| BenefitsLink Retirement Plans Newsletter |   |
October 25, 2004
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Looming Defined Benefit Pension Plan Woes Trouble Experts Who Have Opinions and Offer Solutions
Excerpt: "With underfunded pensions threatening to become the U.S. taxpayer's next multibillion-dollar headache, lawmakers are working on a long-term fix for struggling traditional retirement plans. But some experts fear any solution will hasten the decline of the very system it is supposed to save. Other experts say the old-fashioned fixed payout at retirement, called a defined benefit pension, is already going the way of the corporate gold watch; ...." (Reuters via The New York Times; one-time registration required)
SEC Probes Payments to Pension Planners
Excerpt: "The Securities and Exchange Commission is finding troubling indications that mutual-fund companies and other money managers paid retirement-plan consultants to be recommended to the consultants' clients, people familiar with the probe told The Wall Street Journal." (CNN Money)
Text of IRS Employee Plans News, October 2004 Edition (PDF)
2 pages. This special edition contains the following: IRS Continues to Oppose Deduction in ESOP Redemption Cases and Extended SEP and SIMPLE Contribution Deadline for Disaster Areas. (Internal Revenue Service)
Text of IRS Employee Plans News Published by IRS, 'Extra Special' Edition of October 22, 2004 (PDF)
This issue includes articles on 'Extended Deadline for Retroactive Annuity Starting Date Amendment.' 'Model Amendment for Automatic Rollover Safe Harbors,' and, 'They're Here: The 2005 Dollar Limitations!' (Internal Revenue Service)
A Very Short Primer on Pension Accounting
Excerpt: "In finance, a process that requires a company to estimate the expected future value of a company's pension assets and the expected cost of fulfilling pension and health care obligations to current and retired employees. ... The subject of recent Securities and Exchange Commission subpoenas to General Motors, Ford, Boeing, Delphi and other large companies. For investors and industry analysts, a black box." (The Washington Post; one-time registration required)
Overview: Certain Underfunded Pension Plans Must Give Participants Funding Notice (PDF)
4 pages. Excerpt: "The Pension Benefit Guaranty Corporation's (PBGC) underfunded plan notification rule applies to employers with qualified defined benefit plans that are required to pay a PBGC variable rate premium, unless they are eligible for certain exceptions. The rule does not apply to governmental plans, nonelecting church plans, and multiemployer plans." (Prudential Retirement,)
Technical Tip: Certain Plan Amendments Do Not Require Full Vesting
Excerpt: "A 401(k) plan has three types of authorized contributions: elective deferrals, matching contributions, and discretionary profit sharing contributions. The plan is amended to prospectively eliminate the matching and profit sharing contributions. Does the adoption of this amendment require full vesting?" (Reish Luftman Reicher & Cohen)
Overview: DOL Issues Automatic Rollover Rules for Small Cash-Outs (PDF)
6 pages. Excerpt: "These rules affect qualified ... plans that are subject to ERISA Title I requirements, including multiemployer plans and ERISA 403(b) plans. While the safe harbor provisions of the rules do not apply to governmental plans, non-electing church plans, and non-ERISA 403(b) programs, the issuance of the rules means that the automatic rollover rule becomes effective for those types of plans and for ERISA Title I plans for all small cash-outs on or after March 28, 2005." (Prudential Retirement)
Defined Benefit Plans vs. the 401(k): the Returns for 2000–2001
Excerpt: "How do rates of return differ between professionally managed and participant-managed funds? An important, related comparison is between returns for defined benefit plans, which are actively managed, and 401(k) plans, which are generally participant-managed. This article presents results from a Watson Wyatt analysis of rates of return for defined benefit and defined contribution plans in 2000 and 2001, capturing the stock market's fall from grace." (Watson Wyatt Worldwide)
Vanguard's 401(k) Plan Participant Report Card for June 2004 (PDF)
12 pages. Vanguard reports that eleven percent of participants made a transfer during the first half of this year, putting 2004 on track to surpass the number of transfers in 2000. Vanguard also reports that in dollar terms, trading activity remains at cyclical lows, and that during the first six months, nearly as many participant dollars are shifting into the stock market as are leaving it. (The Vanguard Group)
Plain English Guide to Retirement Savings Limits for 2005 Tax Year
Excerpt: "If you're looking to save more money for your retirement, good news is right around the corner. Starting in January, you'll be able to stash away even more in your retirement-savings plan at work -- and in your Individual Retirement Account (IRA), too." (Neil Downing of The Providence Journal via The Dallas Morning News; one-time registration required)
Directory of Retirement Education and Communication Firms Revised and Updated October 21, 2004 (PDF)
Excerpt: "[The 401khelpcenter.com] regularly get[s] requests for information on firms that provide 401(k) participant education services and communication products such as newsletters and statement inserts (Education Services). To meet these requests, we have researched firms and put together this directory. This directory was compiled from information provided by each vendor." (401khelpcenter.com)
A Credit Card to Borrow from Your Future? Can Access to Credit Encourage Savings?
