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The BenefitsLink Newsletter -
Retirement Plans Edition
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July 22, 2002 - 11,391 subscribers
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Full Text of IRS Final Regs on Refund of Mistaken Contributions to Multiemployer Plans
Excerpt: "This document provides final regulations relating to the return of employer contributions or withdrawal liability payments made to multiemployer plans due to a mistake of fact or law. Changes to the applicable laws were made by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA). The final regulations provide guidance to the public in complying with MPPAA." (Internal Revenue Service)

Overview: Final Regs on Entitlement to Refunds of Mistaken Contributions to Multiemployer Plans
Excerpt: "A newly finalized regulation dealing with multiemployer plans provides that contributions or withdrawal liability payments made to such plans due to a mistake of fact or of law can be returned to the employer under specified conditions. The rule, which applies to refunds made after July 22, 2002, reflects law changes made by the Multiemployer Pension Plan Amendments Act of 1980 ..." (tax.CCHGROUP.com)

401(k) Investment Options Continue to Expand
Excerpt: "401(k) plans offer an average of 13 investment funds, but most participants invest in just two or three, according to data from the Profit Sharing/401(k) Council of America and the Society of Professional Recordkeepers and Administrators (SPARK)." (BenefitNews.com)

Creator of First 401(k) Plan Responds to Critics
Excerpt: "I think it's time for a reality check on 401(k)s and how they should be viewed and utilized.... The outrage at pension plans being replaced by 401(k)s is greatly exaggerated.... The ideal is to work for an employer that has both types of plans, which is the case for most Fortune 500 companies.... [S]emi-forced savings, when money is regularly deducted from a worker's paycheck, is by far the greatest benefit of a 401(k)." (mPower.com)

401(k)s and Company Stock: How Big a Risk to Workers' Retirement Security?
Excerpt: "Many workers hold a considerable share of their 401(k) assets in their own company's stock, which adds unnecessary risk to their retirement portfolios. A new Issue in Brief from the Center for Retirement Research at Boston College (CRR) explores how this situation occurred, the implications for workers' retirement security, and potential policy responses." (Center for Retirement Research, Boston College)

Alternatives to the 30-Year Treasury Rate (PDF)
20 pages; 'A Public Statement by the Pension Practice Council of the American Academy of Actuaries.' Excerpt: "The recently enacted Job Creation and Worker Assistance Act ... increased the range of permissible interest rates for determining contributions and PBGC ... premiums for under-funded plans.... Since the temporary remedy in JCWAA only applies to plan years beginning in 2002 and 2003, a permanent fix is needed for this problem." (American Academy of Actuaries)

Economy Woes Hit Pension Benefit Guaranty Corporation
Excerpt: "The agency is expected to assume the benefits of 200,000 more people this year, more than double last year's record, and a higher number in 2003." (Boston Globe)

Another Question is Answered in the Who's the Employer Q&A Column
A trust owns 97% of Company A. Company B is 100% owned by Company A. Company C is 67% owned by Company B and 28% owned by the trust that owns 98% of Company A. A son of the trust's grantor is a 5% owner of Company C. It is not known whether this son is a beneficiary in the trust that owns Company A. Assuming no, would the son who owns 5% of Company C earning $30,000 be considered a highly compensated employee? (BenefitsLink.com)

Another Question is Answered in the Who's the Employer Q&A Column
What is a "management function" for purposes of Code Section 414(m)(5)? Specifically, if a leasing company derives 50% of its revenues from providing back room service staff (billing and accounting and other non-medical staff) to a medical practice, are these considered "management functions"? There is absolutely no common ownership between the leasing company and any of its medical practice clients, or among the medical practice clients. (BenefitsLink.com)

More Firms Rolling Out Exclusively Web-Based 401(k) Plans
Excerpt: "[T]he new e-401(k)s are sold, set up, and managed almost exclusively online. Not only does your company handle all administrative functions over the Web but your employees also choose their investments and make changes online.... Fidelity ... launched the first e-401(k) in late 1999 and now serves 1,200 online customers. Last year, rivals began to follow. Newcomers included ... Principal Financial Group, as well as a raft of Internet startups, such as 401(k) Pro, GoldK, and Emplanet." (Business Week)

Does Your Plan Need Amending Due to Opt-Out Restrictions in Your Cafeteria Plan?
Excerpt: "In order to include deemed §125 compensation for years beginning in 1998, 1999, 2000 and/or 2001, the plan must be amended by the end of the 2002 plan year and the amendment must be effective for all years that the plan was operated in accordance with that definition.... In an Appendix to Rev. Rul. 2002-27, the IRS provides a model amendment for including deemed §125 compensation in the plan's definition of IRC §415(c)(3) compensation." (TRI Pension Services)

Overview: Court Decision Indicates Whipsaw Calculation Generally Not Required for Cash Balance Plans
Excerpt: "[A] new court decision ... casts doubt on the entire methodology used by the [DOL Office of Inspector General] in reviewing cash balance calculations. The decision, the latest in a series involving the Georgia-Pacific cash balance plan, indicates that the whipsaw calculation is not required for distributions after 1994 that are over the cash-out limit." (Watson Wyatt)

4th Cir.: Prenuptial Agreement Does Not Void Spouse's Right to Survivor Benefit
Hagwood v. Newton, 282 F.3d 285 (4th Cir. 2002). Excerpt: "It is not clear why the courts are sometimes strict constructionists and other times not. But this court follows the virtually unanimous decisions of others who have ... concluded that a prenup is not a valid spousal waiver for ERISA purposes no matter how clear the intent. You gotta be a spouse before you can waive a spousal right." (Nixon Peabody LLP)

Court Interprets QDRO Requirements Loosely As Applied to Pre-1984 Property Settlement
Metropolitan Life Insurance Co. v. Bigelow, 283 F.3d 436 (2d Cir. 2002). Excerpt: "Because it could figure out from the divorce proceedings what these literal terms would have been had the parties wanted to satisfy ERISA, the property settlement was a valid QDRO. So, can we just stop worrying about the form requirements of QDROs? Probably not." (Nixon Peabody LLP)

Should You Take a Lump Sum or an Annuity?
Excerpt: "When deciding between accepting your employer's annuity plan or buying one yourself, keep a few things in mind. Women usually fare better in taking their company's annuity, says Towers Perrin's Bill Daniels." (USA Today)

Social Security Reform Across the Pond: An Overview of Great Britain's Experience
Excerpt: "Over the past two decades, efforts to reform public pensions in the U.K. have focused on shifting the financial burden from the state to the individual.... The British public pension system, whose complexity makes most other systems seem absolutely simple in comparison, is made up of several tiers of retirement income provision financed by payroll taxes, or in U.K. parlance, national insurance contributions." (Watson Wyatt)

California Employees' Pension Fund Flexes Its Muscle Around the World
Excerpt: "They may not know it, but 1.3 million California retirees have become major players in the international campaign for human rights. The California Public Employees Retirement System, which handles the pensions for state workers, recently enacted a long-delayed program to screen all its overseas 'emerging markets' investments to ensure that they are not contributing to human rights and labor rights violations." (The San Francisco Chronicle via the Society for Human Resource Management)

Public Retirement Payments Reach Record $100 Billion
Excerpt: "State and local government employee retirement systems paid $100 billion to 6 million retirees and survivors in fiscal year (FY) 2001, the Commerce Department's Census Bureau reported ... There were 2,208 retirement systems at that time, with a membership of 16.8 million persons, who could be eligible for regular benefit payments in the future." (U.S. Census Bureau)

Overview: Restorative Payments By Fiduciaries Not Treated As Employer Contributions
Excerpt: "Rev. Rul. 2002-45 prescribes rules for determining whether a restorative payment made by an employer to a qualified plan is treated as an employer contribution. The IRS has been dealing with this issue for years in private letter ruling requests, but this revenue ruling provisions general guidance that all taxpayers may rely on." (TRI Pension Services)

Opinion: Could Individual Accounts Lead to Government Interference in the Stock Market?
Excerpt: "[P]articipants in the debate have generally accepted the argument that stock investment through the Social Security trust funds could lead to political manipulation of stocks, whereas stock investment through individual accounts would be safe from manipulation. This premise is false ..." (AARP Public Policy Issue Brief)



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

What Are the Pros and Cons of Sending ERISA Materials Electronically to Former Employees?
Excerpt: "Here are the additional requirements for electronic disclosure to non-employees (and to employees who do not have work-related computer access).... You need to be aware, of course, that the above requirements are in addition to the ones that apply to all electronic disclosures, even those made to employees who have work-related computer access." (EBIA Weekly (Question of the Week))

IRS Signals Caution On Cafeteria Plan Auto Enrollment Due to Retirement Plan Consequences
Excerpt: "In Revenue Ruling 2002-27, the IRS cleared the way for automatic enrollment in cafeteria plans that don't restrict an employee's ability to opt out before enrollment. But if an employer wants its employees to certify that they have alternative health coverage before opting out, then there will be an adverse effect, not on the cafeteria plan, but on the employer's retirement plan." (BenefitNews.com)

Survey Results: Employee Benefits in Private Industry, 2000
Results were published July 16, 2002. Excerpt: "Paid time off continued to be the most prevalent benefit available to workers in private establishments in 2000. Paid vacations were available to 80 percent of employees and paid holidays to 77 percent of employees in private industry, according to the Bureau of Labor Statistics, U.S. Department of Labor." (Bureau of Labor Statistics, U.S. Department of Labor)

Overview: Stock Options and Deferred Compensation-- IRS To Split Taxes of Splitting Couples
Excerpt: "In what appears to be a reversal of its prior position, the IRS has just ruled [in Rev. Rul. 2002-22] that Section 1041 trumps the normal compensation rules in the case of divorce. Hence, [a hypothetical Mr. Executive] recognizes no income now or thereafter if he transfers non-qualified options or deferred compensation to his departing spouse.... In a separate proposed ruling [Notice 2002-31], the IRS apparently intends a different result for employment taxes." (Nixon Peabody LLP)

Managerial Power and Rent Extraction in the Design of Executive Compensation
Working paper available for downloading from SSRN.com for $5. Excerpt: "[T]he desire to camouflage rent extraction might lead to the use of inefficient pay arrangements that provide suboptimal incentives and thereby hurt shareholder value. The authors show that the processes that produce compensation arrangements, and the various market forces and constraints that act on these processes, leave managers with considerable power to shape their own pay arrangements." (National Bureau of Economic Research)

Democratic Leaders Urge Bush to Direct Agencies to Move on Pension, Executive Comp Issues (PDF)
Excerpt: "We will continue to press for congressional action on pension reform this year. But there are several actions that you can take immediately under existing authority to reform the nation's pension system and better protect the life savings of millions of Americans. No further action by the Congress is required to achieve many needed reforms." (U.S. Senator Edward M. Kennedy, U.S. Rep. George Miller, published online by ERISA Industry Committee)

Opinion: Attempt to Cap Executive Salaries 10 Years Ago Got Us Into Today's Corporate Mess
Excerpt: "In the early 1990s, angered by coincident downsizings and reports of large executive payouts, Congress ended the deductibility of executive salaries above $1 million." (Daniel Gross in Slate.com, via MSNBC.com)

Five Ways of Valuing Options
Excerpt: "Of these possible methods, only one results in reliable, tamperproof, financial results." (Business Week)

Pinning Down an Option's Value
Excerpt: "As Congress and Corporate America ponder the pros and cons of expensing stock options, a difficult issue looms: Even if a company decides that expensing options is the right thing to do, as Coca-Cola Co. and Bank One Corp. have recently done, determining just how to value them is tough.... The big problem is that corporations can't predict what will happen to share prices, who will leave the company before their options vest, and which options will expire underwater ..." (Business Week via Yahoo! News)

Welcome to new BenefitsLink advertiser Findley Davies, Inc.
Excerpt: "Findley Davies, Inc. is a leading human resources consulting firm. We specialize in providing consulting solutions in organizational planning and development; compensation and rewards management; HR communication; HR technology; health and group benefits; and retirement plans, actuarial services, and recordkeeping. Our offices are located in Charlotte, Cleveland, Greensboro, and Toledo."

Welcome to new BenefitsLink advertiser SMART PlanTrax Timesaver Module
Excerpt: "Developed by Intac Actuarial Services - PlanTrax runs on Windows. This fully customizable, integrated practice management timesaver module enables administrators to gain total control of any plan on any day. More info and FREE downloadable demo are available"




Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
Retirement Sales District Manager for ADP, Inc
in GA, WA
Employee Benefits Administrator for Kidder Benefits Consultants, Inc.
in IA
Plan Administrator for Alliance Benefit Group of New England
in NH
Pension Administrator for PFS
in GA
Defined Benefit Specialist for The Paragon Consulting Group
in GA
Communications Consultant for CitiStreet
in FL



Newly Posted Press Releases (Post Yours!)
ORTEC International Introduces its Proven "Finance Paradigm" to the North American Market (ORTEC International)

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