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The BenefitsLink Newsletter -
Retirement Plans Edition

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July 19, 2000

Treasury Chief Hopes New Rulings on 'Negative Elections' Will Boost Retirement Savings
Excerpt: "Under automatic enrollment, employers that sponsor retirement savings plans such as 401(k) plans can assume employees are participating and deduct a stated amount from their pay to contribute to the savings plan. Employees have the right to opt out of these plans. Traditionally, employees must specifically request to participate in a retirement savings plan." (Bergen County [NJ] Record)

Congress Considering Amending Pension Laws to Increase IRA, 401(k) Contribution Limits
Excerpt: "The [bill would gradually] raise the current $2,000 annual contribution limit for traditional and Roth IRAs to $5,000 by 2003 [indexed for inflation thereafter]. A catch up provision would allow taxpayers age 50 and older to begin contributing the full $5,000 in 2001. The intent of the catch-up provision is to enable those workers to make up for the years when they weren't working, didn't contribute to their retirement plan or otherwise weren't able to save." (Knight-Ridder / Tribune Business News)

Mass Mutual Sued in Texas Over 'Tax-Sheltered Life' Product
Excerpt: "Massachusetts Mutual Life Insurance Co. has been named in a lawsuit alleging that the company improperly sold life insurance as a retirement vehicle to thousands of Texas teachers." (A. M. Best)

Author Seeks Former IRS Employee Plans Auditors to Co-Author New Book for Sponsors, Practitioners
Lawyer Frank Bitzer is co-author of the ERISA Q&A column here on BenefitsLink. He's asked BenefitsLink to post this request on his behalf. Can you help? Thanks. (BenefitsBoards.net)

DOL to Create SelectaRetirementPlan.org Web Site With Merrill Lynch, Other Federal Agencies
Excerpt: "This website is brought to you in the public interest through a partnership of the U.S. Department of Labor, the U.S. Small Business Administration, the U.S. Chamber of Commerce, and Merrill Lynch." (U.S. Department of Labor)

It's Official: Final Regs Eliminate the 'Lookback Rule' for Involuntary Cash-Out Distributions
Generally effective for distributions on or after October 17, 2000. Excerpt: "The lookback rule [formerly prevented] plans from cashing out a benefit currently valued below the cash-out limit simply because it had been valued above the cash-out limit at the time of an earlier distribution. This [created] disparity in the treatment of benefits of equivalent value and [required] plans to incur additional recordkeeping and other administrative costs." (Internal Revenue Service)

Direct Rollover as the Default Method of Making Involuntary Distributions
Commentary from Sal Tripodi. Excerpt: "In Rev. Rul. 2000-36, the IRS ruled that a plan may use the direct rollover as the default method of distribution. Pursuant to Treas. Reg. section 1.401(a)(31)-1, Q&A-7, the plan must explain the default procedure." (TRI Pension Services)

Description of the Railroad Retirement and Survivors' Improvement Act of 2000 (H.R. 4844) (PDF)
Excerpt: "The bill would create a new railroad retirement investment trust (the 'Trust') to administer a new railroad retirement trust fund (the 'Fund'). The bill describes the Trust as a private entity which is not a department, agency, or instrumentality of the Federal government. The Trust would be governed by a seven-member board of trustees. The board would independently manage and invest the assets of the Fund." (Joint Committee on Taxation)

Opinion: Updating the Contribution Limit for IRAs Makes Sense
Excerpt: "For the nearly 50 percent of Americans who don't have workplace pensions, an individual retirement account is the only tax-favored retirement savings plan available. Raising the IRA contribution limit and indexing it for inflation is a matter of parity. But it's also good public policy." (Kansas City Star)

Description of the Social Security Benefits Tax Relief Act of 2000 (H.R. 4865) (PDF)
Excerpt: "The bill would repeal the second-tier, 85-percent level tax on Social Security benefits. Thus, such benefits would be taxed under the law in effect prior to the 1993 Act. The bill would also reduce to 50 percent the amount of Social Security benefits included in the gross income and the amount subject to the withholding tax of a nonresident individual who is not a U.S. citizen." (Joint Committee on Taxation)

ERIC Provides Comments on Employee Benefits Continuity in Corporate Mergers and Acquisitions
Excerpt: "Five components of the federal regulatory scheme frequently block benefit continuity and expansion following business restructurings. The five components are, first, PBGC interventions in business transactions; second, the anti-cutback rule; third, Internal Revenue Code nondiscrimination rules; fourth, IRS disqualification penalties; and fifth, cafeteria plan and MEWA rules. (ERISA Industry Committee)

2d Cir: Deferred Compensation Plan Was A "Top Hat" Plan And Thus Exempt From ERISA
Excerpt: "A deferred compensation plan offered to approximately 15% of a bank's employees constituted a "top hat" plan and thus was exempt from most of ERISA's substantive requirements. This was the decision of the Second Circuit U.S. Court of Appeals in Demery, et al. v. Extebank Deferred Compensation Plan (B), et al." (Spencernet)

(Following also appears in Welfare Plans Edition)

Welcome to new BenefitsLink advertiser Anne M. Wallace, Esq.
Anne Wallace is a New York based attorney with fifteen years of experience representing individual, corporate, and union clients (and providing advice to law firms without specialized in-house expertise) with respect to employee benefit matters, including pension and health plan issues, QDROs, fiduciary matters and employee benefits issues in corporate mergers and acquisitions. (BenefitsLink)

RCN Executive Pay Tied to Relative Stock Performance
Excerpt: "RCN Corp., which sells cable-television, telephone and Internet services, has adopted an executive compensation plan that rewards employees if the company's shares outperform the stock market." (Graef Crystal, on Bloomberg.com)

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