| BenefitsLink Retirement Plans Newsletter |   |
October 4, 2004
Today's sponsor: www.ftwilliam.com
(Click on company name or banner to learn more.)
Register for our free on-line demo! www.ftwilliam.com offers the employee benefits professional the highest quality plan documents and forms at highly competitive prices. Plan documents on a per document basis are only $50/adoption agreement, or $100/volume submitter document (including cross testing). An annual subscription to all documents is only $1,500. The Form 5500 package and the IRS/PBGC form package are only $250 each. Prices include access for five concurrent users.
(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Automatic Rollovers to IRAs: Time to Amend Qualified Plans
Excerpt: "March 28, 2005 is the new amendment deadline for qualified retirement plans. It applies to all qualified plans which force the distribution of a terminated participant account balance or accrued benefit, without consent, if the benefit is less than $5,000." (Briggs and Morgan)
Gail Weiss/McHenry Report on Retirement Plan Fund Trading: TPA Responses to Emerging Issues (PDF)
13 pages. Excerpt: "Service providers to participant-directed plans or plans that involve mutual fund trading are in particularly deep waters. Regulators, prosecutors, legislators and, perhaps most importantly, clients are all taking long looks at what has been a sometimes misunderstood and under-appreciated link in the '401(k) value chain.' [R]ecently, calls for the reduction or elimination of 12b-1 funds have raised questions about the viability of current retirement service economic models." (McHenry Consulting Group and Gail Weiss & Associates)
401(k) Costs: Workers Find It Difficult to Assess Fees on Accounts by Companies Administering Funds
Excerpt: "The costs of 401(k) plans often are too high. And this ugly reality is helping to jeopardize the retirement of millions of unsuspecting Americans. That alone should motivate you to start asking pointed questions. Here's one of the biggest flaws in the most common 401(k) arrangement: the price you pay for services isn't necessarily tied to what they cost." (The Daily Breeze)
The Ups and Downs of Stable Value Funds
Excerpt: "Stable value funds are one of the most popular investment options in 401(k) plans, accounting for almost one-fourth of all assets. They offer the consistency of a money market fund with more than three times the yield. Despite their appeal, it's almost impossible to find a stable value fund outside of 401(k) or other employer-sponsored retirement plans." (San Francisco Chronicle)
Negative Returns and Mutual Fund Trading Scandal Spur Changes That Make 401(k)'s Better
Excerpt: "All the bad investment news gave employers an opportunity to lay down the law with 401(k) providers. They're unloading providers whose funds have worrisome reputations or lackluster results. They're also demanding a reduction in fees. Some providers enjoy profit margins as high as 80 percent from fees they're charging the plans." (Chicago Tribune; one-time registration required)
Behavioral Economists and the 401(k) Plan: Participation and Contribution Rates
Excerpt: "What can make defined-contribution plans work better? [T]he same things that bedevil them: procrastination and inertia. .... Through 401(k) plans, employees are offered the opportunity to invest in a secure retirement with matching funds from their employer. Yet human resources executives and plan providers have been increasingly frustrated in recent years by low participation as well as lackluster saving rates and indifferent account management by those who do participate." (Workforce Management; one-time registration required)
Financial Firms More Likely to Offer 401(k) Rollover Accounts for 401(k) Plans