Excerpt: "For a quarter-century, a Boston inventor has been obsessed with ... an innovation that would give millions of ... workers the chance to borrow their own money from their 401(k) savings plans using a new kind of credit card. In 1980 the inventor, ... Francis Vitagliano, shared his concept with ... Franco Modigliani. The ... economist had been writing for 20 years about his theory of how and when people spend and save money during their lifetime, the so-called Life-Cycle Hypothesis." (The Washington Post; one-time registration required)
As Defined Benefit Pensions Fade, Some Firms Try Hybrid Plans
Excerpt: "The traditional pensioner is becoming a rare breed. In the past five years, no firm has launched an old-style pension plan. Many companies are closing them. Some steelworkers, engineers, and now airline pilots have seen their nest eggs cut when employers went bankrupt - or switched to other retirement plans. But hybrid plans, which combine several pension features with new flexibility, could offer workers a stable retirement. They're called 'cash balance plans.'" (The Christian Science Monitor)
IRS Provides Check-Up for Your SIMPLE IRA, SEP or Similar Plan
Excerpt: "'Check-Ups' are available to help business owners who sponsor IRA-based retirement plans (SIMPLE IRA plans, SEPs or SARSEPs) develop a better understanding of the requirements for their plans. 'Check-Ups' involve a three-step approach with the goal of increasing awareness by business owners of the need to properly operate their retirement plans, pointing them to further information and services. The centerpiece of each 'Check-Up' is a one-page checklist ...." (Internal Revenue Service)
Overview on Solutions to the Mutual Fund Share's Purchase and Redemption Timing Problem (PDF)
9 pages. Excerpt: "[I]ndividuals can time their purchase and redemption of mutual fund shares to expropriate wealth from other fund holders .... The appropriate solution to the ... timing problem remains the subject of much debate. Some argue that fair value pricing is the ... solution while others argue that redemption fees are the answer. This article provides an overview of the key economic issues and considers the relative merits of alternative solutions to the mutual fund timing problem." (Investment Company Institute)
Vice Presidential Candidate Edwards Vows Not to Touch Social Security Full Benefits Retirement Age
Excerpt: "Seizing on a report that a plan to privatize Social Security includes raising the retirement age for full benefits to 72, vice presidential candidate John Edwards ... renewed a promise that the Democrats would never raise the retirement age. Fortune magazine was reporting that the Social Security Administration is considering ... early retirement accounts that begin paying at age 62 by setting aside one-sixth of the money that employees and employers pay to Social Security." (AP via The New York Times; one-time registration required)
Analysis: Bush and Kerry Are Vague on Social Security Reform Details
Excerpt: "'Their goal is to get a mandate without explaining what it is they're trying to get a mandate for,' said Jason Furman, the Kerry campaign's economic policy director, 'and our goal is to pin them down on what they want a mandate for.' That strategy has come at a cost, however. The president's campaign has repeatedly challenged the Kerry team's assumptions, and some media outlets and independent analysts have castigated Kerry for what they see as the Democrat's distortions." (The Washington Post; one-time registration required)
Links to Items on Executive Comp, Benefits in General
President Signs Corporate Tax Legislation: $143 Billion Measure Is Bush's Fifth Major Tax Cut
Excerpt: "With no fanfare, President Bush yesterday signed into law the most sweeping corporate tax legislation in nearly two decades and the fifth major tax cut since he took office less than four years ago. His signature means that Bush and the Republican Congress have fundamentally changed the U.S. tax code in ways large and small, for struggling individuals and corporate giants, bow-and-arrow makers and billionaires." (The Washington Post; one-time registration required)
Accounting for Pensions and Other Postretirement Benefits (FAS 87 and FAS 106) 2004
