| The BenefitsLink Newsletter - Retirement Plans Edition |  |
June 13, 2001
Today's sponsor: The Profit Sharing/401(k) Council of America (PSCA) (click)
The Solution Source for Plan Sponsors! PSCA, the nationally recognized organization that was instrumental in bringing you the 401(k) plan, presents its 54th National Conference and Exhibition, September 12-14, 2001 in Scottsdale, AZ --Analysis and practical application of pension reform regulations. --Presentations, workshops and discussion groups covering every plan aspect. --Networking with more than 200 plan sponsors facing the same issues. Go to www.psca.org to register or learn more!
Tax Law Smiles on Retirement Plans
Excerpt: "The new tax law is stuffed with welcome changes to America's retirement plans. My desk is strewn with summaries listing the new choices that savers might have. One problem: Almost everything is optional, but you don't get to choose. It's up to your company to decide what, if any, changes to make." (Jane Bryant Quinn in the Washington Post)
Principal Financial Group Plans IPO
Excerpt: "Principal Financial Group Inc., the nation's largest provider of 401(k) retirement plans, filed documents Friday to sell $2.1 billion worth of stock to the public late this year or early in 2002. The company will sell at least 109.5 million shares at an estimated $19 each." (Omaha World-Herald)
Eight Tips to Help Your Participants Make the Most of Their 401(k) Plan
Excerpt: "Despite the educational programs offered by companies, 401(k) participants are still lax when it comes to participating in and using to their best advantage. For many employees who have a 401(k) plan as their only source of retirement, this is a vexing situation. To help get employees on the 401(k) bandwagon, here are eight tips suggested by Hewitt Associates (Lincolnshire, IL) that plan sponsors can stress to help employees make the most of their plans." (IOMA's Report on Managing 401(k) Plans)
Chart of Tax Act Provisions Applicable to Governmental Plans
Excerpt: "This summary lists the provisions of interest to state and local government retirement systems and their participants. It includes the effective dates.... The purpose of the summary is to review the changes, but not to provide a comprehensive analysis." (National Council on Teacher Retirement)
No Bankruptcy Discharge of Husband's Obligation to Make Pension Payout to Ex-Wife
Excerpt: "The fact that the funds were payable in the future was dispositive in this case; it was this circumstance that made the obligation nondischargeable in bankruptcy. Even assuming that a valid QDRO was in place, this result could have been avoided if the amount due Cecilia had been payable in a lump sum at the time of Gary's retirement." (Taxline)
Minnesota Supreme Court Upholds Pension Increase
Excerpt: "Workers covered by the state' s $61 billion retirement system will get increased pensions under a law upheld Tuesday by the state Supreme Court." (StarTribune.com)
Lawsuit by New York City Employees Alleges Separate Fund for Police and Firefighters is Illegal
Excerpt: "For thousands of retired police officers, firefighters and correction officers in New York, the city's most oddly structured and awkwardly named retirement benefit -- the Variable Supplement Funds -- is a fruit of maturity ... Since 1970, the funds have provided some retirees with annual lump sum payments in addition to their regular pension checks." (New York Times; free registration required)
IRA's Momentary Ownership of S Corporation Stock Does Not Terminate S Election
Excerpt: "In a recent private letter ruling (Priv. Ltr. Rul. 200122034, Feb. 28, 2001), the IRS ruled that a corporation's S election would not terminate when an ESOP makes distributions of the corporation's stock, and one or more participants elects to make a direct rollover of such distribution to an IRA, provided that the corporation immediately repurchases the stock from the IRA." (Ernst & Young TaxCast)
The Economic Growth and Tax Relief Reconciliation Act of 2001 Summary
Excerpt: "This article concentrates on three areas with significant changes: Estate tax; Income tax; and Retirement Plan provisions. I have also suggested some 'action' points to set the wheels of change in motion." (James Lange, Esq., CPA)
Top Executives in North Carolina Rake in Hefty Perks
Excerpt: "The year 2000 was marked by plummeting stock prices, slowing economic growth and mounting layoffs -- yet top executives at North Carolina public corporations still raked in multimillion dollar pay packages. Nearly half (21) of the 46 publicly traded corporations with headquarters in North Carolina reviewed by the News & Observer paid their chief executive officers more than $1 million in cash, stock and options." (Knight Ridder / Tribune)
Florida Ends Pension Fund Ban on Tobacco Stocks
Excerpt: "Florida officials on Tuesday lifted a four-year-ban on the purchase of tobacco stocks for the state government's $100 billion pension fund. Florida, which in 1997 ordered the sell-off of $825 million in tobacco stocks, becomes the latest and largest state to rescind restrictions on the historically profitable but controversial equities." (Reuters via Excite News)
Savings Incentives for Retirement Plans Don't Do Enough for the Poor
