| BenefitsLink Retirement Plans Newsletter |   |
November 15, 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)
Text of Proposed 403(b) Regulations (PDF)
102 pages. Excerpt: "The purposes of these proposed regulations are to update the current regulations under section 403(b) to delete provisions that no longer have legal effect due to changes in law, to include in the regulations a number of items of interpretive guidance that have been issued under section 403(b) since the 1964 regulations, and generally to reflect the numerous legal changes that have been made in section 403(b)." (Internal Revenue Service)
Text of Temporary 403(b) Regulations Defining 'Salary Reduction Arrangement' for FICA Tax Purposes (PDF)
8 pages. Excerpt: "[T]his temporary regulation explicitly provides that the term 'salary reduction agreement' [for FICA tax purposes] includes a plan or arrangement whereby a payment will be made if the employee elects to reduce his or her compensation pursuant to a one-time irrevocable election made at or before the time of initial eligibility to participate in such plan or arrangement (or pursuant to a similar arrangement involving a one-time irrevocable election)." (Internal Revenue Service)
Text of IRS Notice 2004-78 Providing Actuarial Assumptions to Be Used in 415 Calculations (PDF)
4 pages. Excerpt: "Under the changes to § 415(b)(2) ... made by ... PFEA '04, if a defined benefit plan provides a benefit in a form that is subject to the minimum present value requirements of § 417(e)(3) ... in a plan year beginning in 2004 or 2005, the actuarially equivalent straight life annuity ... is the greater of the straight life annuity determined using the plan rate and plan mortality table and the straight life annuity determined using 5.5% and the applicable mortality table." (Internal Revenue Service)
Surprise: the Boss Put You in a 401(k) Plan -- Automatic Enrollment Trend Extends to All Employees
Excerpt: "Found yourself in your company's 401(k) retirement plan but don't remember signing up? Not surprising. More employers are automatically enrolling workers in their defined-contribution plans. It's perfectly legal, provided they warn you ahead of time and give you the option to decline. There's been a steady progression in this trend. First, companies automatically signed up only new workers, then expanded the program to include all employees." (Chicago Tribune; one-time registration required)
Retirement Accounts Protected by Bankrup.tcy Laws? Not Always.
Excerpt: "Q: Can the government touch your 401(k) if you owe taxes or file bankrup.tcy? A: It depends on which government. States do not have the same authority as the Internal Revenue Service to impound any part of a participant's account, says Ivory Johnson, a certified financial planner in Annapolis, Md. Since most 401(k)s are protected by ERISA Title I, a federal law that governs these plans, state governments cannot attach an account for taxes owed." (The Christian Science Monitor)
Rumors of 401(k) Matching Contributions Demise Have Been Exaggerated
Excerpt: "Over the last few years, numerous articles have reported that companies are decreasing or stopping their 401(k) matching contributions, including such prominent employers as Ford Motor Co., DaimlerChrysler Corp., Delphi Corp. and, yes, even Charles Schwab Corp. Now, not only have many of these firms at least partially, if not fully, restored their matches, but also the reality seems to be that the 'trend' was that it was not as widespread as it seemed." (Employee Benefit News)
Retirement Plan Provider Industry Has Many Myths, Says Vanguard Official
Excerpt: "Much of the sales effort and plan design retirement plan providers are undertaking is based on myths, said William McNabb, managing director of the client relationship group at The Vanguard Group. Speaking at the opening session of the SPARK conference, he said the problem is that providers are often not looking carefully at the statistics of sponsor and participant behavior." (Defined Contribution News)
Seventh Circuit Issues Opinion by Judge Posner Defining a 'Partial Termination' of ERISA Plan
Excerpt: "Don't miss this important decision from the Seventh Circuit ... which discusses 'partial terminations' in the context of when participants must receive 100% vesting: 'Matz, et al. v. Household International Tax Reduction Investment Plan.' (An interesting aspect of the case was the fact that the case was in its 9th year of litigation. Many employers automatically vest participants in such transactions in order to avoid the risk of protracted litigation over vesting.)" (Attorney B. Janell Grenier via BenefitsBlog.com)
Overview: IRS Memorandum Warns of Plan Designs and Hiring Schemes That May Violate Nondiscrimination Rules
Excerpt: "In an internal memorandum, the IRS Director of Employee Plans alerts ... staff to the existence of certain retirement plan schemes that 'may violate the nondiscrimination requirements of the Code even though they ostensibly satisfy certain provisions in the nondiscrimination regulations.' By a combination of plan design and hiring practices, plan sponsors ... include in their plans some or all of the sponsor's highly compensated employees (HCEs), but limit the non-HCEs who accrue ..." (Employee Benefits Institute of America Inc.)
