Headlines about "Ret plans - design"
Gathered from the web by the editors at BenefitsLink.com.
Philadelphia Confronts the Cost of Employee Benefits
Excerpt: "To help inform the public discussion, the Philadelphia Research Initiative, with assistance from the Pew Center on the States, sought to update the situation regarding pension and health-care conditions in Philadelphia and the comparison cities, based on interviews with officials as well as the latest available documents. We reviewed policy changes and proposals that have arisen regarding Philadelphia over the past year and a half. We interviewed two dozen experts on employee benefits from across the spectrum, and three of the four major unions that represent Philadelphia city workers provided varying amounts of information." (The Pew Charitable Trusts)
General Motors Using Huge Pension Fund in Way It Never Intended
Excerpt: "For now, the pension payments to its younger 'retirees,' part of a deal G.M. negotiated with the United Automobile Workers union in 2007, allow the company to drastically shrink its work force without having to come up with the cash to pay severance. The payments also relieve some of the burden on social service programs in the countless factory towns and counties around the country with large numbers of G.M.'s newly jobless. 'G.M. basically raided the pension plan, by having a lot of these severance benefits paid through it,' said Douglas J. Elliott, a fellow with the Brookings Institution who specializes in financial institutions and policy. What G.M. has done is perfectly legal. Nor is this the first time an employer has used a pension fund to pay for pruning its ranks." (The New York Times; free registration required)
[Guidance Overview] Plan Loans: Plan Loan in Excess of 50% Vested Account Balance
Excerpt: "[A]lthough a participant loan of 100% of the vested account balance up to $10,000 is permitted, the amount of the loan in excess of 50% of the vested account balance must be secured by actual collateral to be provided by the participant, not the vested account balance. The additional collateral is required from the participant in order for the participant loan to be considered a prohibited transaction exemption." (McKay Hochman Co., Inc.)
Text of California Governor's Pension Reform Proposal (PDF)
2 pages. Excerpt: "For new employees hired on or after July 1, 2009 this proposal would: Return to pre-SB 400 retirement formulas for Miscellaneous, Industrial, State Safety, and Peace Officer retirement categories. Repeal the SB 183 expanded definition of the State Safety retirement category. Change the benefit formula for Firefighter and Highway Patrol from 3 percent at age 50 to 3 percent at 55. Compute final compensation for Peace Officers, Firefighters, and Highway Patrol based on the highest 3 years instead of the highest 1 year." (State of California, Office of the Govenor, via The Sacremento Bee)
[Guidance Overview] IRS Proposed Reliance Regulations that Permit Suspension of 401(k) Non-Elective Safe Harbor Contributions
Excerpt: "Plan sponsors that need to take advantage of the proposed regulations should act quickly as the analysis with respect to whether the criteria for a 'substantial business hardship' have been met, the drafting of plan amendments, and the requirement to give plan participants 30 days notice will require time to implement, during which the plan sponsor continues to be obligated to make safe harbor contributions to its plan." (The Metropolitan Corporate Counsel)
Big Surprise: Even the AARP Decides to Suspend Its 401(k) Match for at Least Nine Months
Excerpt: "Given its track record of fighting for the financial rights of retirees, it seems shocking that the organization would turn around and take from its own 2,200 or so employees what they'd hoped would be a big pile of matching money. It's almost as if the Teamsters decided to build a new national headquarters and hired nonunion labor to do it." (The New York Times; free registration required)
[Opinion] Obama Retirement Plan Places Primary Responsibility for Retirement Saving on Households (PDF)
3 pages. Excerpt: "Tucked into the blueprint for financial regulatory reform1 released last week is an outline of the president's proposals for strengthening retirement plans and encouraging retirement savings. Though some of the proposals in the Department of Treasury's white paper are welcome and overdue, they should not be mistaken for the kind of comprehensive reform that is needed to fix a system in crisis. . . . The White House plan is two-pronged. First, it would require many employers who do not offer retirement plans to set up automatic payroll deductions into Individual Retirement Accounts (IRAs), using inertia to boost participation by having workers opt out rather than opt in. Second, it would expand eligibility for the Saver's Credit and make it refundable, giving low- and moderate-income families who owe little or no income tax an incentive to save." (Economic Policy Institute)
Los Angeles City Council Approves Early Retirement Plan Despite Opposition
Excerpt: "The proposal also calls for postponing raises for thousands of workers to balance the budget without layoffs or closing City Hall twice a month. But one union threatens a court challenge." (Los Angeles Times)
