Headlines about "Distributions - misc"
Gathered from the web by the editors at BenefitsLink.com.
[Guidance Overview] IRS Issues Final Regulations under Code Section 436; Single-Employer Defined Benefit Plans Affected (PDF)
At page 5. Excerpt: "On October 15, 2009, the Internal Revenue Service published final regulations construing the new funding and benefit restriction requirements applicable to single employer defined benefit plans for plan years beginning after December 31, 2009, under Internal Revenue Code ('Code') sections 430 and 436. . . . This article highlights some of the key provisions of the final regulations governing the benefit restriction provisions of Code section 436." (Trucker Huss)
[Guidance Overview] Notice of Funding-Based Restriction on Lump-Sums Not Required for Participants in Pay Status
Excerpt: "CCH Note: The Treasury Department was authorized by the Worker, Retiree, and Employer Recovery Act of 2008 (P.L. 110-458) to prescribe rules (in consultation with the Labor Department) governing the ERISA-required notice of funding based limitations on distributions. The instant guidance has been issued pursuant to this authority. In addition, the IRS has further indicated that it will set forth (and presumably expound upon) the relief in upcoming guidance." (Wolters Kluwer)
GAO Testimony: Pension Benefit Guaranty Corporation: Workers and Retirees Experience Delays and Uncertainty when Underfunded Plans Are Terminated
Testimony presented by Barbara D. Bovbjerg, director, education, workforce, and income security, before the Senate Committee on Health, Education, Labor, and Pensions, October 29, 2009. 18 pages. Excerpt: "The committee asked GAO to discuss our recent work on PBGC. Specifically, this testimony describes: (1) PBGC's process for determining the amount of benefits to be paid; and (2) PBGC's recoupment process when the estimated benefit provided is too high and a retiree receives an overpayment that must be repaid. To address these objectives, GAO relied primarily on a recent report titled Pension Benefit Guaranty Corporation: More Strategic Approach Needed for Processing Complex Plans Prone to Delays and Overpayments (GAO-09-716, Aug. 2009). In that report, GAO made numerous recommendations. PBGC generally agreed and is taking steps to address the concerns raised. No new recommendations are being made in this testimony." (U.S. Government Accountability Office)
Automatic Annuitization: New Behavioral Strategies for Expanding Lifetime Income in 401(k)s (PDF)
24 pages. Published July 2009. Excerpt: "Each of the 'automatic' or default strategies outlined here -- including acquiring lifetime income incrementally through the use of employer contributions or embedding adeferred annuity in a QDIA, as well as the Gale-Iwry-John-Walker (2008)automatic trial income proposal -- is designed to draw on experience andinsights from behavioral economics to help replicate, within the 401(k), one of the valued features of the traditional defined benefit pension. That feature is guaranteed lifetime income at group rates (combined, in most cases, with professional investment management)." (The Retirement Security Project)
[Guidance Overview] Government Plans Get Two-Year Reprieve on NRA Rule
Excerpt: "The Internal Revenue Service (IRS) has agreed to give governmental plans two more years to comply with final regulations on participant distributions upon reaching normal retirement age (NRA). An IRS news release said the rules will now be effective for plan years after January 1, 2013, instead of January 1, 2011 . . . . The tax agency said the latest move, announced in Notice 2009-86, does not change the effective date for non-governmental plans." (PLANSPONSOR.com; free registration required)
[Guidance Overview] IRS's Final Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)
9 pages. Excerpt: "Guidance is still needed on related important areas not addressed in the final regulations. The IRS indicates that future regulations will be issued covering many of these areas, such as participant notices about benefit restrictions, quarterly contributions, mergers/spinoffs, and expenses to be included in target normal cost." (Buck Consultants)
[Official Guidance] Text of IRS Notice 2009-86: Notice of Extension Until 2013 for Governmental Plans to Comply with NRA Distribution Regulations (PDF)
