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December 16, 2002 - 12,880 subscribers
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   For over 20 years ASC has provided complete automation for the
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   and DV Direct, a revolutionary solution for daily valuation
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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)
Battle Brews Over United Airlines Stock Sales by ESOP
Excerpt: "Boston's State Street Bank & Trust Co. is fighting a court order that blocks further sales of UAL Corp. stock held by the carrier's employee stock ownership plan (ESOP), setting up the first big legal battle over the bankruptcy proceedings of the United Airlines parent." (Chicago Business)

Commentary: Cash Balance Conversion Looming? It May Be Time to Plumb Your Pension's Depths
Excerpt: "Nothing about pension accounting is easy or straightforward, and the prospect of curling up with a thick pension plan document laden with charts is, well, repellent. But the amounts at stake are so vast that it may be well worth the trouble of parsing the plan, and learning your options, if you are among the people notified in the coming months that your employer is changing its pension." (New York Times; free registration required)

Pension Advocates Prepare to Battle Conversions
Excerpt: "Experts note that cash-balance plans have advantages for some workers, particularly younger ones who are likely to switch jobs at least several times in their careers. Younger workers are at a disadvantage with traditional pensions, because those plans are back-loaded -- that is, those who remain with the company the longest get the biggest pension payments." (Los Angeles Times; free registration required)

Proposed Rules Disturb Cash Balance Plan Foes
Excerpt: "William Sweetnam, benefits tax counsel in the Treasury Department, said about 300 letters by companies seeking approval of cash-balance pension plans are pending since the IRS halted the approval process in 1999. 'We wanted to get the determination process up and running again,' he said." (Chicago Tribune; free registration required)

Opinion: Proposed Cash Balance Regs Stick It to Older Workers
Excerpt: "[T]he Treasury Department also ruled that an employer would not be guilty of age discrimination if, in converting to cash balance plans, older employees lose a big piece of their promised benefits, which many would. This is wrong; it amounts to changing the rules long after most of the game has been played." (The [Minneapolis] Star Tribune)

Some Questioning SBC Communications Inc. Decision in 2001 to Increase Expected Pension Returns
Excerpt: "Mark Cheffers, chief executive of AccountingMalpractice.com, an educational consultancy for accountants, said that by operating with an overly optimistic pension forecast, SBC artificially bolstered its reported profit, then dropped the billion-dollar bombshell on the market at the end of the year." (The Dallas Morning News)

EGTRRA Frequently Asked Questions (Updated Dec. 12, 2002)
Excerpt: "Q: When does a plan need to be amended for EGTRRA? A: ... Notice 2001-42 also indicates that EGTRRA did not include any exceptions to the anti-cutback rules of Code §411(d)(6). Thus, if an employer does not amend its plan for EGTRRA until the end of its 2002 plan year (or later), the Employer must ensure that there are no prohibited cutbacks of benefits." (SunGard Corbel)

ESOPs Mean Trouble? Schenectady Business Supply Firm Begs to Differ
Excerpt: "At Superior, you only have to look at how many years employees work at the company to get an idea about organizational loyalty. In the office supply industry, salespeople, drivers and warehouse workers are often very transitory. That is not the case at Superior." (The [Albany] Business Review via bizjournals.com; free registration required)

ESOP Succeeds for Connecticut Manufacturing Company
Excerpt: "Once you step through the double glass doors and into the reception area at Reflexite Americas, however, it quickly becomes apparent that this is not a typical manufacturing-based workplace. In fact, it's unlike most workplaces, regardless of industry.... [E]ach employee has a financial stake in Reflexite's success. Each is an owner, as well as an employee. In good times, each reaps the benefits; in down times, each willingly makes sacrifices." (CTnow.com, produced by the Hartford Courant)

Opinion: Don't Blame ESOP for United's Bankruptcy
Excerpt: "United Airlines didn't have a chance. The struggling carrier was counting on its employee stock ownership plan to help lift it out of its financial mess eight years ago. But how could it, when just about every aspect of the ESOP--the design, execution, membership--was all wrong?" (AP via Chicago Sun-Times)

Study: Most Have No Retirement Savings
Excerpt: "At a time when Americans are living longer, more than half the paid workers ages 25 to 64 don't own retirement savings accounts of any kind. About a third work for employers who don't offer retirement benefits, a congressional study said Friday." (AP via Washington Post)

Low Savings Rates and Social Security Troubles Could Mean Golden Years Not So Golden
Excerpt: "Experts say the need to save on your own for retirement is only getting more desperate. Social Security-- which makes up about 40 percent of the average retiree's income-- could face a serious financial crisis by 2038 if changes aren't made, according to the plan's trustees. Meanwhile, the number of company-funded pension plans has declined sharply in the past few decades, according to the Pension and Welfare Benefits Administration." (Rocky Mountain News)

