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Retirement Plans Edition

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August 29 - 30, 2000

Withholding of North Carolina Income Tax from Pensions, Annuities, and Deferred Compensation
Excerpt: "This Directive addresses the new withholding law requiring State income tax to be withheld from pension payments to residents of this State. The law was enacted in 1999 ... amended in 2000 ... and is effective for tax years beginning on or after January 1, 2001." (North Carolina Department of Revenue)

Company Did Not Violate ERISA In Connection With Spinoff And Transfer Of Pension Plan Assets
Excerpt: "Ruling in two consolidated cases, the Sixth Circuit U.S. Court of Appeals has held that a company did not breach its fiduciary duties under ERISA in connection with the spinoff of a subsidiary and the resulting transfer of assets from the company's defined contribution plans to a new Sec. 401(k) plan established by the subsidiary. The ruling came in Hunter, et al. v. Caliber System, Inc." (Spencernet)

Follow the 401(k) Money Trail: Where It Begins, Where It Ends
Excerpt: "Why does it take so long for your 401(k) money to be posted to your account? 401(k) accounting isn't simple." (401Kafe.com)

403(b) Plans: Wealth-Building Tool for Teachers
Excerpt: "Many educators are in the dark about their retirement options in 403(b) (or TSA) plans. Annuity products pushed in these accounts can end up costing teachers thousands of dollars -- and that's money that isn't plentiful in this profession. Our guest columnist urges teachers to take advantage of no-load (no-fee) alternatives in their retirement plans." (Motley Fool)

Supreme Court ADA Case Could Have Implications for Public Pension Funds
Excerpt: "When the headlines say 'The Supreme Court Eliminates Federal Protection Against Age Discrimination for State Employees,' what does this mean for public pension systems? ... This case may have significant and wide reaching impact on pension liability under the ADEA and the Americans with Disabilities Act." (National Conference on Public Employee Retirement Systems)

7th Cir.: Controlled Group Of Companies Not Exempt From Withdrawal Liability
Excerpt: "A controlled group of three companies owned by one individual did not satisfy the requirements for exemption from withdrawal liability under the Multiemployer Pension Plan Amendments Act (MPPAA) and thus all three companies were responsible for paying the withdrawal liability assessed by a multiemployer pension plan. This was the decision of the Seventh Circuit U.S. Court of Appeals in Central States, Southeast and Southwest Areas Pension Fund, et al. v. Nitehawk Express, Inc." (Spencernet)

Company Was Required to Pay Plan Withdrawal Liability After Failing Exemption Requirements
Excerpt: "A company was required to pay withdrawal liability to a multiemployer pension plan after the company ceased operations following a sale of its assets, because it failed to satisfy certain statutory requirements for exemption from the requirement to pay withdrawal liability. (Central States, Southeast and Southwest Areas Pension Fund v. Nitehawk Express, Inc. (2000, CA7)." (RIA Pension & Benefits Week)

The Downside to an IRA Rollover From Your Former Employer's 401(k) Plan
Excerpt: " There are certainly advantages to rolling over your 401(k) into an IRA. Greater investment flexibility is chief among them. But there also may be a distinct disadvantage. Money in an IRA is more vulnerable to claims made by creditors if you file for bankruptcy or are sued." (CNNfn.com)

Contribution To Money Purchase Plan Made More Than 8-1/2 Months After End Of Plan Year Was Untimely
Excerpt: "The U.S. Tax Court has ruled that the contributions made by a sole proprietorship to its money purchase pension plan for a plan year were untimely under IRC Sec. 412 and thus that the plan failed to satisfy the minimum funding standards for that plan year. The ruling came in Susan Jane Hoyez, C.P.A. v. Commissioner." (Spencernet)

Account of Deceased Participant Goes to Estate, Not to Designated Beneficiary
Excerpt: "... the court ruled that since Norbert was wrongfully denied the distribution before his death, the payment must be characterized as a pre-death payment, which is now payable to his estate. The court ordered the plan to pay the benefits to Corinne in her capacity as the executor, and not in her capacity as the surviving spouse of death benefits." (TRI Pension Services)

Bank's Nonqualified Plan Is 'Top Hat' Even Though 15% Of Workforce Covered
Excerpt: "Demery v. Extebank Deferred Compensation Plan, 24 EBC 2095 (2nd Cir. June 15, 2000), offers a good explanation of the top hat plan definition, and provides helpful guidance on how the top hat criteria may be applied." (TRI Pension Services)

