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The BenefitsLink Newsletter -
Retirement Plans Edition
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July 2, 2002 - 11,391 subscribers
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3 States to Attack Conflicts of Interest in Pension Funds
Excerpt: "In an effort to scrub out conflicts of interest on Wall Street, officials from New York, California and North Carolina announced [on July 1] that they will demand that money managers of their states' pension funds adhere to new ethical guidelines to win their business." (Washington Post)

Retired Andersen Employees Who Depend on Pensions May Lose Them
Excerpt: "Its pension plan for retired partners is relatively simple and allows for a $3,500 per month pay out to each partner regardless of their earnings while at the firm. A spouse receives half that amount once her partner dies.... To avoid large income tax payments, many former partners elected to receive their investment payouts back over a long stretch of time, typically between 10 and 20 years. If Andersen fails, many fear, those payouts could be lost." (Chicago Tribune via International Foundation of Employee Benefit Plans)

Another Question is Answered in the Who's the Employer Q&A Column
Is there attribution between brothers and sisters for controlled group purposes? If so, perhaps the situation below is a controlled group. (BenefitsLink.com)

Another Question is Answered in the Who's the Employer Q&A Column
In an emergency medical partnership, one partner is a medical corporation. The rest of the partners are sole proprietorships. The partnership does not have any employees and has no plan. The corporation, consisting of the owner only, has a profit sharing plan. Most of the sole proprietors each sponsor a SEP. Each partner derives 40-85% of his income from the partnership. Is this a problem? (BenefitsLink.com)

Protecting ESOP Participants Against Dilution When New Debt is Incurred to Finance Additional Shares (PDF)
Excerpt: "A difficult issue which ESOP trustees must consider ... is whether the participants in the ESOP should be afforded protection against a reduction in the value of the shares allocated to their accounts by reason of new ESOP indebtedness. This issue raises a conflict of interest between participants whose employment with the company will terminate shortly after the new ESOP stock purchase and the longer-term participants." (Jenkens & Gilchrist)

Retirement Age Under Railroad Retirement Act To Increase To Age 67
In proposed regulations published in the June 17 Federal Register, the Railroad Retirement Board (RRB) changes the definition of normal retirement age in the same direction as that used by the Social Security Act. The RRB is amending the regulations under the Railroad Retirement Act to remove all references to age 65 and substitute 'retirement age,' which encompasses the same range from age 65 (for those born prior to 1938) to age 67 for those born after 1959. (Spencernet)

Independent Fiduciary to Shut Down $13 Million 401(k) Plan of Bankrupt Plan Sponsor
Excerpt: "A consent judgment and order obtained June 27 by the U.S. Department of Labor and the bankruptcy trustee for DCT, Inc., names an independent trustee to terminate the company's 401(k) plan and distribute the $13.7 million in plan assets to over 700 participants. The independent fiduciary, Midwest Pension Actuaries, Inc. of Farmington Hills, Mich., will conclude any plan-related matters connected with the termination, consistent with [ERISA]." (U.S. Department of Labor, Pension and Welfare Benefits Administration)

Analysis: IRS Issues Guidance On "Restorative Payments"
[Rev. Rul. 2002-45.] Excerpt: "In its first official guidance with respect to 'restorative payments,' the IRS has ruled that certain payments by an employer to a plan to restore plan losses are not 'contributions' for purposes of the Code's limits on 401(k) plan contributions (e.g., the limits under Code Sections 401(a)(4), 404 and 415)." (EBIA Weekly)

Analysis: IRS Guidance on Calculating Excise Taxes for Loans That Are Prohibited Transactions
[Rev. Rul. 2002-43.] Excerpt: "This ruling addressed the question of which rate to use for calculating the excise tax when the prohibited transaction occurred in 1997 (when the applicable rate was 10%) but continued until 1999 (when the applicable rate was 15%). The IRS ruled that the applicable rate for each prohibited transaction--for all years--is the rate that was in effect the first year the prohibited transaction occurred." (EBIA Weekly)

Wall Street Journal Interviews Experts on Solutions to the 'Nest-Egg Blues'
Excerpt: "For tips on how to regain financial and emotional equilibrium in scary economic times, The Wall Street Journal convened a panel at the Wharton School at the University of Pennsylvania. The participants were: John L. McKeever III, a chartered financial consultant ... Olivia S. Mitchell, professor of insurance and risk management at the Wharton School [and] Jack L. VanDerhei, associate professor at the Fox School of Business and Management at Temple University..." (Wall Street Journal via Global Action on Aging)

