| BenefitsLink Retirement Plans Newsletter |   |
November 18, 2004
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Overview: the New Automatic Rollover Regulations - What Plan Sponsors Need to Know
Excerpt: "Beginning March 28, 2005, qualified retirement plans cannot cash out benefits worth more than $1,000 unless the participant affirmatively elects to receive cash. In the absence of the participant's election, any involuntary distribution must be done as an automatic rollover to an IRA. This Alert summarizes the decisions that plan sponsors need to make to deal with this new requirement." (Faegre & Benson LLP)
Overview: New 403(b) Regulations
Excerpt: "The IRS has issued proposed 403(b) regulations. The new regulations represent the first comprehensive guidance on 403(b) plans in 40 years. The new regulations incorporate the statutory changes from ERISA through EGTRRA and other IRS rulings issued since 1964. In addition, the regulations address other issues that have not been addressed by the IRS in any formal guidance. The new regulations are effective for taxable years beginning after December 31, 2005." (SunGard Corbel)
Global Crossing $79 Million Settlement Approved by District Court for Workers and Retirees
Excerpt: "A federal district court in New York City has approved a final settlement of $79 million for the benefit of Global Crossing workers and retirees who lost millions in their retirement plans when the company filed for bankrup.tcy. In addition to the restitution that was recovered in the private litigation, the settlement prohibits the company's executives from acting as fiduciaries to ERISA-covered benefit plans for five years unless the Department of Labor gives prior approval." (HR.BLR.com)
Entrepreneur Rollover Stock Ownership Plan (ERSOP) -- Using Retirement $$ to Start a Business
Excerpt: "Be aware that ERSOP is a marketing phrase, rather than an Internal Revenue Service term, and most of the business and estate-planning experts we talked to weren't familiar with the plan. While the promoters assure potential investors that they have obtained favorable IRS 'determination letters' about the plans' legality, critics point out that determination letters can be challenged. No binding IRS ruling for or against this kind of plan seems to exist." (BusinessWeek Online)
Retirees Don't Have to Be So Frugal -- Could Withdraw Higher Percentage and Enjoy Life
Excerpt: "[A] new study by Minneapolis certified financial planner Jonathan Guyton ... suggests retirees don't have to be nearly so frugal. He analyzed how to generate 40 years of income while surviving brutal market conditions, such as high inflation and a steep market decline early in retirement. His finding: Retirees may be able to withdraw as much as 6.2 percent initially, provided they follow three rules. 'There's nothing radical to this,' Mr. Guyton says." (Wall Street Journal via SFGate.com)
Text of Rev. Rul. 2004-106 Providing Applicable Federal Rates for December 2004 (PDF)
4 pages. Excerpt: "This revenue ruling provides various prescribed rates for federal income tax purposes for December 2004 (the current month). Table 1 contains the short-term, midterm, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code." (Internal Revenue Service)
Working Paper: Why Don't Americans Save? Savings Rate Declined Over Past Two Decades (PDF)
34 pages. Excerpt: "This paper provides an examination of the decline in the household saving rate over the past two decades from both the macroeconomic and microeconomic perspectives. Between 1980-84 and 2000-04 private saving fell more than 8 percentage points of U.S. GDP. At the aggregate level, about 40 percent of the fall in the household saving rate occurred within contractual retirement accounts, that is, within employer-sponsored and individual retirement plans." (Center for Retirement Research at Boston College)
Working Paper: How Do Pensions Affect Expected and Actual Retirement Ages? (PDF)
26 pages. Excerpt: "This paper uses the first six waves of the Health and Retirement Study to investigate the impact of pensions on expected retirement age, on the probability of being retired in each wave given employment in the previous wave, and on the probability of retiring earlier than planned. Pension coverage per se and the type of pension are important in each case. Pension wealth reduces the expected retirement age by 0.6 year, and the incentives in defined benefit plans lower ...." (Center for Retirement Research at Boston College)
United Kingdom Final Salary Pensions 'in Trouble' with Scheme Closures and Funding Pressures
Excerpt: "More than three-quarters of employers with final salary pensions expect to face future funding difficulties, according to the latest annual survey from the National Association of Pension Funds (NAPF), released today. Defined benefits, or final salary schemes, as the name suggests pay a retirement income based on the size of a person's final salary. Because of the costs involved in the schemes and changes to the way their accounts are administered, these schemes have been closing ...." (Guardian Unlimited)
Defined Benefit Pension Plans Reap the Benefits of REITs
Excerpt: "For an industry that has long struggled to make significant inroads in the defined benefit market, the advice from a leading plan sponsor is music to publicly traded REIT executives' ears. 'Put some money in REITs,' says Borge Tangeraas, chief investment officer for real estate at CalPERS .... .... In the 10 years since pension plans began earnestly investing in REITs, REIT shares have found a place in the portfolios of 20 of the nation's top 100 corporate defined benefit plans." (Real Estate Portfolio)
The Emerging Retirement Investment Option: REITs Are Blossoming in the Defined Contribution Market