3 pages. Excerpt from press release: 'Notice 2009-86 states that the IRS and Treasury intend to extend the time by which a governmental plan must comply with final regulations on distributions from a pension plan upon attainment of normal retirement age ('the NRA regulations') beyond the date previously announced in Notice 2008-98 . . . .These regulations were published in the Federal Register . . . . on May 22, 2007. Taking into account this extension, the NRA regulations will be effective for a governmental plan (as defined in ? 414(d) of the Internal Revenue Code) for plan years beginning on or after January 1, 2013. This notice does not change the effective date of the NRA regulations for a plan that is not a governmental plan or modify the relief previously provided in Notice 2007-69, 2007- 2 C.B. 468." (Internal Revenue Service)
House Members Introduce Pension Funding Relief Measure
Excerpt: "U.S. House Representatives Earl Pomeroy (D-North Dakota) and Pat Tiberi (R-Ohio) have introduced a bill to further ease funding requirements for defined benefit plan sponsors. The Preserve Benefits and Jobs Act expands pension funding relief provided in the Worker, Retiree and Employer Recovery Act (WRERA) in 2008 and the Department of the Treasury regulatory guidance for 2009 reducing employer contributions. The Congressmen said the funding relief would continue worker and retirees' protections against pension benefit accruals being frozen in 2009 and 2010, as enacted by WRERA, and would protect future retirees by prohibiting pension plans from being drained by lump sum ad hoc benefits to certain individuals." (PLANSPONSOR.com; free registration required)
[Guidance Overview] IRS Regulations on Pension Funding and Benefit Restrictions (PDF)
2 pages. Excerpt: "The Internal Revenue Service and the Treasury Department recently published final funding regulations for single-employer pension plans, which will generally first take effect for the 2010 plan year. Employers can also rely on these regulations for 2008 and 2009, if they choose. The regulations contain a large amount of technical details. This Bulletin gives a high-level summary of key provisions that might be of interest to private sector employers. It notes highlights of the following: The rules for determining minimum required contributions and The rules for how benefit restrictions are administered." (The Segal Group, Inc.)
.For Delphi Pensioners, the Union Label Helps
Excerpt: "The Pension Benefit Guaranty Corporation, which insures pension plans, caps the amount of benefits it will pay, using a formula based on age and the type of benefits an employee earned. But in a side arrangement, G.M. is agreeing to pay special supplements, called top-ups, so that Delphi's union retirees get everything they were promised. The automaker is drawing the money from its own pension fund, according to a person familiar with the arrangement. In a sense, the G.M. pension fund is being weakened to help the Delphi union members." (The New York Times; free registration required)
[Guidance Overview] 401k Better or Worse: You Need Your Spouse's Consent
Excerpt: "A woman who claimed that a plan distribution form indicating her consent to her late husband's distribution election was never properly notarized and therefore invalid has the agreement of a federal judge[.] The husband had elected a split distribution: one half in a lump sum and one half in an annuity without survivor benefits. The husband passed away after having received the lump sum distribution and two annuity payments. The wife then sued over the waiver's validity. ERISA requires that the distribution waiver form be witnessed by a plan representative or a notary. In this case the notary had stamped the document without the wife present The US District Court threw out the waiver form signed by the woman, finding it had not been properly witnessed by a plan representative or a notary as required by ERISA." (Self Directed 401k)
[Guidance Overview] IRS's Final Rule on Pension Funding and Benefit Restrictions (PDF)
2 pages. (Milliman)
[Guidance Overview] Final Regs on Benefit Restrictions for Underfunded Plans, Measurement of Plan Assets and Liabilities
Excerpt: "Underfunding presumptions: The regulations set forth a series of presumptions that are used to apply the Code Sec. 436 benefit limitations in situations where the plan's enrolled actuary has not yet issued a certification of the plan's AFTAP for the plan year and that describe the interaction of the application of those presumptions on plan operations with plan operations after the plan's enrolled actuary has issued a certification of the plan's AFTAP for the plan year. The rules in the final regulations have been revised from those in the proposed regulations." (Wolters Kluwer)
Should You Use 401(k) Money to Buy an Annuity?
