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The BenefitsLink Newsletter -
Retirement Plans Edition

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June 9 - 12, 2000

IRS Rev Proc 2000-27 Opens Determination Letter Process for Individually Designed Pension Plans
Excerpt: the new procedure will "allow sponsors of qualified plans to obtain determination letters that take into account all the changes in the qualification requirements made by 'GUST', including those changes made by [SBJBA] that are first effective in plan years beginning after December 31, 1998. This procedure also extends until the last day of the first plan year beginning on or after January 1, 2001, the remedial amendment period ..." (Internal Revenue Service)

Benefit Plans Can Sue Brokers and Other Nonfiduciaries for Damages
Excerpt: "The unanimous decision means Ameritech Corp. and its pension plan trustee, Harris Trust and Savings Bank, can continue trying to recover some $20 million lost in a deal with Salomon Brothers Smith Barney Inc., a stock brokerage that is now part of Citigroup Inc." (Associated Press)

Full Text of Supreme Court's Opinion in Harris Trust v. Salomon Smith Barney Inc.
Excerpt: ERISA "Section 502(a)(3)'s authorization to a plan 'participant, beneficiary, or fiduciary' to bring a civil action for 'appropriate equitable relief' extends to a suit against a nonfiduciary 'party in interest' to a prohibited transaction barred by §406(a)." (FindLaw.com)

Supreme Court Says Physician Incentive Payments by HMOs Do Not Violate ERISA
Excerpt: "Patients cannot sue health maintenance organizations under a federal law for giving doctors financial bonuses to hold down treatment costs, the Supreme Court ruled Monday. Such financial incentives are how Congress intended for HMOs to work, the justices said in a unanimous ruling that closed one legal avenue for patients' lawsuits but still leaves open the possibility of lawsuits in state court." (Associated Press, via Yahoo! News)

Full Text of Supreme Court's Opinion in Pegrem v. Herdrich

Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices
Excerpt: "This paper investigates whether peer effects play an important role in retirement savings decisions. We use individual data from the staff of a university to study whether individual decisions to enroll in a Tax Deferred Account plan sponsored by the university (and the choice of the mutual fund vendor for people who choose to enroll) are affected by the decisions of other employees in the same department." (National Bureau of Economic Research Working Paper)

Some Transition Relief Applying Rollover Rules to Hardship Withdrawals from 401(k) and 403(b) Plans
Excerpt: "Notice 2000-32 ... does not further delay the effective date of these new rules, but provides some transition relief ... Thus, hardship withdrawals made from 401(k) plans or 403(b) plans during 2000 and in later years must follow the RRA '98 requirements, except as relief is provided in Notice 2000-32. " (TRI Pension Services)

How to Spot Flaws in a 401(k) Plan
Excerpt: "The evidence is overwhelming: Few workers ever bother to check up on the management, safety, and performance of their plans." (Christian Science Monitor)

Japan Labor Report: More Women Needed in the Workforce to Support Japan's Pension System
Excerpt: "Collin Gillion, director of the ILO's Social Security Department, told Kyodo News in a recent interview that increasing the number of working women would increase the number of people who pay into Japan's two national pension schemes." (Kyodo News)

Welcome to new BenefitsLink advertiser The ESOP Association
The ESOP Association is the national association of companies with ESOPs and service providers with a commitment to ESOPs. Founded in 1978, The ESOP Association represents more than 1,200 ESOP companies, 800 service providers, and 750,000 employee owners who believe that employee ownership will improve American competitiveness and increase productivity through greater employee participation. (BenefitsLink.com)

Pensioner Dies Trying to Prove He Is Alive
Excerpt: "Colombian bureaucracy proved fatal for an 87-year-old man who died of a heart attack as he waited in line to collect a government certificate to prove he was still alive." (Reuters via news.excite.com)

401(k) Account Error Makes Her a Millionaire on Paper, and She's Fuming
Excerpt: "Most workers would be thrilled to hear they had $4 million in their 401(k). But Kathi Steigerwald was appalled. The Dearborn woman, who calls an automated telephone system almost daily to check her account balance, knew the amount should be in the mid-five-figure range. Starting May 5, the computer voice began telling her she had more than $4 million." (Detroit News)

US Electronic Signature Bill Heads for Vote
Excerpt: "Compromise legislation giving electronic signatures and documents the same force in law as their paper counterparts will likely come to a vote in the House next Tuesday, House Commerce Committee Chairman Thomas Bliley said Friday." (Reuters, via The Standard)

Federal Thrift Savings Plan Picks Financial Engines for Online Investment Advice, Information
Excerpt: Financial Engines will service "the Thrift Savings Plan or TSP, the defined contributions retirement plan for Federal government employees. This unique service will initially be offered for free to 2.4 million employees of the Federal government who participate in the TSP, enabling them to have access to institutional quality personalized investment advice to help them choose among the fund alternatives available in their TSP account in order to plan for retirement." (Financial Engines press release)

Worker Reclassification and Subrogation: Using Plan Drafting to Head Off Issues
Excerpt: "Recent guidance from the IRS on worker reclassification and the Sixth Circuit on subrogation rights points the way to drafting plan language that will significantly enhance protections for plan sponsors and plans (pension and welfare)." (Kilpatrick Stockton LLP)

Navigating the Maze of ERISA Class Actions
Excerpt: "Faced with a possible class action lawsuit, many businesses choose to move heaven and earth to avoid having a class certified, fearing the liability of a giant pool of plaintiffs. With ERISA litigation, that's not always the best strategy. Sometimes a class action actually helps the defense." (Faegre & Benson, LLP)

Gillette Churns Out Options as Share Price Drops
Excerpt: "Gillette Co.'s board of directors has a curious notion of pay-for-performance. As performance declines, you pay even more." (Graef Crystal, on Bloomberg.com)

House Passes Estate Tax Repeal
Excerpt: "The House of Representatives has approved a Republican-championed bill that would completely roll back the 84-year-old federal tax on estates, despite the strong objections of the Clinton Administration and the likelihood of a presidential veto should it arrive at the White House in its current form." (CNN)

Pension Partisans Fight for Retirement
Excerpt: "A pension revolution is sweeping the USA. It has attracted union members and white-collar managers, retirees and workers of all stripes. Their weapons range from shareholder resolutions and lawsuits to old-fashioned rabble-rousing demonstrations. Whether they are battling a controversial cash-balance pension plan or pushing for a cost-of-living increase, they have a common goal: retirement security." (USA Today)

The Deep Cuts You Don't Hear About
Excerpt: "George W. Bush's proposals for Social Security have turned into an argument about whether investing in stocks is good or bad. That is not the issue. The real issue is that Bush proposes dramatic cuts in the basic level of protection now provided by Social Security. These basic benefits on which many elderly depend for almost all their retirement income would likely be cut by more than 40 percent." (Alicia Munnell, in the Washington Post)

Your Options on Stock Options
Excerpt: "Here in the Northwest, talking about stock options is as common as ordering a grande latte. The subject comes up in everyday conversations as people reflect on the thousands of Microsofties and other high-tech employees who have made fortunes by exercising their stock options." (Seattle Times)

Corporate Performance of Public Companies with Stock Options
The full text of a new study by researchers at Rutgers University. (National Center for Employee Ownership)

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