| The BenefitsLink Newsletter - Retirement Plans Edition |  |
September 11, 2001 - 12,361 subscribers
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Opinion: 401(k) Investments in Crisis
Excerpt: "The American population is aging faster, retiring sooner and expecting a higher standard of living in retirement than ever before. Unfortunately these dynamics also coincide with the transition from employer- and government-sponsored retirement programs to do-it-yourself retirement planning via 401(k) programs. ... [T]he current 401(k) system is fraught with misinformation and weaknesses." (Invesmart)
Retirement Saving Tips for Workers Who Earn Tips
Excerpt: "Many ... workers who earn income from tips are stiffing themselves when it comes to retirement. These employees commonly work in environments where thinking or planning for the long term is a luxury. For a number of reasons, many tip-employees don't save in employer-sponsored retirement plans. But savings opportunities have become more widespread in the last few years. What's more, new laws taking effect in 2002 may make it easier for tip-earning workers to save for retirement." (mPower Cafe)
Another Question is Answered in the Who's the Employer Q&A Column
Drs. A, B and C each own one-third of a medical practice corporation. Dr. A also provides medical services, as a sole proprietor, to an unrelated hospital. Can Dr. A establish a qualified retirement plan under his sole proprietorship without covering the employees of the medical practice corporation? (BenefitsLink.com)
Campaign Contributions or Conflicts of Interest?
Excerpt: "Law firms chasing jackpot-size fees are showering money on politicians with influence at large public pension funds -- which, in turn, are hiring them to file multimillion-dollar lawsuits against U.S. companies, a USA TODAY investigation shows. When they win, the law firms collect fees that in at least one case are expected to top $100 million." (USA Today)
State & Local Governments Add Matches As Switch to DC From DB Plans Accelerates
Excerpt: "Defined contribution plans are making inroads in the pension-laden world of state and local governments as public employers are beginning to recognize that 401(k)-type retirement plans can attract and retain workers. The key to that surge is having government employers offer matches to their employees' contributions, something that previously was unheard of in the public sector before Congress enacted legislation in 1984." (IOMA's DC Plan Investing)
How Pension Fund Officials and Campaign Contributors Cross Paths
Selection of pension fund officials who accepted or solicited contributions from service-providers who later may have received benefits from their contributions. (USA Today)
Planning for Retirement: the Accuracy of Expected Retirement Dates and the Role of Health Shocks
Working paper. Excerpt: "This paper explores the relationship between expectations about retirement, realizations of retirement, and the role of health shocks. Using waves 1 through 4 of the Health and Retirement Study we follow people into retirement. We explore the factors that affect changes to plans that were made in wave 1 paying special attention to changes in health status. We find that health shocks since the planning horizon trigger earlier retirement than planned." (Boston College, Center for Retirement Research)
Unusual Investments: What You Can and Can't Do With Your IRA
Excerpt: "There are two categories of no-nos, prohibited investments and prohibited transactions. The latter are fairly straightforward ... But investments are a different story.... IRS guidelines don't address many 'nontraditional' investments that are legal but complicated to administer in an IRA, such as private mortgages, private equity or even real estate. The result is that many IRA custodians won't allow these investments, and some financial planners aren't sure what the rules are." (mPower Cafe)
Overview of IRS Notices 2001-56 and 2001-57: Effective Dates and Amendments for EGTRRA Provisions (PDF)
10 pages. Excerpt: "In the past, the IRS has allowed a plan to comply with new laws on an operational basis without a formal plan amendment until the end of the remedial amendment period. For EGTRRA, the IRS changed this policy and is requiring a 'good-faith' amendment in the year to which the provision applies." (Milliman USA's Legislative Information Bulletin)
Executive Summary: Revenue Sharing in the 401(k) Marketplace (PDF)
Excerpt: "Revenue sharing is the 'big secret' of the retirement industry. This practice has created an environment that makes it hard for employers and employees to understand the true cost of their retirement services. Gross inequities can exist for both plan sponsors and participants. Revenue sharing is a blanket term for the practice of transferring 'soft' dollars between mutual funds and administration service providers who support 401(k) and other types of defined contribution plans." (McHenry Consulting Group)
