Compliance February 26, 2015

GAO Finds Lump-Sum Information Materials Deficient

The GAO recommends that the Department of Labor require defined benefit plan sponsors to notify the agency when they offer lump-sum payment windows.
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The Government Accountability Office (GAO) says it reviewed 11 packets of informational materials provided by defined benefit (DB) plan sponsors offering lump sums to as many as 248,000 participants, finding that all lacked at least some key information needed to make an informed decision or were otherwise unclear.

GAO identified eight key types of information that participants need to have a sound understanding of a lump-sum offer. While GAO did not review the packets for compliance or legal adequacy, most packets provided a substantial amount of this key information.

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However, the relative value notices were often unclear about how the value of the lump sum compared to the value of the lifetime monthly benefit provided by the plan. Similarly, many packets did not clearly indicate the interest rate or mortality assumptions used, limiting participants’ ability to assess how the lump-sum payment was calculated.

In addition, according to GAO, few of the packets informed participants about the benefit protections they would keep by staying in their employer’s plan—full or partial protections provided by the Pension Benefit Guaranty Corporation if the plan sponsor defaults. GAO says this omission is notable because many participants it interviewed cited fear of sponsor default as an important factor in choosing the lump sum.

GAO noted that participants potentially face a reduction in their retirement assets when they accept a lump-sum offer. The amount of the lump-sum payment may be less than what it would cost in the retail market to replace the plan’s benefit because the mortality and interest rates used by retail market insurers are different from the rates used by sponsors, particularly when calculating lump sums for younger participants and women. In addition, participants who take a lump-sum payment face potential investment challenges, and some may not continue to save their assets for retirement but instead spend some or all of the lump sum.

The GAO recommends that the Department of Labor (DOL) improve oversight by requiring DB plan sponsors to notify the agency when they implement lump-sum windows, and coordinate with Treasury to clarify guidance about the information plan sponsors provide to participants. In addition, GAO suggested the Department of Treasury should reassess regulations governing relative value statements, as well as the interest rates and mortality tables used in calculating lump sums.

The full GAO report may be downloaded from here.

Break from the Grind February 26, 2015

A Little Friday File Fun

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In Milville, New Jersey, a 33-year-old school bus aide complained that someone stole $400 from her. Authorities reviewed surveillance footage from the bus on which she worked, and saw her rummaging through students’ backpacks. She was seen stealing money and food from the three- to five-year-olds she was supervising. The aide has been fired.

In Atlanta, Georgia, researchers at Georgia Tech released results of a study that reveals the perfect eyelash length. According to the researchers, the ideal eyelash length is one-third the width of the eye—, anything shorter or longer than this increases the odds of getting dust and debris in the eye. In addition to analyzing animal hides from the American Museum of Natural History in New York, the researchers constructed a model eye and put it inside a wind tunnel to better understand the reasoning for the dimensions. “Eyelashes form a barrier to control airflow and the rate of evaporation on the surface of the cornea,” said lead study author Guillermo Amador, a researcher in mechanical engineering at Georgia Tech. “When eyelashes are shorter than the one-third ratio, they have only a slight effect on the flow. Their effect is more pronounced as they lengthen up until one-third. After that, they start funneling air and dust particles into the eye.”

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In Augusta, Georgia, a family found out a man buried during a closed-casket funeral in December was not actually their loved one. The Augusta Chronicle quoted Burke County Coroner Susan Salemi as saying the lab didn’t return the man’s body after an autopsy. The body of another man was mistakenly returned and buried by relatives who thought they were laying their loved one to rest. Georgia Bureau of Investigation officials said it will retrieve the wrong body from the grave and pay for a new burial.

In Ottowa, Ontario, Canada, last week, legislator Pat Martin hurriedly ran out of the House of Commons during a vote. As members of Parliament began to rise one by one to vote, he bolted from the room, but was able to return in time to cast his vote. He later blamed his departure on an unwise purchase at a local store. “They had men’s underwear on for half price and I bought a bunch that was clearly too small for me. I find it difficult to sit for any length of time,” he told the chamber to guffaws and applause from fellow legislators, according to Reuters.

In Bogata, Columbia, a 36-year-old woman previously known as Ladyzunga Cyborg (not her original name) has won a court battle to have her name changed. According to UPI, the woman says her government ID card now officially lists her first name as ABCDEFG HIJKLMN and her last name as OPQRST UVWXYZ. She said it took her a year of arguing with the Colombian National Registry to officially get her new name, which she chose for being unusual and hard to pronounce.

 

In Seoul, South Korea, it’s scary enough when a car is swallowed by a sinkhole, but this couple was walking on the sidewalk.

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We all need a dog like this in winter weather.

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YouTube’s 10th anniversary viral video mashup.

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