Excerpt: "Much of the publicity surrounding the $1.35 billion tax cut measure signed Thursday by President Bush centers on tax rebates and rate cuts. But also in the bill is a wish list of incentives proposed over many years by advocates of individual saving. Unfortunately for many Americans, the savings provisions put the cart before the horse." (Bill Barnhart in the Chicago Tribune)
Lucent Technologies Buyout Offer Targets 10,000
Excerpt: "Under the offer's terms, employees would have five years added to their age and five years added to their time at Lucent to count toward pension, making those 45 and older with at least 10 years at the company eligible for minimum pension. Typically, age and service with Lucent must total 75 years to be eligible for full pension." (Chicago Tribune)
Pension Reform and Economic Performance in Britain in the 1980s and 1990s (PDF)
49 pages. Excerpt: "The late 1980s saw a major shift in pension provision in the United Kingdom, when for the first time individuals were permitted to opt out of part of the social security programme into individual retirement savings accounts (personal pensions). At the same time, membership of company-provided schemes (occupational pensions) was made voluntary. This paper explores the possible impact of these, and other pension-related changes in the 1980s and 1990s ..." (Richard Disney, Carl Emmerson and Sarah Smith, published by National Bureau of Economic Research)
Consider "Repotting" Instead of Retirement
Excerpt: "The formula is simple: Start with your existing skill or profession and find a way to do it differently or for another purpose on a schedule better suited to your needs and interests rather than to others'." (CareerJournal.com)
Mutual Fund Fees Are Dropping, Trade Association Says
Excerpt: "Recent research by the Investment Company Institute found that since 1980, the average cost of equity mutual funds has decreased 40 percent; bond funds, 29 percent; and money market funds, 24 percent." (Investment Company Institute)
Big and Small Hurdles Remain for Social Security Reform
Excerpt: "How do you keep track of the investments of 150 million people, millions of whom contribute as little as $40 a year? How do you persuade brokerage houses, which make no profit on such small accounts, to offer their products to these fledgling investors?" (Los Angeles Times)
Opinion: Social Security Will Start To Collapse in 15 Years Unless We Fix It
Excerpt: "In 2016 Social Security benefits paid out will exceed Social Security taxes paid in, and without fundamental reforms the system will fail. Then, in the words of former Sen. Daniel Patrick Moynihan (now co-chairman of President Bush's Social Security Commission) we will have 'a social insurance program that will disappear before our eyes.'" (Pete du Pont in OpinionJournal.com)
Bush's Commission on Social Security May Propose Caps
Excerpt: "The co-chairmen of President Bush's Social Security commission said [on Monday] that they would probably have to propose politically difficult steps like raising the retirement age and reducing cost of living adjustments when they make recommendations to the White House for restoring the system's long-term financial health." (New York Times; free registration required)
Major Pension and Benefits Changes Under New Tax Act
Excerpt: "While the provisions of the Act are set to expire for years beginning after December 31, 2010, the effect of this 'sunset' provision is uncertain in the benefits area." (Ernst & Young TaxCast)
Salary and Benefit Costs Associated With Acquiring Installment Contracts Are Not Deductible
Excerpt: "The Tax Court, in a reviewed decision, has ruled that an S corporation must capitalize salaries and benefits associated with purchasing and servicing long-term installment contracts. David J. Lychuk, et ux. v. Commissioner, 116 T.C. No. 27 (May 31, 2001). The court also held that professional fees and commissions related to an offering of notes must be capitalized." (Ernst & Young TaxCast)
Executive Pay: "This Stuff is Wrong"
Excerpt: "That's the conclusion of most of the insiders who talked to FORTUNE--candidly--about CEO pay. And you know what's even worse? They don't see how the overreaching can be stopped." (Fortune.com)
Employee or Independent Contractor? Improper Classification Can Plunge You Into Hot Water
Excerpt: "Many independent contractor relationships are not legally valid, a lesson that employers are learning the hard way as they face tax audits and lawsuits with potentially huge payouts." (HR Magazine)
New Supplemental Withholding Rate For Stock Option Income Effective After August 6, 2001
Excerpt: "The IRS has just released Publication 15-T, which states that the supplemental withholding rate is 27.5% for wages (e.g., income realized on the exercise of a NQSO) paid after August 6, 2001." (National Association of Stock Plan Professionals)
Newly Posted or Renewed Job Openings (Post Yours!)
| Compensation Manager (BL-SJCORP6922) | for Sony Electronics Inc. in CA, NJ |
| Employee Benefit Tax Senior Manager | for Deloitte & Touche, a Professional Services Firm in OH |
| Trust Officer/Trust Administrator | for CNA TRUST in CA |
| Retirement Plan Analyst/Pension Administration | for BAE SYSTEMS in TX |
| Benefits Analyst | for County of San Bernardino in CA |
| Health & Welfare Associate | for Aon Consulting, Inc. in MD |
Newly Posted Press Releases
| Good News From Washington! (Swerdlin & Company) |
| Joanne Swerdlin Elected to National Board for the Worldwide Employee Benefits Network (WEB) (Swerdlin & Company) |
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