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The BenefitsLink Newsletter -
Retirement Plans Edition
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May 13, 2002 - 11,342 subscribers
Today's sponsor: Actuarial Systems Corporation

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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)

Rite Aid Negotiating to Resolve 401(k) Lawsuit, DOL Investigation of Company Stock Purchases
Excerpt: "The U.S. Department of Labor is investigating Rite Aid's benefit plans, including the principal 401(k) plan that permitted employees to buy company stock in the late 1990s when questionable financial activities were uncovered. Purchases of Rite Aid stock were suspended in October 1999 after the former chairman and chief executive officer was ousted." (Knight Ridder/Tribune Business News via International Foundation of Employee Benefit Plans)

Text of California EGTRRA Conformity Bill
Link to identical bills AB 1122, authored by California State Assemblywoman Ellen Corbett, and SB 657, authored by California State Senator Jack Scott, which conformed California governmental plans to the provisions of EGTRRA. Signed by Governor Gray Davis on May 8, 2002. (California Legislature)

Commentary: Alabama Fails to Conform State Income Tax Laws to EGTRRA
Excerpt: "Michael Mason, director of tax policy for the state Department of Revenue, says Alabama law conforms to federal law on the initial contribution increase. He says the problem is the catch-up provision. 'Those people will still be able to contribute the higher amount, but it will be taxable for Alabama purposes,' Mason says.... [L]egislation that would have brought Alabama into compliance with the catch-up provision failed during the recent legislative session." (Birmingham Business Journal via bizjournals.com)

Employee Ownership Update for May 10
NCEO executive director Corey Rosen reports on the latest legislative proposal for retirement plan reform; an IRS TAM clarifying that distributions on ESOP stock in an S corporation ESOP must be based on account balances, not compensation; a shareholder vote requiring a company to obtain approval of stock option plans; and studies showing that although many employers are loosening company stock rules in 401(k) plans, many workers are not responding. (National Center for Employee Ownership)

PBGC Issues Semiannual Regulatory Agenda (PDF)
Excerpt: "The agenda lists regulations that are currently under development or review or that PBGC expects to have under development or review during the next 12 months.... The Pension Benefit Guaranty Corporation is considering amending its benefit valuation and asset allocation regulations by adopting more current mortality tables and otherwise simplifying and improving its valuation assumptions and methods." (Pension Benefit Guaranty Corporation)

3d Cir.: No Fiduciary Breach for Failure to Disclose "Non-Material" Amendment to Retirement Plan
Nydes v. Equitable Resources, Inc. (3d Cir. 2002). Excerpt: "The court also found that the record supported the employee's claim that the amendment at issue was under serious consideration when the employee inquired about the change. But the key issue in the case was whether the misrepresentation was material to the employee." (EBIA Weekly)

Overview: Proposed Regs on Nonqualified Deferred Comp Plans of Governments and Tax-Exempt Orgs (PDF)
Excerpt: "On May 8, 2002, the Internal Revenue Service published in the Federal Register long-awaited proposed regulations under section 457 of the Internal Revenue Code ... governing nonqualified deferred compensation plans maintained by state and local governmental employers and by tax-exempt organizations.... The proposed regulations address both 'eligible' plans, within the meaning of Code section 457(b), and 'ineligible' plans, which are governed by Code section 457(f)." (Sutherland Asbill & Brennan LLP)

SunGard Corbel Publishes EGTRRA Good Faith Defined Benefit Amendment
Excerpt: "We have posted an EGTRRA good faith amendment for defined benefit plans on our Web site.... If you sponsor one of our prototype plans (Corbel, PPD, or FDP), a separate e-mail is being sent EARLY NEXT WEEK with the EGTRRA good faith amendments that can be adopted at the sponsor level.... IMPORTANT NOTE: In many cases the amendment may need to be adopted by May 31, 2002. See IRS Notice 2001-42." (SunGard Corbel)