Benefit Cuts Possible for Future Iowa Public Employee Retirees
Excerpt: "Iowa's largest public employee pension fund could be forced to reduce benefits for future retirees because of the global recession, which has worsened the fund's existing financial troubles, state officials said Thursday. The Iowa Public Employees' Retirement System has 312,000 members who include current and former employees and retirees of state government, cities and counties, public schools and other agencies. . . . A study is under way to examine such factors as retirement ages, cutting early retirement subsidies, requiring new and current employees to earn pensions more slowly, and increasing the number of years used to calculate final average salaries for pension purposes. The research will also explore additional increases in contributions by taxpayers and employees, coupled with benefit reductions. Recommendations are expected in September. They could include benefit changes, said Donna Mueller, IPERS's chief executive." (The Des Moines Register)
IRS Shoots Down New Roth Ploy: Recent Ruling Finds That Transactions Moving Income Were Similar to Those Outlawed Earlier
Excerpt: "[T]he Internal Revenue Service repeatedly has taken steps to minimize Roth IRA scams. A recent IRS ruling took another step in that direction, determining that transactions entered into by a husband and wife were substantially similar to transactions outlined in IRS Notice 2004-8. An error in reporting the couple's transactions, along with the transactions themselves, has left the two exposed to severe and potentially devastating penalties.' (Investment News; free registration required)
[Guidance Overview] IRS Allows Struggling Employers to Reduce or Suspend Nonelective Contributions to 401(k) Plans
Excerpt: "Under regulations proposed by the IRS, an employer undergoing a substantial business hardship can reduce or suspend 401(k) safe harbor nonelective contributions during a plan year. The rules give employers an alternative to terminating their safe harbor plans. The regulations are proposed to be effective for amendments adopted after May 18, 2009, but employers may rely on the proposed regulations for guidance in the meantime. If the final regulations are more restrictive than those proposed, the stricter provisions will not be made retroactive." (Watson Wyatt Worldwide)
House Lawmakers Revive Federal Retirement Reforms That Were Stripped Out of Tobacco Legislation
Excerpt: "H.R. 2990, which would allow veterans receiving disability benefits from the Veterans Affairs Department to receive full retirement benefits from the Defense Department, included a provision that would let employees in the Federal Employee Retirement System count unused sick leave toward their pensions. The House, which approved the bill under a suspension of the rules, plans to roll H.R. 2990 into the fiscal 2010 Defense authorization bill." (GovernmentExecutive.com)
Median Cost for Defined Contribution Plans Now Exceeds Cost for Defined Benefit Plans
Excerpt: "In 2008, the median cost as a percentage of revenue for defined contribution plans sponsored by the Standard & Poor's 500 companies has exceeded the median cost for defined benefit plans (.39% versus .38%), for the first time. The median cost for defined contribution plans has remained steady over the last four years (.37% in 2005-2007) while the median cost for defined benefit plans has declined from .51% in 2005, .46% in 2006, and .42% in 2007. According to Mercer, the reason for the decline in defined benefit costs is a reflection of freezing of accruals, closure of plans to new participants, or other cutbacks." (Wolters Kluwer)
Most Small Employers Would Face Low Costs to Implement Automatic IRAs
Excerpt: "This report finds that most employers would likely face low costs to implement a system of automatic individual retirement accounts (IRAs). Automatic IRAs can be designed to integrate into existing business payroll systems in a way that will minimize an employer's responsibilities. Most small employers will have only small incremental costs to modify their payroll processing systems in order to facilitate enrollment in Automatic IRAs and withholding of Automatic IRA contributions. The widespread adoption of automated payroll systems, including within the small business sector, and the ability of those system providers to build the Automatic IRA into their services, will make this new employee benefit relatively simple to implement." (AARP)
RothRetirement.com Site Educates on the 2010 Roth IRA Conversion Option
Excerpt: "Convergent Retirement Plan Solutions of Brainerd, Minnesota, and Archimedes Systems, of Waltham, Massachusetts, have jointly launched a Web site, RothRetirement.com, to help educate consumers about the 2010 Roth IRA conversion. A news release said the site includes a library of short educational clips on the 2010 Roth IRA conversion, a compendium of nearly 100 frequently asked questions, a consumer version of the Roth IRA Conversion Optimizer calculator, and links to additional online Roth articles and resources. [The site is available at www.convergentrps.com.]" (PLANSPONSOR.com; free registration required)
Business Group Presses Los Angeles City Council for Details on Early-Retirement Proposal
