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The BenefitsLink Newsletter -
Retirement Plans Edition
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May 9, 2002 - 11,615 subscribers
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California Governor Signs EGTRRA Conformity Bill
Excerpt: "Governor Gray Davis signed the following bills into law: AB 1122 ... and SB 657 ... conform State law to changes made by the federal Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. These bills, which are identical, affect pensions, individual retirement accounts, and qualified tuition plans. They also conform California's tax code to other changes made in the federal tax code over the last several years. The bills would take effect immediately." (Office of the Governor, California)

Status of EGTRRA Conformity Bill in Massachusetts
Excerpt: "Without widespread constituent support of SB 2339, Massachusetts legislators may not realize how important EGTRRA conformity is to employers and employees in Massachusetts. It appears as though SB 2339 may only be enacted as a 'stand-alone' bill, and may not be included in a larger budget package. This will be a tough battle, but it is the right thing to do for Massachusetts taxpayers." (Profit Sharing/401(k) Council of America)

Amend Your Profit Sharing or 401(k) Plan When Merging In a Money Purchase Pension Plan
Excerpt: "The problem is that although money purchase pension plans only allow distributions upon retirement or other termination of employment, profit sharing/401(k) plans may allow [in-service] distribution of company profit sharing contributions after two years. Thus, in the event that a money purchase pension plan and 401 (k)/profit sharing plan are merged ... the 401(k)/profit sharing plan would have to be amended." (IOMA's Report on Managing 401(k) Plans via International Foundation of Employee Benefit Plans)

10 Challenges That Will Face 401(K) Sponsors in the Next Decade
Excerpt: "Gerard Mullane, a principal at the Vanguard Group ... outlined 10 challenges in four key areas that will need to be met in the coming decade: [nonparticipation; excessive trading; behavioral finance; savings rates; system leakage; distribution issues; Social Security; the next generation of ERISA; the end of the bull market; and the dangerous concentration in company stock.]" (IOMA's Report on Managing 401(k) Plans via International Foundation of Employee Benefit Plans)

Summary and Comparison of Select Retirement Legislative Proposals (PDF)
May 6, 2002. Excerpt: "This chart provides a summary and comparison of current law, the Bush Administration's proposal, the House-passed bill (H.R. 3762), and leading Senate bills." (American Benefits Council)

Another Question is Answered in the Who's the Employer Q&A Column
Given that Rev. Proc. 2002-21 seems to treat PEOs as though they weren't the employer of their worksite employees, what affect does it have on cafeteria plans and other welfare or fringe benefit plans maintained by a PEO? (BenefitsLink.com)

Another Question is Answered in the Who's the Employer Q&A Column
If a PEO wants to terminate its plan now, does it need to wait until 2003 in order to comply with Rev. Proc. 2002-21? (BenefitsLink.com)

Loan Repayment Made To Profit-Sharing Plan Was Not Exempt In Bankruptcy
A loan repayment made to the profit-sharing plan of a sole proprietorship three weeks before an involuntary bankruptcy petition was filed against the firm was not exempt from the company's creditors. This was the ruling of the Sixth Circuit U.S. Court of Appeals in In re Yates (No. 00-6023). (Spencernet)

Post-Enron Pension Reform Aims to Educate and Protect Employees
Excerpt: "[T]he typical participant with an overly concentrated company-stock holding will end up with less than the participant who is more diversified. This is because the average individual stock experiences much wider price swings than the market as a whole. Greater volatility undermines the beneficial effects of compounding, since the big down years more deeply erode the principal on which future gains are based." (The Wharton School of the University of Pennsylvania; free registration required)

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


Rev. Rul. 2002-22: IRS Rules on Tax Aspects of Nonstatutory Stock Option Transfers in Divorce (PDF)
Excerpt: "Issues: Is a taxpayer who transfers interests in nonstatutory stock options and nonqualified deferred compensation to the taxpayer's former spouse incident to divorce required to include an amount in gross income upon the transfer? Is the taxpayer or the former spouse required to include an amount in gross income when the former spouse exercises the stock options or when the deferred compensation is paid or made available to the former spouse?" (Internal Revenue Service)

Notice 2002-31: Proposed Ruling on Withholding Tax Aspects of Nonqualified Stock Option Transfers (PDF)
Excerpt: "This notice sets forth the contents of a proposed revenue ruling explaining how [FICA, FUTA], and the Collection of Income Tax at Source on Wages (income tax withholding) apply to a transfer of interests in nonstatutory stock options and nonqualified deferred compensation to a former spouse incident to a divorce. The proposed revenue ruling also contains proposed reporting requirements with respect to such transferred interests." (Internal Revenue Service)

IRS Changes Time of Hearing On Proposed Regs On FICA, FUTA Taxation of Stock Options
The Internal Revenue Service has announced that it has changed the time of the public hearing on its recently issued proposed regulations governing the application of Social Security (FICA) and unemployment (FUTA) taxes and income tax withholding to statutory stock options. Notice of the change was published in the May 7 Federal Register. (Spencernet)

Shareholders Endorse Shareholder Voting Requirement For Stock Option Plans
Excerpt: "TIAA-CREF announced today that shareholders of Mentor Graphics strongly supported a CREF shareholder resolution asking that all material stock option plans be submitted to shareholders for approval. The resolution was approved, winning support from 57.2% of the shares voted ... The SEC estimates that only about 20% of companies with equity compensation plans have instituted programs not approved by shareholders, but the number appears to be growing." (PR Newswire via Yahoo! Finance)

Mentor Graphics Loses Proxy Fight in Big Win for Shareholder Activists
Excerpt: "In a sign of increased shareholder activism following widespread corporate accounting scandals and concern over outsized executive pay, investors in two companies ... approved shareholder resolutions opposed by management.... Mentor Graphics said 56.7% of shareholders voting at its annual meeting on Tuesday backed a nonbinding resolution asking that all significant stock-option plans be submitted to the software company's shareholders for approval." (Wall Street Journal via Yahoo! News)

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Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
Client Services Director for PFPC
in MD
Pension Consultants/Administrators; F/T & P/T for Northern NJ Mid-Size Pension Consulting Firm
in NJ, NY
Associate Account Executive for Lockton Companies of Dallas
in TX
401k Administrator for Secured Trust Bank
in TX
Consultant/Manager for Montgomery County Administration Firm
in PA
Retirement Plan Administrator 401(k) for Alliance Benefit Group
in MN
Health Care Facilitator for UCLA
in CA
Senior Retirement Plan Consultant for Invesmart
in WA



Newly Posted Webcasts (Post Yours!)
Reducing Medical Errors: A Review of Innovative Strategies to Improve Patient Safety on May 8, 2002
presented by KaiserNetwork.org
Closing the Gaps in Hatch-Waxman: Assuring Greater Access to Affordable Pharmaceuticals on May 8, 2002
presented by KaiserNetwork.org



Newly Posted Conferences (Post Yours!)
Security, Privacy, Nondiscrimination: Looking at the Post 9/11 Workplace Audio Conferencein ALL STATES on May 29, 2002
presented by Thompson Publishing Group, Inc.

Subscribe to the Welfare Plans Edition, too (click)


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.