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November 22, 2004
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Phasing Into Retirement - With IRS Help
Excerpt: "An intriguing proposal would allow workers to trim their hours and tap into pensions without penalty. More and more employees say they want to ease into retirement, gradually reducing their hours on the job as they get older before quitting work altogether. But because of today's rigid pension regulations, they may feel their only choices are to quit work or stay on the job full time. The Treasury Department is offering a possible middle ground." (Baltimore Sun via The Philadelphia Inquirer; one-time registration required)
Overview: IRS Takes a Position on Phased Retirement and Defined Benefit Pension Plans
Excerpt: "In recognition of the changing retirement landscape, the IRS has proposed regulations that would allow defined benefit and money purchase pension plans to make in-service distributions under a voluntary phased retirement program for employees at least 59-1/2 years old. While the proposed regulations may not be relied upon until they are issued in final form, plan sponsors should consider whether creating some type of phased retirement program, or formalizing 'informal' programs ...." (Mercer Human Resource Consulting)
Overview: IRS's Proposed Regulations on Phased Retirement (PDF)
5 pages. Excerpt: "On November 10, the IRS issued proposed regulations that would allow employers to begin pension payments to employees who have attained age 59½ and continue to be actively employed, but with reduced work schedules. These proposed regulations apply only to pension plans and do not affect 401(k) or other profit sharing plans, which can already be used to support phased retirement programs due to more liberal distribution rules." (Hewitt Associates)
Overview: Legal Alert: IRS Proposes Regulations on Phased Retirement Under a Pension Plan (PDF)
7 pages. Excerpt: "Under the proposed rule, a full-time employee eligible for retirement may have the option of reducing his work hours and participating in a phased retirement program, instead of fully retiring. If an employee elects to participate in a phased retirement program, the employee will be treated as having the dual status of being partially retired and partially in service." (Sutherland Asbill & Brennan LLP)
ERISA Council Proposes Changes to Fee Disclosure Rules for Employers and Providers
Excerpt: "The Employee Retirement Income Security Act (ERISA) Advisory Council has recommended new rules forcing employers and providers to disclose fees that mutual-fund companies pay to get into retirement offerings. The bipartisan council ... has submitted a draft regarding the possible rule change .... The draft states that plan sponsors often don't understand the fees paid revenue-sharing arrangements, in which mutual fund companies pay to be part of a 401(k) plan's investment offerings." (PLANSPONSOR.com; one-time registration required)
Providers Share Strategies for Encouraging 401(k) Participation
Excerpt: "Employers may need to rethink their attitudes on 401(k) vesting and matching contributions if they want to increase employee participation in their programs, according to plan providers. 'The right plan design, along with an effective communications program, will bring you confident participants,' asserts Sandy McCarthy, president of defined contribution services for CitiStreet." (Employee Benefit News)
Overview of Partial Termination Case: Matz v. Household Int'l Tax Reduction Inv. Plan (7th Cir. 2004)
Excerpt: "The overall dispute concerns whether the company's 401(k) plan was partially terminated when a total of 2,396 of the 11,955 participants ceased to be active participants following a corporate reorganization. If so, Code Section 411(d)(3) requires full vesting of all affected participants. Informally, the IRS has advocated that a pension plan should be deemed partially terminated if at least 20% of its participants lose coverage as the result of a corporate event." (Employee Benefits Institute of America)
The Plan Document Requirements of the Newly Proposed 403(b) Regulations
Excerpt: "After making my way through the newly-proposed and voluminous (100+ pages) 403(b) regulations (mentioned here in this previous post), one of the items that stands out overall is the plan document requirement. Proposed regulation section 1.403(b)-3(b)(3) provides: ...." (Attorney B. Janell Grenier via BenefitsBlog.com)
Asset-Liability Modeling: a Powerful 'Financial Engineering' Tool for Pension Plan Sponsors (PDF)
4 pages. Excerpt: "ALM can help Trustees of multiemployer plans consider answers to the following ...: What is the range of possible and probable funding requirement over the next 10 years? To what extent can future investment returns be expected to improve/jeopardize the plan's funded position? Is the plan likely to experience a funding deficiency, and if so, when is it expected? Is the plan likely to be faced with withdrawal liability? What are the plan's future liquidity requirements? ...." (The Segal Company)
Results of Hewitt's Global Survey of Retirement Plan Accounting Assumptions
Excerpt: "This Actuarial Advisory presents the results of Hewitt's global survey of fiscal 2003 year-end accounting assumptions for retirement plans. The report includes information for 18 countries, as well as aggregated results for countries in the Euro Zone. The report also provides a range of expected discount rates that, based on current economic indices, will likely be used for 2004 year-end assumptions. Companies with a fiscal year ending in the last three months of 2004 may find ...." (Hewitt Associates)
Savings Bonds Step Into the 21st Century with Electronic Payroll Savings
Excerpt: "U.S. savings bonds have been a part of the payroll savings plan landscape since the 1930s. Until recently, however, most small businesses, and even some larger ones, lacked the ability to offer these ultra-safe savings vehicles to employees through payroll deductions. Now, the payroll savings program has stepped into the 21st century with the addition of a new feature to TreasuryDirect (www.treasurydirect.gov), an Internet-based system that allows individuals to purchase, hold, ...." (Employee Benefit News)
Business Records Establish That COBRA Election Notice Was Mailed
Excerpt: "[Maya v. Inspro Corporation, 2004 U.S. Dist. LEXIS 22880 (N.D. Cal. 2004)] In this case, a former employee claimed that she never received COBRA election notices for her group medical and dental coverage. The employer (which apparently was also the plan administrator) claimed that it had sent the notices twice to her home address and then, when the employee notified the employer that the notices had not been received, to the employee's attorney." (Employee Benefits Institute of America Inc.)
