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August 14, 2003 - 13,310 subscribers
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“Cash-Balance Pension Plans-- Opportunities and Challenges for
Employers and Plan Sponsors”
Audio Conference 8/20/03 * 2:00 p.m. ET Many employers are changing their pension plans to cash balance plans. These plans are attractive and can save the company money. But in some instances, the conversion has triggered disputes. . .and companies have found themselves in court! Don't let this happen to you! Register today for this interactive audio conference featuring employee benefits expert, Charles D. Lockwood, J.D. and LL.M. (Taxation).
(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Three Areas of Concern in the Proposed 401(k) Regulations
Excerpt: "Timeframes for amending plans to change ADP/ACP testing related provisions ... Permitted disparity issue ... GAP Income Calculation" (The McKay Hochman Co., Inc.)
A Lump-Sum Threat to Pension Funds
Excerpt: "Though little chronicled, a rush by individuals to pull cash out of a weakened fund represents a hidden risk to pensions. Their accelerating withdrawals can work like a bank run, draining so many assets that the plan's solvency can be threatened." (New York Times; one-time registration required)
Analysis: Changing Discount Rates for Determining Lump Sums (PDF)
6 pages. Excerpt: "The minimum lump sum payable from a pension plan has increased dramatically due to the unusually low 30-year Treasury rates of the past few years. This has made pension plans that have lump sum provisions much more expensive than the plan sponsor ever intended. Proposals to increase the lump sum interest rate could reduce lump sums unless they provide a transition period." (Academy of Actuaries)
Overview: Why Interest Rate Rule Change Is Needed for Purposes of Making Lump Sum Distributions (PDF)
2 pages; "talking points." (American Benefits Council)
American Benefits Council Invites Plan Sponsors to Contact Congress on 30-Year Interest Rate Issue
Excerpt: "It is imperative for Congress to enact a replacement interest rate for the 30-year Treasury bond, which currently serves as the benchmark for calculating pension liabilities, funding requirements, lump-sum distributions and PBGC premiums." (American Benefits Council)
Chart of Proposals to Replace 30-Year Treasury Rate for Pension Calculations (PDF)
4 pages; prepared by the Benefits Group of Davis & Harman LLP, which owns the copyright. (American Benefits Council)
Overview: Why Yield Curve Approach Is Wrong Approach for Reforming Interest Rate Rules (PDF)
2 pages; "talking points." (American Benefits Council)
Overview: Why Private Pension Plans Are Threatened Unless Interest Rate Rules Are Changed (PDF)
2 pages; "talking points." (American Benefits Council)
Risks and Costs of Socially Responsible Investing
Excerpt: "[W]hen returns are adjusted for risk, index-style investors give up very little by using socially responsible funds, while investors who choose actively managed funds can pay a heavy price-- losing more than 3.5 percentage points of return a year.... For the index investor, the cost of using SRI funds may average only 0.5% a year ..." (The Wharton School of the University of Pennsylvania)
Is Your Company on CalPERS' Corporate Governance Hit List?
Excerpt: "The head of America's largest pension fund promises no letup in its campaign to change corporate governance. Come proxy season, companies that resist reforms can expect attention-- or a lawsuit." (Corporate Board Member)
Massachusetts State Pension Fund Trustees Eye Targeted Investing
Excerpt: "The Massachusetts pension board today will consider investing up to 2 percent of its $28 billion in assets in housing and business-development projects that could produce economic and social benefits for the state and not just financial returns for its public employees." (The Boston Globe)
How Prevalent are Cash Balance Conversions?
