BenefitsLink Retirement Plans Newsletter for September 18, 2001

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The BenefitsLink Newsletter -
Retirement Plans Edition

September 18, 2001 - 12,361 subscribers

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(Help BenefitsLink to provide this newsletter at no charge to you -- our sponsors pay our way. Remember to visit them periodically; we try to make sure their products and services will be of interest to you. Thanks! --Editor)

Interview with the IRS Director of Employee Plans Examinations
Excerpt: "Four initiatives are underway in our current work plan ... (1) Multiemployer plans; (2) 403(b) and 457 plans ... ; (3) 401(k) plans (We want to follow-up on results from prior IRS studies of 401(k) plans. We recently increased our examination units to 600 because of increased Congressional interest); and (4) A more in-depth look at plans of larger corporations with a team audit approach including subject matter experts, computer audit specialists, etc." (Internal Revenue Service)

403(b)/457 Video Available from IRS
Excerpt: "A single, free copy of the Retirement Reports: IRS Tax-Sheltered Annuities and 457 Plans video is now available for order. This 28-minute video provides information on the new requirements of the tax law for tax-sheltered annuities and 457 deferred compensation plans. The video highlights compliance problems that have been identified during IRS examinations and in the voluntary compliance programs." (Internal Revenue Service)

Cash Balance Whipsaw Upheld, Again
Excerpt: "Ruling against a cash balance plan's method of determining lump sums, another federal court has held that lump sum distributions cannot be determined simply by reference to the cash balance account. This is the third such decision in less than a year ... though all three cases concerned lump sums paid before recent IRS guidance was released.... Berger v. Xerox addressed a classic cash balance plan issue - calculating the lump sum benefit." (Watson Wyatt)

7th Circuit: Only Non-Vested Participants Need Be Counted in Determining Partial Termination
Matz v. Household Int'l Tax Reduction Inv. Plan (7th Cir. 2001). Excerpt: "In holding that vested participants need not be included in the count of terminated participants to determine whether a partial termination has occurred, the Seventh Circuit has adopted a rule that adds an element of clarity in this area.... [T]his decision will make a finding of partial termination less likely--at least for companies in the jurisdiction of the Seventh Circuit (Illinois, Indiana and Wisconsin)." (EBIA Weekly)

New U.S.-U.K. Tax Treaty Affects Cross-Border Pension Treatment
Excerpt: " new tax treaty between the United States and the United Kingdom provides significant relief in the pension treatment of employees transferred between the two countries. After the treaty's ratification by the U.K. Parliament and the U.S. Senate, pension rules will be more favorable to expatriate employees in both countries." (Watson Wyatt)

Retirement Advice Act Returns
Excerpt: "The Retirement Security Advice Act (H.R.2269) is back and on the move. Introduced by Education and the Workforce Committee chair John Boehner (R-Ohio), the legislation would provide employees with broader access to specific investment advice.... Plan sponsors would not carry fiduciary liability for the investment advice or resulting transactions, but they would be responsible for the 'prudent selection and periodic review' of chosen advisers." (Watson Wyatt)

New Notice Requirements Could Have Unintended and Unfavorable Consequences for Defined Benefit Plans
Excerpt: "Since the IRS must issue regulations specifying the notice's content and timing-- and the agency has broad leeway in so doing-- precise implications for plan sponsors are difficult to predict just yet. Under EGTRRA, the notices must be distributed to all affected participants and written in a manner the average plan participant can understand. The notice must provide 'sufficient information' to enable participants to understand how the amendment will affect them." (Watson Wyatt)

Pension Investors Stay Calm
Excerpt: "As markets dropped Monday, the largest pension funds were holding tight, just as they have through the last year's market decline - and some were even buying to show confidence. New York State's Common Retirement Fund bought an extra $250 million in U.S. stocks by midday Monday and pledged to invest a total of $1 billion over the next several days." (Associated Press via Excite News)

(Following items are in both editions of the BenefitsLink Newsletter)

Welcome to new BenefitsLink advertiser Stellar Software Ltd.
Excerpt: "Payroll Café software is easy to use and easy to learn. It is highly comprehensive and is specifically designed to handle an unlimited number of benefits of all kinds and taxing structures. It is affordable and includes an integrated human resources package. Designed by a Certified Payroll Professional from the APA with credentials from Microsoft as a Certified Solution Developer and Certified Systems Engineer. Go to www.payrollcafe.com to get a demo and more information."

