| BenefitsLink Retirement Plans Newsletter |   |
November 29, 2004
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Overview: Temporary Rules Expand FICA Taxation of 403(b) Contributions Under Salary Reduction Agreements
Excerpt: "The IRS has issued temporary regulations that, effective November 16, 2004, define salary reduction agreements in manner that confirms, if not expands, the FICA tax treatment of 403(b) contributions. By expanding the definition of 403(b) salary reduction agreements beyond the definition of elective deferrals that applies for income tax purposes, the temporary rules (which also serve as the text of proposed rules) effectively subject a wider variety of 403(b) contributions to FICA tax." (CCH Pension & Benefits News)
American Academy of Actuaries' Letter to the Wall Street Journal on Recent Pension Article (PDF)
1 page. Excerpt: "The article 'Tracking the Numbers,' by Ellen Schultz on Nov. 4, could have left your readers with an incorrect understanding of the cash balance plan pension plan being discussed. When Bank of America employees were given the option to transfer money from their 401(k) plans to the bank's new cash balance retirement plan, their principal became guaranteed. While most stock investors lost money over the past few years, Bank of America employees lost none of the principal in ...." (American Academy of Actuaries)
When Every Basis Point Counts -- Plan Sponsors and Participants Checking Plan Fees and Expenses
Excerpt: "When the economy and the stock market were flying high, reducing 401(k) plan costs ranked low on the corporate agenda. After all, plan assets were racking up double-digit returns, employees eagerly contributed to their 401(k) accounts and companies had plenty of cash to match those contributions. Today, none of those conditions still holds. Many investments are experiencing losses or only small gains. Every basis point counts, so businesses and their employees are paying close ...." (Business Finance)
Working Paper: How Does Marriage Affect Asset Allocation in Women's Defined Contribution Plans? (PDF)
20 pages. Excerpt: "Past studies that examine gender differences in investment decisions have treated married households as a single decision-making unit. This study improves upon traditional unitary bargaining models and estimates a series of unitary and collective-type models to investigate how a husband's age and relative control over financial resources affects the allocation ....' The 2 page Executive Summary is at http://www.bc.edu/centers/crr/papers/summary/wp_2004-28.pdf. (Center for Retirement Research at Boston College)
American Academy of Actuaries' Letter to the Economist on Two Recent Pension Articles (PDF)
Excerpt: "Two articles on pension accounting in your Oct. 28 edition may have left your readers with the wrong understanding of the role of actuaries in the U.S. In the article 'Time to End a Scandal,' it was written that, 'by the stroke of an actuary's pen a company can make heroic assumptions about the returns its pension assets will earn...' In the U.S., the assumptions used by a company for its financial statements are strictly the responsibility of company management." (American Academy of Actuaries)
Fee Deferral Arrangements for Mutual Fund Directors & Trustees: Impact of New Legal Requirements (PDF)
4 pages. Excerpt: "Many mutual funds have nonqualified deferred compensation arrangements under which independent directors or trustees can defer all or a portion of the fees otherwise payable to them for their services. This article summarizes new requirements resulting from the recently-signed American Jobs Creation Act of 2004 that significantly alter the federal income tax rules governing nonqualified deferred compensation plans (NDCPs), including those covering mutual fund directors." (Investment Management Alert via Kirkpatrick & Lockhart LLP)
Overview: IRS Addresses Phased Retirement Arrangements Under Qualified Pension Plans (PDF)
5 pages. Excerpt: "IRS is proposing to eliminate a significant obstacle to phased retirement arrangements under qualified pension plans. This Alert describes the attractiveness of phased retirement programs to both employers and employees, including the role of qualified plans, and summarizes the key provisions of the IRS proposal. Because the proposal significantly changes the current regulatory structure, it cannot be relied upon until finalized." (Aon Consulting)
A Premature Sunset for Traditional Pension Plans? Is It a Question of Money Management?
