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Retirement Plans
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December 18, 2002 - 12,880 subscribers
Today's sponsor: International Foundation of Employee Benefit Plans

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   New! International Foundation Books Available on BenefitsLink.

   When you have the right resources, you can answer the questions
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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)
In Rev. Rul. 2003-6, IRS Clarifies Application of EGTRRA S Corp ESOP Provision's Effective Date
Excerpt: "An S corporation ESOP described in this ruling is not eligible for the delayed effective date under § 409(p) of the Code provided under section 656(d)(2) of EGTRRA, and thus is subject to the nonallocation rules of § 409(p) of the Code effective for plan years ending after March 14, 2001. Any taxpayer who is a disqualified person with respect to the S corporation ESOP is treated as receiving a deemed distribution [and] excise taxes under § 4979A apply ..." (Internal Revenue Service)

North Carolina Bar Asserts Retirement Plan Consulting Constitutes the Unauthorized Practice of Law
Excerpt: "The North Carolina State Bar last month sent letters to two firms with ASPA members asserting that many of the retirement plan services provided by the firms constitute the unauthorized practice of law. The firms implicated were a large financial institution as well as a smaller plan administration firm." (American Society of Pension Actuaries)

Text of ASPA Memorandum to NC Bar Asserting Retirement Plan Services Are Not 'Practice of Law' (PDF)
14 pages. Excerpt: "[T]he extremely broad list of services described in [the N.C. Bar's] letter simply do not constitute the unauthorized practice of law, as defined by the General Statutes of North Carolina. Second, even if [they are], North Carolina is prohibited from restricting retirement plan services that are specifically authorized by Federal law. Finally ... the continued maintenance of the Committee's current position would in fact be detrimental to the citizens of North Carolina ..." (American Society of Pension Actuaries)

Bethlehem Steel Plays Down Takeover of Pension Plan by PBGC
Excerpt: "The PBGC said yesterday that it won't know how many people will lose parts of their pensions until it evaluates employee records, but executives at Bethlehem and union officials said most retiree plans will remain the same. Those working for the company won't accrue any more benefits after today. Some employees will lose part of their pension depending on how long they've worked for Bethlehem." (The Baltimore Sun)

Bankruptcy Judge Refuses to Allow United Airlines ESOP to Shell More Shares
Excerpt: "Fallout from the bankruptcy of United Airlines continued yesterday as a bankruptcy judge refused an emergency request from the trustee for the United Airlines employee stock ownership plan for permission to sell up to $40 million of the company's stock to secure some value from the embattled shares." (The Boston Globe)

401(k) Investment Advice for Participants: the Missing Link
Excerpt: "The collapse of Enron, WorldCom and other companies destroyed the retirement savings of thousands of employees and showed what can happen when you are handed sole responsibility for investing in your job-related retirement plan. The 401(k) system isn't broken, but it is incomplete. What's missing? Operating instructions. But, finally, help is arriving, in the form of personalized investment advice." (Kiplinger's Personal Finance)

Commentary: DOL Amicus Brief Draws Concern of Recordkeepers, Directed Trustees
Excerpt: "While the focus was on Enron, the outcome could have a major impact on plan sponsors and their service providers for years to come. According to industry experts, the 60-odd page document contains a little something for everyone-- to be nervous about." (PLANSPONSOR.com; free registration required)

Treasury Secretary Nominee to Get Pension Credit for Years Not Worked
Excerpt: "When the CSX Corporation calculates pension benefits for its chief executive, John W. Snow, nominated by President Bush last week to be Treasury secretary, he will receive credit for 44 years of service to the company, though he has worked there just 25. Moreover, Mr. Snow's benefits will be based not just on his salary, or even his salary and bonus, but also the value of 250,000 shares of stock the CSX board gave him." (New York Times; free registration required)

Firefighters in Florida Protest Decision of Town Pension Not to Accelerate Payment of Benefits
Excerpt: "'This could change all my plans,' said Lt. Carl Caradonna, who worked for Lake Park for 14 years. 'I might have to pull my kids out of private school.' When the firefighters were hired by Palm Beach County Fire-Rescue, the county refused pick up their [Lake Park] town pension plans -- meaning they had to start building retirement benefits from scratch under a state plan. The firefighters want Lake Park to liquidate their former plan and pay them ... in a lump sum in January." (The Palm Beach Post)

CalPERS Considers Disclosure of More Venture Capital Investment Information
Excerpt: "CalPERS, the nation's largest public pension fund, said it is considering disclosing more information about its private equity investments. It would be a policy reversal opposed by the fund's venture capital partners, which shun such scrutiny." (Los Angeles Times; free registration required)

Overview: Decrease in Workforce Can Cause Plan 'Partial Termination' (PDF)
At pp. 1 and 2. Excerpt: "Employers who have experienced a reduction in force ('RIF') or downsizing may also have unknowingly experienced a partial termination of their retirement plans. If a plan is partially terminated, all affected participants become fully vested in their accounts or benefits. Failure to vest affected participants contravenes the plan qualification rules under the Internal Revenue Code." (Trucker Huss, ERISA and Employee Benefits Attorneys)

UK Proposes Increased Benefits For Those Who Delay Retirement Under Its Social Security Program
Excerpt: "To encourage people to work longer, the government proposes a 50 percent increase in their weekly payment if they defer taking their state pension for five or more years. It also suggests allowing people to continue working part-time while drawing a pension from the same company." (AP via New York Times; free registration required)

