Retirement Plans Edition
January 22, 2001
Today's sponsor is Still River Retirement Planning Software, Inc. (click on banner for more information)
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Updated and Restated IRS Revenue Procecure for Correcting 401, 403(b) Plan Defects (PDF)
90 pages, in Adobe Acrobat Reader (PDF) format. Excerpt: "This revenue procedure updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of sections 401(a), 403(a), or 403(b) of the Internal Revenue Code, but that have not met these requirements for a period of time. This system, the Employee Plans Compliance Resolution System (EPCRS), permits plan sponsors to correct these failures ..." (Internal Revenue Service)
Highlights of Changes in Rev. Proc. 2001-17 Restating EPCRS Program
Excerpt: "... combining the prior programs that allow voluntary correction with Service approval ... into a single voluntary correction program, called VCP; renaming the previous APRSC program the Self-Correction Program (SCP); broadening the submission procedures under VCP to allow certain organizations, such as master and prototype sponsors or third-party administrators, to receive a compliance statement for correcting failures that affect more than one Plan Sponsor ..." (Corbel)
Work 1,000 Hours, Get $401,000 -- That's What the Booklet Says, Grandma (Humor)
Excerpt: "Bryan Foster, 15, got a weekend job as a junior assistant to the snowboard instructors at a ski resort. He read the orientation booklet and then informed Sydelle Carter, his grandmother, that he was happy for the older men who worked more hours than he did ..." (New York Times; free registration required)
Employer Stock in Plan Accounts During a Bear Market: Gimme Shelter
From January 2001 issue. Excerpt: "Investment experts have continued their mantra that owning too much company stock in 401(k) plans is risky. As soon as the equity markets lost the head of steam they had in the late 1990s, they reasoned, participants would be howling. The future, it seems, is now." (Plan Sponsor magazine; free registration required)
Chump Changed: Retirees Unhappy About Handling of Pension Plan Surplus by Qwest
Excerpt: "Shirley Zach knows that the merger, and Qwest's potential appropriation of the pension surplus, is legal. But she also knows that she has very little to show for her decades of service. She feels ruthlessly discarded by her former employer, one that never lived up to its promises of great retirement in exchange for company loyalty." (CityPages Minneapolis/St. Paul)
PBGC Technical Update 01-1 Provides Overview of Electronically Available Services
Excerpt: "This Technical Update explains the PBGC’s ongoing efforts to improve customer service through information technology. Americans have become accustomed to using the Internet to get information, communicate, and conduct transactions at their convenience 24 hours a day, 7 days a week. The PBGC is committed to improving customer service-- to both participants and practitioners-- by allowing its customers to interact with the PBGC electronically whenever possible." (Pension Benefit Guaranty Corporation)
Whipsawed? Two Federal Appeals Courts Call For Adherence To IRS Cash Balance Guidelines
From January 2001 issue. Excerpt: "In the space of less than two months, two federal circuit courts ruled that employers sponsoring cash balance plans must comply with complex guidance from the Internal Revenue Service on how to value lump-sum payments of participants' account balances." (Plan Sponsor magazine; free registration required)
Taxman Softens On Distributions For Retirees
Excerpt: "It doesn't happen often, but the Internal Revenue Service is getting a lot of praise these days. The reason is that the agency this month proposed rules that significantly simplify taking required distributions from 401(k) and 403(b) accounts, individual retirement accounts and other tax-deferred retirement plans." (Baltimore Sun)
New Rules Favor IRA Owners
Excerpt: "After more than a decade of essentially torturing IRA-owning retirees and their families, the Treasury Department and the Internal Revenue Service have suddenly decided to ease off the thumbscrews. In a surprise announcement 10 days ago, the IRS issued new rules governing distributions from IRAs and other retirement savings plans that will make it much easier for retirees to figure out how much they have to take out each year..." (Washington Post)
New SEC Rule Seeks Tax Bite Info Disclosure; Qualified Plans Exempt
