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The BenefitsLink Newsletter -
Retirement Plans Edition

October 16, 2000

Web Sites Seek to Draw 401(k) Brokers
Excerpt: "As competition for the 401(k) dollar tightens, online intermediaries are becoming a necessity for brokers seeking to match their corporate clients with the right plans. With the rise of Web sites like 401Konnect.com, 401KExchange.com, 401Kduediligence.com, and the upcoming Buildyourown401k.com, competition among intermediaries is getting fierce ... Two-thirds of the 401(k) plans purchased in 1997 were bought through intermediaries ..." (American Banker)

IRS Private Ruling Allows Disability Insurance Policy In 401(K) Plan
Excerpt: "An employer can offer a disability income feature inside a 401(k) plan, according to a new IRS private letter ruling. The Service said that the purchase of the long-term disability insurance policy would not violate the Code, nor would the employer or employees who elect coverage lose any of the tax-favored treatment of contributions used for the policy." (National Underwriter Company)

Employee Benefits, Employment Law and Estate Planning Update - September, 2000
Includes articles on 401(k) distribution following sale of part of company, IRS relief from invalid rollovers, conflict of interest can change standard review, IRS confirms no prohib. against sale of unalloc. shares to prepay ESOP loan, IRS extends determ. letter filing deadline, def. comp. plan is exempt from substantive provisions of ERISA even to 15% employees, Q&As relating to MEWAs, pub. of Post-1999 PBGC rates, new form of disability insurance to insure 401(k) contrib. against disability (Sanders, Schnabel & Brandenburg, P.C.)

Another Question is Answered in the Correcting Plan Defects Q&A Column
(This Q&A is a follow up to Q&A 137.) A profit sharing plan permits several ineligible employees to share in employer discretionary contributions for the plan year. Under the terms of the plan, employer discretionary contributions are allocated in proportion to compensation. Under what IRS remedial program can this problem be corrected? What is the correction? (BenefitsLink.com)

SSA Enhances Online Calculator, Supplies Retirement Planning Information Along With Statements
Excerpt: "The online Planner ... is evolving from strictly a Retirement Planner into a Benefits Planner containing a Retirement Planner, Disability Planner and Survivors Planner. Each planner contains valuable information about retirement, disability and survivors benefits and factors that can affect them. The Planner's online calculators, which previously provided only estimates of retirement benefits, have been enhanced to add estimates for disability and survivors benefits." (Social Security Administration)

Cash Balance Plans: Implications for Retirement Income (PDF)
Excerpt: "Fueled by recent General Accounting Office reports and the ongoing complaints of a number of IBM workers, the debate over cash-balance pension plans shows no sign of abating." (Washington Post)

Rethinking Affirmative Duty to Disclose Retirement Incentives
Excerpt: "The extent of an employer's fiduciary obligation to communicate information about early retirement incentives that have not yet been made public has bedeviled both employers and the courts for some time." (Nixon Peabody LLP)

IRS Determination Letters Can Include Review of Amendments Eliminating Forms of Benefit Payment
Excerpt: "Effective September 6, 2000, plan sponsors may adopt plan amendments that are permitted under the final regulations under section 411(d)(6). Determination letters that are issued with respect to plans for which an application is filed with the Service on or after September 6, 2000, may be relied upon with respect to whether a plan satisfies the requirements of the final regulations." (Internal Revenue Service)

News Analysis: Grassley and GAO Dustup About Merits of Top-Heavy Rules
Excerpt: "On October 2, the GAO released a report on the top-heavy rules for qualified retirement plans, which generally require that a plan whose benefits are too concentrated in the hands of highly paid employees also provide something for lower-paid employees. The report states, in veiled terms, that the top-heavy rules are an effective backstop to the general qualified plan nondiscrimination rules, and that they raise benefits for lower-paid workers." (Lee Sheppard of Tax Analysts, Inc.)

How Would Financial Risk Affect Retirement Income Under Individual Accounts?
Excerpt: "Proponents [of personal retirement accounts] claim that private plans offer better returns than traditional Social Security. To achieve higher returns, however, contributors are exposed to extra risks associated with financial market fluctuations. This issue in brief offers evidence on the extent of these risks by considering the hypothetical pensions U.S. workers would have obtained during the past century if they had accumulated retirement savings in individual accounts." (Center for Retirement Research at Boston College)

(Following also appears in Welfare Plans Edition)

E-Signatures: Don't Shred All The Paper Yet
Excerpt: "... while the business community has been clamoring for the legislation, its impact on human resource and benefits administrators is somewhat unclear." (Employee Benefit News)

9th Cir.: District Court Couldn't Order Embezzler to Pay Over His ERISA Plan Benefits
U.S. v. Jackson (9th Cir., 10/12/2000). Excerpt: "This case presents the question whether, as part of a criminal sentence, a district court may order that undistributed funds from a pension plan covered by the Employee Retirement Income Security Act (ERISA) be used to make immediate payment of restitution. We hold that unless the crime involved the ERISA pension plan in question and restitution is ordered to that plan, undistributed funds are not available for such payment." (FindLaw.com)

Plan Not Required to Inform Claimant of Right to Review Pertinent Documents During Benefit Appeal
Simpson v. Ameritech Corp., Inc. (E.D. Mich. 2000). (EBIA Weekly)

Employer's Error on Benefit Statement Does Not Create Estoppel or Fiduciary Breach Claims
Hofsas v. Montgomery Hosp. Medical Ctr. (E.D. Pa. 2000). (EBIA Weekly)

Supreme Court Denies Review Of Two Employee Benefits Cases
Excerpt: "The U.S. Supreme Court has denied a petition to review the decision of the Sixth Circuit U.S. Court of Appeals in Western Atlas, Inc. v. Pennington ... In that case, the Sixth Circuit upheld a jury award in the total amount of $483,092 in favor of two plaintiffs who were terminated by their employer in violation of ERISA. Separately, the Court denied a petition to review the decision of the Seventh Circuit U.S. Court of Appeals in Gallegos v. Mt. Sinai Medical Center." (Spencernet)

Insurers Watch Two Cases Before High Court
Excerpt: "[T]wo cases now pending before the United States Supreme Court ... could have a significant impact on the [life insurance] industry. [In the Egelhoff v. Egelhoff case], which will be decided during the court's 2000-2001 term, ... [the] specific issue is whether a Washington state law that automatically revokes entitlement of a former spouse to plan benefits upon divorce, even though the former spouse remains the named beneficiary, is preempted by ERISA." (National Underwriter Company)

Job Openings Newly Posted or Reposted on EmployeeBenefitsJobs.com

401(k) Client Account Managerfor New York Life Benefit Services LLC
in MA
Client Relationship Managersfor Leading Search Firm
ERISA Attorneyfor Riordan & McKinzie
in CA
Pension Systems Supervisor - Palm Beach Gardens, Floridafor Philips Electronics - Personal Access Center for Employees (PACE)
in FL
Pension Plan Administratorfor The Angell Pension Group, Inc.
Total Benefit Outsourcing Project Managerfor Unifi Network a division of PricewaterhouseCoopers
in NJ
Benefits Adminstrator - Walnut Creek, CAfor Brown and Caldwell
in CA
Benefits Supervisorfor Jet Propulsion Laboratory
in CA
Benefits Accountantfor Catholic Archdiocese of Seattle
in WA

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