Excerpt: "About a quarter of all companies these days offer their employees the option to purchase annuities with their 401(k) money, according to the Profit Sharing/ 401(k) Council of America, an industry group for plan sponsors. But these are lump-sum purchases that typically happen at the brink of retirement and aren't too popular with employees, says David Wray, president of the PSCA. What insurers have been working on during the past several years are specially-designed guaranteed-income products that can be purchased in small chunks with each paycheck, just like shares of a mutual fund." (SmartMoney)
Defined Benefit Pension Sponsors Implementing Lump Sum Restrictions Need Not Notify Retirees
Excerpt: "Pension plan sponsors implementing PPA's lump sum restrictions do not need to notify individuals in pay status who no longer can elect a lump sum regardless of the PPA restriction, according to an IRS newsletter. The guidance helps sponsors facing an October deadline under ERISA Section 101(j) to notify participants and beneficiaries of restrictions that took effect on Oct. 1 or the earlier AFTAP certification date. But the newsletter's scope is narrow, so plan sponsors should review with counsel whether notices must be provided more broadly given their plans' terms." (Mercer LLC)
[Guidance Overview] For 2010, Only PBGC Single Employer Premium to Increase, No Change in PBGC Guarantee Limit Anticipated (PDF)
2 pages. Excerpt: "For 2010, the per capita flat-rate Pension Benefit Guaranty Corporation (PBGC) premium for single employer plans will increase by one dollar and the per capita flat-rate premium for multiemployer plans will be unchanged. The PBGC has not yet released its monthly maximum guarantee for 2010, but because there was no change in the 'old law Social Security wage base' ($79,200), Segal does not expect the maximum benefit guaranteed by the PBGC under private-sector single employer pension plans that terminate during 2010 to change from the 2009 level." (The Segal Group, Inc.)
Research Project: Should You Borrow from Yourself? The Determinants and Effects of 401(k) Loans
Excerpt: "This project proposes to evaluate the economic rationale for 401(k) plan loans and the empirical determinants of loan patterns. We will show how plan design and participant characteristics contribute to borrowing from one's pension, as well as default and repayment behavior. This research will be useful to employers in developing plan design, and also to employees seeking to enhance their retirement preparedness." (University of Michigan Retirement Research Center)
Withdrawal Rate Strategies for Retirement Portfolios: Preventive Reductions and Risk Management
Excerpt: "This paper builds on the work of Stout and Mitchell (2006), Stout (2008), and Blanchett and Frank (2009) by creating a preventive approach to withdrawal management. Proactive strategies, which reduce the withdrawal rate before there are insufficient funds, are shown to significantly reduce the probability of ruin (shortfall) while maintaining the average withdrawal rate. The paper also explores the micro effects of strategy changes by dividing the simulation iterations into groups which have been positively or negatively affected by any particular change, and demonstrates that conventional reporting of the effectiveness of withdrawal rate management techniques can be improved by examining additional moments of the distribution. Data covers 1926-2008 and the mortality table is extended to 108 years." (Social Science Research Network)
[Guidance Overview] Multiemployer Plan Wrongfully Suspended Retiree's Benefits After Misreading ERISA's 'Trade or Craft' Rule
Excerpt: "A multiemployer pension plan violated ERISA when it suspended a retired meat cutter's monthly benefit after he obtained employment as a baked goods independent distributor, the U.S. Court of Appeals in St. Louis (CA-8) has ruled in Eisenrich v. Minneapolis Retail Meat Cutters and Food Handlers Pension Plan. The determination of whether two jobs are included within the same 'trade or craft' under ERISA ?203 must be based on the specific skills actually used by the retiree in the two jobs, and not the general classification of the two jobs." (Wolters Kluwer)
Retirement Income Products Fall Short of Retirees' Needs
Excerpt: "According to Fidelity, 85% of Americans aged 55-70 now value guaranteed monthly income more than above-average returns. In response to the need of pre-retirees for products that guarantee income and the impending retirement of the baby boom generation, retirement plan providers have continued to invest in income-oriented product innovation." (BusinessWeek)
[Guidance Overview] Short Summary of Final IRS Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)
3 pages. (American Benefits Council)
[Official Guidance] PBGC Interest Assumptions for Valuing and Paying Benefits from Terminating Single-Employer Plans Having November 2009 Valuation Dates (PDF)
2 pages. (Pension Benefit Guaranty Corporation)