Groups Want Public Pension Funds to Divest from Sudan
Excerpt: "Black activists and religious groups are pressing public pension funds to divest a purported $91 billion in holdings of companies operating in oil-rich Sudan. The United States and some human rights groups have claimed that Sudan's government and Arab militia known as the Janjaweed are guilty of genocide for their actions in the Darfur region. Activists, including members of the Congressional Black Caucus, are making the case that public pension funds should sell investments ..." (AP via The Washington Post; one-time registration required)
Federal Pension Agency Deficit Increases to $23.3 Billion in Fiscal Year 2004
Excerpt: "The deficit at the federal agency that rescues ailed U.S. pension funds more than doubled to $23.3 billion in fiscal 2004, officials said [November 15], as the safety net was hit by losses from pension plans that have failed or are expected to fail. The U.S. Pension Benefit Guaranty Corp., which insures the traditional pensions of about 44 million Americans, had started the year with a then-record deficit of $11.2 billion. The agency's statement did not name the companies ..." (Reuters via MSN Money)
The Benchmark Companies Launches National Effort to Draw Attention to Pension Consultant Abuses
Excerpt: "The following letter and Pension Consultant Conflict of Interest Checklist were sent to larger pensions around the country, in anticipation of the upcoming release of the findings of an SEC investigation into these abuses. Below the letter and checklist are two additional related articles: a letter to the editor of Global Pensions magazine regarding the condition of America's pensions and the text of a speech entitled 'The High Cost of Pension Consultant Corruption.'" (Benchmark Advisory Services, Inc., and Benchmark Financial Services, Inc.)
Opinion: Wall Street's Big, Dirty Secret about Retirement Planning and Your Money
Excerpt: "Over the past few weeks, I have let you in on Wall Street's dirty, big secret: Some 'financial consultants' will do anything to get your money. They'll use manipulation. They'll prey upon senior citizens' 'need to be wanted,' 'fear,' 'desires for security,' 'guilt,' and 'greed' (as advised by one marketing guru). They'll dig through your tax returns. They'll put their names and faces on books someone else wrote for them. When they talk about 'retirement planning,' they're talking ..." (Robert Brokamp via The Motley Fool)
U.S. Pension Funds and Endowments Gain in Third Quarter 2004
Excerpt: "U.S. pensions and endowments gained 0.29% for the three months ended Sept. 30, as bonds rose and stocks fell, according to a report released Thursday by Wilshire Associates. The third quarter was the second straight period that performance lagged behind the targets of most public and private pensions, which seek annual returns of 7% to 9%." (Los Angeles Times; one-time registration required)
Teamsters Find Pensions at Risk
Excerpt: "Since 1982, under a consent decree with the federal government, the fund has been run by prominent Wall Street firms and monitored by a federal court and the Labor Department. There have been no more shadowy investments, no more loans to crime bosses. Yet in these expert hands, the aging fund has fallen into greater financial peril than when James R. Hoffa, who built the Teamsters into a national power, used it as a slush fund." (The New York Times; one-time registration required)
Opinion: Any of Several Solutions May Easily Repair U.S. Social Security
Excerpt: "There is not just one good blueprint for fixing Social Security.... What's more, the best of these blueprints do not require raising tax rates for workers even though the U.S. public pension tax, 12.4 percent shared by employer and employee, seems achingly low to outsiders. The first such blueprint involves benefit formulas. Under the current system, retiree benefits are indexed to prices. They also are linked to the average wage in America during the years the retiree worked." (San Francisco Chronicle)
Social Security Overhaul Expected to Help and Hurt: Could Shift Advantages Toward Well-Paid Workers
Excerpt: "Divorced and stay-at-home spouses, on the other hand, would see their monthly payments diminished by whatever amount is diverted to personal accounts -- and their claim on these accounts would be finite. Salisbury of the Employee Benefit Research Institute said such a spouse would probably be limited to half of the other spouse's account. Salisbury said the institute's studies estimated that 20% to 60% of the population could end up with less Social Security under a personal ..." (Los Angeles Times; one-time registration required)
Social Security Bonanza? Not Yet for Mutual Fund Firms and May Not Be Profitable After All
