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February 13, 2004 - 13,655 subscribers
Today's sponsor: APSCREEN, Employee Locator
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Treasury and IRS Shut Down Abusive Life Insurance Policies in Retirement Plans
Press release. Excerpt: "Today, the Treasury Department and the Internal Revenue Service issued guidance to shut down abusive transactions involving specially designed life insurance policies in retirement plans, section '412(i) plans.' The guidance designates certain arrangements as 'listed transactions' for tax-shelter reporting purposes." (Internal Revenue Service)
Text of Rev. Rul. 2004-21 on Discriminatory Right of HCEs to Purchase Life Insurance from Plans (PDF)
3 pages. Excerpt: "Does a plan that is funded, in whole or in part, with life insurance contracts satisfy the requirements of § 401(a)(4) ... prohibiting discrimination in favor of highly compensated employees where: ... any rights under the plan for nonhighly compensated employees to purchase life insurance contracts from the plan prior to distribution of retirement benefits are not of inherently equal or greater value than the purchase rights of highly compensated employees?" (Internal Revenue Service)
Text of Rev. Proc. 2004-16 on Use of Cash Value as FMV of Life Insurance Contract Distribution (PDF)
Excerpt: "Until further guidance is issued, this revenue procedure provides interim rules under which the cash value (without reduction for surrender charges) of a life insurance contract may be treated as the contract's fair market value when the contract is distributed from a qualified plan under § 402 and for purposes of §§ 79 and 83." (Internal Revenue Service)
Text of Proposed Regulation on Distribution of Life Insurance Contract from a Qualified Plan (PDF)
21 pages. Excerpt: "Q&A-10 of Notice 89-25 should not be interpreted to provide that a contract's reserves (including life insurance reserves (if any) computed under section 807(d), together with any reserves for advance premiums, dividend accumulations, etc.) are always an accurate representation of the contract's fair market value." (Internal Revenue Service)
Text of Rev. Rul. 2004-20 on Use of Life Insurance by 412(i) Plan (PDF)
8 pages. Excerpt: "Can a qualified pension plan be a plan described in § 412(i) of the Internal Revenue Code if the plan holds life insurance contracts and annuity contracts for the benefit of a participant that provide for benefits at normal retirement age in excess of the participant's benefits at normal retirement age under the terms of the plan?" (Internal Revenue Service)
IRS Requires Executive Comp Data From Plans Seeking Funding Waivers
Excerpt: "After Feb. 17, plans applying for funding waivers under Revenue Procedure (Rev. Proc. 2004-15) will need to provide the IRS with information about their executive compensation packages, said Martin Pippins, Manager for the Employee Plans Technical Guidance section of the IRS. The IRS intends to use this data to check whether the 'hardship' claimed by the waiver applicant is real." (Thompson Publishing Group)
Benchmark Your 401(k) Plan: 2004
Excerpt: "Many plan sponsors want to know how their 401k plan stacks up to the typical or average plan. This is often the first question asked when attempting to determine whether an effort should be made to upgrade the features and benefits of the plan. To help you answer this question, we have identified the common features offered by most 401k plans and compiled statistics from a variety of sources that will allow you to benchmark your plan." (401kHelpCenter.com)
Pact With Democrats Propels Pension Funding Bill
Excerpt: "Senate leaders on Thursday resolved a lingering dispute over Democratic participation in negotiating bills, opening the way for Congress to finish work on a measure that could save employers billions of dollars in pension payments." (AP via Washington Post)
DROP Update: Latest Variations on Popular Theme (PDF)
4 pages. Excerpt: "Public sector retirement plans have used DROPs -- the acronym for deferred or delayed retirement option plans -- for a variety of reasons, including managing workforce issues, such as the timing of retirement or providing competitive benefits; offering benefit flexibility to plan participants; and reducing the required contributions for their pension plans." (The Segal Company)
Fifteen Brokerages Accused of Overcharging Big Mutual Fund Investors To Reach Accord With Regulators
Excerpt: "The SEC and the NASD, the brokerage industry's self-policing group, have found that brokerage firms -- apparently inadvertently -- often fail to give large-scale investors in mutual funds the discounts they are owed. The so-called 'breakpoint' discounts are required by NASD rules to go to investors in funds with upfront sales charges when they invest at high levels, typically $50,000, $100,000, $250,000, $500,000 and $1 million." (AP via SFGate.com)
Surrender Charges: the Problem and the Solution
Excerpt: "Some 401(k) and 403(b) investment products have surrender charges--which are imposed when the plan sponsor ends the relationship with the investment provider. These charges are also known as termination fees, back-end charges, contingent deferred sales charges, and CDSCs. We were recently hired by a plan sponsor to advise them on the demand by an insurance company that they pay a six-figure surrender charge." (Reish Luftman Reicher & Cohen)
Blackouts and Fiduciary Responsibility
Excerpt: "In both of these cases, the plan fiduciaries decided to liquidate the investments of the old provider and to place the participants' accounts in cash, pending participant elections to re-invest the proceeds. In both cases, a significant number of participants did not re-invest their accounts-- missing the stock market run-up of 2003." (Reish Luftman Reicher & Cohen)
Opinion: Best Idea for Mutual Fund Is Eliminate 12b-1 Fees Entirely
Excerpt: "Abolish 12b-1 fees, the charges that are collected from the assets of many funds to pay for distribution and marketing. Jettison them! Deep-six them! Send them someplace from which they can never return. Senator Peter Fitzgerald, an Illinois Republican who is one of those making the suggestion, calls these fees 'disguised loads,' or sales charges, which are all too often used in 'confusing and misleading' ways." (Chet Currier on Bloomberg.com)
Links to Items on Executive Comp, Benefits in General
Benefits Planning for 2004 (PDF)
4 pages. Excerpt: "With so much rapid change in the world of compensation and benefits, it's hard for executives and human resources professionals to know where to focus their efforts. This article briefly highlights some issues that will deserve particular attention this year." (Kenneth A. Hoogstra of von Briesen & Roper, s.c.)
Newly Posted Events
Washington Update Webcast
Nationwide on February 26, 2004
presented by ASPA (American Society of Pension Actuaries)
Managing an Aging Workforce
Nationwide on February 25, 2004
presented by Winston & Strawn
Breaking Down the Barriers to 401(k) Use
Nationwide on February 13, 2004
presented by Hewitt Associates LLC
Newly Posted Press Releases
Treasury and IRS Shut Down Abusive Life Insurance Policies in Retirement Plans
(Internal Revenue Service (IRS))
Treasury and IRS Make it Easier for States to Use the Health Coverage Tax Credit
(U.S. Treasury Department and Internal Revenue Service)
SEC Adopts Enhanced Mutual Fund Expense and Portfolio Disclosure; Proposes Improved Disclosure of Board Approval of Investment Advisory Contracts and Prohibition on the Use of Brokerage Commissions to Finance Distribution
(U.S. Securities and Exchange Commission)
'Hard 4 PM' Trading Deadline Will Cost Participants $1 Billion -- NDCC Suggests Allowing Intermediaries to Accept Trades Until 4:00 PM ET
(National Defined Contribution Council)
Newly Posted or Renewed Job Openings
Project Manager-CCI
for Transamerica
in CA
Vice President, Retirement Services
for Invesmart
in KY
401k Client Service Representative
for BISYS Retirement Services
in PA
Compensation Manager
for Harrah's Entertainment, Inc.
in NV
Account Manager - Recordkeeping
for Executive Benefits TPA
in GA
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