Excerpt: "Mutual fund investors will get more information about the tax bite on their portfolios and their after-tax returns under rules adopted Friday by the Securities and Exchange Commission.... Exempted from the tax disclosure requirement: money-market funds and tax-deferred investments such as 401(k) plans and variable annuities." (Las Vegas Sun)
Northrop Grounded By Pension Income
From January 2001 issue. Excerpt: "Those that live by the sword, die by the sword-or so defense contractor Northrop Grumman found out last month as it acknowledged that a decline in pension fund income might trim next year's earnings by 45 cents a share or $50 million-sending its stock sliding 2%." (Plan Sponsor)
Asset Allocation Threatened When Funds Catch a Drift
Excerpt: "Just like the person who almost bought cubic zirconia instead of a diamond, plan sponsors need to be confident that the investments they choose for their company's defined contribution plan do not 'drift' out of their style objectives. Both look similar at first, but may perform differently over the long term." (401kWire)
Going for Broke With 'CD Brokers'
Excerpt: "When you see an ad for unusually high-rate certificates of deposit, get out your skunk detector. So-called 'CD brokers' are setting up in areas where a lot of retired people live. They're selling FDIC-insured CDs at higher rates of interest than banks pay." (Jane Bryant Quinn, in the Washington Post)
Annuity Values in Defined Contribution Retirement Systems: The Case of Singapore and Australia
Link to a Working Paper available for downloading from the National Bureau of Economic Research. Excerpt: "In this paper we derive and compare the value of life annuity products in an international context. Our specific goal is to assess the money's worth and adverse selection impact of annuities in two countries Singapore and Australia that have mandatory DC-type retirement plans. This similarity in plan type is offset by differences in the two countries' national retirement policies." (Suzanne Doyle, Olivia S. Mitchell, John Piggott)
(Following also appears in Welfare Plans Edition)
Labor Department Provides Guidance On Employee Benefit Plan Expenses
Excerpt: "The U. S. Department of Labor’s Pension and Welfare Benefits Administration (PWBA) [on Friday, January 19, 2001] announced the issuance of interpretative guidance under the Employee Retirement Income Security Act (ERISA) to clarify the circumstances under which employee benefit plans may properly pay certain expenses relating to tax-qualification and other activities." (U.S. Department of Labor press release)
Web Strategies for Communicating Employee Benefits
New survey available for purchase. Excerpt: "IFEBP surveyed corporate, multiemployer and public plan sponsors to determine their use of and opinions about employee benefit communication on the Internet. Specific communication and administration features are covered, along with a comparison of the effectiveness of Internet communication versus other methods of benefit communication." (International Foundation of Employee Benefit Plans)
Hot Disputes Cool Down in Online Mediation
Excerpt: "Cyberspace dispute resolution can defuse anger and save HR managers time, energy and real-world lawsuits." (Workforce)
PWBA Guidance on Settlor versus Plan Expenses: Six Fact Patterns
Excerpt: "In an effort to specifically address the most frequently raised questions, the Pension and Welfare Benefits Administration has developed a set of six hypothetical fact patterns in which various plan expense issues are both presented and addressed." (U.S. Department of Labor)
New From EBRI: Executive Summary Of Issue Brief No. 229, EBRI Research Highlights (January 2001)
The Issue Brief and Special Report "EBRI Research Highlights: Retirement and Health Data" synthesizes highlights of recent EBRI research on retirement and health issues. It also provides general background information on the finances of the U.S. employment-based retirement system; lists public opinion surveys conducted by EBRI; and cites numerous other benefit-related organizations that are potential sources of additional research and information. (Employee Benefit Research Institute)
| Pension Administrator | for Pension Investors Corporation in FL |
| Health & Welfare Benefits Consultant | for MassMutual Benefits Management, Inc. in MA |
| Benefits Analyst | for Circuit City Stores, Inc. in VA |
| Assistant Benefit Consultant | for Buck Consultants, A Mellon Consulting Company in NJ |
| Compliance Specialist | for Benetech, Inc. in GA |
| Pension Administrator | for Regional TPA Firm in NJ |
| Plan Administrator | for EAI in PA |
| Senior Benefit Specialist | for Buck Consultants, Inc. in CA |
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