Retirement Plans Edition
February 5, 2001
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Battles Ensnare Florida Government Employees Pension Proposal
Excerpt: "In the national debate over the future of Social Security, experts are watching Florida's pioneering effort to give public employees a chance to manage their own investments. The picture isn't pretty." (St. Petersburg Times)
New Jersey's Pension Funds Lost $6 Billion Last Year
Excerpt: "The shaky stock market is taking a toll on the state pension funds for public workers in New Jersey. After more than doubling in value between 1995 and last year, the funds have shrunk since July, a published report said." (Bergen County [NJ] Record)
Bureau of Labor Statistics Takes a Look at Its Own Retirement, Turnover Numbers
Excerpt: "But in at least one regard, BLS is no different from the rest of the government. In the next five years, 24 percent of its approximately 2,570 employees will be eligible to retire." (Washington Post)
Non-Profit Participants Find the Web
Excerpt: "Fidelity Investments Tax-Exempt Services Company, the unit of the nation's largest fund firm that handles the not-for-profit retirement business, reports that participants paid more than 6 million visits to its Web site in 2000-- roughly twice the visits as in 1999." (401kWire)
Court Declines to Impose Death Penalty on Cash Balance Plans
Discusses Eaton v. Onan Corporation (S.D. Ind. 9/29/00). Excerpt: "The Onan plaintiffs, however, attempted to apply the no-reduction-in-accruals requirement not to persons who reached age 65 but to older employees who were below age 65. Basically, their argument was that a cash balance design inherently discriminates against older workers because it provides for a reduced benefit accrual for older employees." (Nixon Peabody LLP)
Bad Advice But No Relief
Discusses Glencoe v. TIAA (4th Cir. 10/19/00). Excerpt: "The daughter contacted the insurance company that administered the participant's account and was told, erroneously, that the law required her to receive her father's entire account within five years. She followed the advice, took the money, and paid her taxes. Later, she discovered that she could have chosen to receive the money over her life at a lower overall tax cost." (Nixon Peabody LLP)
2d Cir.: Consent From Separated Spouse Required to Enforce Alternate Beneficiary
Board of Trustees of the Equity-League Pension Trust Fund v. Royce (2d Cir. 2001). Excerpt: "Applying this court's decision to a 401(k) plan, a participant who is separated from his or her spouse would not need to obtain the spouse's consent to a beneficiary designation if (1) the legal separation exception is included in the plan's terms, and (2) the separation is documented in a court order." (EBIA Weekly)
IRS Clarifies Newly Proposed Minimum Required Distribution Regulations
Available only for about a week; not archived. Excerpt: "Qualified plan sponsors that want to follow the 2001 proposed regulations when making distributions for 2001 and later years should adopt the corrected model amendment. Plan sponsors that adopted the model amendment as published on January 17, 2001 should amend their plans to substitute the corrected model amendment." (Practitioners Publishing Company)
Historical Limits and Other Values Affecting Retirement Plans (PDF)
Excerpt: "This Reference Guide consolidates certain historical limits and other numbers affecting retirement plans including the Social Security wage base, 415 limits, 401(k) deferrals, and maximum PBGC guaranteed benefits." (Hay Benefits Reference Guide)
Estate Planning for Retirement Benefits
Excerpt: "The simplest and most common approach is to name the taxpayer’s spouse as beneficiary, which allows the spouse to roll the benefits over into her own IRA, defer both the income and estate taxes, elect new beneficiaries, select a new payout method, and potentially convert to a Roth IRA." (CPA Journal)
Too Rich a Pension Deal for Ex-Presidents?