Excerpt: "Based on BLS surveys of employee benefits, the percentage of full-time workers in private industry who are covered by a defined benefit plan has dropped from 32 percent in 1996-97 to 22 percent in 2000. But of those covered by a defined benefit plan, the incidence of cash account plans has risen from 4 percent in 1996-97 to 23 percent in 2000." (U.S. Department of Labor, Bureau of Labor Statistics)
Overview: Final Section 457 Regulations-- Implications for Taxable Employers? (PDF)
Excerpt: "The final regulations ... reaffirm the proposed regulations' controversial rules on the interrelation of sections 83 and 457, rules that interfere with the continued use of discounted options by tax-exempt entities. This Alert highlights significant issues in the new regulations for tax-exempt employers, and it considers the possible implications of this guidance for the deferred compensation programs of taxable employers." (Kilpatrick Stockton LLP)
Roth IRAs Grab Spotlight Amid New Tax Law
Excerpt: "[T]he new law ... broadens the 10% tax bracket -- in 2003 and 2004 the bracket ends with taxable income of $14,000 for joint filers, and at $7,000 for single filers. (In 2005 it goes back down to $12,000 and $6,000; the 10% tax bracket disappears entirely in 2011.) And that's good news for investors who are interested in converting their existing IRAs to a Roth IRA." (TheStreet.com)
Investment Vendors, Brokers Targeting Those Tapping Into Retirement Savings
Excerpt: "Mutual-fund companies, insurers, and brokers are rolling out all manner of new products and services that-- for a fee, of course-- promise to help retirees avoid running out of money. The products range from simple annuities to automatic portfolio-rebalancing tools." (The Wall Street Journal via SFGate.com)
Annuities: Who Needs 'Em?
Excerpt: "So, if 1) you're in the 25% tax bracket or higher; 2) have maxed out your other tax-advantaged retirement accounts, such as your 401(k) and IRA; 3) don't tend to be a buy-and-hold investor of tax-efficient mutual funds; and 4) are at least 15 years from retirement, then maybe an annuity fits into your plan. But those are a lot of 'ifs.'" (The Motley Fool via Yahoo! News)
Utilization of Tax Incentives for Retirement Savings
Excerpt: "This Congressional Budget Office (CBO) paper examines the utilization of tax incentives for retirement saving, focusing on 1997. The paper breaks down rates of participation in and contributions to retirement savings plans by age, income, and marital status/earner role and discusses the patterns that emerge and their implications for public policy. The paper was prepared at the request of the Senate Finance Committee ..." (U.S. Congressional Budget Office)
Links to Items on Executive Comp, Benefits in General
Survey: Employee Benefits in Private Industry (2000)
Excerpt: "Paid time off continued to be the most prevalent benefit available to workers in private establishments in 2000. Paid vacations were available to 80% of employees and paid holidays to 77% of employees in private industry, according to the Bureau of Labor Statistics, U.S. Department of Labor. These data are from the National Compensation Survey (NCS), which provides comprehensive measures of occupational earnings, compensation cost trends, and details of benefit provisions." (U.S. Department of Labor, Bureau of Labor Statistics)
Newly Posted or Renewed Job Openings
Benefits Analyst
for City Colleges of Chicago
in IL
Sr. Plan Administrator
for Actuarial Benefits Co
in CA
Employee Benefits Managing Consultant (03-0001054)
for Wachovia Corporation
in NC
ERISA Corporate Counsel
for ADP
in NJ
Manager, Compensation & Benefits
for RS Information Systems
in VA
Newly Posted Conferences
(Post Yours!)
The Health Care Cost Crisis and Strategies That Work
in RI
October 7, 2003
New England Employee Benefits Council
Retirement Plan Compliance Testing: What Every Benefits Professional Needs to Know
in MA
September 17, 2003
New England Employee Benefits Council
ERISA Litigation Conference
in NY
September 22, 2003
Glasser LegalWorks
ERISA Litigation Conference
in CA
October 16, 2003
Glasser LegalWorks
Newly Posted Press Releases
(Post Yours!)
Evolution Benefits and WiredCommute Announce Agreement
(Evolution Benefits)
SunGard Corbel Introduces Relius Government Forms 1099/W-2 Batch Import
(SunGard Corbel)
Handy Links:
- View Today's Active Message Threads
- Search BenefitsLink
- Using the Web for Employee Benefits Research
- Employee Benefits Library
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