[Official Guidance] Typeset Federal Register Version of Final IRS Regs on Measurement of Assets and Liabilities for Pension Funding Purposes; Benefit Restrictions for Underfunded Pension Plans (PDF)
82 pages. (Internal Revenue Service)
Comparing Spending Approaches in Retirement
Excerpt: "This chapter describes and evaluates alternative approaches to spending in retirement, including income annuities, common rules of thumb for spending used by financial planners and advisors, and the spending rules that have been incorporated into payout funds, a relatively new type of investment product designed to be used by investors in the spending stage of life." (Pension Research Council; registration required to download fulltext of paper)
The Displacement Effect of Public Pensions on the Accumulation of Financial Assets
Excerpt: "The generosity of public pensions may depress private savings and provide incentives to retire early. While there is plenty of evidence supporting the latter effect, there remains considerable controversy as whether or not public pensions crowd out private savings. This paper uses international micro-datasets collected over recent years to investigate whether public pensions displace private savings." (University of Michigan Retirement Research Center)
[Guidance Overview] PBGC Rules for Standard Terminations Leave Questions for Future Guidance, Speaker Says
Excerpt: "The Pension Benefit Guaranty Corporation takes a dim view of employers that purchase annuities at a favorable price before initiating a standard termination process to end their pension plan, an employee benefits attorney said Oct. 10 at an American Law Institute-American Bar Association Conference. 'PBGC tends not to like the idea of purchasing irrevocable commitments and then doing a standard termination as an afterthought,' said attorney Harold Ashner, [a partner at Keightley &Ashner]. [Click on the title link under 'Items of Interest' on the target page.]" (Keightley & Ashner LLP)
[Official Guidance] IRS 'Employee Plans News' - October 2009 Special Edition (PDF)
2 pages; contains hypertext links to the new final funding regulations, and a notice of an upcoming October 28 webcast about the required minimum distribution rules and the new 402(f) notice. (Internal Revenue Service)
[Guidance Overview] Final Funding Regs and Benefit Restriction Notices for Single Employer Defined Benefit Plans (PDF)
2 pages. Also, information on a Phone Forum on Retirement Plan Distributions will be held October 28, 2009; Join Martin Pippins and Rhonda Migdail, from IRS Employee Plans Rulings & Agreements, for a 90 minute forum on recent retirement plan guidance. The forum will cover: the new required ?402(f) notice; rollovers, including the expanded Roth rollover rules; the 2009 required minimum distribution (RMD) waiver; RMD rules for governmental plans; and paid time off contributions." (Internal Revenue Service)
Retirement Planning Beyond the Longevity Tables
Excerpt: "WHEN financial markets began to plummet two years ago, many retirees faced the very real prospect of outliving their money. As a solution, many academic researchers have long advocated 'fixed life annuities': investment vehicles that pay a set amount each year until the investor -- or, sometimes, a spouse -- dies. These annuities are not to be confused with a range of other products with 'annuity' in their names, including many known loosely as 'variable' annuities. Most of these other products don't directly address retirees' risk of outliving their money. These vehicles also generally exact higher fees. Only a tiny minority of the products sold as annuities in the United States are of the 'fixed life' variety, enjoying that academic seal of approval." (The New York Times; free registration required)
[Opinion] Book Review: 'The Smartest Retirement Book You'll Ever Read'
Excerpt: "The first problem is inflation. Even if it runs at a relatively tame 3 percent a year, the impact will be substantial. . . . Second, you'll need to figure out how to withdraw enough money during retirement to live the way you want, but without outliving your savings. [The author] sets out to deal with both topics, throwing in advice about other retirement issues like health care costs and estate planning." (The New York Times; free registration required)
[Guidance Overview] IRS Final Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)
1 page. Excerpt: "These regulations modify and finalize two sets of proposed regulations issued in 2007. The final regulations are quite lengthy, detailed, and complex, and provide much needed guidance including[:] automatic approval for changes in asset and interest rate methodology in 2008, 2009, and 2010; automatic approval for certain changes from using segment interest rates in years after 2010; rules regarding the establishment of, use of, and elections for credit balances; clarification of the calculation of target normal cost; rules regarding the use of special assumptions required for at-risk plans; extension of the deadline for final AFTAP certification when range certifications were issued; rules regarding the timing and issuance of AFTAP certifications; clarification of rules regarding partial restrictions on accelerated benefit payments (e.g., lump sum benefits)." (Buck Consultants)
