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The BenefitsLink Newsletter -
Retirement Plans Edition


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August 1, 2000

ASPA Executive Director Encourages Plan Service-Providers to Contact Senators re Pension Bill
Excerpt: "The House overwhelmingly passed the Comprehensive Retirement Security and Pension Reform Act on July 19, 2000. Now it is time for the Senate to take action. Encourage the Senate to consider this important legislation by sending a letter to your Senator through the [e-mail link found on ASPA's] Government Affairs Action page." (American Society of Pension Actuaries)

APPWP: Cash Balance Conversion Benefit Plateaus Are Not Age Discriminatory
Excerpt: "When employers change to a cash balance plan, they typically provide an opening balance ... A benefit plateau (also known as 'wear-away') results if the value of the employee's cash balance account is less than the value of the benefit he or she accrued under the prior plan as of the time of the conversion. Until the value of the cash balance account catches up to the value of the previously accrued benefit, it is the higher accrued benefit to which the worker is entitled..." (Association of Private Pension and Welfare Plans)

Final Regulations Explain Requirements For Nontaxable Loans, Tax Treatment of Defaulted Loans
Excerpt: "The regulations are effective for loans made on or after January 1, 2002. ... The plan year of the plan is irrelevant. In other words, all plans become subject to the regulations as of January 1, 2002, even if that date occurs in the middle of a plan year ... Between the applicable statutory date of any provision of 72(p) and the regulatory effective date, plan administrators must apply a reasonable, good faith standard of compliance. " (TRI Pension Services)

Proposed Regulations Issued To Cover Loan Refinancing, Military Service Leave, and Multiple Loans
Excerpt: "The proposed regulations will apply to loans made on or after the first January 1 which is at least six months after the regulations are finalized ... the earliest effective date for the rules contained in these proposed regulations will be January 1, 2002 (assuming final regulations are issued by June 30, 2001). For earlier loans, a reasonable, good faith compliance standard applies. Presumably, following these proposed regulations will satisfy this good faith standard." (TRI Pension Services)

Risks of Nonqualified Plans, Then and Now
Excerpt: "Among the risks in nonqualified plans are the following: forfeiture of plan payments, overdependence on unsecured funds, extra taxes on estate transfer, an undiversified investment portfolio, constructive receipt, unexpected Social Security tax, and a jump in income-tax bracket." (RIA Pension & Benefits Week)

Opinion: Beware-- The Rich Are Getting Richer
Excerpt: "When the siren song of pension reform emanates from our nation's capital, beware: The rich are likely to get richer, and almost everyone else will get poorer. As a nation, we have invested hundreds of billions of dollars ... in tax subsidies aimed at encouraging employers to offer pension plans ... Despite this massive national investment in retirement security, fewer than half of the employees in the private-sector work force participate in a pension plan ..." (Professor Norman Stein, in the Los Angeles Times)

Forbes Magazine's Retirement Guide 2000
Excerpt: "Retirement, on your terms. Yes, that's the goal. The task, however, is getting there in one piece. So for this year's guide, we've given your retirement fantasies a reality check. First, we've crafted seven nuts-and-bolts savings and investment plans to help a few real readers reach their retirement dreams. Then we picked a bevy of great stocks and mutual funds to keep any portfolio sprinting into the next decade." (Forbes)

Getting Help Tracking Down Pension Money
Excerpt: "It's easy to lose track of pension benefits you've earned, especially if you change jobs. What can you do once you've left an employer? Where can you turn?" (Providence Journal)

Retirement Resources: Free Information Flows From U.S. Government Agencies
Excerpt: "Worried about retirement? Or about how much money you'll need to get by comfortably, and whether you have accumulated enough already? You'd be surprised at how much solid guidance on these and other subjects is available free from the U.S. government." (Thanks to Don Blandin of the American Savings Education Council for recommending the link!) (CBS.Marketwatch.com)

Opinion: Too Many Secrets-- How Money Managers Hide Illegalities From Investors
Excerpt: "Securities regulators, law enforcement agencies, pension fund executives and the money management industry itself, together, are responsible for the lack of public awareness of the dangers related to the management of the nation's retirement savings. There has been a concerted effort to conceal the wrongdoing from investors by everyone who might be held accountable, including pension trustees and plan administrators, pension staffs and money managers." (Benchmark Financial Services, Inc.)

Just What Is a Fair Price for Passive Advisor Services?
Excerpt: "Passive and index investment strategy clearly offers a superior approach compared to active management. I will argue here, however, that annual percentage fees have no place in the passive advisory business, and are unjustifiable. Further, I will argue that any fee which exceeds $5000 per year, for any account, is simply too high." (IndexFunds.com)

Cleaning Up 'Same Desk' IRS Rule
Excerpt: "What happens to your 401(k) account when your company gets taken over? As merger fever continues to sweep the nation, this is an important issue to millions of workers -- and the sole focus of today's MoneyLine." (Neil Downing, in the Providence Journal)

(Following also appears in Welfare Plans Edition)

Moving to the Paperless HR Department: The New Electronic Signature Law's Potential
Guest article by Martha Priddy Patterson. "Employers wanting to move to a paperless human resources department could come very close to that goal, especially for 401(k) plans, under the newly enacted Electronic Signatures in Global and National Commerce Act. This new law allows us to sweep away at least three millennia of the burden of writing and return to the days when an 'X' served as an individual's witness to be bound by his or her pledges. The act applies to far more than mere signatures." (Thompson Publishing Group)


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