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December 11, 2002 - 13,150 subscribers
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IRS Says Cash Balance Plan Conversion Rulings Still on Hold Until Regs Finalized
Excerpt: "[C]ertain age discrimination issues under § 411(b)(1)(H) have continued to be the subject of discussions between Treasury and other agencies. While the regulations issued today address the age discrimination issues of § 411(b)(1)(H), they are subject to public comments and possible revision before finalization. The technical advice cases on cash balance conversions will not be processed until the regulation addressing the age discrimination issues is finalized." (Internal Revenue Service)

Newsday Coverage: Pension Plan Changes Could Affect Older Workers
Excerpt: "The proposed regulations issued for comment by the Treasury Department Tuesday 'give a green light to a tremendously unfair practice that robs older employees of benefits they had counted on getting,' said Karen Ferguson of the Pension Rights Center, a worker advocacy group in Washington, D.C." (Newsday)

NPR Coverage (Audio Excerpt): Pension Plan Conversions Could Hurt Older Workers
Excerpt: "The Bush administration prepares to lift a moratorium on a new, controversial type of pension, the cash-balance plan. The Treasury Department has released regulations indicating what companies must do when converting pensions to cash-balance. Companies with large numbers of older workers are especially interested. Critics say lifting the moratorium will lead to a flood of conversions that will hurt older workers. NPR's Jim Zarroli reports.' (Dec. 10, 2002) (National Public Radio)

Overview: Age Discrimination Rules for Cash Balance Pension Plans (PDF)
2 pages. Excerpt: "As long as a conversion has satisfied the rules for determining the opening balance and for applying the age discrimination rules to the post-conversion formula, the presence of a wear-away period will not be treated as a violation of the age discrimination restrictions." (Milliman USA)

Philly Inquirer Coverage: Bush Push for Cash-Balance Pension Plans Benefits Younger Workers
Excerpt: "The pension benefit under traditional plans is determined by the employee's length of service and final pay, which means that the bulk of the pension benefit is earned late in the person's career. That makes the switch from a tradition defined-benefit plan to a cash-balance plan particularly hard on a 50-year-old who has been working at a company for 20 years, [said Judith Mazo, a senior vice president with The Segal Co., an employee-benefits consulting firm]." (The [Philadelphia] Inquirer via NewsAlert.com)

USA Today Coverage: Treasury Says Cash Balance Plans OK
Excerpt: "Worker advocates expect employees to complain loudly about new Bush administration proposals in support of a controversial type of pension plan.... Under the proposed rules, it still would be possible for workers to reach a plateau for several years after a conversion without earning new benefits, says David Certner, AARP's director of legislative affairs." (USA Today)

Text of Press Secretary Ari Fleisher's Comments About Cash Balance Proposed Regulations
Excerpt: "Q: ... [S]ome people say [cash balance plans are] unfair to older workers; not necessarily constitute age discrimination in every case, but they're unfair. What's your position on these plans? MR. FLEISCHER: Well, I think the reason that that's not valid is because the proposed regulations also address conversions ... Under these rules, the plan must be age neutral before the conversion, age neutral after the conversion, age neutral in the process of the conversion." (PR Newswire via Yahoo! Finance)

More AP Coverage: Q&As About Cash Balance Plans
Excerpt: "[A]doptions of cash balance has been at a virtual standstill since 1999, after protests by workers at some companies led the Internal Revenue Service to halt approval of new plans ... While employers were free to go ahead with such changes even without the government's OK, most waited ... New rules proposed by the administration, if approved, clarify the standards for such plans, putting limited burden on companies to prove their fairness and allowing more conversions to move forward." (AP via Washington Post)