Overview of IRS Notice 2001-57: Sample EGTRRA Amendments
Excerpt: "In Notice 2001-57, the IRS provides sample plan amendments that will qualify as good faith amendments for purposes of the EGTRRA remedial amendment period with respect to the qualification requirements covered in the sample amendments. The amendments address: loans to owner-employees; changes to the Code Section 415(c) annual additions limit; increased Code Section 401(a)(17) compensation limit; top-heavy rules; and faster vesting for matching contributions." (EBIA Weekly)
Overview of IRS Notice 2001-56
Excerpt: "The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) modified (among many other things) the Code Section 401(a)(17) compensation limit, the top-heavy rules, and the hardship safe harbor rules. These changes generally are effective for plan years beginning on or after January 1, 2002. In Notice 2001-56, the IRS provides guidance on when these changes can first be implemented by a plan." (EBIA Weekly)
Explaining Why So Many Households Do Not Save
Excerpt: "Planning is shaped by the experience of other individuals: individuals learn to plan for retirement from older siblings [and] old parents. [U]npleasant events, such as financial difficulties and health shocks at the end of life, provide incentives toward planning. In addition, planning affects wealth levels as well as portfolio choice. Individuals who plan are more likely to hold large amounts of wealth and to invest their wealth holdings in high return assets, such as stocks." (Boston College, Center for Retirement Research)
Retirement Wealth and Adequacy: Assessing Changes in the Age of Eligibility for Full Social Security
Excerpt: "This paper assesses whether the accumulated retirement wealth of pre-retirees will be adequate to cover needs during retirement, and how variation in age of eligibility for Social Security benefits affects adequacy." (Boston College, Center for Retirement Research)
Elderly Labor Supply: Work or Play?
Excerpt: "Approximately 15 percent of individuals over the age of 65 are employed. Due to the apparent reversal in the trend toward early retirement and the aging of the U.S. population, these individuals are becoming an increasingly important part of the labor force. However, very little research has examined labor market behavior in this population. In this paper, we examine a series of questions in an attempt to better understand why the elderly continue to work." (Boston College, Center for Retirement Research)
2001 Social Security Summary (PDF)
48 pages. Very good outline; well-organized, plenty of charts. (Hay Group)
Confidentiality Concerns Do Not Justify Refusal to Furnish Requested Plan Documents
Staib v. Vaughn Indus., Inc. (N.D. Ohio 2001). Excerpt: "[T]he documents requested consisted of 'the plan and related documents.' The employer did not dispute that the documents were subject to disclosure. Rather, it insisted that the documents were proprietary because it had paid to have them prepared. Thus, it argued, the employee should be obligated to keep the documents confidential." (EBIA Weekly)
Grocery Vouchers Issued to Retirees For Life Is ERISA Pension Plan
Musmeci v. Schwegmann Giant Supermarkets, et al. (E.D. La. 2001). Excerpt: "[The issue is] whether a program under which grocery vouchers were provided to former employees upon retirement (and continuing until their death) could be terminated ... In 1985, the majority shareholder of a supermarket chain designed an arrangement to ensure that long-term employees would always 'have food on their tables.' ... Retirees under the program received $216 worth of vouchers each month until they died." (EBIA Weekly)
Paying Employee Benefit Plan Expenses (PDF)
Originally published April, 2001. Excerpt: "This Benefits Perspectives Update examines the implications of the DOL's guidance on paying plan expenses from a trust." (Milliman USA)
Opinion: Stock Market's Bubble Exposed an Options Mirage
Excerpt: "During the stock market's wild run-up not so long ago, compensation consultants could be found touting options as a powerful engine for growth, generating prosperity not only for America's executives but for the nation as a whole. U.S. companies were growing much faster than their German and Japanese rivals, these experts claimed, because our executives got lots of options, and theirs didn't. That argument hasn't been heard a lot lately." (Graef Crystal, on Bloomberg.com)
Holding the Line on Salaries and Benefits
Excerpt: "HR is in a squeeze play. There's pressure to raise (or maintain) salaries to stay competitive. But there's an equal push to cut costs. Salaries and benefits are tempting targets. Here's what companies are doing to hold the line." (Workforce.com)
Newly Posted or Renewed Job Openings (Post Yours!)
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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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