Excerpt: "Two days before the Los Angeles City Council is expected to vote on an early retirement package for thousands of workers, the city's largest business organization warned the proposal would contribute to a 'massively unfunded and unsustainable' pension liability. The Los Angeles Area Chamber of Commerce sent Mayor Antonio Villaraigosa and the City Council a letter demanding that taxpayers receive more information on the financial consequences of the proposed five-year labor agreement with the Coalition of L.A. City Unions, which represents 22,000 workers." (Los Angeles Times)
Company-Sponsored Retirement Plans More Important Than Ever
2 pages. (Hewitt Associates)
Consumers Should Take 401(k) Plan Loans Instead of Consumer Loans, Study Contends
Excerpt: "The cost for a non-401(k) plan loan is the after-tax interest rate that is paid to the outside vendor. In contrast, the lower interest rate for a 401(k) plan loan is paid to the participant's account, causing it to grow. The authors noted that a participant who is trying to maximize 401(k) plan contributions but is constrained by the contribution limits 'might prefer a 401(k) loan with a sufficiently high interest rate simply as a way to get more assets into the tax-favored account.'" (Wolters Kluwer)
Lawmakers Plan Push to Reform 401(k) Plans
Excerpt: "Two key lawmakers are expected to introduce a bill on retirement reform later this week that could have substantial implications for investment advisors, 401(k) service providers and the majority of employer-sponsored retirement plans. Rep. George Miller, D-California, and Rep. Rob Andrews, D-New Jersey, are preparing to introduce the 401(k) Fair Disclosure and Pension Security Act on Wednesday, June 24, at a Committee on Education and Labor meeting, confirmed Aaron Albright, press secretary of the committee." (Workforce Management; free registration required)
Pension Reform in the Aftermath of Enron: Congress' Failure to Deliver the Promise of Secure Retirement 401(K) Plan Participants
Excerpt: "This article examines the historical role of company stock ownership in tax-qualified retirement plans and how Congress is distorting that role to justify its failure to enact meaningful pension reform that restricts 401(k) plan investment in company stock. Specifically, the article addresses H.R. 3762, the Republican-backed House Bill that has arisen like a phoenix out of the ashes of more than 20 pension reform bills introduced by the 107th Congress. The article examines how the House Bill fails to deliver ERISA's promise of a secure retirement by rejecting overall limitations on 401(k) plan investment in company stock, by failing to mandate the appointment of an independent plan fiduciary where company stock is offered as an investment alternative, and by failing to mandate that employers provide participants with investment advice as a condition of fiduciary liability relief." (Social Science Research Network)
The Death Knell of Traditional Defined Benefit Plans: Avoiding a Race to the 401(k) Bottom
Excerpt: "This Article looks at America's loss of retirement security stemming from the shift away from traditional defined benefit plan sponsorship and the embracement of defined contribution plan sponsorship. It also looks at the root causes underlying the shift and how the Act fails to adequately address the looming pension crisis. Finally, the Article, recommends additional legislative changes that increase the retirement security provided under employer-sponsored defined contribution plans." (Social Science Research Network)
[Guidance Overview] New Rules Allowing Employers to Suspend Nonelective Contributions to Safe Harbor Plans Due to Business Hardship (PDF)
2 pages. Excerpt: "On May 18, 2009, the IRS published rules allowing sponsors of Safe Harbor Plans, including Qualified Automatic Contribution Arrangements (QACAs), to suspend or reduce nonelective contributions before the end of the plan year due to business hardship. These rules provide an attractive alternative to plan termination, which had been the only option for sponsors of Safe Harbor Plans providing required nonelective contributions that needed to reduce or eliminate their ongoing obligations during this time of economic distress. Currently, the rules are only proposed, which means that they are subject to change when they are finalized. However, the IRS will allow plan sponsors to follow them in their current form until they are finalized and will impose any new or more stringent requirements only on a prospective basis. The new rules may be applied to plan amendments adopted after May 18, 2009." (Prudential Retirement)
[Guidance Overview] Mid-Year Elimination of Safe Harbor Non-Elective Contributions
Excerpt: "While many plan sponsors are resorting to cutting back or eliminating company match contributions in a effort to reduce costs, does recent guidance from the Internal Revenue Service on eliminating safe harbor non-elective contributions offer an alternative solution? In May, the IRS proposed rules that would permit employers affected by substantial business hardship to decide mid-year to reduce or suspend safe harbor non-elective contributions to 401(k) and 403(b) plans . . . . What does this mean for 403(b) plan sponsors?" (PLANSPONSOR.com; free registration required)
The Economic Crisis Has Accelerated the Decline of Defined Benefit Plans in the U.S. and U.K.