Excerpt: "Modest $50,000 pension plan has expanded into a $2.5 million entitlement." (MSNBC.com)
CalPERS Tightens Its Grip on Venture Capital
Excerpt: "CalPERS (California Public Employees’ Retirement System), the nation’s largest state pension fund, turned heads last week when it purchased ownership stakes in two very large venture capital firms. It is only the second time an institutional investor has made such a move-- and the first such move was also made by none other than CalPERS." (MSNBC.com)
Put Myths About 'Death Tax' To Rest
Excerpt: "[F]ew Americans pay estate taxes. This fact is widely misunderstood. Opponents of the tax renamed it the 'death tax,' leading many people to believe it's levied on everyone at death. Some Americans have purchased cash-value life insurance to offset this tax when in fact they will never owe it. They also may have started unnecessary trusts." (Jane Bryant Quinn, in the Washington Post)
The 401(k) Performance Derby: Year-End Results
Excerpt: "Remember the rules for the 401(k) Performance Derby? Pick one of the 92 most popular domestic equity funds, plunk down $100 a month for 36 months, and ride for all you're worth." (Scott Burns of the Dallas Morning News)
German Pension Reform Seen As Big Boost To Stocks
Excerpt: "German pension reform could boost equity investment by over 85 billion euros ($80.04 billion) and accelerate growth in the European high yield debt market ..." (Reuters via Excite! News)
Japan Might Approve 401(k)-Type Pensions Soon
Excerpt: "Japan's ruling coalition plans to revive a bill in the current session of parliament that would establish portable, defined-contribution pensions modelled on the U.S. 401(K) pension scheme, a U.S. official said on [February 2]." (Reuters via Excite! News)
Prefunding in a Defined Benefit System -- The Finnish Case (PDF)
Excerpt: "The Finnish pension system consists of earnings-related pensions, covering almost all paid work, and a residence-based national pension. There has been considerable rivalry, even battle, between these two parts, with the former now the undisputed winner. The Finnish earnings-related system has some rather unique features: it is statutory by law but largely privately run, and it has collected funds to smoothen the contribution increases due to aging in the future." (Jukka Lassila and Tarmo Valkonen, published online by the National Bureau of Economic Research)
(Following also appears in Welfare Plans Edition)
Communicating Employee Benefits Information Online
Excerpt: "Overall, most companies--79 percent--choose a company intranet as their primary method for delivering HR-related services to employees and managers, up from 50 percent just two years ago, according to Watson Wyatt." (HR magazine)
A Silent Fiduciary is an At-Risk Fiduciary
Discusses Harte v. Bethlehem Steel Corporation (3d Cir. 5/26/00). Excerpt: "Just what you needed-- a case where a court seemingly requires a fiduciary to peer into a participant's mind in order to avoid fiduciary liability ..." (Nixon Peabody LLP)
10th Cir.: Golden Parachute Program Providing One-Time Lump-Sum Payments Held Not to be ERISA Plan
Lettes v. Kinam Gold, Inc. (10th Cir. 2001). Excerpt: "[T]he Tenth Circuit's approach in this decision may be quite significant for employers in that jurisdiction (which includes Kansas, Oklahoma, Colorado, Wyoming, Utah, and New Mexico)-- their severance programs are now less likely to be treated as ERISA plans if they provide lump-sum payments in connection with one-time reductions in force." (EBIA Weekly)
Golden Parachute Payments Not Illegal Merely Just Because They're Excessive and Grossed Up for Taxes
Campbell v. Potash Corp. (6th Cir. February 02, 2001). Excerpt: "[Appellant] next argues that the golden parachutes violate public policy, and therefore that the assumption agreement promising them is void.... [Appellant] cites no circuit case law supporting its proposition. At most this court has frowned on golden parachutes in past dicta, but we have never held that such severance packages are per se unlawful." (FindLaw.com)
3d Cir.: No Non-Marketability Discount to be Applied to Stock Options After Wrongful Termination
Scully v. US WATS, Inc. (3d Cir. February 01, 2001). Excerpt: "In this appeal, the primary issue is whether US WATS improperly denied Mark Scully the right to exercise his stock option following his wrongful termination, and, if so, whether the District Court, in awarding damages, improperly failed to apply a discount from market value to account for the option shares' lack of marketability." (FindLaw.com)
Graef Crystal: Tyco CEO Needs a Truck to Haul Pay
Excerpt: "The dismal performance didn't stop Kozlowski from raiding Tyco's treasury. He needed a dump truck to cart away his pay package for 2000: Salary of $1.35 million. Bonus of $2.8 million. Miscellaneous compensation of $527,000. And a free-share award of $21.2 million. What a reward for a sub-par performance." (Graef Crystal, on Bloomberg.com)
Choosing The Right Name Can Turn A Bill Into A Law
Excerpt: "Experience has taught politicians legislative success begins with marketing." (St. Petersburg Times)
| Team Manager 401(k) | for Fidelity Investments in TX |
| Manager, Plan Service Team | for ICMA Retirement Corporation in DC |
| 401(k) Client Service Manager - Full or Part Time | for Independent 401(k) Advisory Firm in Harrisonburg, Virginia in VA |
| A TPA Firm Looking to Purchase a Small TPA Firm or Block of Qualified Plan Business | for A small full service consulting firm that provides legal and administrative employee benefit and retirement plan services to employers in ALL STATES |
| Pension producer | for Leading Regional Independent Producers Group in DE, MD, NJ, PA |
| Actuarial Analyst | for Ceridian Retirement Plan Services in CO |
| 20th Annual Conference-Employee Stock Ownership Plans-Stock Options-Employee Involvement | in WA on April 25, 2001 presented by National Center for Employee Ownership |
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