[Guidance Overview] Pension Calculation Dispute Thrown Out on Appeal
Excerpt: "Three pension participants who sued their employer over a pension calculation dispute can't pursue their claims because they have no written proof the employer misrepresented plan rules, a court has ruled. The 2nd U.S. Circuit Court of Appeals, in issuing that decision, upheld a ruling by U.S. District Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of New York." (PLANSPONSOR.com; free registration required)
[Guidance Overview] IRS Releases Funding and Benefit Restriction Regulations (PDF)
2 pages. Excerpt: "The IRS has released final regulations on certain aspects of minimum funding requirements and benefit restrictions. The regulations address many open issues and provide some approaches that will be welcomed by plan sponsors, but they also leave many issues open to be addressed by future regulations. The effective date of the regulations is plan years beginning on or after January 1, 2010, and they can be relied upon for earlier periods. The regulations are over 300 pages long and are quite technical in many areas. Based on our initial review, the key changes from the proposed regulations that should be of most interest to plan sponsorsare summarized . . . ." (Towers Perrin)
Outsourcing Pension Longevity Protection
Excerpt: "Steadily improving mortality rates are boosting pension liabilities, and plan managers are starting to evaluate ways to handle this exposure. We explore the impact of increasing longevity on pension plans and what can be done about it. Responses include plan design changes, transferring this risk to an insurance company, and development of strategies to hedge this risk without completely eliminating it." (Pension Research Council; registration required to download fulltext of paper)
[Official Guidance] Final IRS Regulations -- 318 Pages -- on Use of Funding Balances for Single-Employer Defined Benefit Plans, and Benefit Restrictions for Certain Underfunded Plans (PDF)
Scheduled for publication in the Federal Register on October 15. Excerpt: "These regulations reflect provisions added by the Pension Protection Act of 2006, as amended by the Worker, Retiree, and Employer Recovery Act of 2008. . . . Section 412 provides minimum funding requirements that generally apply for pension plans (including both defined benefit pension plans and money purchase pension plans). PPA '06 makes extensive changes to those minimum funding requirements for defined benefit plans that generally apply for plan years beginning on or after January 1, 2008. Section 430, which was added by PPA '06, specifies the minimum funding requirements that apply to single employer defined benefit pension plans (including multiple employer plans) pursuant to section 412. Section 436, which was also added by PPA '06, sets forth certain limitations on benefits that may apply to a single employer defined benefit plan based on its funded status. Neither section 430 nor section 436 applies to multiemployer plans. . . . The final regulations under section 430 apply to plan years beginning on or after January 1, 2010, regardless of whether section 430 applies to determine the minimum required contribution for the plan year. For plan years beginning before January 1, 2010, plans are permitted to rely on these final regulations for purposes of satisfying the requirements of section 430. This reliance applies section by section under the final regulations. Alternatively, for plan years beginning before January 1, 2010, plans are permitted to rely on the proposed regulations . . . . The final regulations under section 436 apply to plan years beginning on or after January 1, 2010. For plan years beginning before January 1, 2010, plans are permitted to rely on the provisions set forth in these final regulations for purposes of satisfying the requirements of section 436. Alternatively, for plan years beginning before January 1, 2010, plans are permitted to rely on the proposed regulations . . . ." (Internal Revenue Service)
[Guidance Overview] Third Circuit Validates Indemnity Agreement in Collective Bargaining Agreement for Payment of Withdrawal Liability (PDF)
Pages 2-3 of 5 pages. Excerpt: "The Third Circuit's decision does not give employers a free pass on withdrawal liability, but it may very well provide employers with an opportunity to significantly reduce theirexposure to this type of liability -- over which they typically have little control -- through the collective bargaining process." (Proskauer Rose LLP)
Guidance for Sustaining Retirement Income Before and After Market Downturns
16 pages. Excerpt: "The objective of this paper is to provide financial professionals with insight as to when and how to deal with market volatility for clients just entering, or already in, retirement. The paper presents guidelines as to when action is needed, and offers some alternative strategies to help sustain retirement income." (Principal Financial Services, Inc.)