Excerpt: "U.K. policymakers spent some six years investigating second-pillar (employment-related pensions) plans around the world to develop a new U.K. second-pillar institution: the Personal Accounts Delivery Authority. Under the U.K. Pensions Act of 2008, employers will be required to enroll eligible employees into a high-quality workplace pension. . . . U.S. policymakers have not matched U.K. policymakers' initiative; they appear stuck in a DB mindset. Indeed, Congress seems more interested in saving the DB institution for those who have DB benefits than embarking on reforms to create a new second-pillar institution for all, which would minimize the burden on the firm while ensuring retirement security for individuals." (Oxford Analytica via Forbes.com)
Cost of Civil Service Retirement System Retirement Plan Fix Pegged at $40 Million Over 10 Years
Excerpt: "A bill aimed at modifying the way retirement benefits are calculated for certain federal employees who work part-time at the end of their careers would cost the government $39 million from 2010 to 2019, the Congressional Budget Office reported this week. The legislation (S. 469), sponsored by Sen. George Voinovich, R-Ohio, would modify the way retirement annuities are calculated for employees covered under the Civil Service Retirement System. Currently, CSRS employees who retire with part-time service late in their careers could see reduced annuities. According to the CBO report, the bill would provide an average of $2,000 more in retirement benefits per year for about 650 of the expected retirees from the CSRS system in 2010. Additional retirements by 2019 would boost the overall cost of the measure to $39 million, according to CBO." (GovernmentExecutive.com)
Rethinking 401(k) Plan Design for Challenging Times (PDF)
18 pages. Excerpt: "Clearly, the economic downturn is causing many companies to reevaluate their 401(k) plan design carefully, and in many cases, rethink their 401(k) plan strategy. Based on the survey responses, many plan sponsors are assessing whether or not to reduce or eliminate the matching contribution feature under their plans. As part of this plan design assessment, companies may want to consider the potential impact of any such change on future participation in the 401(k) plan by eligible employees. Since many employees, especially the so-called 'non-highly compensated employee' group, participate in 401(k) plans because of the matching contribution feature, a key challenge faced by plan sponsors is assessing the impact of reducing or eliminating the matching contribution feature on future plan participation rates." (Grant Thornton LLP)
Executive Summary: Effect of the Economic Crisis on Employee Attitudes Toward Retirement: Retirement Timing
Excerpt: "The economic crisis will further extend the length of working careers, which have been increasing for the past decade. Half of workers aged 50 and over now plan to work past age 65. Employees with a defined benefit (DB) plan, however, are more likely to retire before age 65 than those with only a defined contribution (DC) plan." (Watson Wyatt Worldwide)
Employers Cutting Back 401(k) Plans, According to Study
Excerpt: "A quarter of U.S. employers have eliminated matching contributions to employee 401(k) retirement plans since September to save money amid the economy's downturn, according to research released on Monday. A quarter of U.S. employers also have instituted limited enrollment rather than open the savings plans to all employees, according to the study conducted for Charles Schwab Corp. by CFO Research Services." (Reuters)
Benefits for Ex-City Employees Examined in San Diego
Excerpt: "For weeks after leaving their city jobs, more than 100 San Diego employees enjoyed benefits such as health insurance, holiday pay and pension contributions, according to a new audit. In the past year, the city spent $660,000 to pay the benefits to 111 employees, the report by City Auditor Eduardo Luna found. The workers received the benefits by staying on the payroll while they were paid vacation and sick time they had coming. In part because of union contracts, they were treated as active employees and enjoyed the same benefits as before." (The San Diego Union-Tribune)
Orange County, California, Workers Vote to Change Pension Plan, Retirement Age
