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November 19, 2004
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Text of IRS Employee Plans News, November 17, 2004 Edition, on 403(b) Annuities (PDF)
Excerpt: "On November 15, 2004, a momentous event occurred in the world of 403(b) tax-sheltered annuities. The first comprehensive regulations in 40 years were issued. These regulations were released in proposed form and state that they cannot be relied upon until finalized. They reach out beyond 403(b) to provide guidance on 402(b), 402(g), 414(c), and 3121(a)(5)(D). There is a general effective date, when finalized, which will be for taxable years beginning after December 31, 2005, with ...." (Internal Revenue Service)
Overview: Safe Harbor 401(k) Plans for 2005
Excerpt: "The safe harbor 401(k) plan is one of the most popular plan designs for small employers. The beauty of the safe harbor plan is that for the price of a safe harbor employer contribution, the discrimination tests that apply to employee deferrals (ADP) and matching contributions (ACP) are deemed satisfied and, thus, the Highly Compensated Employees (HCEs) may make the maximum allowable deferral of compensation without the need for the plan to pass the discrimination tests." ( McKay Hochman Co.)
The Role That Financial Education Programs Play in Influencing Participant Behavior in 401(k) Plans (PDF)
Excerpt: "Ernst & Young LLP ... conducted a survey of large employers nationwide to determine whether they are measuring the success of their employee financial education programs. Focusing initially on 401(k) education programs, the survey explored: Whether or not employers track the influence of these programs on employee 401(k) behavior; The degree to which these education programs influence participant behavior; Employer practices in 401(k) education; Employer attitudes towards, and ...." (Ernst & Young LLP)
Employee Filing Suit Says Pricewaterhouse Misused Pension and 401(k) Plans
Excerpt: "A former employee of PricewaterhouseCoopers LLP is suing the professional-services firm, saying it used its pension and 401(k) plans to enrich its partners at the expense of regular employees. Among other things, the complaint says Pricewaterhouse provided partners with a 200 percent matching contribution in their 401(k)s, compared with 25 percent matches to other employees, and provided partners with outsize contributions to their so-called cash-balance pension accounts." (Wall Street Journal via SFGate.com)
Overview: IRS Issues Long-Awaited Guidance on 403(b) Annuities for Tax-Exempt Organizations
Excerpt: "On November 16, 2004, the IRS issued comprehensive proposed regulations applying to tax-sheltered annuities (also known as 403(b) annuities or tax-deferred annuities). This type of benefit is available only to employees of organizations exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and to employees of public educational institutions." (McDermott, Will & Emery)
U.S. Pension System Future May Turn on Cash Balance Decisions
Excerpt: "Often hailed as the one bright, shining star in the dimming universe of the defined benefit pension system, cash balance plans are now clouded by an onslaught of legislation and litigation - measures that may soon threaten all employer-sponsored retirement vehicles. Cash balance plans still hold tremendous promise for today's workers. As a hybrid of the traditional defined benefit model and the modern defined contribution (401(k)) model, they combine the best of both worlds." (Employee Benefit News via BenefitNews.com)
Overview: IRS to Stop Abusive Plan Design Nondiscrimination Schemes
Excerpt: "The IRS Employee Plan News, November issue, reports that Carol Gold, Director of Employee Plans recently issued an internal memorandum regarding abusive plan designs that make use of allocations to short service employees to satisfy nondiscrimination requirements applicable to cross-tested plans. This memorandum was addressed to IRS agents monitoring determination letter applications and plan audits. It cautioned those agents to be aware of this type of scenario and to take ...." (McKay Hochman Co.)
Bloomberg Directs Pension Fund Boards to Provide Same-Sex Partners with Pension Benefits
Excerpt: "Mayor Michael Bloomberg announced ... that he will direct his appointees on the city's pension fund boards to treat city employees in g.ay marriages the same as those in traditional marriages. Bloomberg's decision, based on a legal opinion by the city Law Department, makes no immediate changes. .... If the idea is approved by the city's ... pension fund boards, same-sex couples who are legally married or involved in a civil union with a city employee would receive pension benefits ...." (The Bergen County Record via)
Employee Ownership Update for November 16, 2004
NCEO Executive Director Corey Rosen discusses the 2005 dollar limits for qualified plans, a decision by the Financial Standards Accounting Board (FASB) to allow closely held companies to use a simpler valuation method for options, a dismissal of a claim against ESOP fiduciaries in a court case, and how ESOP companies are going on an acquisition binge. (National Center for Employee Ownership)
Some New Ways to Preserve Your Savings and Guarantee Retirement Income
Excerpt: "Insurance companies and mutual-fund firms are rolling out a dizzying variety of annuities and other products targeted to people worrying about running out of money in their retirement. .... It is a marked shift from the invest-or-perish mindset of the 1980s and 1990s, when companies focused their marketing efforts on getting people to save for retirement. The emphasis now is moving toward making those investments last." (Wall Street Journal via SFGate.com)
Disaster Relief Relating to PBGC Deadlines in Response to Hurricane Jeanne in Virginia
Excerpt: "The Pension Benefit Guaranty Corporation is waiving certain penalties and extending certain deadlines in response to the major disaster declared by the President of the United States on account of damages from Hurricane Jeanne beginning September 27, 2004, in Virginia. The PBGC is taking this action under its authority in section 4002(i) of ERISA, which was added by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, 115 Stat. 2427." (Pension Benefit Guaranty Corporation)