The Role that Financial Education Programs Play in Influencing Participant Behavior in 401(k) Plans (PDF)
18 pages. 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." (Ernst & Young LLP Human Capital Practice)
Don't Worry, Be Happy, Put Retirement Income Planning Fears to Rest
Excerpt: "In honor of 'National Retirement Planning Week' the investment industry has churned out a zillion studies, each saying that Americans are woefully unprepared or uninformed about how much money they will really need. They've also launched a highly visible public relations campaign fronted by actor/comedian/game show host/sometime policy analyst Ben Stein and designed to scare the pants off baby boomers he suggests are delusional if they think they have enough money." (Reuters via The New York Times; one-time registration required)
Public Pension Funds Have Problems -- Funding, Returns, Conflicts of Interest
Excerpt: "A lot of drama is playing out in the normally quiet world of public pension funds. A number of pensions that fund the retirement of municipal workers, police officers and firefighters have suffered extremely poor investment results in the last few years. If pension funds can't earn enough money to pay retirees, the taxpayers end up paying the difference. In some cities, that's already begun." (The Miami Herald; one-time registration required)
The Right to An Allocation After Plan Amendment?
Excerpt: "A profit sharing plan provides that each eligible participant who is credited with 1,000 hours of service and who is employed on the last day of the plan year is entitled to receive an allocated share of the discretionary employer contribution. The plan sponsor intends to amend the plan to change the allocation formula, and the amendment could result in smaller allocations for some participants. To avoid any potential violation of the anti-cutback requirements, when should the ....?" (Reish Luftman Reicher & Cohen)
Opinion: How Promising Are the Traditional Pension Plans? the Quirks of Funding and Investing
Excerpt: "Traditional pension funds are generally run by professional money managers, following well-known rules for making prudent investments. Section 401(k) plans are run by their owners -- in other words, the likes of you and me -- following who knows what strategy, constrained only by the investment options offered by their employers. So how have these two very different types of plans performed over the years? About the same, according to a new study of average annual returns of ...." (The Washington Post; one-time registration required)
Opinion: the End of Social Security? Don't Reform It, Replace It
Excerpt: "After a long campaign season of spin, smear, and slogan, we're finally having a serious debate over domestic policy. President Bush has set the agenda -- Social Security's privatization and tax reform. The president wants to cut Social Security's payroll tax and have workers invest their tax cut in stocks and bonds within private accounts. And he wants to replace the federal income tax with a tax on consumption. Both proposals drive Democrats nuts." (Laurence J. Kotlikoff via The Boston Globe)
Links to Items on Executive Comp, Benefits in General
New IRS W-2 Code for Reporting Annual Deferrals of Income Under a NQDC Plan (PDF)
Excerpt: "In Announcement 2004-96, the IRS unveiled a new code (Code Y) for use on the 2005 Form W–2 to identify annual deferrals of income under a nonqualified deferred compensation plan. The American Jobs Creation Act of 2004 (PL 108-357) added section 409A to the Internal Revenue Code. Section 409A generally takes effect after December 31, 2004, and requires employers to report annual deferrals under a nonqualified deferred compensation plan on each employee's Form W–2." (Internal Revenue Service via Mercer Human Resource Consulting)
A Due Diligence Review Checklist for Merging Companies
Excerpt: "This review is critical to ensure sound financial decisions and a smooth employee integration." (The M&A Transition Guide via Workforce Management)
Year-End Legislative and Regulatory Review for Plan Sponsors and Administrators of Benefit Plans (PDF)
