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The BenefitsLink Newsletter -
Retirement Plans Edition
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May 8, 2002 - 11,615 subscribers
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Proposed Regulations for Eligible Deferred Comp Plans Under Code Section 457(b) (PDF)
21 pages. Excerpt: "The regulations reflect the changes made to section 457 by the Tax Reform Act of 1986, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002, and other legislation. The regulations would also make various technical changes and clarifications to the existing final regulations on many discrete issues." (Internal Revenue Service)

Overview: Proposed Regulations Provide Guidance on Compensation Deferred Under Eligible 457(b) Plans
Excerpt: "The regulations would provide broad guidance regarding the rules applicable to eligible deferred compensation plans described in Code Sec. 457(b) and, in particular, set forth clear standards for the administration and operation of such eligible plans.... The proposals clarify that the requirements ... apply to both elective contributions and to other types of contributions, such as mandatory contributions, nonelective employer contributions and employer matching contributions." (taxCCHGROUP.com)

Inspector Finds Wrong Payouts 20% of the Time from Cash Balance Plans
Excerpt: "The Labor Department's inspector general has found that more than 20 percent of cash-balance pension plans violated the law by not providing workers with all the benefits due them. In a study of 60 cash-benefit plans, the inspector general found that 13 plans were underpaying participants by a total of $17 million a year, primarily by using improperly low interest rates to calculate benefits." (New York Times; free registration required)

AP Coverage: Some Cash Balance Pensions Are Shorting Workers
Excerpt: "[Vermont Congressman Bernie] Sanders, who represents hundreds of IBM employees, said he would introduce legislation soon to require that the government do a better job of enforcing pension laws. [DOL Assistant Secretary Ann] Combs added that the Labor Department would work with the IRS and the Treasury Department to determine if guidance is needed to help cash-balance administrators make their calculations more accurate." (AP via Lycos)

Commentary: Nebraska Sees Red Over Its 401(k) Plan, Drops Program
Excerpt: "After 38 years, the state of Nebraska has recently jettisoned its version of the retirement plan, judging it a failure.... The Nebraska case shows the disastrous results of letting people manage their own retirement funds over the long term. The state began letting workers opt out of its traditional pension plan to invest in a defined-contribution plan back in 1964." (K.C. Swanson on TheStreet.com)

Another Question is Answered in the Who's the Employer Q&A Column
Two different scenarios: (1) A client organization (a 'CO' within the meaning of Rev. Proc. 2002-21) with an existing plan begins to use a PEO and wishes to participate in a multiple employer plan (instead of the CO's plan), or (2) a CO discontinues its relationship with the PEO and therefore ceases participation in the multiple employer plan. Is it safe to assume that funds are transferred into and out of the PEO's plan via plan-to-plan transfers? (BenefitsLink.com)

Another Question is Answered in the Who's the Employer Q&A Column
Often client companies of PEOs want to continue to maintain their own 401(k) plans. However, the PEO cannot deduct 401(k) contributions to the client company's plan, because deductions under IRC section 404 are limited to plans "maintained by the employer," which is not the PEO. Has the IRS considered this issue? (BenefitsLink.com)

Another Question is Answered in the Who's the Employer Q&A Column
What if the staffing company (a PEO, as the industry defines it) employs not only the rank and file employees of the client company, but also employs the owner and manager of the client company? Because the employees then would be subject to the direction and control of a PEO employee, wouldn't the worksite employees be considered common law employees of the PEO? Should the single employer plan of such a PEO follow Rev. Proc. 2002-21? (BenefitsLink.com)

Free Travel for Philadelphia Pension Fund Trustees Unreported
Excerpt: "Trustees of the Philadelphia pension fund have accepted several thousand dollars in free meals and resort accommodations from money managers without making the disclosures required under the state ethics law, public records show." (The Philadelphia Inquirer via Philly.com)

Philadelphia Plans Pension Fund Ethics Policy for Trustees
Excerpt: "Responding to reports detailing the frequent trips of pension board trustees, the [Philadelphia mayor's office] is crafting a travel and ethics policy for the fund. City Finance Director Janice Davis said she was gathering information from other cities and would 'hopefully put together something that gives us a rationale for what we're doing and sets some guidelines.'" (The Philadelphia Inquirer via Philly.com)

Summary of Findings: EBRI's 2002 Small Employer Retirement Survey (PDF)
8 pages. Excerpt: "The issue of low plan sponsorship rates among smaller employers continues to be a public policy challenge.... In addition to the issues of administrative cost and burden involved in establishing and maintaining a plan, difficulties involve the financial realities of operating a small business ... Motivators that appear to be most effective among current nonsponsors are those that increase the affordability of retirement plans ..." (Employee Benefit Research Institute)




Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
401(K) Customer Service Technical Representative for Pentegra Group
in NY
Pension Benefit Consultant for MetLife/New England Financial
in MA



Newly Posted Press Releases (Post Yours!)
John Hancock Funds and ExpertPlan Introduce T(k)O (ExpertPlan)
Study of Retirement Services Intermediaries Analyzes Provider Satisfaction (Search401k)

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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.