Excerpt: "Thousands of Orange County workers will begin voting Saturday on a new contract that includes a two-tier 'hybrid' retirement plan that would require a new state law before it could go into effect. The proposed option would push back the retirement age to 65 from 55 and result in a smaller pension. But the amount of money workers would pay into their pension plan would be cut by nearly half, and the county would match up to 2 percent for a 401(k), according to the Orange County Employees Association, which represents the workers and is backing the proposal." (City News Service)
[Guidance Overview] New Tax Rules Will Give More People Access to a Roth IRA, One of Best Savings Plans for Later Life
Excerpt: "Starting Jan. 1, the income limits that have prevented many individuals . . . from converting a traditional IRA or employer-sponsored retirement plan to a Roth will be eliminated. The change -- one of the biggest and most important on the IRA landscape in years -- will widen the entryway to one of the best deals in retirement planning. With a Roth IRA, virtually all income growth and withdrawals are tax-free." (The Wall Street Journal)
[Opinion] Jottings from a Conference on Plan Designs
Excerpt: "'Staying the course' is only a viable strategy if you're on the right track to begin with. It could get worse before it gets worse. If you're automatically enrolling participants, what is your match encouraging them to do? If you can't remember the last time you did a provider search, you're probably overdue." (planadvisor)
The West Virginia Teachers' Retirement System: DC to DB to DC?Then Back Again
Excerpt: "Until June 30 of this year, participants who transferred into the DB plan also have the option to make up for not making? the same contributions by purchasing benefits credits. Since DC plan members only contributed 75% of what DB members? contributed? (4.5% versus 6%), Lambright says, the basic service? transfer was set at 75%. Those who want to purchase the remaining 25% service credit pay a cost based on the 1.5% of pay not contributed, plus 4% interest." (PLANSPONSOR.com; free registration required)
Bridging Employees' Retirement Income Gap with Income Annuities: An Employer's Guide
24 pages. Excerpt: "This paper is intended to help employers assess the feasibility of adding income annuity options and to understand how they can do so with minimal disruption to the plan's administration and coststructure." (Principal Financial Services, Inc.)
Four New Mexico Public Employee Unions Sue to Stop 'Wage Tax' for Pensions
Excerpt: "Four of New Mexico's public employee unions are suing the state to stop the enactment of a new law that decreases the state's payment into public employee pension funds by 1.5 percent for two years. . . . If enacted . . . the law will force more than 66,000 public employees to shore up the state's budget deficit by paying 1.5 percent more out of their paychecks into PERA and ERB, the state's public employee pension funds." (The New Mexico Independent)
Tax Proposal Has Silver Lining for IRAs, Social Security
Excerpt: "[HR 882] proposes to increase the required age for distributions from qualified retirement plans to 75 from 70?. The effective date would be for years beginning after the date of enactment. Thus, if the bill were to become law this year, the age 75 rule would be effective for 2010 and thereafter. The bill would also provide for contributions to traditional individual retirement accounts to the year prior to age 75 rather than the present rule of 70? ." (Investment News; free registration required)
Massachusetts Governor Exults in Signing Pension Reform Bill
Excerpt: "Gov. Deval L. Patrick, struggling all year with multibillion deficits, squabbles with the Legislature and scandals erupting over legislative payoffs and bid rigging, broke through that Beacon Hill funk today and was beaming over signing a bill closing loopholes in state pension laws that have outraged the public for years. . . . The 'one day-one year rule' allowed legislators whose terms expire Jan. 1 to take a year of pension credit for serving one day in a calendar year. 'King for a day' pension rules let employees retire on accidental disability pensions at a pay rate of their supervisors if they worked for one day in that job as a fill-in. The 'termination allowance' gave a substantial pension boost to elected officials if they were voted out of office." (Worcester Telegram & Gazette Corp.)
