| The BenefitsLink Newsletter - Retirement Plans Edition |  |
September 10, 2001 - 12,361 subscribers
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Trend: Cost-Cutting Auto Industry Trims 401(k)s
Excerpt: "Chrysler capped its 401(k) matching contribution for higher-paid workers while GM cut its match program by 25 percent. Delphi suspended its matching plan indefinitely, gutting a generous plan that matched 70 percent of the first 6 percent an employee contributed from a paycheck." (The Detroit Free Press)
Opinion: a Wise Guy in Riverside County, California, Fights for Better 403(b) Choices
Excerpt: "Riverside County (California) is requiring all 403(b) vendors to sign a hold harmless agreement. These 'agreements' place often onerous responsibilities on the vendor. Vanguard and other low-fee providers object to the wording of many of these documents as they hold companies liable for errors they have no control over." (403bWise.com)
Opinion: Needed to Offset Influence of the AARP in Battle Over Social Security Reform
Press release. Excerpt: "A new organization, the American Association for Unborn Persons (AAUP), should be formed to safeguard the Social Security benefits of future generations, [said Daniel F. McGinn, president and chief actuary of McGinn Associates.] McGinn, who is 70 years old but is not retired, criticized the American Association of Retired Persons (AARP), certain members of Congress and others for resisting efforts to reform Social Security and save it from eventual collapse." (Business Wire via Yahoo! News)
Tweaking the Benefits Accounting Rules (PDF)
Originally published in the spring of 2000. Excerpt: "This article discusses some of the recent developments in the benefits accounting rules, including changes affecting defined contribution plans with participant-directed accounts, pending positions on stock issued to employees, and advice from regulators on disclosures of material plan amendments." (Milliman USA)
Another Question is Answered in the Correcting Plan Defects Q&A Column
Under the Self-Correction Program ("SCP") of the Employee Plans Compliance Resolutions System ("EPCRS"), plan sponsors may self-correct any operational failure within a two-year correction period. Are there any circumstances under which a plan sponsor would not use SCP to correct an operational failure? (BenefitsLink.com)
Another Question is Answered in the Who's the Employer Q&A Column
Parent Company sells one of its subsidiary companies on November 15, 2000. Company B continues as a participating employer in Parent Plan until March 1, 2001 when it establishes its own Plan. Parent Plan realizes it needs to be treated as a multiple employer plan for January 1, 2001 through February 28, 2001. But what about November 15, 2000 through December 31, 2000? (BenefitsLink.com)
Analysis: Elimination of Optional Forms of Benefits After EGTRRA (PDF)
Begins on page 5. Excerpt: "EGTRRA provides that, for years beginning after December 31, 2001, a defined contribution plan that receives assets and liabilities from another defined contribution plan is going to be allowed to not provide all of the optional forms of distribution that were previously available under the transfer-or plan. The following requirements must be met to use this rule ..." (Jenkins & Gilchrist)
EGTRRA Changes Bring Expanded Portability Choices Increase Responsibilities For Plan Sponsors (PDF)
Begins on page 2. Excerpt: "Beginning January 1, 2002, EGTRRA permits [distributions from section 401(a) qualified retirement plans] to be rolled over to IRAs, tax-qualified 401(a) retirement plans, 403(b) plans, and governmental 457 plans (but not 457 plans of tax exempts). Another important change allows distributions from tax-qualified 401(a) retirement plans that include after-tax contributions to be rolled over to an IRA ..." (Jenkins & Gilchrist)
Florida Government Employees' Pension Fund Might Lift Ban on Northern Ireland Investments
Excerpt: "The state Board of Administration, charged with overseeing Florida's $100-billion employee pension fund, will consider Tuesday whether to ask the Legislature to cut red tape the state faces every time it invests in a company in the region. Florida has had the restrictions since 1988 ... The state is required to document the companies' adoption of programs designed to recruit religious minorities and protect them from discrimination." (St. Petersburg Times)
Ripped-Off Investors May Sue Police Officers' Pension Fund
Excerpt: "South Florida investors ripped off by a once-prominent accountant are threatening to sue a Miami police pension fund for almost $1.2 million, claiming the retirement trust's board members allowed the accountant to bilk the investors so he could pay back some of the money he had stolen from the cops. The investors are now targeting the police fund, accusing the trust of 'aiding and abetting' accountant Ronald Stern's fraud." (The Miami Herald)
Analysis: Modifications to Top-Heavy Rules Under EGTRRA (PDF)
Begins on page 4. Excerpt: "EGTRRA changes the definition of a 'key employee' to: 1. delete the 'top 10 employees' rule; 2. provide that an officer will be treated as a key employee only if he or she earns more than $130,000 in the year (which will be indexed in $5,000 increments); and 3. eliminate the 4-year-look-back rule for identifying 'key employees.'" (Jenkins & Gilchrist)
Analysis: Expansion of Disclosure Requirements by EGTRRA (PDF)
Excerpt: "EGTRRA provides that, in addition to notices about reductions in the rate of future benefit accruals, the notice must now also be provided if there is to be an elimination or significant reduction of an early retirement benefit or retirement-type subsidy.... The 15 day advance notice period [of ERISA section 204(h)] has been repealed. Now the notice must be given within only a reasonable time prior to the effective date of the amendment." (Jenkins & Gilchrist)
Lesser, Not Greater, Expectations from Stocks
Excerpt: "What if the future is more like the distant past? What if our destiny is to watch stock valuations return to average levels over the next 10 or 20 years? If that happens ... the return will be about 5 percent." (Scott Burns of The Dallas Morning News)
Opinion: Investor Beware-- Can Small Investors Survive Social Security Privatization?
Excerpt: "In the case of Social Security, support for a privatized system rests entirely (and often implicitly) on assumptions about public knowledge and competency with regard to stock investing. But recent studies by economists and finance scholars suggest that Americans really don't understand the risks associated with stock investments and stand a good chance of doing worse financially under a hybrid system than under the current one." (The American Prospect)
Retailer Reaps Rewards of an Aging Workforce
Excerpt: "CVS Corp. has fulfilled a business objective to hire more mature employees by more than doubling its number of workers over age 50 in less than 10 years. More than 15% of the drug-store chain's employees are 50 or older, up from 7% in 1992.... CVS has found that mature workers are more dedicated to their work and have significantly higher retention rates than younger employees. In addition, the customer-service work of older employees is outstanding." (CareerJournal.com)
Another Question is Answered in the Stock Options, Restricted Stock and Other Long-Term Employment Incentives Q&A Column
While working for a non-publicly traded company, I received incentive stock options. The company has been acquired by a larger publicly traded company. The new owner is purchasing our 'exercised option stock' and 'vested unexercised options' at a price higher than the exercise price, and is running the proceeds through the payroll system where it is subject to income tax and FICA withholding. Isn't the gain for incentive options subject to income tax withholding only, not FICA? (BenefitsLink.com)
Newly Posted or Renewed Job Openings (Post Yours!)
| Pension Administrator/Accountant | for First Mercantile Trust Company in TN |
| Account Manager | for Benefit Plan Services, Inc. in GA |
| Testing Compliance Manager | for The 401(k) Company in TX |
| Pension Administrator/Manager | for Applied Pension Services of Suffolk, Inc. in NY |
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Copyright 2001 BenefitsLink.com, Inc., but you may freely distribute this email newsletter in whole. This newsletter is edited by David Rhett Baker, J.D.
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