Excerpt: "The politically charged issue of allowing workers to divert a portion of their Social Security taxes to individually controlled accounts investing in the stock or bond markets is back on the table, and speculation about the windfall that Wall Street would reap already is swirling. In the wake of the Nov. 2 election, the stock prices of a number of mutual-fund companies have outpaced the market's overall gains." (Wall Street Journal via SFGate.com)
Links to Items on Executive Comp, Benefits in General
SEC to Ramp Up Enforcement of Executive Compensation Disclosure Rules
Excerpt: "Based on a recent speech by a top SEC official, the agency appears ready to step up enforcement against companies for failure to adequately disclose executive compensation on corporate proxy statements. Alan Beller, the Director of the SEC's Division of Corporation Finance, stated: 'Unless a company has disclosed all plan and non-plan compensation for all services rendered that is awarded to, earned by, or paid to the executive officers and directors covered in the proxy ...'" (HR Policy Association)
Complying with the Sarbanes-Oxley Act Audit Compliance Deadline Proving Costly to Companies
Excerpt: "Some of the nation's biggest companies face a deadline today for completing reviews of their internal financial controls, a labor-intensive, costly effort that has created intense friction between corporate managers and auditors. Top regulatory officials repeatedly have warned that a significant minority of companies, from a few hundred to a thousand, may report serious weaknesses in their fiscal checks and balances, which could have repercussions in the price of stock shares." (The Washington Post; one-time registration required)
US Airways Seeks Benefit Cuts and Contract Repeals
Excerpt: "US Airways ... asked a bankrup.tcy court judge to terminate the long-term contracts of its flight attendants, mechanics, and customer service and ticket agents if the workers fail to agree on millions of dollars in pay and benefit cuts. The ... airline also asked the judge for permission to reduce or eliminate company-paid health benefits for retirees and replace the remaining defined-benefit retirement plans of its flight attendants and mechanics with a defined-contribution plan ..." (The Washington Post; one-time registration required)
Opinion: a New Twist to Your Tax Bill? Pay Only Sales Taxes -- No Payroll or Income Taxes
Excerpt: "The House Republican leadership supports substituting a sales tax for the federal tax system. The switch would essentially make interest, dividends, profits, and capital gains tax-free.... [At Americans for Fair Taxation], Mr. Wright has spent 14 years ... urging that the sales tax replace all current federal taxes - payroll taxes as well as income taxes. Collection would be done by the states ... The Internal Revenue Service would become redundant." (The Christian Science Monitor)
Oversight Hearing on Insurance Broker Practices, Conflicts of Interest, Current Regulatory Framework
Excerpt: "This oversight hearing will focus on insurance brokerage practices, such as contingent commissions, that raise conflict of interest questions, and whether these practices harm consumers or suggest changes to the existing regulatory framework." (U.S. Senate Committee on Governmental Affairs, Subcommittee on Financial Management, the Budget, and International Security)
Opinion: Bond Market Should Fear $43 Trillion Retirement Tab for Social Security and Medicare
Excerpt: "As ... George W. Bush prepares to 'spend political capital' to reform the retirement system, the best way of telling if his emerging plan is sound is to watch from the summit of the bond market. If Bush and Congress fail to prudently fund Social Security and Medicare, it may mean paring benefits or selling mountains of government debt to pay for the increasing costs of retiring baby boomers. That may increase interest rates and hurt everyone, from homebuyers to corporate ..." (Bloomberg.com)
Newly Posted Events
Dependent Definition Changes Impacting Benefit Plans as of January 1, 2005
Nationwide on December 2, 2004
presented by International Foundation of Employee Benefit Plans
Newly Posted Press Releases
Treasury and IRS Propose Retirement Annuity Regulations
(U.S. Department of Treasury)
Newly Posted or Renewed Job Openings
Investment Advisory/Retirement Sales Consultant – St. Louis
for Invesmart, Inc.
in MO
Head of Worksite ALM & Valuation
for ING US Financial Services
in CT
Benefit Analyst/Recordkeeper
for Leggette Actuaries, Inc.
in NC
Retirement Plan Consultant - Harrisburg, PA
for Invesmart, Inc.
in PA
Pension Administrator - DB Plan Experience / Actuarial Training
for Retirement System Group Inc. (www.rsgroup.com)
in NY
Sr. Benefit Analyst
for OfficeMax
in IL
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: