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The BenefitsLink Newsletter -
Retirement Plans Edition
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July 26, 2002 - 11,391 subscribers
Today's sponsor: The Plan Sales System

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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)

Massachusetts Conforms to EGTRRA
Excerpt: "The Massachusetts Senate enacted a tax package on July 25 that overrides Governor Jane Swift's earlier veto ... The bill includes provisions for full conformity with federal law with respect to workplace savings plans and education savings plans, permitting Massachusetts taxpayers to take advantage of EGTRRA's changes to the ability of individuals to save for retirement and accumulate savings for higher education. The provisions are effective as of January 1, 2002." (BenefitsLink)

PBGC Reports Large Increase in "Shortfall" in Pension Funds on Termination Basis
Excerpt: "Shortfalls in private companies' pension plans soared to $111 billion last year, the highest level ever reported by the Pension Benefit Guaranty Corp. That was four times the $26 billion shortfall that companies reported for 2000, according to the PBGC, the government's insurance program for private workers' pensions. A shortfall is the amount of money that would be owed to pension participants if a plan was terminated." (AP via Yahoo! News)

House Passes Bill Including Cash Balance Plan Provision
Excerpt: "Representative Bernie Sanders (I-Vermont) ... introduced an amendment to an appropriations bill that would prevent the Internal Revenue Service from changing the current requirement that cash balance plans continue using the 30-year Treasury interest rate as a growth assumption in establishing participant balances.... The bill now moves to a conference committee with the Senate." (PLANSPONSOR.com)

5,660 New Jersey State Workers Choose Early Retirement Incentive Program
Excerpt: "The rush to retirement will save the current state budget $46 million by eliminating the salaries of longtime employees. But nearly half of those accepting the offer were not directly on the state payroll in the first place ... In addition, state employee union leaders say several key departments that deal directly with the public -- including the Division of Youth and Family services, which oversees child welfare -- have been hit hard by the loss of experienced employees." (NJ.com)

Miami City Commissioners Slice Former Mayor's Pension
Excerpt: "The City Commission voted unanimously Thursday to recalculate [former Miami Mayor Joe[ Carollo's pension to exclude a back pay award of about $39,000 that was added to his W-2 form for 1999 -- bringing his annual $112,000 pension down to less than $85,400.... [The] one-time payment of about $39,000 [was] for back pay and benefits for four months he was out of office in 1997-98 after a contested election." (The Miami Herald)

California State Treasurer Wants Pension Funds Out of Investments in U.S. Companies Moving Offshore
Excerpt: "[Phil] Angelides, who is a board member of both pension funds, proposed that the California Public Employees Retirement System and the California State Teachers' Retirement System, which combined control more than $250 billion in assets, also vote their shareholder proxies against expatriation proposals by companies. The two pension funds, often referred to as Calpers and Calstrs, are the first and third largest in the nation, respectively ..." (Washington Post)

Some Retirees Long for Defined Benefit Pensions
Excerpt: "With the stock market causing many 401(k)s to hemorrhage money, the advantages become clearer for defined benefit plans, or those professionally managed pensions that provide retirees with a fixed, steady stream of income.... [W]hile many state and local governments provide workers' retirement through defined benefit plans, the number of private companies offering this type of pension has dwindled in recent years." (ABCNews.com)

New Trends in U.S. Pensions (PDF)
38 pages. Excerpt: "We trace plan evolution by evaluating Employee Benefits Survey (EBS) information on pensions offered to full-time workers employed in medium and large establishments.... After describing key retirement plan features, we report on time trends in retirement provisions and benefit formulas in US defined benefit and defined contribution plans. We conclude with a discussion of implications for the American workplace going forward." (Prof. Olivia S. Mitchell with the assistance of Erica L. Dykes)

The Behavior of Defined Contribution Plan Participants (PDF)
35 pages. Excerpt: "[A] significant amount of data regarding participants' decisions already exists. Thus, we have the ability to examine the successes and failures of various means that have been used to encourage certain decisions, which in turn gives us the ability to decide how to proceed in the future.... [This] paper suggests [there are] aspects of the law of pension plans that are premised on the acceptance of rational choice principles that simply do not operate in the area." (Prof. Susan J. Stabile in the NYU Law Journal)

Opinion: The Seamy Side of Pension Funds: Conflicts of Interest for Consultants
Excerpt: "[Consultants] seemingly provide a valuable service: advising pension managers on everything from allocating assets to selecting stock pickers and the other money managers who actually invest the plans' assets.... Consultants typically charge a fixed fee for the advice--the tab for a $1 billion public pension plan might be $150,000--but they can earn millions more by moonlighting. It's those extracurricular activities that can cause trouble." (Fortune.com)

Another Question is Answered in the Who's the Employer Q&A Column
John owns 10% of F Corp (a service organization) and 25% of B Corp, which derives most of its income from providing employee services to F Corp. John is not an employee of F Corp but he provides services to F Corp as an independent contractor (he receives a Form 1099). Is John an HCE of F Corp for purposes of the B-Org rules of IRC section 414(m)(2)(B)(ii)? (BenefitsLink.com)

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

Text of Corporate Accountability Bill, With Hypertext Links to Benefits-Related Provisions
As approved by both the House and the Senate and sent to President Bush for signature. Includes a provision banning corporate officers and directors from trading employer stock during plan blackout periods and requiring 30 days' advance notice of plan blackout periods; another provision prohibits loans to certain executives; another section increases penalties for white-collar crimes that are willful violations of ERISA. (Congress of the United States)

Benefits Account For 28% of Total Compensation Costs
Employer-provided benefits costs for civilian workers in private industry and state and local governments in March 2002 averaged $6.39 per hour worked, accounting for 27.6% of total compensation costs, which averaged $23.15 per hour worked. (SpencerNet)

Compliance Issues Drive TPA Activity
Third party administrators are scrambling to comply with recent regulations, including those of the Department of Labor dealing with claims (which are effective this year) and requirements under the Health Insurance Portability and Accountability Act for electronic data interchange (EDI) and privacy of protected health information. (SpencerNet)

Welcome to new BenefitsLink advertiser Stanley, Hunt, DuPree & Rhine, Inc.
Excerpt: "Stanley, Hunt, DuPree & Rhine, Inc. (SHDR) was one of the first firms in the South to provide professional counseling in the field of employee benefits. Today, we have developed into the largest organization headquartered in the South offering complete Actuarial and Employee Benefit Services, with clients ranging from small professional and closely held corporations, to large public corporations."

Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
PENSION ADMINISTRATOR for Small Third -Party Administration/Consulting Firm
in VA
Retirement Plan Services Relationship Manager for Strong Financial Corporation
in WI
Senior Auditor Benefit Plans for Crowe Chizek
in IL
Pension Paralegal for NJ TPA Firm
in NJ
Pension Administrator for Suburban PA Pension Consulting Firm
in PA
Retirement Plan Specialist for Giant Food
in MD
Processing Analyst for Suburban Pension Consulting Firm
in PA

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