Minneapolis Asks Judge to Rule on Return of an Alleged $52 Million in Pension Overpayments
Excerpt: "About 1,400 retired Minneapolis police and firefighters learned Monday that they could face huge IOUs to the city if it prevails in a lawsuit against their pension funds. For the first time, the city made it clear that it wants a judge to order two closed pension funds to retrieve $52 million in alleged overpayments to retired police and firefighter pensioners or their survivors. That would amount to an average of nearly $42,000 for each retired police pensioner or survivor and more than $30,000 from each firefighter retiree or survivor." (Star Tribune)
[Guidance Overview] IRS/Treasury Officials Provide Informal Views on Safe Harbor Contributions, ADP/ACP Testing Methods, and W-2 Imputed Income
Excerpt: "EBIA Comment: We chose these highlights from the report's 44 Q&As covering a variety of retirement and welfare plan issues . . . . While the answers in the report do not necessarily represent IRS or Treasury policy, they provide helpful insight regarding the issues addressed. On some issues, the officials reported that the IRS is working on formal guidance. Those issues included optional changes under the HEART Act, the 2009 required minimum distribution (RMD) waiver amendment requirements . . ., and guidance regarding when shutdown benefits are retirement-type protected benefits under Code Section 411(d)(6)." (Employee Benefits Institute of America)
Answers to the 401(k) Questions that Matter Most
Excerpt: "The information that HR provides to employees about their defined contribution savings plan typically focuses on basic plan facts. That leaves unanswered questions about how to use the plan. [On the target page] are some of the answers employees need to begin using their 401(k) to have the financial future they want (in Jeopardy style, followed by the questions)." (Society for Human Resource Management)
Medicare Bite Tied to Roth Would Be Temporary
Excerpt: "Yes, converting to a Roth could result in paying higher Medicare premiums, but the increase will likely be temporary. The key: If you are a Medicare beneficiary, or about to become one, it is smart to calculate whether the additional income created by a conversion could increase your Part B premiums, as well as your tax bill. Then, with that information in hand, you can make an informed decision about whether a Roth conversion makes sense for you." (The Wall Street Journal)
[Guidance Overview] How to Tap Retirement Assets Early with Minimal Tax Bite
Excerpt: "There are several ways to get at least a portion of your retirement money out without paying penalties. But there's just one method that works for all types of retirement plans -- the 'substantially equal periodic payments' or 'the 72(t)' method of retirement withdrawals. (Section 72[t] of the tax code spells out the rules for penalty-free early retirement plan distributions. Accountants, being clever wordsmiths, thus call these penalty-free early withdrawals '72[t] distributions.' To be fair, there's no snappy way to say it.) How does it work? In a nutshell, you spread out your retirement payments over your remaining life span, taking 'substantially equal' annual payments for the rest of your life." (Los Angeles Times)
Supreme Court Sladed to Hear One ERISA Case
Excerpt: "The issue in Conkright vs. Frommert involves how much deference a court must give to an ERISA plan administrator's interpretation of the terms of the plan. A group of Xerox Corp. retirees who left and then returned before retiring brought the suit. At issue is the method of accounting for lump sum distributions received by the employees when they first left the company when determining the benefits to which they were entitled at retirement." (Business Insurance)
Making Your Retirement Nest Egg Last a Lifetime
Excerpt: "One straightforward solution to the drawdown challenge is an immediate annuity, which turns a lump sum of income into a lifelong payment stream. However, for various reasons, such annuities have not proven broadly popular. Therefore, this brief examines several alternatives. All such strategies involve a trade-off between maximizing consumption and minimizing the risk of running out of money. Calculating the optimal strategy is really hard ? maybe impossible. But, despite the complexity of the problem, some strategies are clearly superior to others... " (Center for Retirement Research at Boston College)
[Guidance Overview] Another Question is Answered in the 401(k) Plans Q&A Column
What is the source of the age "59 1/2" in the Code Section 401(k) distribution restrictions? Do you know why they did not use an even number? (BenefitsLink.com)
How Does Retirement Planning Software Handle Post-Retirement Realities?