Fearing Crisis, EU Calls for Pension Reforms
Excerpt: " With a pension crisis looming in some member countries, the European Union Commission is now pushing reforms, such as raising the retirement age and encouraging the creation of investment funds." (PLANSPONSOR.com; free registration required)

UK White Paper Published by Government on Need for Private Pension Reform
Excerpt: "On 17 December 2002 the Government released a [white paper] setting out the results of their reviews of: pension scheme taxation (Inland Revenue review); security in defined benefit schemes (MFR review); incentives for long term saving (Sandler report); pensions simplification (Pickering report); and Opra (quinquennial review). The key thrust of these documents is that: ..." (Mercer Human Resource Consulting)

Another Question is Answered in the ERISA Q&A Column
Our company has a 401(k) plan in which we allow participants to direct the investment of their accounts. We forgot to give one of our participants the notice required by 404(c). We gave the participant the notice as soon as we realized our mistake. The fiduciaries of the plan are concerned about their liability for the participant's investment choices. How much liability do they have for the investment choices made by the participant before he got the notice? (BenefitsLink.com)

Another Question is Answered in the Who's the Employer Q&A Column
John forms a single-member LLC in the U.S. (no election to be treated as a corporation) in order to enter into a services agreement with an unrelated foreign company. The LLC invoices the foreign company, and then distributes out the revenue as salary to John. Would an employer/employee relationship between John and the foreign company exist under U.S. tax principles (e.g., Rev. Rul. 87-41) for the reason that the LLC is merely an invoicing entity? (BenefitsLink.com)

Links to Items on Executive Comp, Benefits in General

Overview: Benefits Projects in IRS Semiannual Regulatory Agenda for 2003
Excerpt: "The IRS has issued its semiannual regulatory agenda for fiscal year 2003, which lists all pension and benefit regulations that are currently under development or review.... Some of the areas for which the IRS will be drafting proposed regulations include the following: ... The regulations the IRS expects to finalize include those covering: ..." (CCH News & Information Library (Pension/Benefits))

California State Treasurer Wants Fund Managers to Help Curb Compensation Excesses by Executives
Excerpt: "[California State Treasurer Philip] Angelides, a trustee of the California Public Employees Retirement System and the California State Teachers Retirement System the largest and third-largest pension funds in the country has been using his clout to push for such things as limiting executive pay, bolstering corporate ethics and halting the use of offshore tax shelters." (The San Diego Union-Tribune via Society for Human Resource Management)

Cranberry Growers Angry Over Benefits Provided to Top Executive
Excerpt: "Charges of corporate golden parachutes and extravagant bonuses -- while growers struggle to make ends meet -- have rocked the Ocean Spray cranberry cooperative." (Cape Cod Times via NewsAlert.com)

Deciding on Executive Pay: Lack of Independence Seen
Excerpt: "When America's biggest companies decide how much to pay their top executives, most of them leave the decision to a group of their board members known as the compensation committee. In theory, members of this committee are independent enough of the company's executives to deny them raises or force them to take pay cuts when the company is faring poorly. In practice, it can be a very different story." (New York Times; free registration required)

Northwest Airlines Implements Stock Option Exchange Program
Excerpt: "Northwest Airlines is giving its top executives a chance to trade in hundreds of thousands of stock options that are underwater for ones more likely to make them money. The catch is that they'd have to exchange all their outstanding options-- even those in the money-- for new ones at a rate of two for one." (TwinCities.com)

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

Retirement Plan Analyst - Compliance
for Invesmart
in MA

External Wholesaler
for MassMutual Financial Group
in NY

Communication Consultant
for Aon Consulting Worldwide
in FL

Benefit Specialist
for Earthlink, Inc.
in CA
Newly Posted Webcasts
(Post Yours!)

Employer Coverage: Mounting Challenges, New Approaches
on December 16, 2002
presented by KaiserNetwork.org

Hospitals Launch Landmark Quality Information Initiative
on December 12, 2002
presented by KaiserNetwork.org
Newly Posted Conferences
(Post Yours!)

ESOP Institute
in MO
February 21, 2003
University of Missouri-Kansas City School of Law

Annual Benefits Fair and Trade Show
in MA
May 29, 2003
New England Employee Benefits Council

Fifth Annual Benefits "Best Practices" Conference
in MA
December 4, 2003
New England Employee Benefits Council
Newly Posted Press Releases
(Post Yours!)

Assist America Partners With Managed Care 2000+ To Help Employees Navigate Through the Health Care Delivery System
(Assist America)

Federal Issues Featured at SIIA's First Annual Workers' Compensation Legislative/Regulatory Seminar
(Self-Insurance Institute of America, Inc.)

Alexander Hamilton Institute Releases New Free Report: "Preparing For Performance Appraisal Interviews"
(Alexander Hamilton Institute)

Washington State Selects ICMA Retirement Corporation to Manage 529 College Savings Plan
(ICMA Retirement Corporation)

401Konnect teams with Larkspur Data and Technical Answer Group to offer full turnkey sales solution
(401Konnect, Inc.)

Benesys Selects SunGard Corbel for HIPAA Compliance Services
(SunGard Corbel)
Movers and Shakers: Newly Posted Announcements of Promotions and New Personnel
(Post Yours!)

Samuel T. Brkich (KMZ Rosenman)

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