US Treasury Wants to Yank Tax-Exempt Status of Some Pensions
Excerpt: "The U.S. Treasury Department has offered a plan to Congress that would protect workers from losing some pension rights when employers switch retirement plans. The proposal would revoke the tax-exempt status of new so-called cash-balance pension programs that replace conventional plans if employees lose their current status in the switch. The plan would not protect older workers' claims to higher pensions." (Bloomberg.com)

Facing a Hobson's Choice: Planning for IRA and Qualified Plan Distributions
Excerpt: "Many married couples face a classic estate planning dilemma. They have combined estates large enough to require them to pay estate taxes, but each spouse has insufficient separate assets—other than retirement plans—to fund the bypass trust that could cut their estate tax bill." (Journal of Accountancy)

The Beneficiary's Beneficiary
Excerpt: "As more and more owners of larger and larger IRAs pass away, leaving their accounts to younger generation beneficiaries, a new estate planning situation becomes increasingly common: what becomes of the inherited IRA if the 'designated beneficiary,' having survived the original owner, then himself or herself dies before the end of the life expectancy payout period?" (Natalie Choate, in Trusts and Estates magazine)

Take the Ire Out of IRA Estate Planning
Excerpt: "This article gives trust and estate professionals guidance in preparing beneficiary designations that take into account the tax implications and family and financial objectives of clients. Using different fact patterns, the article discusses the various planning issues associated with preparing a beneficiary designation for an IRA or qualified plan." (Trusts and Estates magazine)

Analysis: IRS Announcement 2000-77 re Determination Letters for Volume Submitter Sponsors
Excerpt: "Under Rev. Proc. 2000-27, the IRS announced that it will review a volume submitter adopter's plan for a GUST II letter, which is a letter than considers all GUST changes, including those that become effective after December 31, 1998, even if the specimen plan does not have a GUST II advisory letter, unless the employer specifically requests a pre-GATT or GUST I letter." (TRI Pension Services)

Coalition Fights to Remedy What It Sees As Flaws In Pension Reform
Excerpt: "A grass-roots coalition of retirees and pension and retirement advocacy groups is fighting a popular pension reform bill, contending that there's more to the Comprehensive Retirement Security and Pension Reform Act of 2000 than meets the eye--and some of it is bad." (Los Angeles Times)

John Bogle: Here's My Idea of Privatization
Excerpt: "Ever the iconoclast, Vanguard Group founder John Bogle has developed his own unique plan for saving the Social Security system. And guess what? Bogle's proposal explicitly forbids any involvement by the mutual fund industry. 'The retirement savings of American families are too important to be entrusted to the mutual fund industry,' Bogle said in an interview with The Associated Press." (Associated Press)

As Rich Get Richer, Fight to Manage Assets Gets Rougher
Excerpt: "Who wants to be a millionaire's banker? As it turns out, not everybody can be bothered to stoop that low.... Now, as the richest American households multiply, a shakeout and potentially unseemly dogfight is shaping up among companies that want to tend to their money. Some firms ... are gladly reaching down market, hoping to reel in newly minted millionaires ... others are reaching into the stratosphere of the fabulously wealthy and spurning millionaires..." (Knight-Ridder / Tribune)

Presidential Candidates Give Differing Views on Fate of Social Security Money
Excerpt: "President Al Gore and Texas Gov. George W. Bush talk frequently and publicly about their divergent prescriptions for Social Security. Beyond their visions of Americans' retirement security, though, the debate underscores how the two men have prepared privately for their own financial futures. Mr. Gore, who opposes any equity investments involving Social Security, has never owned stocks. Mr. Bush, who wants the government to tap the market's higher returns, has had millions invested." (Knight-Ridder / Tribune Business News)

Stock Options Can Benefit Employees If Exercised Intelligently
Excerpt: "It's a dirty little secret that few of those highly educated, well-paid techies want to admit: They're generally clueless about how to handle their stock options. Options are supposed to be the big lure of tech jobs. They can make employees wealthy, but they also can be worthless pieces of paper; the stock market hasn't been kind to tech stocks this year. And even people who end up at companies that succeed can make some costly mistakes if they don't understand their options." (Knight-Ridder / Tribune Business News)

