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The BenefitsLink Newsletter -
Retirement Plans Edition
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July 15, 2002 - 11,391 subscribers
Today's sponsor: Actuarial Systems Corporation

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   For over 20 years ASC has provided complete automation for the
   pension office, including DC/401(k) and DB administration and
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   and DV Direct, a revolutionary solution for daily valuation
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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)

ASPA Provides Side-by-Side Comparison of Pension Reform Bills, Including Finance Committee's Bill
Note: the chart is copyrighted material. Excerpt: "Senate Finance Bill refers to S. 1981, the 'National Employee Savings and Trust Equity Guarantee Act,' which was reported out of the Senate Finance committee on July 11, 2002, by voice vote (no dissenting views expressed). Full Senate consideration of a bill is currently scheduled for sometime in September." (Brian H. Graff, Esq. of the American Society of Pension Actuaries)

Benefits Council Publishes 5-page Summary of Pension Bill Marked Up by Finance Committee (PDF)
Prepared by Randy Hardock of Davis & Harman. Excerpt: "[T]he Mark starts from (and makes modifications to) the National Employee Savings and Trust Equity Guarantee Act (NESTEG) originally introduced by Finance Committee Ranking Republican Chuck Grassley (S. 1971). As such, it does not contain many of the more controversial proposals that were included in Senator Kennedy's Enron-driven retirement bill and reported earlier this year by the Senate Health, Education, Labor and Pension Committee." (American Benefits Council)

Study Shows 401(k) Vulnerability
Excerpt: "A study released [July 12, 2002] found that employees who have only 401(k) retirement accounts, without the additional security of traditional pension plans, have a higher concentration of their company's stock than previously assumed, leaving many workers lacking diversification and therefore at the mercy of a company's rise or fall." (Washington Post via MSNBC.com)

Employee Ownership Update for July 12, 2002
The Senate Finance Committee has passed its own version of the 'Pension Reform Bill.' Employee stock ownership plans (ESOPs) would be relatively unaffected by this bill. Like the House pension bill, this would prevent the IRS from imposing payroll tax withholding on employee stock purchase plan (ESPP) and incentive stock option (ISO) spreads on exercise. In other news, efforts to require companies to expense stock options in their income statements are currently stalled. (National Center for Employee Ownership)

Now More Than Ever, Participants Need Advice
Excerpt: "[F]iduciary advisors are becoming increasingly concerned that employees do not have access to, or are not using, appropriate educational and advisory services. Yet rising indications show when employees do use such services, they can benefit dramatically." (BenefitNews.com)

Democrats See Scandals as Chance to Attack Privatizing Social Security
July 12, 2002. Excerpt: "Democrats have been using Social Security as a campaign issue all year, and today they appeared particularly bold, an early sign of how the debate on corporate responsibility is spilling into other issues." (New York Times; free registration required)

The Basics of Social Security (PDF)
Updated 2-page fact sheet. (Employee Benefit Research Institute)

Another Question is Answered in the Who's the Employer Q&A Column
My client has a professional practice as a sole proprietorship, with a defined benefit plan. He also has several domestic employees: gardener, housekeeper, nanny, etc. He is concerned about the domestic employees and wants to do something for their retirement, but he doesn't want to include them in the defined benefit plan. I'm concerned about whether I need to count them in the plan regardless. What can we do? (BenefitsLink.com)

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

Coke to Report Stock Options as an Expense
Excerpt: "The Coca-Cola Company, breaking ranks with the vast majority of American companies, said [on July 14, 2002] that it would change its accounting so that its earnings reflect the value of the stock options it grants to executives and other employees." (New York Times; free registration required)

What Is the Effective Date for the DOL's SPD Content Regulations?
Excerpt: "Over a year and a half ago, in November 2000, the DOL issued final regulations addressing the required contents of ERISA SPDs. These final regulations have the force of law and were technically effective January 20, 2001. However, they are not applicable until the first day of the second plan year beginning after January 22, 2001." (EBIA Weekly (Question of the Week))

Biggest Liability in Federal Budget: Pension and Health Benefits for Federal Employees and Military
Excerpt: "Taking over first place as the biggest government liability was $3.36 trillion in future pension and health benefits owed to federal civilian and military retirees." (AP via Lycos News)

The Future of Employee Benefits: a Call for Reform (PDF)
Excerpt: "[N]ow is the time to undertake a fundamental reevaluation of ERISA and the employee benefit system it regulates. The basic premise of ERISA is that the system is voluntary, employers are not required to maintain benefit plans, and that employees are protected by a uniform scheme of federal standards and regulations. The structure itself, however, may have become too difficult, too expensive, too burdensome, and too inflexible ..." (Scott Macey and Gretchen Young of Aon Consulting, published online at eric.org by the ERISA Industry Committee)

Evaluating a Broad-Based Workers' Lobby to Provide Portable Benefits (PDF)
September 28, 2001 version. Excerpt: "I begin with an overview of how organizations form and survive. Section II provides additional background on the broad based workers' lobby suggested by Herbert Gans. I follow this in Section III with a discussion of two highly successful membership organizations, AARP and Common Cause, which might serve as potential models for a workers' lobby.... I conclude with an evaluation of the prospects of a broad-based workers' lobby." (Joni Hersch, Lecturer on Law, Harvard Law School)

Opinion: Is True Corporate Reform Possible Here?
Excerpt: "[T]he Business Roundtable ... issued a statement saying that its members were 'appalled, angered and, finally, alarmed' about the year's run of outrageous business news.... [D]espite the rhetoric, the Roundtable opposes any changes in the accounting treatment of stock options, the seemingly obscure issue that many governance experts say is behind exorbitant executive pay and has fueled the worst abuses of many of the current scandals." (New York Times; free registration required)

Opinion: True Corporate Reform Lies in Stock Options
Excerpt: "Corporate reform is not a minor matter. So what should we focus on? Stock options. Why? They are the key to reform." (Scott Burns of the Dallas Morning News)

Managing Stock Option Fragility
Working paper available for downloading from SSRN.com for $5. Excerpt: "We build a detailed data set on executives' portfolios of stock and options and find that executive options are frequently underwater, even when average stock returns have been high.... We find that, in contrast to the incentives provided by stock, the incentives provided by options are quite sensitive to stock price changes, especially on the downside." (National Bureau of Economic Research)

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
Sr. Plan Administrator for M.L. Kerns & Assoc., Inc. - Houston, TX
in TX
Internal Wholesaler for Ceridian
in FL
Senior Vice President Benefits for The Elam Group
in DC, MD, VA
Compliance Analyst for Leggette Actuaries, Inc.
in TX
Compliance Consultant for The Segal Company
in MA

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