Excerpt: "This chapter explores retirement planning software that provides individuals and advisors the opportunity to perform a range of calculations to help them in retirement planning. We link results from surveys and research by the Society of Actuaries to show how the software handles post-retirement risks. We find that approaches to managing these risks are often not well-integrated." (via Pension Research Council)
GAO Suggests Change to 401(k) Hardship Withdrawal Rule
Excerpt: "To enable employees to replenish their 401(k) plan account balances more quickly after they take hardship withdrawals, Congress should consider changing current law that bars plan participants from making new contributions until six months after a hardship withdrawal, the Government Accountability Office suggests." (Workforce.com)
401(k) Plans: Policy Changes Could Reduce the Long-term Effects of Leakage on Workers' Retirement Savings (GAO Report)
52 pages. Excerpt: "The incidence and amount of the principal forms of leakage from 401(k) plans -- that is, cashouts of account balances at job separation that are not rolled over into another retirement account, hardship withdrawals, and loans -- have remained relatively steady, with cashouts having the greatest ultimate impact on participants' retirement preparedness. . . . [A] provision requiring plans to suspend contributions to participant accounts for 6 months following a hardship withdrawal may exacerbate the long-term effect of leakage by barring otherwise able participants from contributing to their accounts. GAO also found that some plans are not following current hardship rules, which may result in unnecessary leakage.' A 'highlights' report is online at http://www.gao.gov/highlights/d09715high.pdf (U.S. Government Accountability Office)
[Guidance Overview] IRS's Final Regulations on Section 401(a)(9) Required Minimum Distributions for Governmental 401(a), 403(b) and 457(b) Plans (PDF)
2 pages. Excerpt: "The IRS has now finalized the 2008 proposed regulations without change. Under the final regulations, reasonable good faith compliance with the required minimum distribution rules is extended to ? all governmental plans, including defined contribution plans, 403(b) plans and 457(b) plans; all distribution options under governmental plans, not just annuity distribution options available under the terms of the plan as in effect on April 17, 2002; all distributions from governmental plans, not just those made during 2003, 2004 and 2005." (Buck Consultants)
Employer-Provided Retirement Planning Programs
Excerpt: "As older workers approach the end of their working career, they face a series of important decisions that will determine their economic wellbeing during their remaining lifetime. They must decide when to retire, when to start Social Security and company pensions, whether to annuitize 401(k) balances, and whether to take lump sums from defined benefit plans. Lack of knowledge or insufficient financial literacy may lead to regrettable decisions. This chapter assesses employer provided financial education as well as pre-retirement planning programs and examines their effectiveness in increasing knowledge and altering retirement behavior." (Pension Research Council; registration required to download fulltext of paper)
[Official Guidance] Text of Fall 2009 Edition of IRS 'Employee Plans News' (PDF)
16 pages. Excerpt: "This edition contains the following articles:Dos and Don'ts of Hardship Distributions . . . When Limits Collide, Which One Wins? . . . Loans and Hardships in 401(k) Plans . . . A Message from the Advisory Committee on Tax Exempt and Government Entities: Stakeholders: please participate! . . . 401(k) Phone Forum Rescheduled to September 30, 2009 . . . Ways to Avoid Delays: Determination Letter Application Processing Procedures" (Internal Revenue Service)
[Opinion] ERIC Urges Supreme Court to Reverse Appeals Court Failure to Provide Judicial Deference Under ERISA Plan
Excerpt: "The case arose when company employees sued their ERISA retirement plan and administrator challenging the method used to calculate how their current benefits are offset to reflect prior distributions. The employees claimed that the plan violated ERISA's provisions relating to summary plan description, notice, and anti-cutback rules." (The ERISA Industry Committee)
[Opinion] American Benefits Council Amicus Brief with U.S. Court of Appeals for Second Circuit in Conkright v. Frommert (PDF)
25 pages. Excerpt: "Amici and their members seek to ensure that voluntary employee benefit plans remain a workable and vital feature of the American employment landscape. When courts refuse to defer to a plan administrator's reasonable exercise of discretionary authority, some employers may question the wisdom of continuing to maintain such plans in the future." (American Benefits Council)
[Guidance Overview] Beneficiary Options Chart, Updated
Excerpt: "[General rules are] Decision Deadline: September 30th of Year After Death; Beneficiary Decision Options: Withdraw all the money by the decision deadline or arrange to defer taking all money until 12/31 of 5th year after death, Establish Life Expectancy Payouts, [or] Disclaim Being a Beneficiary" (McKay Hochman Co., Inc.)