Overview: IRS Publishes Additional Rules for Required Payments from DB Plans (PDF)
6 pages. Excerpt: "Participants who are 5% owners and reached age 70-1/2 before January 1, 2002, will need to receive their 2002 MRDs (plus required actuarial increases, if they earned additional benefits in 2002) by December 31, 2002. Participants who reached age 70-1/2 in 2002 or earlier and are not 5% owners, including participants in governmental plans and certain church plans, may also need to receive MRDs for 2002." (CIGNA's Pension Analyst)

Little United Stock Left for Employees; Shares Sold from 401(k), ESOP
Excerpt: "They may not know it yet, but United Airlines employees no longer hold any UAL stock in their 401(k) plans, and their former 55 percent stake in the airline through its ESOP plan is also dwindling. Aon Fiduciary Counselors, the independent fiduciary recently hired to protect 401(k) plan participants, sold all the UAL stock held by the plans before the company filed for bankruptcy on Monday, according to Nell Hennessy, president of the Aon unit." (San Francisco Chronicle)

Alabama State Pension Fund Presses for Concessions from US Airway Unions
Excerpt: "Alabama's pension system chief said the state fund may withdraw some $200 million in promised loans to bankrupt US Airways unless the carrier's union contracts are modified. 'The only other choice is liquidation,' said David Bronner, head of the Retirement Systems of Alabama. 'We can't keep on going as is, with union work rules that are from another century.'" (AP via Lycos News)

Deductibility of EPCRS Corrections by Plan Sponsor
Excerpt: "We believe that the proper analysis is that correction payments for plan qualification defects, such as correcting a top-heavy failure, are deductible under IRC §404; however, restoration payments by plan sponsors for fiduciary breaches and prohibited transactions are, as a general matter, deductible under IRC §162, and not under IRC §404." (Reish Luftman McDaniel & Reicher)

Cutting the Costs of Investing
Excerpt: "[T]he cost of mutual fund investing has fallen, a trend investors have helped bring about. Between 1998 and 2001, shareholders' cost of investing in stock funds declined by about 5 percent, according to a recent study by the Investment Company Institute ..." (Washington Post)

Understanding Individual Account Guarantees
36 pages. Working paper, temporarily available for downloading. Excerpt: "[P]articipants holding capital market investments in [social security individual accounts, or 'IAs'] are exposed to fluctuations in the value of their pension assets. Concern over market volatility has prompted some to emphasize the need for 'guarantees' of pension accumulations. This paper offers a way to think about guarantees in the context of a social security reform that includes Individual Accounts." (Marie-Eve Lachance and Olivia S. Mitchell, published by the Pension Research Council)

Links to Items on Executive Comp, Benefits in General

Compensation Committees Appear Ready to Push Back Pay, Perks for Executives
Excerpt: "[T]he newfound independence of compensation committees has been overlooked by many in the business press. But some observers believe the growing sway of compensation committees could have an impact on the bankbooks of senior executives. For one thing, committee members who meet more often in private will likely be tougher negotiators when dealing with under-performing CEOs and CFOs." (CFO.com)

Stock Options Get a Nod from Business Schools
Excerpt: "As the debate continues over executive stock options, the pro-options camp scores a thumbs up from a new study penned by three business school professors." (CFO.com)

Newly Posted or Renewed Job Openings
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Senior Actuarial Analyst
for Watson Wyatt Worldwide
in MA

Retirement Plan Analyst
for Actuarial Services Group, Inc.
in TX

Actuarial Consultant
for Watson Wyatt Worldwide
in MA

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for Suburban PA Consulting Firm
in NJ, PA

for Indianapolis Consulting Firm
in IN

Newly Posted Press Releases
(Post Yours!)

ASC Announces Single-Step Processing - An Automation Tool Designed to Increase Pension Professional's Productivity
(ASC - Actuarial Systems Corporation)

AHI's BENEFITS ALERT RELEASES NEW FREE REPORT: "Seasonal Tidings: Legal And Practical Suggestions For Bonuses, Perks, And Other Benefits"
(Alexander Hamilton Institute - AHI's BenefitsAlert.com)

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