[Opinion] What's Wrong with the Current 401(k) System - and How It Can Be Salvaged
Excerpt: "Unfortunately a one-two punch thrown by well-meaning consumer advocates and desperate corporations has worsened an already bad situation. First, as a way to save too-cautious investors from themselves, in 2007 and 2008 some plans changed the default investment from a money market fund to an age-appropriate mix of stocks and bonds. Which then proceeded to tank. Second, a growing number of companies (see the list above and to the right [on the target page]) are eliminating or curtailing the employer match entirely. Doing so when stock prices are low is particularly harmful because it makes it that much harder for investors to recoup losses." (CNNMoney.com)
[Guidance Overview] Plan Provision Relieving Trustee of Duty to Monitor and Collect Contributions Is Void as Against Public Policy
Excerpt: "EBIA Comment: We found the court's final comments most interesting. Under the heading 'Coda,' the court essentially admonished the DOL for using the courts to establish a trustee's duty to monitor and collect contributions rather than its rulemaking authority. The court then noted that the implications of its order will require 'nuanced development' and a 'proper balance' that must be provided by DOL rulemaking, so that a trustee's duty to collect unpaid contributions does not become so costly and burdensome that small employers will not be able to provide retirement benefits for their employees." (Employee Benefits Institute of America)
International Pension Issues in a Global Economy: A Survey and Assessment of IRS' Role in Breaking Down the Barriers (PDF)
Excerpt: "The focus of the Employee Plans subcommittee of the ACT for the year 2008-2009 was to survey and assess the most important federal tax issues affecting retirement plans of employers involved in cross-border transactions and the Internal Revenue Service ('IRS') Employee Plans Division's role in addressing those issues and providing education and outreach. . . . It is the ACT's hope that this report will spur the IRS to begin to address these international pension issues as 'one' IRS, while keeping in mind the goal... '... to break down the barriers and impediments to U.S. employers desiring to provide pensions to nonresident aliens working in the United States and to U.S. citizens and resident aliens transferred to affiliates of U.S. employers outside the United States.'" (IRS Advisory Committee on Tax Exempt And Government Entities via American Benefits Council)
[Opinion] Groom Comments on Proposed IRS 403(b) Prototype Plan Program (PDF)
6 pages. Excerpt: "Firm has specific comments on: vesting, selected church plan rules, employer contributions, cash limit, hardship distribution and disability definition." (Groom Law Group via 403bwise)
Choosing Between 401(k) and 403(b) Plans
Excerpt: "BNA has published a brief article on choosing between 403(b) and 401(k) formats for retirement plans at http://www.bnatax.com/tm/insights_kenty.htm. The summary is well written and brief, both of which are real virtues. I have only two comment[s]." (403(b)-457 Plans Blog)
Tobacco Bill Includes Thrift Savings Plan Changes
Excerpt: "Congress last week approved legislation designed to further regulate and restrict tobacco products ? but at the same time made changes to federal worker benefit provisions. The bill -- HR 1256, the Family Smoking Prevention and Tobacco Control Act -- puts the Food and Drug Administration in charge of regulating tobacco and imposes restrictions on the marketing and production of tobacco products. But it also contained a number of enhancements to the federal government's Thrift Savings Plan, or TSP. . . . Not included in the final bill was a provision in the House-passed version that would have allowed unused sick leave accumulated by employees covered by the Federal Employees Retirement System (FERS) to be counted toward their retirement payments . . . ." (PLANSPONSOR.com; free registration required)
DC Spending Now Ahead of DB Spending, According to Mercer Study
Excerpt: "For the first time, employers' median spending on defined contribution (DC) benefits in 2008 topped their median spending on earned pension benefits, according to Mercer's annual study of S&P 500 companies' retirement programs. A Mercer news release said the latest data reflects the now well-documented shifting defined benefit to defined contribution benefits landscape, with the median defined contribution plan costing 0.39% of revenue in 2008, compared to the median value of median defined benefit accruals of 0.38% of revenue. Although DC spending was relatively constant from 2005 through 2008, DB spending was down from 0.51% of revenue in 2005, Mercer reported." (PLANSPONSOR.com; free registration required)
Borrowing from 401(k) Plan May Have Positive Effects for Some Participants
Excerpt: "A new government report breaks from conventional wisdom and casts doubt on some long-held beliefs about the negative effects of borrowing from a 401(k) fund. Shifting expensive consumer debt to defined-contribution plans may make sense for some workers." (Human Resource Executive Online)
New Mexico State Workers Sue Over Pension Changes
Excerpt: "Multiple unions representing more than 60,000 state and public school employees filed a lawsuit against the state of New Mexico on Monday, accusing the state of violating employees' constitutional rights by decreasing contributions to public employee pension funds and making employees fill the gap. 'We believe this was in order to remedy a general budget shortfall, and we believe it's just not fair,' said attorney Shane Youtz at a news conference . . . ." (KRQE News 13)
[Guidance Overview] Section 403(b) Plan Participants Need to Correct Defective Contract Exchanges by June 30
Excerpt: "Plan sponsors whose plans permitted exchanges with non-approved vendors after September 24, 2007, and who did not enter into ISAs with such vendors by January 1, 2009, might wish to remind plan participants of the upcoming deadline and the need to re-exchange any such contracts back into the plan in order to avoid the potential income tax consequences." (The Segal Group, Inc.)
