The BenefitsLink Newsletter -
Retirement Plans Edition
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August 4 - 7, 2000
ERIC Summarizes H.R.1102, The Comprehensive Retirement Security And Pension Reform Act
Excerpt: "The House of Representatives July 19, 2000, passed H.R.1102, the Comprehensive Retirement Security and Pension Reform Act, by an overwhelming vote of 401-25, dramatically boosting chances that pension reform legislation will be enacted this year. A similar package of pension reforms is scheduled for mark up by the Senate Finance Committee on September 7." (ERISA Industry Committee)
Participant Investment Education: Where's the Beef?
Excerpt: "That's the way I feel sometimes about participant education. In some situations it's been 'dumbed down' to hit a median audience, and unfortunately it ends up of little use to either extreme-- the highly educated or the novice investor. Many times it goes straight into the trash. That's why targeted education programs are so important." (401kWire.com)
Don't Bank 401(k) on Employer's Stock-- If Company Hits Bad Spot, Retirement Plan Can Tank
Excerpt: "Few financial planners would recommend putting more than 10% or 20% of a client's portfolio in one stock. Yet millions of Americans routinely invest much larger portions of their 401(k) assets in their employer's stock.... Even the best of companies are not immune to stock market turbulence. A sudden downturn can be devastating for employees close to retirement." (USA Today)
mPower Calls Retirement Security Advice Act Less Than 'Investor Friendly'
Excerpt: "Consumers are getting an unwelcome surprise from representatives departing Capitol Hill for the Congressional recess, in the form of proposed legislation that would take away basic protections currently offered to pension plan participants." (Business Wire)
The First Union Case: Buying at the Company Store, and a Whole Lot More
Excerpt: "In one respect, the First Union case is atypical-—if not unique-— in that the plan sponsor owns a mutual fund management company and the plan investment options are limited to the sponsor's own mutual funds.... in other respects, the case reflects common problems in plan operations in general and in the selection and monitoring of investment options in particular." (Reish & Luftman)
Safe-Harbor Corrections After Revenue Procedure 99-3
Excerpt: "This column is the first in a series that will explore the most significant safe-harbor correction methods in Revenue Procedure 2000-16. This discussion addresses the safe-harbor corrections for ADP and ACP test failures. The focus will be on the requirements, options, pitfalls, and non-safe-harbor alternatives for correcting these types of operational failures." (Reish & Luftman)
ERISA =A7404(c): The Requirement for a Broad Range of Investment Alternatives
Excerpt: "Most people think of 404(c) as requiring at least three diversified investment alternatives. That is one of the broad range requirements; however, there are two more-- and all three must be satisfied to get 404(c) protection. The investment alternatives must also be sufficient to permit a participant to: materially affect the potential return on his or her account and the degree of risk; and diversify the investments to minimize the risk of large losses." (Reish & Luftman)
Online FDIC Trust Examination Manual Covers, Explains Collective Investment Funds
Excerpt: "A collective investment fund (CIF) is a trust fund maintained by a bank exclusively for the 'collective investment' of money of several accounts administered by a trust department.... Unlike mutual funds, however, a CIF is not available for investment by the general public. Rather, CIFs are established by banks to facilitate the administration of accounts held under 'bona fide fiduciary' appointments (as viewed under existing Federal securities laws)." (Federal Deposit Insurance Corporation)
Online FDIC Trust Examination Manual Covers Employee Benefit Accounts at Banks, Savings Institutions
Excerpt: "Banks and savings institutions may be granted trust (fiduciary) powers under the jurisdiction of Federal Financial Institutions Examination Council (FFIEC) regulatory agencies. The FDIC examines the trust operations of FDIC-regulated financial institutions." (Thanks to Dick Martin and Daphne Rich, who recently added this link to their splendid Web page at http://members.aol.com/pwweasel/index.html) (Federal Deposit Insurance Corporation)
A Hazard of Boom Times: Forgetting to Save
Excerpt: "Stock-driven prosperity explains to a large extent why personal savings as a proportion of disposable income (after-tax income) has fallen to 0.2 percent in the first half of this year. That savings ratio was 8.7 percent in 1992. It has fallen every year since then." (Christian Science Monitor)
Social Security and Retirement
Link to a Working Paper available for downloading from the National Bureau of Economic Research. Excerpt: "A critical question for Social Security policy is how program incentives affect retirement behavior. We use the wealth of new data available through the Health and Retirement Survey (HRS) ... Our findings suggest that Social Security policies which increase the incentives to work at older ages can significantly reduce the exit rate of older workers from the labor force." (National Bureau of Economic Research Working Paper)
(Following also appears in Welfare Plans Edition)
Follow-Up: Exclusion of Stock-Based Compensation from Overtime Pay Determinations
Excerpt: "The [Worker Economic Opportunity Act] provides an exemption to the inclusion of such compensation in overtime determinations ... its effective date is August 16, 2000. This Legal Alert highlights the key features of the Act and the requirements for meeting the exemption. The DOL will issue regulations. Until then, stock options for non-exempt employees should be granted either before August 16, 2000 or in careful compliance with the Act." (Kilpatrick Stockton LLP)
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