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The BenefitsLink Newsletter -
Retirement Plans Edition
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March 29, 2002 - 11,962 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)

PBGC Protects Benefits of 82,000 LTV Workers In Largest-Ever Federal Pension Takeover
Excerpt: "The Pension Benefit Guaranty Corporation (PBGC) today announced it is taking over three underfunded pension plans covering some 82,000 workers and retirees of bankrupt steel maker LTV Corp., based in Cleveland.... With combined assets of almost $2.2 billion and benefit liabilities of $4.4 billion, the plans are underfunded by about $2.2 billion, PBGC estimates." (Pension Benefit Guaranty Corporation)

Employers Take Issue with Kennedy Committee's Bill Requiring Joint Trustee Boards
Excerpt: "Of the many provisions in Senator Edward Kennedy's pension reform bill, the one that seems to upset employers the most is the initiative to allow employees to serve on the retirement plan board of trustees." (PLANSPONSOR.com; free registration required)

Pension Expert Suggests Fiduciary Fix-its After Enron
Excerpt: "Pension attorney Michael Melbinger ... who heads the global pension and benefits practice of Winston & Strawn ... stressed that, without the legislated limit on 401(k) investments in the plan sponsor itself, the protection of these 401(k) investments heavily depends on how faithfully the plan fiduciary keeps to certain fundamental duties: loyalty, prudence, diversification of investments and administration of the plan in accordance with its terms." (Thompson Publishing Group)

Opinion: What's Wrong With Your 401(k) -- and How To Fix It
Excerpt: "Problem No. 1: Wimpy savings ... Problem No. 2: Expensive retirement plans ... Problem No. 3: Keystone cop investing ... Problem No. 4: Advice blackout ... Problem No. 5: Cash hemorrhage ..." (CNBC on MSN.com)

Another Question is Answered in the Who's the Employer Q&A Column
A husband is the sole proprietor of a medical practice; his wife is the sole proprietor of her medical practice. Husband and wife also own 50% each of a separate farming operation with 2 employees, which is unincorporated. Must they cover the employees of the farming operation under the husband's profit sharing plan? Is a SLOB an alternative? (BenefitsLink.com)

QDROs, 404(c) Plans, and a Bear Market; or, the Incredible Shrinking Divorce Decree (PDF)
Excerpt: "This column reviews the statutory rules and case law that makes establishing and following a QDRO procedure essential for any qualified plan." (David R. Levin, Esq. of Wiley Rein & Fielding)

8th Circuit: No Harm, No Foul Due to Asset Surplus, in Suit Over DB Plan Investment That Went Sour
Excerpt: "Defined benefit plan participants weren't injured - and had no basis for recovery - for a hedge fund investment loss in a pension plan that still enjoyed a surplus, according to a federal appeals court.... The case is Harley v. Minnesota Mining and Manufacturing Co., 8th Cir., No. 00-2214, 3/26/02." (PLANSPONSOR.com; free registration required)

401(k) Refugees: Involuntary Cash-Outs Coupled With Tax Withholding Present Hardships for Savers
Excerpt: "Congress passed laws last year to ensure that the accounts will no longer be cashed out unless they contain less than $1,000. The exact terms of those rules have not been written or enacted by the US Department of Labor; until they are, the current cash-out problem will continue." (Boston Globe)

Global ESOPs: Putting the Pieces Together
Excerpt: "The good news is that for companies willing to live with the headaches, there's plenty that they can do in terms of administration and implementation to make a global ESOP run smoothly." (CFO.com)

Analysis: IRS Says Top-Heavy Test Applies 5-year Add-Back rule to Plan Termination Payments
Item dated March 28, 2002. Excerpt: "We have learned that the IRS Headquarters in Washington, DC, interpret IRC §416(g)(3) as applying 5-year add-back rule to plan termination distributions to the extent such distributions are made for reasons other than severance from employment, disability or death. There is some disagreement in the pension community about the proper interpretation of this provision. An opposing view is ... a 1-year add-back rule ..." (TRI Pension Services)

Summary: Issues and Implications of the Ongoing Growth of DC and Individual Account Plans
Excerpt: "Today, prospective retirees need to be able to generate about 75 percent of their current income to maintain their standard of living in retirement, up from 63 percent of their income in 1997 ... The number of large employers offering DB plans continues to decline ..." (Employee Benefit Research Institute)

2002 Annual OASDI Trustees Report
Excerpt: "The long-term financing gap for both Social Security and Medicare is slightly larger this year and remains large for both programs. Closing that gap will require innovative solutions that also present opportunities to strengthen each program." (Social Security Administration)

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


Analysis: Substantially Reduced Penalties for Late Form 5500 Filings
Item dated March 28, 2002. Excerpt: "[A] new 'per plan' cap is added to the DFVC Program, for plans that have failed to file for multiple years.... Thus, a plan pays no more than the per plan cap for multiple late filings, regardless of whether the late filings involve only two plan years or many more than that." (TRI Pension Services)

ERISA Enforcement of Nonqualified Executive Compensation Arrangements
Extensive outline, presented as an ALI-ABA Business Law course. Excerpt: "Susan Katz Hoffman is a charter fellow in the College of Employee Benefit Counsel and current chair of the Merger and Acquisitions Sub-Committee of the Employee Benefits Committee of the ABA's Section of Taxation. This article has been edited for publication, and was timely as of June 15, 2001." (Susan Katz Hoffman, Esq. of Pepper Hamilton LLP)

Analysis: Hedging Deferred Compensation Does Not Meet IRS Definition of Hedging Transaction (PDF)
Excerpt: "In final regulations on the character of hedging transactions (T.D. 8985, Regs. §1.1221-2), the IRS has closed a potential loophole for Nonqualified Deferred Compensation Plans that was opened by amendments to Code Section 1221 made in 1999.... Providing a tax- and cost-efficient method to informally fund NQDC liabilities remains a challenge for which there is no 'magic bullet' solution." (Vinings Management Corporation)

Stock Options: Boon or Boondoggle?
Excerpt: "Sen. Carl Levin, D-Mich., the co-sponsor of a Senate bill on options, calls them a 'stealth form of compensation' that create a misleading 'double standard.' And none other than Federal Reserve Chairman Alan Greenspan has placed the issue high atop his list of future financial fixes.... In response, business lobbyists have mobilized ..." (ABCNews.com)




Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
Senior DC / 401(k) Administrators for L.A. Area TPA with Ocean View
in CA
Trust Specialist for BenefitStreet, Inc.
in CA
Retirement Plan Services Manager for Ceridian
in FL



Newly Posted Conferences (Post Yours!)
College Savings Plans: How Do They Work, What Are the Benefits?in MD on April 18, 2002
presented by The Baltimore Chapter of ISCEBS
What To Look For In Your Flexible Spending Accountin FL on April 11, 2002
presented by WEB - Jacksonville Chapter
Plan Design and Tax Deduction Issues In Light of EGTRRAin CA on April 18, 2002
presented by Western Pension and Benefits Conference - Orange County Chapter



Newly Posted Press Releases (Post Yours!)
PBGC Protects Benefits of 82,000 LTV Workers In Largest-Ever Federal Pension Takeover (Pension Benefit Guaranty Corporation)



Newly Posted Announcements of Promotions and New Personnel (Post Yours!)
Jeffrey D. Corso (Rock, Fusco & Garvey (Chicago))

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Copyright 2002 BenefitsLink.com, Inc., but you may freely distribute this email newsletter in whole. This newsletter is edited by David Rhett Baker, J.D.