Humor: Economics 102
Excerpt: "I have noticed that, the longer I stay alive, the less money I have saved for retirement. Why is this? A. You probably have a 401(k) plan, which is a type of plan where your balance gets smaller each month and eventually disappears altogether, like a pizza in a men's dormitory." (Dave Barry in the Washington Post)

Humor: How the Hold-Harmless Grinch Stole the 403(b)
Excerpt: "Every 403(b) investor liked no-load mutual funds a lot... But the Grinch, Who served as benefits director, Did NOT!" (403bWise.com)

When It Comes To Social Security, 65 Is No Longer Magic Number
Excerpt: "So you plan to retire at 65 and collect full Social Security benefits? Forget about it. Beginning next month, you'll have to work two months beyond your 65th birthday in order to qualify for full Social Security. Start collecting beforehand and you'll suffer a permanent cut in your monthly benefit check." (Neil Downing in the Providence Journal)

Links to Items on Executive Comp, Benefits in General

Report: Is Working Longer the Answer for an Aging Workforce?
Link to 12 page article. Excerpt: "In recent years, many public policies and private institutions that encourage early retirement have been modified. Mandatory retirement was outlawed in most jobs. Social Security is no longer growing more generous, and coverage under company pension plans is no longer rising.... An open question is whether further changes are needed." (Gary Burtless and Joseph F. Quinn, published by the Boston College Center for Retirement Research)

Should Older Workers Be Encouraged to Delay Retirement?
Press release. Excerpt: "With the first members of the baby boom generation nearing age 60, policymakers may want to consider ways to encourage older workers to delay retirement ... The brief-- co-authored by Gary Burtless of The Brookings Institution and Joseph Quinn of Boston College-- discusses the potential social and economic benefits of extending worklives and assesses how policy changes affect workers' decisions." (Boston College Center for Retirement Research)

Analysis: Bright Line Drawn for the Attorney-Client Privilege and Work Product Doctrine (PDF)
At pp. 17 through 19. Excerpt: "The District Court for the Southern District of West Virginia has delineated a bright line test for the application of the attorney-client privilege and work product doctrine in employee benefits matters. Additionally, this case serves as a reminder of the importance of carefully monitoring all written materials relating to matters involving persons acting in a fiduciary capacity to a plan." (Debra Davis, published by the American Bar Association, Section of Labor and Employment Law, Employee Benefits Committee)

Appropriate Equitable Relief After Great-West v. Knudson (PDF)
At pp. 2 through 6. Excerpt: "After the Supreme Court's recent decision in Great-West Life & Annuity Insurance Company v. Knudson, 122 S. Ct. 708 (2002), ERISA lawyers need to add to their arsenal an understanding of the historic distinction between law and equity. Fortunately, or not, there are approximately 600 years of doctrine available to those who are looking for guidance on that distinction." (Prof. Dana M. Muir, published by the American Bar Association, Section of Labor and Employment Law, Employee Benefits Committee)

Great-West v. Knudson: the Death Knell of Fiduciary Liability Claims? (PDF)
At pp. 6 through 12. Excerpt: "[At one time] it appeared the Court was opening the door to damage claims against ERISA fiduciaries for misrepresentations and other negligent conduct in administering plan benefits. That door has arguably swung the other way with the Knudson ruling." (Mark D. DeBofsky, published by the American Bar Association, Section of Labor and Employment Law, Employee Benefits Committee)

Survey Results: Employer Costs for Employee Compensation
Excerpt: "In September 2002, employer costs for employee compensation for civilian workers in private industry and State and local government in the United States averaged $23.44 per hour worked, the U.S. Department of Labor's Bureau of Labor Statistics reported [on Dec. 11, 2002]. Wages and salaries, which averaged $16.93, accounted for 72.2 percent of these costs, while benefits, which averaged $6.51, accounted for the remaining 27.8 percent." (U.S. Department of Labor, Bureau of Labor Statistics)

Overview: Changes in NYSE and Nasdaq Requirements Affecting Equity Plans and Executive Comp
Excerpt: "In October 2002, the Securities and Exchange Commission ('SEC') published for comment proposed rule changes by the New York Stock Exchange ('NYSE') and The Nasdaq Stock Market ('Nasdaq') that, upon approval by the SEC, will require shareholder approval of most equity compensation plans and material revisions to such plans. The rule changes also affect other aspects of executive and director compensation." (Cooley Godward LLP)

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