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The BenefitsLink Newsletter -
Retirement Plans Edition

May 16, 2000

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1% Mandatory Employee Contribution Should Not Have Been Counted for Purposes of the ADP Test
Excerpt: "The IRS district counsel had raised the compliance issue of whether a 401(k) plan was being administered in accordance with the plan document where all employees had to make a mandatory 1% contribution, rather than limiting the contribution requirement to participants only (i.e., in this case, employees who had completed one year of service)." (EBIA Weekly)

Same-Desk Rule Relaxed; Separation From Service OK After Selling Less Than Substantially All Assets
Excerpt: "In this ruling, the IRS addressed a situation in which Employer X sold less than 85% of the assets of a trade or business to Employer Y." (EBIA Weekly)

Banks Have Opportunity to Get Back Into the Retirement Plan Business
Excerpt: "An impending change in the business of managing retirement ssets may give banks a chance to reverse 30 years of losses in share of these assets to mutual funds, brokers, and insurance companies, some industry officials say. As investors become more aware of the tax consequences of 401(k) plans, many will seek advice on how to reduce their tax burden. Banks are well positioned to grab this business because so many are already expert at managing assets through trust accounts..." (American Banker)

California Official's Proposal to Link CalPERS Investments to Social Goals Draws Mixed Reviews
Excerpt: "State Treasurer Phil Angelides' proposal to link CalPERS investments in developing countries to social justice and political freedom got at best a mixed reception Monday from other board members and clear opposition from the pension fund staff." (Sacramento Bee)

Retirement Debate Pits Old Politics Against New
Excerpt: "... Mr. Bush's own polls show that voters are comfortable with his idea and do not fear the usual ups and downs of the financial markets. Vice President Al Gore, on the other hand, has positioned himself squarely against giving workers the choice of investing part of their earnings in IRA-type stock and bond mutual funds--an idea that he calls 'risky' and that the liberal base of his party considers a heretical assault on its oldest, most cherished social welfare program." (Washington Times)

Who Should Pay for Pensions? (Slide Presentation)
Employers, governments, or individuals? The three-legged stool returns. Professor Orszag provides several nicely-done charts in this presentation. (J. Michael Orszag, Birkbeck College, London)

Pension Systems: a Comparative Perspective (PDF)
Excerpt: "The relationships between social security (pillar I), sponsored pension and retirement plans (pillar II), and individual retirement income accounts (pillar III) are essential to any understanding of pension systems. There are significant differences between the Anglo-American world, much of continental Europe, and Latin America with respect to the structure of relationships between the three pillars of retirement income." (Gordon L Clark, University of Oxford (working paper))

European Court of Justice Rules Part-Time British Workers Can Claim Benefits Back to 1976
Excerpt: "A European court ruling Monday could force British businesses to pay out billions of dollars in backdated pension payments to part-time workers ... Six trade unions launched legal action over six years ago on behalf of part-time workers excluded from professional pension plans. The unions won the right for part-timers to be included in pension plans but legal arguments have dragged on over how far back payments should be backdated." (Associated Press)

Social Security Plans Collide; Pension Debate between Bush and Gore Could Be Pivotal
Excerpt: "the sharpness of their coast-to-coast exchange reflected not only the wide gap in their political philosophies but also the potential Social Security reform has to become the decisive issue in a razor-close election this fall." (Atlanta Constitution)

Gore Slams Bush on Social Security Issues
Excerpt: "George W. Bush proposed letting Americans invest Social Security taxes in the stock market Monday, appealing for support from the millions of people who have thrived in a booming market. Presidential rival Al Gore condemned the idea as a dangerous gamble that would turn the solemn obligations of the 65-year-old retirement plan into 'a system of winners and losers.'" (Associated Press)

Bush Outlines Social Security Reforms, Including Private Accounts
Excerpt: "With the Social Security system now as old as some retirees claiming benefits, George W. Bush today outlined a plan that would allow workers to invest part of their payroll taxes in private accounts. He also promised to strengthen Medicare." (Associated Press)

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