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June 7, 2004 - 13532 subscribers
Today's sponsor: Actuarial Systems Corporation

(Click on company name or banner to learn more.)

ASC - QUALITY SOFTWARE FOR THE PENSION INDUSTRY FOR OVER 20 YEARS
ASC provides complete automation for the pension office,
including: DC/401(k) and DB administration and valuation
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(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Too Many Investment Choices May Overwhelm Even Sophisticated 401(k) Plan Participants
Excerpt: "[N]ew research published by the Center for Retirement Research at Boston College indicates fewer investment choices may be better for plan participants, including those with above average financial knowledge. The findings by Professors Julie Agnew and Lisa R. Szykman, both of the William and Mary School of Business Administration, are important because they provide additional evidence of the significant role plan design can play in participants' investment behavior." (Deloitte's Washington Bulletin)

Transition from Use of 30-Year Treasury Yield to Corporate Bond Index for Certain PBGC Purposes
Excerpt: "This Technical Update 04-3 explains how the provisions of the Pension Funding Equity Act of 2004 ('PFEA') that relate to the PBGC's variable-rate premium interest rate ('the VRP interest rate') apply to PBGC reporting and disclosure requirements. This Technical Update 04-3 also coordinates the relief provided by PFEA, which was enacted on April 10, 2004, and effective retroactively, with the reporting relief the PBGC provided in Technical Update 02-1 ... and 04-2 ..." (Pension Benefit Guaranty Corporation)

Text of ASPA Comments on EFAST Form 5500 Program
Excerpt: "ASPA commends the Agencies for encouraging the use of electronic filing and on the extensive research that took place prior to issuing the RFC. ASPA supports the efforts of the Agencies to improve the electronic filing process and encourages its use.... ASPA Is Strongly Opposed To Any Acceleration Of The Filing Deadlines.... ASPA Is Opposed To A System Whereby Filings Are Rejected If All Edit Tests And Data Validation Tests Are Not Satisfied." (American Society of Pension Actuaries)

Supreme Court to Consider IRA Bankrup.tcy Case
Excerpt: "The Supreme Court said Monday it would consider whether people facing bankrup.tcy can prevent certain retirement savings from being used to pay their debts. Bankrup.tcy law protects payments from a person's pensions and annuities, but does not mention Individual Retirement Accounts, which are at issue in a case involving an Arkansas couple." (AP via Washington Post; one-time registration required)

Opinion: Investment Consulting Industry Provides 'Bad Advice for Free'
Excerpt: "For 15 years I have spoken about the abuses in the pension consulting industry. Pensions have been slow to accept that the pension consulting industry is riddled with conflicts of interest that result in real, quantifiable harm. Conflict of interest ridden advice is bad advice and bad advice, even for free, is never a good deal." (The Benchmark Companies)

Opinion: Eliminating Income Cap on Roth IRAs Is Bad Policy
Excerpt: "Some House members are apparently considering a deal under which substantial new tax subsidies for saving would be provided to high-income households in exchange for a much less costly expansion of saving tax incentives for low- and moderate-income workers. In particular, the deal is said to involve eliminating the existing income limit on Roth IRAs in exchange for making the saver's credit refundable." (Center on Budget and Policy Priorities)

Text of DOL Adv. Op. 2004-04A on Effect of DB Plan Amendment on Employer Securities Limitation
Excerpt: "This is in response to your request for an advisory opinion on behalf of Butler Manufacturing Company (Company) concerning the application of section 9345(a)(3) of the Omnibus Budget Reconciliation Act of 1987 (OBRA '87) (the grandfather provision) to the amendment of a defined benefit plan reducing future benefit accruals." (U.S. Department of Labor)

Corporate Bond Weighted Average Interest Rate For Plan Years Beginning In June 2004 (PDF)
2 pages; 6.34 percent. (Internal Revenue Service)

NCR Corp. To Phase Out Defined Benefit Plans
Excerpt: "Beginning Sept. 1, NCR no longer will offer pension benefits to new employees and current employees younger than 40. Instead, NCR will offer them only 401(k) plans, with an increased company matching contribution ..." (Dayton Business Journal via bizjournals.com; one-time registration required)

Earnings Manipulation and Managerial Investment Decisions: Evidence from Sponsored Pension Plans
Working paper by Daniel Bergstresser, Mihir A. Desai and Joshua Rauh. Excerpt: "Managers are more aggressive with assumed long-term rates of return when their assumptions have a greater impact on reported earnings. Managers also increase assumed rates of return as they prepare to acquire other firms and as they exercise stock options, further confirming the opportunistic nature of these increases. Decisions about assumed rates of return, in turn, influence asset allocation within pension plans." (National Bureau of Economic Research)