Excerpt: "We have compiled a list of changes made by recent laws and regulatory pronouncements, as well as unfinished business in Congress, that affect employee benefit plans. Some of these items may require employer action, including plan amendments. In addition, other developments (e.g., inflation adjustment of key plan maximums, court decisions) may require some administrative changes to retirement and health and welfare plans." (Mellon)
A Chart to Use for Benefits Comparisons for Merging Companies
Excerpt: "Benefits is often a major clashing point for merging companies. Use this chart to help you summarize the major differences between the two organizations." ( The M&A Transition Guide via Workforce Management)
Description of the Tax Technical Corrections Act of 2004 (PDF)
7 pages. Excerpt: "This document, prepared by the staff of the Joint Committee on Taxation, provides a description of the 'Tax Technical Corrections Act of 2004.' The bill was introduced on November 19, 2004, as H.R. 5395 in the House of Representatives and as S. 3019 in the Senate." (U.S. Congress. Joint Committee on Taxation)
Presentation: the Sarbanes-Oxley Act of 2002 and the Impact on Public Employee Retirement Systems (PDF)
10 pages. Presentation at the State Association of County Retirement Systems, by Thomas A. Hickey III, on November 8-12, 2004, in bullet format (Kirkpatrick & Lockhart LLP)
Opinion: Ownership Society Would Still Need Rules in Health Care and Retirement Industries
Excerpt: "The Bush team's 'ownership society' is mainly about Social Security: It wants to convert part of this government program into private retirement accounts. But the administration is skeptical of corporate collectivism as well as the governmental variety. It's not sure that your employer should provide your health care or your retirement plan. And it may well be right. Corporations became the anchors of traditional benefit programs only by accident." (The Washington Post; one-time registration required)
Revised Dollar Limits for 2005 for Employee Benefit Plans with Commentary and Explanations (PDF)
2 pages. Excerpt: "On October 20, 2004, the Internal Revenue Service ... announced the 2005 cost of living adjustments applicable to dollar limits on benefits and contributions, annual compensation limits, and other dollar limits that will apply to tax-qualified retirement plans and Simplified Employee Pension plans ... for 2005 plan years. In addition, several pension plan limits that were set by the Economic Growth and Tax Relief Act of 2001 ... will increase in 2005 by statute, rather ...." (Pillsbury Winthrop LLP)
Revenue Procedure 2004-71 on 2005 COLAs Released by Treasury (PDF)
19 pages. Excerpt: "The U.S. Treasury Department and the Internal Revenue Service have released the amounts indexed for cost-of-living adjustments for 2005." (U.S. Department of the Treasury)
Newly Posted Events
Do Your Employees Need An Asset Adjustment?
in New York on December 2, 2004
presented by Eisner Retirement Solutions LLC
Federal Securities Law Issues for Qualified Plan Lawyers
Nationwide on December 2, 2004
presented by ABA Joint Committee on Employee Benefits
Nonqualified Deferred Compensation: Treasury's Initial Guidance on Section 409A
Nationwide on December 16, 2004
presented by ABA Joint Committee on Employee Benefits
What California Employers Need to Know: Leave of Absence Laws
in California on December 1, 2004
presented by No. Calif. Chapter of Certified Employee Benefits Specialists (ISCEBS)
Newly Posted Press Releases
HSA Bank to Offer Health Savings Accounts to Unity Health Insurance Members
(HSA Bank)
Newly Posted or Renewed Job Openings
Defined Benefit Calculation Specialists
for Constantin Control Associates
in NJ
Pension Plan Administrator
for South Florida TPA
in FL
Senior Plan Administrator
for American National Insurance Company
in TX
Marketing/Sales/Enrollments
for South Florida RIA, TPA and Record Keeping Firm
in FL
Chief of Pension Education
for ASPA
in DC
TPA Specialist
for Transamerica
in CA
DCS Compliance Manager
for Boston Financial Data Services
in MA
Actuary
for Retirement System Group Inc. (www.rsgroup.com)
in NY
Benefit Plan Manager
for HEREIU Welfare-Pension Funds
in IL
Regional Retirement Wholesaler
for Legg Mason, Inc.
in MD
Retirement Services District Manager (SALES)
for ADP Retirement Services
in OH
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