Cheney Reviews Stock Options to Avoid Conflict of Interest
Excerpt: "Republican vice presidential candidate Dick Cheney said Sunday that he's examining different scenarios to avoid a possible conflict of interest involving Halliburton Co. stock options worth millions of dollars. 'I will take whatever steps I have to take to avoid any conflict of interest,' Mr. Cheney, who stepped down this month as CEO of Dallas-based Halliburton, said on CBS' Face the Nation." (Knight-Ridder / Tribune)

(Following also appears in Welfare Plans Edition)

Welcome to new BenefitsLink advertiser Fraser Trebilcock Davis & Foster, P.C.
David Waddell, a benefits attorney with Fraser Trebilock Davis & Foster, P.C. in Detroit, Michigan, has launched a new website for clients and other employers compiling articles on benefits topics by benefits attorneys at www.MyBenefitsLawyer.com. Mr. Waddell is accepting article submissions from attorneys nationwide for possible inclusion on the site.

Welcome to new BenefitsLink advertiser ARAG Group
LawExpress.com empowers employees to take control of their legal situations and protects the important things in your employees' lives at no cost to you. By using LawExpress, your employees can: ·Learn about their legal situation ·Purchase/create their own legal documents ·Get help in finding an attorney ·Talk to a telephone attorney to get quick and inexpensive legal advice For more information e-mail kkelly@araggroup.com

Welcome to new BenefitsLink advertiser About Your Benefits, Inc.
Printed Benefit Statements and On-Line Employee Benefit Profiles - David Kaufman and Jay Marchant, both highly experienced consultants in Personalized Benefit Communication, are the principals behind About Your Benefits, Inc. The service offerings from this newly expanded group include two different styles of Printed Benefit Statements and an Online Statement Service that will permit employees to access benefit information via the web.

Another Question is Answered in Our ERISA Q&A Column
If a fiduciary (who is protected by a "hold harmless" provision) is determined by a court to be not liable for a breach of fiduciary duty that had been alleged, can the plan sponsor pay for the fiduciary's legal fees? (BenefitsLink.com)

Analysis: Bins v. Exxon Co. USA (9th Cir. 2000)
Excerpt: "[There is no] affirmative duty to disclose information about benefit enhancements after amendment is under serious consideration, but employer, if it has agreed to follow up with an inquiring employee, must provide affirmative disclosure when the proposal later comes under serious consideration." (TRI Pension Services)

Graef Crystal: Joseph Galli Sure Loves His Fat Signing Bonuses
Excerpt: "After a 13-month stint as chief operating officer of Amazon.com Inc., where he collected a signing bonus of $2.9 million and a one-year anniversary bonus of $3 million, Galli jumped ship this summer to VerticalNet, where he immediately pocketed a $4 million welcome-aboard present." (Graef Crystal, on Bloomberg.com)

Investors May Now Eye Costs of Stock Options
Excerpt: "It is one of the prettiest lies in corporate America. Stock options dispensed to executives and workers are not accounted for as an employee expense, even though they clearly are. So companies that reward their employees with stock options do not include the costs of those programs in their overall expenses, giving their earnings a boost." (New York Times; free registration required)

Job Openings Newly Posted or Reposted on EmployeeBenefitsJobs.com

Executive Compensation & Benefits Consultantfor Compensation Resource Group, Inc
401(k) Client Account Managerfor New York Life Benefit Services LLC
in MA
Retirement Plan Administratorfor Bolton Offutt Donovan, Inc.
in DC, MD
Health Benefits Underwritersfor Bolton Offutt Donovan, Inc.
in DC, MD
Benefits Managerfor Dorsey & Whitney LLP
in MN
Compliance Specialistfor The Segal Company
in GA
ERISA Compliance Supervisorfor National City Corporation
in OH
Total Benefit Outsourcing Project Managerfor Unifi Network a division of PricewaterhouseCoopers
in NJ
Experienced Actuarial Analystfor PricewaterhouseCoopers
in FL
Actuaryfor Bolton Offutt Donovan, Inc.
in DC, MD
Implementation Project Managerfor Fidelity Investments
in MA
Client Relationship Manager, Full Service Accountsfor INVESCO Retirement Plan Services
in GA
Benefits Coordinator/Managerfor Ambrose Group, LLC
in NY

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