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Retirement Plans
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December 10, 2002 - 12,959 subscribers
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(Help BenefitsLink to provide this newsletter at no charge to you -- our sponsors pay your way. Remember to visit them periodically; we try to make sure their products and services will be of interest to you. Thanks! --Editor)
IRS Issues Cash Balance Plan Proposed Regulations
Text of U.S. Treasury News Release; we're working on obtaining the text of the regulations, and will link to them as soon as possible. Excerpt: "The regulations address the application of the pension plan age discrimination rules to cash balance plans.... [A] cash balance plan would generally satisfy the age discrimination rules if the pay credits to an employee's account are not less than the pay credits that would be made if the employee were younger." (U.S. Treasury Department and Internal Revenue Service)

Text of IRS Proposed Regulations on Cash Balance Plans (PDF)
75 pages. Excerpt: "This document contains proposed regulations that would provide rules regarding the requirements that accruals or allocations under certain retirement plans not cease or be reduced because of the attainment of any age. In addition, the proposed regulations would provide rules for the application of certain nondiscrimination rules to cash balance plans." (Internal Revenue Service)

Washington Post Coverage: Treasury Wants To Permit Firms To Convert Pension Plans
Excerpt: "Such conversions [to cash balance plans] are highly controversial. Critics contend that they discriminate against older workers in violation of federal law. The Treasury Department and the Internal Revenue Service stopped approving employers' requests to convert their pension plans three years ago amid complaints from workers and some members of Congress. That moratorium will remain in place until the regulations become final, probably next year." (Washington Post)

AP Coverage: Cash Balance Proposal May Protect Employers from Age Discrimination Liability
Excerpt: "The Bush administration plans to propose new regulations Tuesday that would protect employers from age discrimination liability when a company converts its traditional retirement pension benefit to a different arrangement called a 'cash balance plan.' Such conversions typically mean less money for workers closer to retirement age." (AP via Yahoo! News)

NY Times Coverage: IRS Issues Proposed Rules on Cash Balance Pension Plans
Excerpt: "The Bush administration has proposed sweeping new pension rules that will encourage companies to adopt a type of retirement plan that has been under attack for three years for what critics call a tendency to strip benefits from older employees." (New York Times; free registration required)

Creating a Request For Proposal (RFP) For a 401k Provider
Excerpt: "Here is an outline you can use when putting together a RFP for a 401k provider. Included in this outline are important questions you should be asking. Where appropriate, we also tell you why you should be asking these questions. Please note that these explanations (bold italicized text) should NOT be included in your final RFP-- they are there for your information only." (Rick Meigs on 401kHelpCenter.com)

Few Workers Using Catch-Up Provisions in 401(k) Plans
Excerpt: "Only 5% of older workers are taking advantage of a chance Congress gave them to catch up on retirement savings under last year's sweeping new tax law. That's unfortunate, because many workers are unprepared for retirement." (USA Today)

Union, National Steel Question PBGC Intervention
Excerpt: "The Pension Benefit Guaranty Corporation's move to terminate seven National Steel Corporation pension plans has drawn criticism from union and company representatives alike." (PLANSPONSOR.com; free registration required)

Stock Gains Ease Pension Shortfalls
Excerpt: "Companies have been burdened by hefty shortfalls in their employee pension plans. But they've gotten some welcome relief in recent weeks from Wall Street's gains." (USA Today)

Opinion: It's Time to Move Pension Accounting Out of the Dark
Excerpt: "Pension information is published only once a year, in a company's annual report. The impact of a pension's performance at a company is relegated to a footnote. Investors who want to know how much a company may have to kick into a depleted plan are out of luck." (Gretchen Morgenson in the New York Times; free registration required)

Opinion: Employee Stock Ownership Experiment Flopped At United
Excerpt: "Although the Elk Grove, Ill., Township-based airline stopped making contributions to its vaunted employee stock ownership plan two years ago and the shares were reduced long ago to a tiny fraction of their peak value, the bankruptcy filing has important symbolic value that resonates through the world of ESOPs." (The Chicago Tribune via StateDaily.com)

Opinion: ESOP's Fable Played Out at United Airlines
Excerpt: "There is widespread frustration among the employee ranks at United that, while Wall Street assumed the workers were in the driver's seat, with representation on the board and half the company's stock in a trust in their name, the employees never wielded the kind of power they would have liked." (The Boston Globe)

