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The BenefitsLink Newsletter -
Retirement Plans Edition
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May 28, 2002 - 11,383 subscribers
Today's sponsor: In Plain English

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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)

New Issues for Cash Balance Plans (PDF)
2 pages; May 2002. Excerpt: "Recent activity includes: a spate of class-action lawsuits brought by sophisticated plaintiffs' counsel, based on theories under which many cash balance plans could be found to have underpaid participants; well-publicized court decisions against cash balance plans on the 'whipsaw' issue; and a controversial Department of Labor report which concluded that more than one out of five cash balance plans in its sample had underpaid participants." (Gardner Carton & Douglas)

Reporting and Disclosure Requirements For Governmental and Nonelecting Church Plans (PDF)
12 pages. Excerpt: "Most qualified plans must comply with ERISA's reporting and disclosure requirements. Governmental and nonelecting church plans are not subject to ERISA. However, they still must file some documents with the IRS and provide certain information to plan participants and beneficiaries.... This special edition of CIGNA's Pension Analyst ... indicates what you need to provide or file and when." (CIGNA's Pension Analyst)

Overview: Economic Stimulus Bill Provides Funding Relief for DB Plans, EGTRRA Technical Corrections (PDF)
7 pages. Excerpt: "The new law affects participants in and sponsors of qualified defined benefit and defined contribution plans, including governmental plans. It also affects participants in and sponsors of tax-sheltered annuity (403(b)) programs and section 457 plans.... Plan sponsors should review this publication to identify the items that may apply to their plans and participants. In some situations, plan sponsors may want or need to adopt additional EGTRRA plan amendments." (CIGNA's Pension Analyst)

Resigning Bank Trustee Held Liable for Investment Losses After Participants Chose to Self-Direct
Allison v. Bank One - Denver, No. 99-1465; Crosby v. Bank One - Denver (10th Cir. 2002). Excerpt: "The Tenth Circuit held that ... Bank One remained responsible for participants' investments, in part because the plan did not comply with its own terms regarding conversion to participant-directed investment. The letter agreements that were required by the plan's terms would have informed participants that Bank One was no longer responsible for participants' investment choices." (EBIA Weekly)

EGTRRA Overview: Big Changes, Big Benefits
Excerpt: "CPAs who help clients with pension planning, take notice: Sweeping changes in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) have transformed this discipline. Fortunately, most of the changes are beneficial. For instance, 401(k) participants now can contribute more money and plan participants can move money more freely between plans." (Journal of Accountancy, published by the American Institute of CPAs)

Analysis: Tax Reform Alters ESOP Landscape
Excerpt: "With the Economic Growth and Tax Relief Reconciliation Act of 2001, Congress enacted significant changes, effective in 2002, to employee benefit plans which raised the total dollar amount of contribution limits and liberalized companies' combined use of ESOPs and 401(k) plans ... This article discusses how the legislation has affected ESOP use and recommends CPAs and plan sponsors review the changes with their corporate and small business clients ..." (Journal of Accountancy, published by the American Institute of CPAs)

Overview: DOL Announces Changes to Delinquent Filer Voluntary Compliance (DFVC) Program (PDF)
3 pages. Excerpt: "The revised DFVC program became available March 28, 2002, to plan sponsors who have not received written notification from the DOL that they have failed to file a timely Form 5500. To correct a failure to timely file a Form 5500 under the DFVC program and qualify for the reduced penalties, the plan sponsor must take the following steps ..." (CIGNA's Pension Analyst)

Summary of Proposed 457 Regulations
Excerpt: "On May 8, 2002, the Internal Revenue Service published new proposed regulations providing guidance on eligible deferred compensation plans of state and local governmental and tax-exempt entities pursuant to Internal Revenue Code 457(b). The proposed regulations represent the first comprehensive guidance on these plans since 1978." (403bWise.com)

2002 Mutual Fund Factbook Is Online
Includes chapter on the use of mutual funds by retirement plans. Excerpt: "At year-end 2001, mutual funds accounted for $2.4 trillion, or 22 percent, of the $10.9 trillion U.S. retirement market. The remaining $8.6 trillion of 2001 retirement market assets were managed by pension funds, insurance companies, banks, and brokerage firms." (Investment Companies Institute)

Another Question is Answered in the Who's the Employer Q&A Column
I work for a temp agency. They send me out to different jobs that need short term clerical support. I've never been more than two months at a particular job site, but I have work to do most of the year. Now the agency is telling me it can't cover me under their 401(k) plan after 2003 because of a new IRS ruling. Is that right? (BenefitsLink.com)

Another Question is Answered in the Who's the Employer Q&A Column
What's the difference between a "Client Organization" (CO) under Rev. Proc. 2002-21 and a "recipient" under the leased employee rules of IRC section 414(n)? (BenefitsLink.com)

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

Analysis: Automatic Enrollment Approved for Cafeteria Plans; Pension Plans Might Need Amendments
Excerpt: "There are essentially two parts to this ruling: an analysis of two hypothetical situations that illustrate how the income exclusion works under cafeteria plans; and an explanation of how the Code Section 415(c) compensation definition used for qualified retirement plans is affected by this Ruling, including guidance about amending plans to be consistent with the Ruling." (EBIA Weekly)

NASDAQ Approves Rule Changes to Modify Corporate Governance Standards, Including Stock Options
Press release. Excerpt: "[Existing NASDAQ] rules contain an exception for broadly based plans, that is, plans in which at least a majority of the participants are not officers or directors. In response to comments by SEC Chairman Pitt and others, the board voted to strengthen the rule by requiring shareholder approval for all plans in which officers and directors participate." (Nasdaq Stock Market, Inc.)

Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
Administrator - Traditional and Daily Valuation Capable for WESPAC Plan Services, Inc.
in CA
Benefits Associates for Stanton Hughes Diana Cerra Mariani & Margello P.C.
in NJ
Account Specialist/ Plan Administrator for INVESCO Retirement, Inc.
in GA
Communications Manager for Financial Engines, Inc.
in CA
Relationship Director for CitiStreet
in FL
Underwriter for Integrated DisAbility Resources, Inc.
in CT, ME

Newly Posted Webcasts (Post Yours!)
Fiduciary Responsibility and Risks: Where Are We Headed? on May 23, 2002
presented by Hewitt Associates

Newly Posted Conferences (Post Yours!)
Basics of Employee Retirement Plansin MA on October 17, 2002
presented by New England Employee Benefits Council
Annual Education Meetingin UT on August 18, 2002
presented by Western Pension & Benefits Conference
Plan Fiduciary Concerns After Enronin VA on June 4, 2002
presented by Foundation for Enterprise Development / Beyster Institute

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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.