Excerpt: "The Labor Department's final regulations (http://www.dol.gov/ebsa/regs/fedreg/final/2004021591.htm) on automatic 401(k) rollovers will make it easier for employers to locate a financial institution willing to accommodate the plans, says Michael Eisenberg, vice president of the retirement services division of Chernoff Diamond & Co., based in Garden City, N.Y." (BenefitNews Connect)
Retirement Plan Design and 401(k) Savings Outcomes (PDF)
36 pages. Excerpt: "[The paper assesses] the impact of 401(k) plan design on four different 401(k) savings outcomes: participation in the 401(k) plan, the distribution of employee contribution rates, asset allocation, and cash distributions. We show that plan design can have an important effect on all of these savings outcomes." (Harvard University Economics Department)
United Airlines' Pension Woes: Sign of Bigger Issue -- Retirement Just Isn't What It Used to Be
Excerpt: "Despite ongoing negotiations with its unions, United Airlines has told the bankrup.tcy court that the 'likely result' will be a decision to terminate all of its pension plans. That would precipitate the biggest pension default in history, more twice the size of the Bethlehem Steel Corporation default in 2002. The move is expected to destabilize the already struggling airline industry, prompting other old-line carriers like Delta to eventually follow suit to maintain competitiveness." (The Christian Science Monitor)
Mellon's HR&IS Issues Full Report and Analysis on 2004 Survey of Cash Balance Plans (PDF)
3 pages. Excerpt: "Mellon's Human Resources & Investor Solutions has issued two reports, one that covers the results of its 2004 survey on cash balance plans, and a companion piece that provides Mellon's analysis and commentary on the survey. The survey provides information on 150 cash balance plans, including transition approaches, ongoing provisions, employer costs and employee communications." (Mellon’s Human Resources & Investor Solutions)
Abrahamson v. Board of Education of the Wappingers Falls Central School District
Excerpt: "The U.S. Court of Appeals for the Second Circuit has ruled that a collective bargaining agreement (CBA) negotiated between the school district and teachers' union contained a salary elective program (SEP) that violated the Age Discrimination in Employment Act (ADEA) by excluding a group of teachers on the basis of age.' Full opinion is at http://caselaw.lp.findlaw.com/data2/circs/2nd/027841p.pdf (22 pages) (National School Boards Association)
Court Rejects Republic Pensions: Ruling Denies Federal Shutdown Benefits for Steelworkers in Stark
Excerpt: "A U.S. appeals court rejected arguments Friday that the federal government should pay 'shutdown pensions' to former employees of Republic Technologies International LLC. The 6th U.S. Circuit Court of Appeals' ruling denies payments of $1,000 to $2,000 a month to about 2,500 people who worked for the steel bar manufacturer. RTI ran plants in Canton, Massillon and Lorain before it filed for bankrup.tcy and closed in 2002." (AP via The Beacon Journal)
Overview: Implementation of an Employee Stock Ownership Plan: When is SEC Registration Required?
Excerpt: "Employee investment in the capital stock of an employer is often effected through the implementation of an employee stock ownership plan (ESOP). When deciding whether to establish an ESOP, there are a variety of securities law issues that an employer should consider. This article provides an overview of some of those issues." (Leading Companies Online Magazine, Beyster Institute)
The Looming National Benefit Crisis: Social Security, Medicare and Government Pensions
Excerpt: "The long-term economic health of the United States is threatened by $53 trillion in government debts and liabilities that start to come due in four years when baby boomers begin to retire. (Related graphic: U.S. economy threatened by aging of America)' at http://www.usatoday.com/news/graphics/debtcalculator/flash.htm (USA TODAY)
Social Security and Pension Reform: Heard Much About These Issues During the Campaign?