Is Notion of Retirement Going Way of Carrier Pigeon?
16 pages. Excerpt: "If retirement isn't dead, it's at least dying, according to Ken Dychtwald, Ph.D., psychologist, gerontologist, author, and one of America's foremost experts on the lifestyle, marketing and workforce implications of baby boomers." (Journal of Financial Planning)

Overview: IRS Finalizes Plan Loan Regulations
Excerpt: "The final regulations are generally applicable to loans made on or after January 1, 2004, except that they will not apply to loans under insurance contracts in effect on December 31, 2003 if the issuer is required to offer unsecured loans (i.e., other than a requirement that the insurance contract be pledged as security)." (EBIA Weekly)

Overview: Final Plan Loan Regulations Clarify Treatment of Refinancing, Other Issues
Excerpt: "A participant that refinances a plan loan may encounter problems if the arrangement results in a replacement loan with a term ending later than 5 years from the original date of the loan it replaced (i.e., the latest permissible term of the replaced loan). In this case, both the replacement and the replaced loans will be treated as outstanding on the date of the transaction, meaning the arrangement may cause the participant to exceed the maximum loan limit." (Deloitte & Touche Human Capital Advisory Services)

Opinion: Eight Reasons ETFs Deserve Attention Now as Plan Investments
Excerpt: "[A]re you [financial advisors] taking a serious look at another kind of fund that can enhance your business model: exchange-traded funds (ETFs)? ... Clients can buy ETFs for one brokerage fee, hold them years, and never pay the advisor another dime. That's not motivating for transaction-based advisors. But the compensation chemistry changes in a fee-based brokerage account or discretionary separate account." (Rich White on FreeERISA.com)

Opinion: Let's Turn Roth IRAs into Universal Savings Accounts
Excerpt: "[T]he Roth IRA is a ready-made vehicle for Congress to expand into USAs. By turning Roth IRAs into [Universal Savings Accounts, or 'USAs'], all families would have a simple and flexible method to structure nearly all of their savings. USAs would greatly simplify financial planning and help families build economic security free from the risks of pensions tied to companies and the insolvent Social Security system." (Chris Edwards and Ernest Christian, published by the Cato Institute)

Links to Items on Executive Comp, Benefits in General

IRS Approves Arrangement to Swap Excess Sick Leave for Contribution to Defined Contribution Plan
PLR 200247050 (Aug. 26, 2002). Excerpt: "In this Private Letter Ruling, the IRS approved an arrangement that allowed employees to exchange up to five days of unused sick leave for an employer contribution to a 'discretionary defined contribution plan with a salary deferral feature' (apparently a 401(k) plan)." (EBIA Weekly)

Research Counters Popular Thinking On Stock Options
Excerpt: "As the country marks the first anniversary of Enron Corp.'s bankruptcy this week, University of Washington Business School research is questioning the ongoing claim that stock option compensations benefit executives to the detriment of shareholders." (The [Tampa Bay] Business Journal via bizjournals.com; free registration required)

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

401(k) /Pension Administrator
for Great Lakes Pension Administrators, Inc.
in MI

Individual Consultant
in MN

401(k) / Pension Administrator
for Ingham Group
in FL

401(k) Plan Administrators
for PFPC
in MN

Associate Attorney
for Wolf, Block, Schorr and Solis-Cohen LLP
in PA

Section 125 Manager
for Security Benefit Group of Companies
in KS

DC or DB Plan Administrator
for Pension Administrators, Inc.
in IL

Retirement Plan Administrator
for Jones & Roth, P.C.
in OR

Plan Administrator
for Management Recruiters of Portland
in WA

Qualified Pension Administrator (QPA)
for Third Party Pension Administration and Actuarial Firm
in CA

Benefits Specialist
for Phillips Van- Heusen Corporation
in NJ

Benefits Analyst III
for Raley's
in CA

Operations Manager
for Benefit Consultants, LLC
in AL

Newly Posted Webcasts
(Post Yours!)

Presentation of Kaiser-Hewitt Retiree Health Benefits Survey, Including the Employers' Perspective
on December 5, 2002
presented by Kaiser Family Foundation and Hewitt Associates

Newly Posted Press Releases
(Post Yours!)

ASPA Benefits Council of Atlanta Names 2003 Officers and Committee Members
(ASPA Benefits Council of Atlanta)

Radiant Systems Expands Benefit Services
(Radiant Systems, Inc.)

CMC Interactive, LLC Chooses SunGard for Straight-Through Processing
(SunGard Corbel)

(U.S. Treasury Department and Internal Revenue Service)

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