McDonnell Douglas Liable For ERISA Section 510 Violations in Connection With 1993 Plant Closure
Millsap v. McDonnell Douglas Corp. (N.D. Okla. 2001). Excerpt: "[T]he court concluded that the plant closure violated ERISA Section 510 because its purpose was to interfere with the terminated plant employees' benefits ... [C]ourts generally will defer to the business decisions made by companies regarding their employee benefit plans. However, the court's finding of 'a history of deception and bad faith by the company' led it to distinguish this case from the typical one." (EBIA Weekly)

When Does Partnering Turn Into Conflict of Interest? A Financial Perspective (PDF)
Excerpt: "A primary cause for this mounting concern is the growth of outsourcing and continuous mergers among service providers. Employee benefit plan fiduciaries are particularly interested in understanding and managing possible conflicts. Are conflicts of interest inevitable? Probably, but they can be managed. Consider these real examples of conflicts ..." (Curcio-Webb)

CCH Examines How Your Workplace Will Be Affected By Reservist Call-Up
Press release. Excerpt: "To help military reservists and their civilian employers understand and comply with employment laws when workers are called away from their jobs, CCH INCORPORATED (CCH) ... notes that now is the time for companies to review their military leave and reemployment rights policies. To assist you with this important review, here are some of the most common issues...." (PR Newswire via Yahoo! Finance)

IRS Provides Relief For Taxpayers Affected By Terrorist Attacks
The IRS has issued two notices detailing initial relief that will be provided to affected taxpayers in the wake of the September 11 terrorist attacks. And according to the ERISA Industry Committee (ERIC), the Pension and Welfare Benefit Administration (PWBA) will shortly issue regulatory relief from certain requirements under ERISA. (Spencernet)

Bush Calls Up Reserves, Says They Will Play "Essential Role"
Excerpt: "Bush said the Defense Department is in the process of calling up 35,000 reserve troops.... Bush thanked the employers of reserve troops for understanding that 'there is more to corporate life than just profit and loss.' Federal law requires that employers allow Guard and Reserve members to serve on active duty for up to five years and still return to their jobs at the same salary. The same rules apply to federal government employees in the reserve force." (GovExec.com)

Overview: Military Leave Protected Under USERRA
Excerpt: "The Uniformed Services Employment and Reemployment Rights Act (USERRA) of 1994 prohibits employers from discriminating against any employee or prospective employee because of past, present, or future membership ... in a uniformed service. The law covers all public and private employers. USERRA requires that upon returning from service, members of the armed services and its reserve components be reinstated to their civilian jobs without loss of seniority or benefits ..." (HRNext.com)

Overview: Benefits While on Military Leave
Excerpt: "The law requires employers to offer those on military leave and their dependents the right to continue in the group health plan for up to 18 months of service (similar to the Consolidated Omnibus Budget Reconciliation Act (COBRA)).... For defined contribution [pension] plans [that] offer benefits only when the employee makes contributions, returning employees will have up to three times their length of service-- up to a maximum of five years-- to make [missed] contributions ..." (HRNext.com)

Employer Responsibilities to Employees on Military Leave
Excerpt: "In the wake of the recent national tragedy, many Americans may be leaving their regular employment to serve in the armed forces. Employers' responsibilities to such employees are governed by the Uniform Services Employment and Reemployment Rights Act ('USERRA'), a law which was established to encourage civilian service in the military by trying to eliminate the disadvantages employees may face due to such service." (Faegre & Benson LLP)

Individual Agreement To Pay Money and Provide Life Insurance After CFO Retires May Be An ERISA Plan
Nelson v. Jones & Brown, Inc. (W.D. Pa. 2001). Excerpt: "The chief financial officer (CFO) of the company involved in this case entered into a written agreement with his employer under which he would receive $75,000 annually, paid in monthly installments over a ten-year period, commencing 60 days 'after retirement or termination of employment.' The employer also promised that it would pay the premiums for an insurance policy [payable to the CFO's] beneficiaries." (EBIA Weekly)

Newly Posted or Renewed Job Openings (Post Yours!)

Account Executive

for CitiStreet
in FL

PENSION ADMINISTRATOR/CONSULTANT

for Gordon Fraser Pension Consultants
in CA

Manager of Qualified Retirement Plans

for Campbells Administration Inc.
in CA

401 (k) Consultant Position

for Mutual of Omaha
in NE

Director, Relationship Management

for CitiStreet
in FL

Project Director

for CitiStreet
in FL

Director of Client Services

for ArlenGroup
in CA

Human Resources - Benefits Coordinator

for Diagnostic Products Corporation
in CA

Newly Posted Conferences (Post Yours!)

Vendor Selection and Management

in IL on March 18, 2002
presented by WorldatWork

Vendor Selection and Management

in TX on October 14, 2002
presented by WorldatWork

Vendor Selection and Management

in CA on May 22, 2002
presented by WorldatWork

Vendor Selection and Management

in DC on June 12, 2002
presented by WorldatWork

Vendor Selection and Management

in GA on August 14, 2002
presented by WorldatWork

Vendor Selection and Management

in NY on October 28, 2002
presented by WorldatWork