Excerpt: "In this report, Watson Wyatt Worldwide analyzes disclosures under Financial Accounting Standards Board (FASB) Statements 87 and 106 (FAS 87 and FAS 106), as amended by FASB Statement 132 (Revised 2003) (FAS 132). The disclosures are from the most recent annual reports or financial statements of the nation's largest industrial and service companies. The report summarizes the assumptions used by companies in the calculation of pension expense and obligations, ...." (Watson Wyatt Worldwide)
Miners' Benefits Vanish With Bankrup.tcy Ruling Terminating Collective Bargaining Agreements
Excerpt: "[L]ast month, a federal bankrup.tcy judge in Kentucky authorized Cannelton's owner, Horizon Natural Resources, to terminate its collective bargaining agreements with the United Mine Workers of America. .... Mr. Leake is one of nearly 3,800 union coal miners and their dependents in West Virginia, Kentucky, Illinois and Indiana whose company-financed health insurance vanished with a swipe of Judge William S. Howard's pen last month." (The New York Times; one-time registration required)
Overview: Deferred Compensation Legislation Enacted (PDF)
3 pages. Excerpt: "Changes to the tax rules governing nonqualified deferred compensation, which are included in the American Jobs Creation Act of 2004 (the 'Act'), will require many employers to act quickly to modify the deferred compensation arrangements they maintain for executives. The new rules apply to amounts deferred after December 31, 2004, and to amounts deferred under an arrangement that is materially modified after October 3, 2004." (Hay Group; one-time registration required)
Overview: How Do You Fund a Nonqualified Deferred Compensation Plan? (PDF)
Excerpt: "Under current tax law, nonqualified plans - such as deferred compensation plans - must remain unfunded to effectively defer taxation. However, an informal financing strategy can help sponsoring companies offset the costs of these plans, provide a source of funds to pay benefits and offer some benefit security." (Aon Consulting)
Overview: How is CEO Pay Really Changing? the Answer is Surprising (PDF)
4 pages. Excerpt: "With many recent studies showing a decline in large company CEO pay, we decided to see if this accurately reflected company trends. Using data from Aon's eComp database, we examined 2,400 mid-sized, large and jumbo company CEO pay packages and were surprised with some of our findings." (Aon Consulting)
Hewitt Federal Legislation Quick Guide Updated October 19, 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)
DOL's Employee Benefits Security Administration Enforcement Actions and Results for 2000-2004
1 page chart. The Employee Benefits Security Administration reports that they achieved a 121% increase in enforcement results that protected $3.1 billion in retirement, health and other benefits for American workers and their families in fiscal year 2004. (http://www.dol.gov/ebsa/pdf/fs2004enforcementresults.pdf)
Election 2004 Guide: Compare President Bush and Sen. Kerry and Review the Issues of the Past Year
Excerpt: "This interactive tool compares President Bush and Sen. John F. Kerry using voting records, past statements and stated policy stances. See where Kerry and Bush stand on a wide range of issues, both foreign and domestic." (The Washington Post; one-time registration required)
A Quick Guide to Where Bush and Kerry Stand on the Issues
Excerpt: "The debates are over, and there's less than two weeks to go to election day. Still not sure where President George W. Bush and U.S. Sen. John Kerry stand on the issues? Here's a look at their position on 15 key points." (Chicago Sun-Times)
Newly Posted Press Releases
FREE from DATAIR: Pension Reporter (5500) System with Year 2004 Forms
(DATAIR Employee Benefit Systems, Inc.)
Newly Posted or Renewed Job Openings
Plan Administrator
for Weaver Partners, Inc.
in ANY STATE
Associate Attorney
for Kraw & Kraw
in CA
Pension Sales Manager
for American Express Tax & Business Services
in CT, MA, NY
Defined Contribution Plan Administrator
for The Heintzberger Company
in OR
Defined Benefits Administration Specialist
for Exelon Corporation
in IL
Sr. Programmer Analyst
for Hewitt Associates
in IL
Health & Welfare Consultant
for Hewitt Associates
in IL
Benefits Service Manager
for Hewitt Associates
in TX
Pension Administrator
for Schiller's Pension Consulting
in CA
Benefits Service Manager
for Hewitt Associates
in IL, WI
Benefit Project Manager
for Hewitt Associates
in IL
Defined Benefits Requirement Analyst
for Hewitt Associates
in IL
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