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September 20, 2002 - 11,860 subscribers
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Dentist-Trustee Forfeits Interest in His Professional Association's DB Plan Due to Loan
Press release. Excerpt: "The U.S. Department of Labor filed a complaint against Merrill E. Schmidt DDS, Inc. and the trustee of the Merrill E. Schmidt DDS, Inc., Defined Benefit Plan for alleged violations of [ERISA]. The department is seeking to restore losses to an employee benefit plan of the company, which was based in Santa Ana, California.... [The DOL alleges that] no security agreement or promissory note was executed in connection with the loan [from the plan to Dr. Schmidt] ..." (U.S. Department of Labor, Pension and Welfare Benefits Administration)

Overall, Ted Benna Takes Pride in 401(k) Creation, But Acknowledges Limits
Excerpt: "Like any proud father, Ted Benna takes pride in the accomplishments of his brainchild, the 401(k) account. But that doesn't mean he ignores his progeny's shortcomings-- flaws facing more scrutiny as the nation's once-ballooning 401(k) savings deflate under the weight of a bearish stock market and corrupt companies." (AP via Yahoo! News)

Oft-Maligned Lifetime Annuity Contracts Gain Some Lost Luster
Excerpt: "Fixed annuities, which fell out of fashion during the roaring '90s, are back in vogue. Their rates of return have fallen near 5 percent, far below the highs of a decade ago, but the return is guaranteed, often higher than those from bank CDs and carry none of the uncertainty of the stock market." (

Special Rule Allows Transfers to Individual 403(b) While Employed
Excerpt: "A special rule gives some 403(b) participants the opportunity to transfer money out of their plans, and into investments they prefer, while still employed.... 403(b) participants who qualify may move money from their employer-sponsored 403(b) to an account they set up with a financial services firm of their choice, without owing tax.... These transfers are known as 90-24 transfers, a cryptic name that comes from the 1990 IRS ruling that permits them." (

New Study Analyzes Reforms to Alleviate Tax Burden on IRA and 401(k) Retirees Over Age 70-1/2
Press release; includes link to full text of 25-page report. Excerpt: "A new study showing the detrimental impact of current tax policy on millions of seniors' retirement assets was released [Thursday, Sept. 19, 2002] by Joint Economic Committee (JEC) Chairman Jim Saxton. The new JEC study ... demonstrates how mandatory withdrawals from retirement plans in a falling stock market will force millions of seniors to reduce their IRA and 401(k) holdings much faster than expected." (Congress of the United States, Joint Economic Committee)

Little Known ESOP Provision Yields Major Tax Savings
Excerpt: "Last year's pension reform legislation made important changes to a little-known section of the tax code that allows companies to deduct reinvested dividends paid on employee stock ownership plan (ESOP) shares." (The Vanguard Group)

The Aftermath of Enron: Retirement Plan Issues
Excerpt: "Let us imagine a company whose only asset is $10 million cash, and no liabilities. I own five shares and you the other five.... I decide that there would be certain tax advantages in forming an ESOP to purchase my shares, and I convince you to go along with the idea. What are your shares now worth? ... If the transaction had been structured as a redemption, you would own all the stock. As it is, you now own only half. Was this a good deal for you?" (Noel C. Ice, Esq. of Cantey & Hanger, L.L.P.)

A Guide to Reduce IRA Fee Confusion
Excerpt: "The key is recognizing what you are being charged for and what is a reasonable price. Here's a guide to make it easier." (

Ashton Testifies to ERISA Advisory Council on Fiduciary Competence
Excerpt: "[W]e believe there is an important-- indeed, critical-- issue that is receiving far too little attention. This is the issue of fiduciary competence. By 'fiduciary competence' I mean the ability of company executives and plan service providers to properly fulfill their fiduciary duties under ERISA." (Bruce Ashton, Esq. of Reish Luftman McDaniel & Reicher, for the American Society of Pension Actuaries)

The Role of Company Stock in 401(k) Plans
$19 from Blackwell Publishing. Excerpt: "I suggest that, contrary to conventional wisdom, the introduction of company stock into 401(k) plans is not simply more risk for no additional (expected) return. Rather, the introduction of this asset class into the 401(k) participant's portfolio may have beneficial influences via the differential asset allocation. I create a model to ... find that average balances are expected to be between 4.0 and 7.8 percent larger if company stock is retained." (Professor Jack L. VanDerhei in Risk Management & Insurance Review)

Another Question is Answered in the Who's the Employer Q&A Column
Several unrelated doctors have formed a management company, which serves them and half a dozen other doctors in the area. The company takes care of payroll, employee taxes, health insurance and similar employee benefits issues for the doctors it serves. The doctors still control hiring and firing, and still supervise their own employees. Obviously the management company is a B-Org for the doctors who own more than 10% of it, but what about the other doctors who have little or no ownership? (

Links to Items on Executive Comp, Benefits in General

Opinion: Stock Options for All!
Excerpt: "Increased employee share ownership and less gravy for the greedy few will encourage what every company wants: motivated workers." (Business Week)

New Bearings for Compensation Committees
Excerpt: "Corporate directors should take heed, because they are at risk of public scrutiny and condemnation for lapses in their independent, thorough, monitoring of compensation matters within their purview. There is more at stake than bad press for directors who stumble-- see 'Duties and Liability' below. A few simple steps should nevertheless guide and protect prudent boards." (Mark Poerio, Esq. of Paul Hastings)

Weathering the Storm: a Study of Employee Attitudes and Opinions
Excerpt: "Corporate America has a problem. Unless it can resolve the crisis of confidence among its employees, it has no hope of restoring the trust and confidence of investors ... The WorkUSA® 2002 study results provide companies with a blueprint for responding to this crisis in confidence. To restore employee trust, the first step is knowing -- and understanding -- exactly what employees think." (Watson Wyatt)

Opinion: It's Time to Change the Way Stock Options Are Taxed
Excerpt: "Let the valuation that is calculated for options be used to value them for tax purposes as well. The company would get a deduction for the value of the option, and the employee would pay taxes on that value.... The current tax rules are perverse. Employees owe high ordinary income taxes on stock option profits, while companies that issue the options can get big tax deductions when options are cashed in." (New York Times; free registration required)

Newly Posted or Renewed Job Openings - Post a Help Wanted Ad

Senior Benefit Administrator (Client Delivery Specialist)
for Towers Perrin
in VA

Lead Implementation Analyst
for American Express is a leader among credit, travel, and financial mgmt Co.
in MN

Senior Benefits Communication Specialist
for National Rural Electric Cooperative Association
in DC, VA

Sr Benefits Analyst - 578HS
for Bausch & Lomb
in NY

Technical Specialist
for Edward Jones
in MO

Newly Posted Conferences (Post Yours!)

Health Insurance Basics - Chicago
in IL
October 11, 2002

Pension Plan Design and Administration - Indianapolis
in IN
October 22, 2002

ERIC-Mercer 2002 Fall Benefits Conference
in DC
October 16, 2002
ERIC (The ERISA Industry Committee) and Mercer Human Resource Consulting

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