Excerpt: "In recent years, an increasing number of investment consultants as well as NAREIT staff have worked to see that publicly traded real estate equities share the spotlight with other stock and bond fund options in defined contribution plans, such as 401(k) plans. Slowly but surely, those plans have begun to view REITs as a valuable and viable diversification tool." (Real Estate Portfolio)
National Retirement Planning Week Site, at www.retireonyourterms.org, Offers Keys to Saving
Excerpt: "Comedian Ben Stein is making the rounds in his trademark business suit and sneakers with a not-so-funny message for Americans: 'People aren't saving anywhere near enough for a comfortable retirement.' Stein, who serves as spokesman for the annual National Retirement Planning Week, says he's worried that many people won't be able to retire or will have saved so little that they'll outlive their money. He scoffs at the excuses people come up with for not saving." (AP via The Washington Post; one-time registration required)
Study: Portfolio Transactions Costs at U.S. Equity Mutual Funds (PDF)
21 pages. Excerpt: "We study the trading costs for a large sample of equity mutual funds. Using the actual brokerage commissions paid in 2002 and estimating the implicit trading costs, we find that fund investors bear substantial portfolio trading costs. Equity funds incur an average annual explicit brokerage commission of 38 basis points and an average annual implicit trading cost of 58 basis points. When measured separately for different mutual fund styles, these costs are highest for ...." (Zero Alpha Group (ZAG))
GAO: the Federal Government's Role in Improving Financial Literacy
Excerpt: "[O]n July 28, 2004, GAO hosted a forum on the role of the federal government in improving financial literacy. Forum participants included experts in financial literacy and education from federal and state agencies, the financial industry, nonprofit organizations, and academic institutions. Participants discussed the topics federal efforts should cover, populations that should be targeted, methods of delivering information, and the role of program evaluation." (U.S. Government Accountability Office)
Opinion: Easy Fixes For Social Security
Excerpt: "The president's determination to partially privatize Social Security stems from ideological reasons. But in fact the projected Social Security deficit is small enough -- 1.89 percent of payroll, under the Social Security trustees' intermediate assumptions (neither optimistic nor pessimistic) -- that a major revision to the system is not necessary. The deficit can be remedied with a few discrete changes in the program, all of which are surprisingly easy to understand and accept." (Edith U. Fierst via The Washington Post; one-time registration required)
Links to Items on Executive Comp, Benefits in General
IRS Initiative to Examine the Compensation Practices of Exempt Organizations
Excerpt: "This IRS program focuses on curbing excessive officer and other insider compensation and benefits at some exempt organizations. This IRS enforcement initiative mainly serves as a reminder to all tax-exempt organizations that governing bodies must exercise diligence in establishing leadership team pay packages." (Hay Group; registration required)
FASB Board Meeting November 17th, 2004: Equity Based Compensation Discussion
Excerpt: "The Board discussed various issues that had been identified by the staff during the course of drafting a final revised standard for FAS123. Issues and decisions are described .... Issue 1: Calculated Value Method for Liability Awards of Nonpublic Companies. The staff recommended and the Board agreed that nonpublic entities should have the ability to use the calculated value method for liability awards, following the same measurement pattern established in the proposed Statement ...." (Financial Executives International)
What To Look For In Employee Benefits In the Next Four Years
Excerpt: "During the presidential campaign, President George W. Bush clearly outlined those employee benefits-related issues that he will promote in his second term. The following summary describes what to expect in terms of proposals from the Bush Administration." (Spencer Benefits Reports)
World Not Ready for Aging Boom, Says AARP Survey
Excerpt: "The impact of the aging boom is well known around the world but opinion leaders in the leading industrialized nations, especially Italy, Germany and Japan, to not believe their countries are prepared to deal with the consequences, according to a survey released yesterday by AARP. The study also found that these leaders see a higher cost for social services, possible labor shortages, and higher costs for pensions, and health care as probable outcomes from a larger older population." (Senior Journal)
Newly Posted Press Releases
The Season of Giving Does Not Include Holiday Bonuses, According to Hewitt Associates; More Companies Favor Pay-for-Performance as a Way to Award Bonuses
(Hewitt Associates LLC)
Benefit Advisors Network and D2Hawkeye Enter Strategic Alliance
(Benefit Advisors Network)
New Book Ties Effective Communication of Benefit Plans to Wiser Health Care and Investment Decisions
(International Foundation of Employee Benefit Plans)
Benefits & Compensation Digest Discusses Preparing an Investment Policy Statement
(International Foundation of Employee Benefit Plans)
Lifetime Achievement Fund Added to CPI Retirement Plan Platform
(CPI Qualified Plan Consultants, Inc.)
Dallas-Fort Worth Business Group On Health Elects New Board Members
(Dallas-Fort Worth Business Group on Health)
Newly Posted or Renewed Job Openings
Education Account Executive- Retirement Services
for Principal Financial Group
in OH
Plan Administrator
for Concannon, Miller & Co., P.C.
in FL
Compliance Analyst
for Great-West Life & Annuity
in CO
EB Field Wholesaler - 92452
for Evergreen Investments
in TX
Actuary
for The Mayer Benefits Advisory, LLC
in CT
EB Field Wholesaler - 92453
for Evergreen Investments
in OH
Benefits Analyst
for Hewitt Associates
in TX
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