Links to Items on Executive Comp, Benefits in General
(These items appear in both editions of the BenefitsLink Newsletter)

When Plan Document Is More Favorable to Participant, It Controls Over Conflicting SPD
Bergt v. Retirement Plan for Pilots Employed by MarkAir, Inc. (9th Cir. 2002). Excerpt: "The reasoning of this case, which applies equally to both pension and welfare plans, illustrates the difficulties and importance of creating an SPD that is consistent with the plan document. The Ninth Circuit in its discussion cited a familiar concept: the burden of uncertainty created by careless or inaccurate drafting of an SPD is placed on the drafter ..." (EBIA Weekly)

Executive Comp Consulting Firm Comments on Proposed NYSE Corporate Governance Changes (PDF)
Excerpt: "The June 6 proposal addresses two primary executive compensation issues: 1. The shareholder approval requirements applicable to equity compensation plans ... 2. Other governance issues related to the structure and operation of Board compensation committees ... Our comments on each of these issues are provided below." (Frederic W. Cook & Co., Inc.)

Opinion: Congress Ought to Stay Away From Executive Pay
Excerpt: "History shows that laws intended to do good, like the Levin-McCain proposal, actually hurt shareholders when judged in retrospect. Indeed, I would like to see Congress roll back two pieces of the current tax law that relate to executive pay. The first is the so-called $1 million cap on its deductibility. The second pertains to 'golden parachutes,' the munificent payouts that many chief executive officers receive when their companies are taken over." (Graef Crystal on Bloomberg.com)

For HR Professionals: What to Do With Bad News
Excerpt: "A supervisor has legitimate worries about the value of the company stock in the 401(k) plan, but would doing something about it constitute illegal trading on inside information?" (HR Magazine)

Welcome to new BenefitsLink advertiser Chicago Consulting Actuaries
Excerpt: "Chicago Consulting Actuaries is different from other actuarial firms. We are genuinely dedicated to discovering and developing the full value and potential of our clients' information...we turn numbers into ideas. CCA's technology is at the heart of the company, embodying CCA's fresh, client-centered focus. We have a full suite of innovative products and services, which offer unique advantages to our clients everyday."

Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
Client Relationship Manager for Pension Third Party Administrator
in MI
Flex Plan Services Manager for Pension Specialists, Inc.
in CA
Sr. Plan Administrator for American National Insurance Company
in TX
Trust Officer for American Express Financial Advisors
in MN
Pension Administrator for BFP Associates
in MA

Newly Posted Conferences (Post Yours!)
Plan Sponsor Forum 2002 - Cleveland OHin OH on August 19, 2002
presented by Caterpillar Investment Management Ltd.
Plan Sponsor Forum 2002 - Washington DC Metro Areain DC, MD, VA on August 20, 2002
presented by Caterpillar Investment Management Ltd.
Plan Sponsor Forum 2002 - Central Illinoisin IL on September 6, 2002
presented by Caterpillar Investment Management Ltd.
SmartFlex...an Innovative Solution for FSAsin NY on July 10, 2002
presented by New York Metropolitan Area Chapter - ISCEBS
Retirement Distributions: Estate and Tax Planning Strategiesin OH on August 5, 2002
presented by Presented by Professional Education Systems Institute, LLC
Retirement Distributions: Estate and Tax Planning Strategiesin OH on August 6, 2002
presented by Presented by Professional Education Systems Institute, LLC
Retirement Distributions: Estate and Tax Planning Strategiesin OH on August 8, 2002
presented by Presented by Professional Education Systems Institute, LLC

Newly Posted Press Releases
Federated Clearing Services Launches Internet-Based Software (Federated Investors, Inc.)
Labor Department's Lawsuit Names Independent Fiduciary To Terminate DCT's 401(k) Plan (U.S. Department of Labor, Pension and Welfare Benefits Administration)
Labor Department Amends EXPRO (U.S. Department of Labor, Pension and Welfare Benefits Administration)

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Editor and Publisher: David Rhett Baker, J.D.