Five Questions About the Need for Fiduciary Control
Excerpt: "Don Trone, president of the Foundation for Fiduciary Studies, educates advisers on the need for fiduciary control." (Financial-Planning.com)

Text of DOL Adv. Op. 2004-05A on Use of 'Alternative Trading System' for Securities Transactions
Excerpt: "[Y]ou ask whether the execution of a securities transaction between a plan and a party in interest with respect to such plan as defined in ERISA through an alternative trading system (ATS) maintained by Liquidnet, Inc. (Liquidnet) constitutes a prohibited transaction under section 406(a)(1)(A) and (D) of ERISA.... The Liquidnet System is an 'alternative trading system,' as defined in Rule 300(a) of Regulation ATS under the Securities Exchange Act of 1934, as amended." (U.S. Department of Labor)

Do Mutual Funds Really Need Directors?
Excerpt: "Sheldon Jacobs, editor of the No-Load Fund Investor newsletter and a longtime fund watcher, thinks regulators should consider moving in a radically different direction: scrapping fund boards entirely because, he says, they aren't very effective watchdogs over fund-management companies." (Wall Street Journal via SFGate.com)

Links to Items on Executive Comp, Benefits in General

Overview of Provisions in Senate-Passed JOBS Bill Affecting Deferred Compensation (PDF)
2 pages. Excerpt: "Under the Jumpstart Our Business Strength Act of 2004 ('JOBS') which was passed by the Senate on May 11, deferred compensation will be taxable on a current basis, unless it meets certain requirements. If the deferred compensation is subject to vesting, it will not be taxable until the vesting requirements are satisfied. In addition to current tax, deferred compensation not satisfying the requirements would be subject to additional tax equal to ..." (Frederic W. Cook & Co., Inc.)

Overview: Stock Options and Deferred Compensation Rights Transferred in Divorce
Excerpt: "The new ruling addresses the FICA and FUTA tax consequences and adopts the proposed rules set forth in Notice 2002-31, 2002-1 CB 908, with some changes. Generally, compensation realized on the exercise of stock options by the nonemployee spouse and deferred compensation paid or made available to the nonemployee spouse remain subject to FICA and FUTA taxes as if they had been retained by the employee." (CCH News & Information Library)

Big Perks Put Seven CEOs in a Whole 'Other' Club
Excerpt: "Insurance, forgiven loans, corporate jet travel and 'gross-ups' are key features of their million-dollar packages." (Los Angeles Times; one-time registration required)

Rev. Rul. 2004-60 Describes Tax Consequences of Transfer of Nonqualified Stock Options In Divorce (PDF)
9 pages. Excerpt: "What is the effect upon taxation under the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), and the Collection of Income Tax at Source on Wages (income tax withholding) of a transfer of interests in a nonstatutory stock option and in nonqualified deferred compensation to a former spouse incident to a divorce? What is the appropriate reporting of income and/or wages recognized ... ?" (Internal Revenue Service)

Overview: Lattice-Based Option Valuation Methods (PDF)
3 pages. Excerpt: "The Financial Accounting Standard Board's (FASB) Exposure Draft on amendments to FASB Statement No. 123 states that a lattice-based option valuation model (e.g., binomial) is preferable to a closed-form model (e.g., Black-Scholes-Merton) ... This letter was written in a collaborative effort with Equity Methods (specialists in the field of employee stock option valuation) and is meant to provide a technical framework regarding lattice-based option valuation models." (Frederic W. Cook & Co., Inc.)

Newly Posted Events

CAPSA's Model Law Principles
Nationwide on June 17, 2004
presented by International Foundation of Employee Benefit Plans
Newly Posted Press Releases

Great-West Retirement Services Introduces Reality Investing -- A Participant Managed Account & Savings Solution
(Great-West Retirement Services)

New Study Links Workplace Gender Issues to Stress, Health Risks, and Rising Health Care Costs
(LLuminari)
Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

Retirement Plan Administrator
for R.J.L. Pension Services, Inc.
in FL

Manager of Benefits
for Diversified Entertainment Company In New York City
in NY

Sales Assistant
for Great-West Healthcare
in AZ, NJ, OH

Retirement Plan Administrator
for Wipfli LLP
in WI

401k Underwriter (plan review)
for ADP Retirement Services
in NJ

Defined Contribution Plan Analyst
for Coble Pension Group
in AZ

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