scenario, assets would be reflected at market value as of a valuation date, a uniform actuarial cost method would be used for every public pension plan, and two liability measures would be used: market liability and ongoing liability.

The report authors say that the traditional valuations based on an actuary’s best guess should be replaced with an annual probabilistic valuation looking at a range of possibilities and their likelihood. In the authors’ suggested scenario policy-makers would specify in advance what ongoing and market funding ratio thresholds would be required to increase benefits, and governments would reflect the market values of assets and liabilities on their balance sheet.

Finally, Wozniak and Austin warn that a change in valuation methods would require governments to educate the media and stakeholders that lower funded status ratios do not necessarily indicate a plan is in trouble and to emphasize a plan’s ongoing funding.

The report, U.S. Public Pensions At a Crossroad: Which Way Forward?, is here .

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