Excerpt: "In the months leading up to the election, President Bush and John Kerry sparred over lots of things: the war on terrorism, jobs, taxes, g.ay marriage, stem-cell research. But they ignored one issue that will be critical for whoever takes over the White House in January: how to ease America's aging population into retirement without bankrupting the country in the process." (Workforce Management; one-time registration required)
Equity Markets, Interest Rates & U.S. Corporate Scandals Lead to Global Management of Pension Plans
Excerpt: "Falling equities have reduced pension asset values, low interest rates have increased the present value of liabilities, and fallout from corporate scandals has amplified the need for better legal oversight. For multinationals, the global management of pensions is a way to balance resources, control costs and help lower risks, pension experts say." (Employee Benefit News)
U.S. Rep. Rahm Emanuel Proposes Trade-Off to Help Save Airline Retirement Funds
Excerpt: "I propose establishing an Airline Employees Retirement Board, inspired by the Railroad Retirement Board that Congress created in the 1930s when that industry faced a similar challenge to its business model and financial stability. Such a board would administer a federally guaranteed airline pension system that delivers a stable and universal benefit." (Chicago Sun-Times)
More Tension Over Pensions: Plan Terminations and the Effect on PBGC
Excerpt: "The federal agency that insures company pensions has developed an $11 billion tear in its safety net. The Pension Benefit Guaranty Corp. is buckling under a load of steel company and airline pension plans that were dropped on it in recent years. Those plans account for more than 70 percent of benefits the pension insurance agency now pays." (Pittsburgh Tribune-Review)
Opinion: How to Save Social Security; Three Specific Steps Offered
Excerpt: "Clearly, it's possible to reform Social Security while preserving its essential character: a contract under which the young support the old via taxes, and the rich help the poor through a benefit formula that favors the neediest. It is also possible for the system to adapt while retaining its key provisions. We do not favor taking away full inflation protection because it is increasingly important over long lives and is unavailable in other retirement plans." (The New York Times; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Implementing Section 404: a Practical Approach to Compliance With the Sarbanes-Oxley Act
Excerpt: "The Sarbanes-Oxley Act requires that all public companies do something that they probably should have been doing anyway: assign the CEO and the CFO authority over the company's internal controls and the opportunity to demonstrate competent and transparent governance, not just to the SEC but to shareholders and the financial community in general. While some public companies may previously have managed with less-than-stellar internal controls, those days are over." (The CPA Journal)
Leaders for US Airways' Pilots to Revisit Deal on Pay Cuts
Excerpt: "Leaders of the US Airways pilots' union will meet [Oct. 5] in Pittsburgh to resume debate over a tentative agreement that would grant $300 million in wage and benefit cuts to the airline. Union officials failed to agree at a two-day meeting over the weekend in Charlotte, N.C., on whether to send the deal to members for a vote." (The New York Times; one-time registration required)
Pilots Reach Tentative Deal with US Airways on Pay Cuts and Retirement Plan Contributions
Excerpt: "US Airways and its pilots' union reached tentative agreement ... on $300 million in annual wage and benefit cuts, after weeks of debate inside the union over whether to grant concessions to the troubled airline. The deal, which is worth $1.8 billion over the next six years, includes annual pay cuts of 18 percent, .... It would also reduce the company's contribution to pilots' retirement benefits, and require pilots to fly more hours a month for the same pay." (The New York Times; one-time registration required)
New Benefits Technology Saves Time and Also Enhances Employee Satisfaction
Excerpt: "As open enrollment winds down, many HR-benefit managers' thoughts will turn to the system changes they might want for next year. While there's not much that's brand-new on the technology solutions shelves, they will find improved versions of everything from Internet portals to debit cards to databases." (Employee Benefit News)
Study Shows Six Out of 10 Companies Outsource Employee Benefit Functions
Excerpt: "Recent findings from the International Foundation of Employee Benefit Plans lend credence to the notion that benefits professionals are doing more with less. Especially in larger organizations, which much of the time hire one benefits staffer for every few hundred or even every few thousand employees, outsourcing in particular appears to have made the difference between effectiveness and overwork." (Employee Benefit News)