Pension Benefit Guaranty Corporation: More Strategic Approach Needed for Processing Complex Plans Prone to Delays and Overpayments
Excerpt: "To conduct this study, GAO reviewed PBGC policies and procedures, analyzed automated data and case files, and interviewed PBGC officials and certain associations, participants, and their representatives from among those most affected by the process." (U.S. Government Accountability Office)
Hard Times Lead to Hardship Withdrawals from 401(k) Plans
Excerpt: "Tapping 401(k) retirement funds to meet expenses is a last resort for many investors, but the relentless economic downturn took its toll this year, as hardship withdrawals saw double-digit increases, according to record keepers. Hardship withdrawals among the 2.8 million participants in 1,500 plans served by Bank of America Merrill Lynch increased 23 percent year to date through August 31 compared with the year-earlier period, said Kevin Crain, managing director of plan participant solutions at Bank of America Merrill Lynch, the institutional retirement, philanthropy and investments business unit at Bank of America. In addition, in-service withdrawals, used by employees who are still at their jobs and contributing to the plans, were up 27 percent through August 31." (Workforce Management; free registration required)
[Guidance Overview] No Fiduciary Breach Where Plan Rolled Back Retiree's Mistakenly High Monthly Benefit Payment
Excerpt: "The trustees of a defined benefit plan did not breach their ERISA fiduciary duty when they decreased a retiree's monthly benefit because the plan had made mistakes when it first calculated the benefit amount, the U.S. Court of Appeals in Philadelphia (CA-3) has ruled in Bocchino v. Trustees of District Council Ironworkers Funds of Northern New Jersey." (Wolters Kluwer)
[Guidance Overview] IRS Guidance on Model Tax Notices, Contributions of Unused Paid Time Off, and Automatic Enrollment Features
Excerpt: "The IRS issued two model tax notices for compliance with Code Section 402(f) -- one for a distribution of designated Roth contributions and one for distribution of traditional contributions. A participant or beneficiary eligible to receive a distribution of both types of contributions will need to receive both explanations. The new model notices address relatively recent issues such as rollovers to Roth IRAs, rollovers by non-spouse beneficiaries to inherited IRAs, and the waiver of the 10% early distribution penalty on qualified reservist distributions." (Seyfarth Shaw LLP)
Will the Demand for Assets Fall When the Baby Boomers Retire? (PDF)
33 pages. Excerpt: "Although the shift in demographics caused by that group's retirement from the workforce might affect the U.S. economy in many ways, this background paper focuses on what could happen in just one area: the demand for assets, particularly financial assets, such as stocks and bonds. Some economists have warned of the possibility of a dramatic decline in demand as baby boomers sell off their assets to finance consumption in retirement; they assert that the sell-off could cause a dramatic decline in prices. An evaluation of the evidence, however, indicates that such a dramatic decline in asset demand and prices is unlikely." (U.S. Congressional Budget Office)
[Guidance Overview] Criminal Conviction Not Required for Rhode Island Pension Board Action, According to Court
Excerpt: "A Rhode Island state judge has declared that the Providence Retirement Board can cut or reduce a retiring worker's pension under a law governing dishonorable government service, even when the person does not stand convicted of a crime. A news report on television station WPRI's Web site said Associate Justice Michael A. Silverstein of the Rhode Island Superior Court, ruling for the first time on the issue, asserted that the city's Honorable Service Ordinance (HSO) did not require a criminal conviction or a plea bargain before the board can move against a pensioner's benefits." (PLANSPONSOR.com; free registration required)
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