Disaster Relief Relating to PBGC Deadlines in Response to Tropical Depression Ivan in New York
Excerpt: "The Pension Benefit Guaranty Corporation is waiving certain penalties and extending certain deadlines in response to the major disaster declared by the President of the United States on account of damages from Tropical Depression Ivan during the period September 16-24, 2004, in New York. The PBGC is taking this action under its authority in section 4002(i) of ERISA, which was added by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, 115 Stat. 2427." (Pension Benefit Guaranty Corporation)
Disaster Relief Relating to PBGC Deadlines in Response to Severe Storms and Flooding in Minnesota
Excerpt: "The Pension Benefit Guaranty Corporation is waiving certain penalties and extending certain deadlines in response to the major disaster declared by the President of the United States on account of severe storms and flooding during the period September 14-27, 2004, in Minnesota. The PBGC is taking this action under its authority in section 4002(i) of ERISA, which was added by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, 115 Stat. 2427." (Pension Benefit Guaranty Corporation)
Disaster Relief Relating to PBGC Deadlines in Response to Tropical Storm Frances in South Carolina
Excerpt: "The Pension Benefit Guaranty Corporation is waiving certain penalties and extending certain deadlines in response to the major disaster declared by the President of the United States on account of damages from Tropical Storm Frances during the period September 6-October 11, 2004, in South Carolina. The PBGC is taking this action under its authority in section 4002(i) of ERISA, which was added by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, 115 Stat. 2427." (Pension Benefit Guaranty Corporation)
Disaster Relief Relating to PBGC Deadlines in Response to Tropical Depression Ivan in New Jersey
Excerpt: "The Pension Benefit Guaranty Corporation is waiving certain penalties and extending certain deadlines in response to the major disaster declared by the President of the United States on account of damages from Tropical Depression Ivan during the period September 18-October 1, 2004, in New Jersey. The PBGC is taking this action under its authority in section 4002(i) of ERISA, which was added by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, 115 Stat. 2427." (Pension Benefit Guaranty Corporation)
Links to Items on Executive Comp, Benefits in General
Actuarial Responsibilities for Communicating Sarbanes-Oxley Control -- Financial Reporter Article (PDF)
Pages 16-18 of 28 pages. Excerpt: "This article explores the concept of internal controls and what actuarial valuation processes are covered by SOX 404. It examines what is required of the actuary and what professional standards apply." (Society of Actuaries)
Actuarial Aspects of SOX 404 -- Article in December 2004 Issue of the Financial Reporter (PDF)
Pages 12-15, 19 of 28 pages. Excerpt: "As insurance companies move to implement the requirements of Section 404 of the Sarbanes-Oxley Act (SOX 404), it is clear that examination of actuarial processing is a significant piece of the assessment of the company's internal control over financial reporting (ICFR)." (Society of Actuaries)
Easy and Quick Returns on Investment Reported for Employee Self-Service Systems
Excerpt: "Employee self-service usually pays for itself within two years of deployment, finds the latest survey of workforce technologies (http://www.thecedargroup.com/SurveysWhitePapers/) by The Cedar Group, which has been tracking such implementations since 1997. Web self-service combined with some form of service center allows companies to serve at least 50 employees per human resource staff member, results show." (BenefitNews Connect via BenefitNews.com)
Overview: Rules Change for Nonqualified Deferred Compensation Plans
Excerpt: "Restricts the flexibility that executives currently enjoy in controlling the timing of distributions; The Act requires that a nonqualified deferred compensation plan comply with the new Section 409A of the Internal Revenue Code. The use of offshore rabbi trusts have been virtually eliminated. When an offshore trust is created to fund participant's benefits it will trigger a taxable transfer of property under Code Section 83. A taxable transfer under Code Section 83 also ...." (McKay Hochman Co.)
Means for Complying with American Jobs Creation Act's NQDC Plan Changes Are Still Unclear
Excerpt: "The newly-enacted American Jobs Creation Act of 2004 (P.L. 108-357) has left plan professionals with considerable uncertainty with regard to the Act's impact on nonqualified deferred compensation plans, .... Code Sec. 409A, effective beginning in 2005, provides for the first time specific rules for elections and distributions under nonqualified deferred compensation plans .... Treasury guidance on the Act will probably come in stages throughout 2005, ...." (CCH Pension & Benefits News)
Hewitt Federal Legislation Quick Guide Updated November 16, 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)
Newly Posted Events
403(b) Plans Intermediate
Nationwide on December 15, 2004
presented by McKay Hochman
Qualified Plan Training for Retirement Plan Professionals
in California on December 1, 2004
presented by San Diego County Chapter of NIPA
Newly Posted Press Releases
Hewitt Study Shows Employees Willing to Take on Greater Health Care Responsibility; Employees Need Support to Move Toward Greater Consumerism
(Hewitt Associates LLC)
Sentinel Benefits Introduces the SmartFlex® Prepaid Visa® Card to its Flexible Spending Account Clients
(Sentinel Benefits)
Multi-State, Federal Settlement Addresses Concerns Regarding UnumProvident Claims Handling
(U.S. Department of Labor, Employee Benefits Security Administration (EBSA))
Treasury and IRS Issue Indexed Amounts for Health Savings Accounts
(U.S. Department of the Treasury)
Federal Retirement Thrift Investment Board Announces Vendor Selection for Lifecycle Funds
(Federal Retirement Thrift Investment Board)
Newly Posted or Renewed Job Openings
Employee Benefit Team Leader
for The Trust Company of Knoxville, Inc.
in TN
Senior Plan Administrator
for RSM McGladrey
in IL
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