Commentary: Could the Enron Collapse Help Level the Pension Playing Field? (PDF)
May-June 2002 Issue. Excerpt: "The post-Enron examination of the employer-sponsored pension system is appropriate and, in fact, long overdue. Thus far, however, the pundits have focused mainly on what has been described as the inadequate regulation of defined contribution (DC) plans ... Another important lesson of Enron, however, is ... the sea change in the retirement system that has left many Americans dependent on 401(k) accounts to provide security in retirement." (Contingencies magazine, from the American Academy of Actuaries)

You Fix It! Play the Online Social Security Reform Game
Excerpt: "Actuaries say that unless Social Security is fixed, the system may not be able to pay full benefits after 2037. Many solutions have been proposed, but no single approach is likely to succeed alone. Here's a game that lets you decide the trade-offs and construct a solution that rings the solvency bell. Below are the most-discussed reform options and their impact on solvency." (American Academy of Actuaries)

Overview: Social Security Trust Funds-- 2002 Trustees' Projections
Excerpt: "The Trustees of the Old-Age and Survivors Insurance and Disability Insurance (OASDI) programs project in their 2002 report that the combined trust funds are sufficient to pay full benefits for the next 39 years, until 2041. This three-year improvement over the 2001 report estimates is based primarily on projected growth in productivity." (AARP)

GOP Shunning Use of 'Privatization' to Describe Proposed Social Security Reforms
Excerpt: "Republican congressional leaders, bracing for Democratic attacks on the issue of Social Security this fall, are drafting plans for a House vote against 'privatizing' the system. The strategy, they hope, would insulate them from voter anger without directly repudiating President Bush's proposal to allow private investments of some, but not all, Social Security contributions." (Washington Post)

Social Security Privatization Reform and Labor Markets: the Case of Chile
Available from downloading from ssrn.com for $5. Excerpt: "We analyze the way in which social security privatization reform affects labor market outcomes.... Results from simulation exercises suggest that in the case of Chile the reforms resulted in an increase in informal sector wages of approximately 2.0%. These results also suggest that the reforms made a positive, but small, contribution to the reduction of Chile's aggregate of unemployment." (National Bureau of Economic Research)

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


Welcome to new BenefitsLink advertiser 4myBenefits, Inc.
Excerpt: "4myBenefits, Inc. (www.4mybenefits.com) is an innovative internet service that provides companies with a cost efficient employee benefits communication and administration solution. Order your free demonstration CD."

Analysis: Harris Trust Case in Supreme Court Expanded Persons Subject to Lawsuits Under ERISA
Excerpt: "In [Harris Trust and Savings Bank v. Salomon Smith Barney, Inc., 120 S.Ct. 2180 (2000)], the Supreme Court concluded that ERISA § 502(a)(3) does not limit 'the universe of possible defendants.' Accordingly, the Court has decided that anybody can be sued under ERISA, if they have been involved in some action that causes harm to the plan. How did the Court get there?" (Kilpatrick Stockton LLP)

To File a Form 5500 By Hand, Preparers Must Obtain Official DOL OCR Forms
Because there are two different types of hand-print 5500 Forms, one provided by the Department of Labor in optical character read (OCR)format and one generated by commercial software, some preparers have questioned whether the software-generated form can be printed and then filled out by hand. The answer is no. (SpencerNet)

Overview: IRS Guidance Issued on Taxation of Golden Parachute Payments
Excerpt: "A parachute payment is any payment that is: in the nature of compensation; to or for the benefit of a 'disqualified individual'; contingent on a change of ownership or control; and in [the] aggregate with other similar payments, at least 3 times the recipient's 'base amount." (Kilpatrick Stockton LLP)




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
Defined Benefit Professionals for Northern Trust Retirement Consulting, L.L.C.
in GA
Pension Administrator for Local Pension Administration Firm - Houston, Texas
in TX
Retirement Plan Administrator for Retirement Plan Services, Inc.
in NC
Senior Vice President - Client Relationship Manager for CitiStreet
in MA



Newly Posted Press Releases (Post Yours!)
Release of 457 Regulations Spurs Record Participation in May 8 NAGDCAST (National Association of Government Defined Contribution Administrators, Inc.)
Pyramid Reports Growing Interest in Service Aggregation and Systems Integration (Pyramid Digital Solutions)

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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.