ABC Comments in Letter to IRS on Notice 2004-55 Regarding Employee Stock Purchase Plans (PDF)
5 pages. Excerpt: "We are writing in response to Notice 2004-55, which addresses employee stock purchase plans under Code section 423 ('ESPPs'). In that Notice, the IRS asked for comments on whether the final regulations on ESPPs should be amended. We encourage the IRS to update the regulations and comment below on several issues raised in the Notice and three more issues not mentioned in the Notice." (American Benefits Council)
Hewitt Federal Legislation Quick Guide [updated September 28, 2004]
Excerpt: "Hewitt's Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding health and welfare benefit plans, retirement plans, and human resources and employment law." (Hewitt Associates)
The USA TODAY Lifetime Social Security and Medicare Benefits Calculator: Assumptions and Methods (PDF)
Excerpt: "C. Eugene Steuerle and Adam Carasso of the Urban Institute helped USA TODAY design a web-based retirement benefits calculator that appeared on the paper's website October 4, 2004. The calculator estimates the lifetime value of Social Security and Medicare benefits and compares them against the lifetime value of taxes for these two programs. Included is the new Medicare pres.cription drug program. Not included are estimates of the benefits and taxes for the Disability Insurance program." (Urban Institute)
Greenspan Worried About Congressional Actions on Expensing of Stock Options
Excerpt: "Federal Reserve Chairman Alan Greenspan on Friday said he was 'deeply concerned' Congress would try to thwart efforts by the Financial Accounting Standards Board to require expensing of stock options." (Reuters via The Washington Post; one-time registration required)
Overview: Employee Stock Option Valuation: New Source of Litigation Risk for Auditors
Excerpt: "On March 31, 2004, FASB released the Exposure Draft on Share-Based Payment, an Amendment of SFAS 123 and 95, requiring companies to expense the value of employee stock options that they issue. The exposure draft recommends using a 'lattice model' to determine the value of options for most public companies, and establishes guidelines for their construction." (The CPA Journal)
Newly Posted Events
Fiduciary Check-Up
Nationwide on October 14, 2004
presented by International Foundation of Employee Benefit Plans
Newly Posted Press Releases
PBGC Extends Hours Of Customer Contact Center
(Pension Benefit Guaranty Corporation (PBGC))
The Segal Company Celebrates 65th Anniversary
(The Segal Company)
PERFORMAX Forges Into Northern California Market
(PERFORMAX)
U.S. Labor Department Extends Annual Reports Deadline After Severe Storms Hit Ohio
(U.S. Department of Labor, Office of Public Affairs, Chicago)
U.S. Labor Department Extends Annual Reports Deadline After Hurricane Ivan Hits Georgia
(U.S. Department of Labor, Office of Public Affairs, Washington, D.C.)
U.S. Labor Department Extends Annual Reports Deadline for Pennsylvania due to Tropical Depressions Frances and Ivan
(U.S. Department of Labor, Office of Public Affairs, Washington, D.C.)
U.S. Labor Department Extends Annual Reports Deadline After Severe Storms Hit West Virginia
(U.S. Department of Labor, Office of Public Affairs, Washington, D.C.)
Treasury and IRS Issue Ruling To Halt Abusive Employment Tax Arrangements Involving Employee Parking
(U.S. Department of Treasury)
CMS Announces Demonstration Project For Beneficiaries With High Medical Costs
(Centers for Medicare & Medicaid Services (CMS))
The City of Coppell, Texas Announces Savings in Annual Health Care Spending Amidst National Surge with Help from Partner WinningHabits
(City of Coppell, Texas)
Newly Posted or Renewed Job Openings
Retirement Plan Conversion Specialist
for Great-West Life & Annuity
in CO
Client Services Manager
for Transamerica
in IL
Defined Contribution Plan Administrator
for Oxford Associates in Baltimore, MD
in MD
Retirement Plans Advisor
for FedEx Corporation
in TN
Manager of Employee Benefit Services
for Bland Garvey Eads Medlock + Deppe P.C.
in TX
Retirement Plan Consultant
for Metavante Corporation
in CA
Compliance Team Analyst
for Administaff
in TX
Handy Links:
- View Today's Active Message Threads
- Search BenefitsLink
- Using the Web for Employee Benefits Research
- Employee Benefits Library
Copyright 2004 BenefitsLink.com, Inc.; except that you can reprint this newsletter in full (if you also include this boilerplate part) without obtaining our permission.
Published by:
BenefitsLink.com, Inc.
https://benefitslink.com/about.html
1298 Minnesota Avenue, Suite H
Winter Park FL 32789
(407) 644-4146
Fax: (407) 644-2151
Editor and Publisher: David Rhett Baker, J.D.
Housekeeping: