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October 17, 2002 - 12,057 subscribers
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IRS Tightens Conditions for 401(k) Plans Needing to Change Contribution Deduction Method (PDF)
Excerpt: "Rev. Rul. 2002-46 ... holds that grace period contributions to a [401(k) plan] .... are not deductible by the employer for a taxable year if the contributions are attributable to compensation earned by plan participants after the end of that taxable year.' It also held that an employer could conform its treatment of contributions to the ruling by following certain IRS procedures. Those procedures now are available only for the first taxable year that ends on or after Oct. 16, 2002. (Internal Revenue Service)

House GOP Shelves Tax Measure That Would Have Increased 401(k) Deferral Limits
Excerpt: "The legislation would ... increase contribution limits beginning next year for 401(k) plans and individual retirement accounts; and gradually raise the age for withdrawals from retirement plans from 70 1/2 to 75." (AP via New York Times; free registration required)

DOL Publishes 'Field Assistance Bulletin'-- ESOP Technical Guidance for DOL Auditors, Investigators
Press release. Excerpt: "In the course of audits and investigations by PWBA field enforcement staff, difficult legal issues often arise. In an effort to provide the regional office staff with prompt guidance, PWBA has developed a new vehicle for communicating technical guidance from the national office.... The first FAB, Field Assistance Bulletin 2002-1, addresses the fiduciary considerations involved with the refinancing of an ESOP loan under section 408(b)(3) of ERISA." (U.S. Department of Labor, Pension and Welfare Benefits Administration)

Text of DOL Field Assistance Bulletin 2002-1
Excerpt: "Issue: What are the obligations of a fiduciary under sections 404(a) and 408(b)(3) of ERISA in connection with the refinancing of an exempt ESOP loan?" (U.S. Department of Labor, Pension and Welfare Benefits Administration)

Pension Rights Center Pushes Enron Pension Bill, Criticizes Letter of American Benefits Council (PDF)
Excerpt: "[The American Benefits Council] objects to establishing an Office of Pension Participant Advocate within the Labor Department on the ground that such an office is 'unnecessary,' 'duplicative,' could result in the 'development of divergent policies,' and would be predisposed to litigation. In fact, such an Office is very necessary, would not duplicate the functions of any other office, would serve only in an advisory capacity, and would not litigate." (Pension Rights Center)

Commentary: Mark-to-Market Madness
Excerpt: "[C]omputing pension expense based on smoothed values can appear to temporarily understate reported pension expense or overstate pension income. While critics base their case on the need for more accurate reporting of pension expense ... a 'mark-to-market' valuation would create dramatic, ultimately insignificant fluctuations in value, making planning almost impossible for defined benefit plan sponsors." (Watson Wyatt)

Watson Wyatt Suggests Changes in Pension Funding Rules
Excerpt: "Instead of determining current liability based on a four-year weighted average of 30-year Treasuries (or some other substitute rate for 30-year Treasuries), why not determine current liability based on the interest rates in effect on the valuation date? ... This would enable risk-averse employers to 'immunize' their contribution risk by investing a significant portion of their assets in bonds." (Watson Wyatt)

Firefighters Sue Employer, Auditing Firm Over Drop in Value of Employer Stock Held by ESOP
Excerpt: "Hundreds of firefighters have filed a class-action complaint against the private Rural/Metro Fire Department and the Arthur Anderson accounting firm to recover millions of dollars lost from their pension funds. The suit claims that Rural/Metro, Arthur Anderson, the company's top executives and their wives made themselves rich by artificially concealing the true value of Rural/Metro stock from 1996 through 2001." (The Arizona Republic)

Massachusetts' Early Retirement Program Proves Lucrative for Some Re-Hires
Excerpt: "Plymouth County Treasurer John McLellan ... said officials in appointed positions may return to a town job, but they can collect a full pension only if they work 960 or fewer hours.... The state's early retirement incentive program ... allows municipal employees who qualify for retirement to add five years to their age or years of service to boost their pension benefits, as long as they retire by Dec. 31." (The Boston Globe)

Links to Items on Executive Comp, Benefits in General

Executive Compensation and Nonqualified Plans: What's Ahead?
Excerpt: "Watson Wyatt set out to understand the corporate perspective on when nonqualified plans met their goals and when-- and why-- they fell short. In Watson Wyatt's 2002 Nonqualified Deferred Compensation Study, we surveyed 169 firms ... Survey highlights include: ..." (Watson Wyatt)

Overview: Impact of Sarbanes-Oxley Act and Current Proposals on Employee Benefits and Executive Comp
6 pages. Includes discussion of shareholder approval of equity-based compensation plans, NYSE and NASDAQ rules on compensation committees and the House-passed Pension Security Act. (Proskauer Rose)

Overview: FASB Addresses FAS 123 Transition Rules
Excerpt: "The latest development in the continuing saga of stock option expensing is a new Exposure Draft from FASB (the Financial Accounting Standards Board). FASB is proposing to amend the transition rules and disclosure requirements of FAS 123, the standard that governs accounting for stock-based compensation." (Mercer Human Resource Consulting)

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

Defined Contribution Project Manager - MJ-020917-008
for Hewitt Associates
in GA

Retirement Specialist - Defined Benefit Plans
for Coca-Cola Enterprises
in GA

Newly Posted Press Releases

Black Mountain Group: "Outsourcing's Jerry Maguire Wins Inc 500 Ranking"
(Black Mountain Group)

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