[Guidance Overview] Loans on 401(k) Plans a Tax Trap
Excerpt: "Conventional wisdom and prudent financial planning caution against borrowing against a 401(k) retirement account for anything other than emergencies. A post by Dana Wilkinson on Bankruptcy Law Network similarly urges caution in using 401(k) loans to pay off dischargeable credit card debt. Now, given last year's overwhelming decline in investment portfolio value, people who borrowed against their 401(k) plans for any reason while the market was still strong may have come out ahead, provided they are able to repay the loans as originally scheduled." (Bankruptcy Law Network, LLC)
[Guidance Overview] 403(b) Plan or 401(k) Plan: How to Decide
Excerpt: "In the half century since Congress created ?403(b) contracts, the regulatory regime has evolved to resemble ever more closely the qualified plan rules. In fact, the IRS announced at the end of 2008 that it intends to create an application for determination procedure for ?403(b) contracts. There remain, however, material differences in the two sets of rules, so that employers that have a choice should consider carefully the relative advantages and disadvantages." (Tax Management Inc.)
Bill Advances with Thrift Savings Plan Reforms, But Not Sick Leave Fix
Excerpt: "The Senate on Wednesday advanced major legislation that includes several provisions expanding federal employees' options under the Thrift Savings Plan, but does not allow some employees to count unused sick leave toward retirement savings. In a 67-30 vote to end legislative debate, lawmakers moved H.R. 1256 forward, but without an amendment that would have enabled federal workers in the Federal Employees Retirement System to count unused sick leave toward their retirement annuities -- a benefit employees in the older Civil Service Retirement System currently have." (GovernmentExecutive.com)
[Opinion] Groom Comments on Proposed IRS 403(b) Prototype Plan Program
Excerpt: "On behalf of Diversified Investment Advisors, Groom Law Group has submitted comments to the IRS detailing ways in which the proposed IRS prototype procedure for 403(b) plans in IRS Announcement 2009-34 could be improved, including allowing vesting schedules for employer contributions and certain church-specific provisions. We also commented on several points in which the language in the proposed List of Required Modifications that accompanied the Notice could be clarified and made more useful." (Groom Law Group)
Massachusetts House and Senate Agree on Plan to Curb State Pension Excesses
Excerpt: "State lawmakers agreed today to end some of the most egregious pension abuses that have plagued the Massachusetts state retirement system for decades, cutting a deal to eliminate sweetheart provisions, tighten the rules, and -- they hope -- repair some of the damage inflicted on Beacon Hill by a series of pension controversies. The House and Senate are expected to vote Thursday on the provisions, and the governor vowed to quickly sign the bill. The moves followed a recent series of Globe stories that revealed how public officials had enriched themselves by exploiting special provisions in state pension law." (The Boston Globe)
Many 401(k) Sponsors Suspending Matching Contributions Are Funding Defined Benefit Pension Plans (PDF)
Pages 12- of 20 pages. Excerpt: "A review by the Employee Benefit Research Institute of 251 401(k) plan sponsors that have suspended matching contributions for their approximately 4.4 million workers finds that those employing 50 percent of the workers also maintained an open defined benefit plan. An additional 16 percent of workers were with employers that were still obligated to fund a frozen defined benefit plan. Further, 8 percent of the workers were with an employer that had both an open and a frozen defined benefit plan that carried funding obligations." (Employee Benefit Research Institute)
[Opinion] Time to Drop DROPs? Alice-in-Wonderland Math Can't Work for Deferred Option Retirement Plans
Excerpt: "The mere existence of a DROP plan should signal that something is wrong with the pension plan. The idea of providing incentives to seniority workers to keep them in service -- because their pension plan encourages a life of leisure well before age 60 -- is a signal that the pension benefit is simply too rich. But early retirement plans with full lifetime benefits are simply not sustainable in today's world of increased longevity, shrunken government budgets and underwater pension fund portfolios. While most workers in the private sector must now toil until or beyond age 65 because their 401(k) accounts are insufficient to retire, the public sector continues to act as if nothing has changed in the world around them. Further sweetening the pot with what some might call a bribe to remain working is a Mad-Hatter-meets-Rube-Goldberg scheme." (Governing.com)
Legislation Provides Incentives for Annuitizing Retirement Plan Distributions
Excerpt: "Bipartisan legislation has been introduced to give workers a new incentive to annuitize, rather than spend, their retirement savings. U.S. Representatives Earl Pomeroy (D-North Dakota) and Ginny Brown-Waite (R-Florida) today introduced The Retirement Security Needs Lifetime Pay Act, which provides tax incentives for workers to annuitize part of their retirement savings. The Retirement Security Needs Lifetime Pay Act, H.R. 2748, would encourage workers to annuitize some of their retirement savings by providing a 50% tax exclusion for up $10,000 of lifetime annuity payments annually." (PLANSPONSOR.com; free registration required)
IRS and DOL Priorities: Spring 2009 Regulatory Agenda
Excerpt: "In the first Semiannual Regulatory Agenda released during the Obama Administration, the Department of Labor and the Internal Revenue Service list their priorities for the coming year." (Deloitte via BenefitsLink.com)
Dropping Your 401(k) Match? Watch Employees Drop the Plan
Excerpt: "[W]hen organizations stop matching employee contributions, employees often stop contributing. In fact, workers are less likely to even join a 401(k) plan if there's no employer match. A Fidelity Investments report showed that about 30% of employees who participate in a workplace retirement plan contribute only the amount they need to get the full employer match." (Business Management Daily)
Trade Groups/Providers Comment on 403(b) Prototype Program
Excerpt: "The deadline for comments on the Internal Revenue Service's proposal for a 403(b) plan document prototype program was June 1, and trade groups and industry providers had a number of concerns. The biggest suggestion among all commenters was to allow prototype plans to include vesting schedules. The SPARK Institute said it believes the most significant revision that is necessary to expand the availability of the prototype program is to permit the use of a vesting schedule in the prototype plan . . . ." (PLANSPONSOR.com; free registration required)
[Guidance Overview] 403(b) Annual Additions
Excerpt: "The section 415 annual additions limit is applicable to 403(b) plans. There is an aggregation of all 403(b) plans of the same employer for the annual additions limit ($49,000 in 2009), including related employers. Like qualified plans, if an employee participates in more than one 403(b) plan in a year with unrelated employers, the section 415 limit applies separately for each employer. However, with a 403(b), the 415 annual additions limit is generally applied as if the employee, and not the employer, maintains the plan. Thus, generally, the 403(b) plan is not aggregated with the qualified plan for 415 purposes." (McKay Hochman Co., Inc.)
403(b) Changes Mean Altered Provider Landscape
Excerpt: "Labeling the 403(b) space 'arguably the most dynamic retirement market sector,' a new report by two research firms predicts the pace of transition and turnover by 403(b) providers is likely to pick up in coming months. 'Retirement Market in Focus,' released by RG Wuelfing and Associates and Retirement Research Inc., notes that 'marginal providers' have already exited from the 403(b) custody business or at least the multivendor 403(b) space and anticipates that will increasingly be the case (see The New 403(b) Model: Exclusive versus Multiple Vendor Programs). In the next year or two, more providers will likely get out, outsource, or stay and acquire 403(b) competitors, the report asserts." (PLANSPONSOR.com; free registration required)
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