Excerpt: "America seems to be giving up on the traditional pension. Scores of pension plans have been cut back, converted or closed in the last few years, and there has been a run of spectacular failures in the airline and steel industries. Last week, the Postal Service said that the price of a first-class stamp may have to rise to 41 cents just to cover the cost of financing its pension plans. Traditional pension plans are said to be an unaffordable burden on companies and taxpayers, a ...." (The New York Times; one-time registration required)
There Are More Ways to Save for Retirement
Excerpt: "Suppose you want to save more for retirement, but are prohibited from setting aside additional funds in your 401(k) retirement-savings plan at work. What other options are there? That's the question a woman from East Greenwich asked MoneyLine ...." (Neil Downing via The Providence Journal)
The Mutual Fund Trading Scandals: Implications for CPAs and Their Clients
Excerpt: "Investment advisers should understand and make clear to clients that market-timing can dilute the value of fund shares held by long-term investors. First, the cash that enters the fund when market-timing investors purchase fund shares is available to the fund's portfolio manager to invest only for a short period of time, until that investor redeems. As such, this short-term cash generally does not earn a return equal to the amount of money the market-timer takes out of the fund ...." (Journal of Accountancy)
Editorial: U.S. Congress Must Take Care of Pensioners by Addressing Issue of PBGC Shortfalls
Excerpt: "Retirees are in jeopardy. No, Social Security insolvency isn't the culprit this time. Instead, we can look to ailments of the lesser known Pension Benefit Guaranty Corp., a federal agency that insures pension plans. According to a recent New York Times story, the agency, which does not now receive any taxpayer money, had a $23.3 billion deficit in its last fiscal year. Simply, the money the agency collects has, for a variety of reasons, not kept pace with the costs of covering ...." (Milwaukee Journal Sentinel via JS Online)
Working Paper: Does Work Pay at Older Ages? (PDF)
54 pages. Excerpt: "Encouraging work at older ages is a critical policy goal for an aging society, but many features of the current system of benefits and taxes provide strong work disincentives. The implicit tax rate on work increases rapidly at older ages, approaching 50 percent for some workers by age 70. In addition, by age 65 people can typically receive nearly as much in retirement as they ....' The 2 page Executive Summary is at http://www.bc.edu/centers/crr/papers/summary/wp_2004-31.pdf. (Center for Retirement Research at Boston College)
Demographic Time Bomb Threatens Pensions in Europe
Excerpt: "In Britain, which offers Europe's least generous old age pensions, Adair Turner, chairman of the government appointed Pensions Commission in London said, 'Our problem is that we are going to have a whole lot of very poor pensioners in 30 years time.' And in much of continental Europe, where years of social legislation have guaranteed pensions of as much as 70 percent of average retirement-age paychecks, Mr. Turner said, the continent 'is going to have reasonably well-off ....'" (The New York Times; one-time registration required)
Opinion: Social Security Plan Might Force Bush to Provide Details
Excerpt: "If President Bush ... wants to push an overhaul of Social Security ... through Congress during his second term, he will probably have to do something he rarely did during his first term -- get his hands dirty. To revamp the popular retirement program, many allies say, Bush will have to offer detailed proposals to Congress and engage in a broad public campaign to justify the changes and its cost. And he will have to ride herd on legislators to ensure they do not veer from his main ...." (Los Angeles Times via Yahoo! News)
Bush's Social Security Plan Might Require Vast Borrowing
Excerpt: "The White House and Republicans in Congress are all but certain to embrace large-scale government borrowing to help finance President Bush's plan to create personal investment accounts in Social Security, according to administration officials, members of Congress and independent analysts. The White House says it has made no decisions about how to pay for establishing the accounts, and among Republicans on Capitol Hill there are divergent opinions about how much borrowing would be ...." (The New York Times; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Year-End Checkup for Benefit Plans (PDF)
9 pages. Excerpt: "This Alert will help identify year-end administrative and planning issues that could lead to compliance or employee relations problems if not addressed before, or early in, 2005. In addition, we have highlighted recent legislative or regulatory developments that may warrant plan design decisions." (Aon Consulting)
Law Firms Point Fingers Over Failure to File Form S-8 Registration Statement
Excerpt: "EarthLink Inc. filed suit Friday in Fulton County State Court against Powell Goldstein, charging the law firm with causing a massive repurchase of employee stock by neglecting to file an important document with the Securities and Exchange Commission. In response, Powell Goldstein filed a third-party complaint against the law firm it says was responsible for the filing slip-up: Hunton & Williams." (Fulton County Daily Report via New York Lawyer)
United Airlines Seeks Court's Aid in Getting Additional Labor Concessions
Excerpt: "UAL Corp., parent of United Airlines, asked a bankrup.tcy court Wednesday to terminate its union contracts if the carrier can't get an additional $725 million in cost savings from employees by mid-January. The nation's No. 2 airline says it needs the additional labor concessions and the ability to drop traditional pensions to secure financing and get out of bankrup.tcy reorganization. The cuts would come atop the $2.5 billion in annual labor concessions the United employees have ...." (AP via The Washington Post; one-time registration required)
Commentary on Today's Article from the Wall Street Journal Titled: "Chapter 11 Doesn't Fly"
Excerpt: "Many are wondering how best to address the problem of the Pension Benefit Guaranty Corporation's ballooning deficit (now $23.3 billion, up from $11.2 billion in 2003) and the further strain to the system of recent airline bankruptcies. Steven A. Kandarian, Douglas M. Steenland and Duane E. Woerth offer their proposal for a solution in a commentary published in today's Wall Street Journal entitled 'Chapter 11 Doesn't Fly' ...." (Attorney B. Janell Grenier via BenefitsBlog.com)
Merck Adopts Plans for Severance Packages
Excerpt: "Merck & Co. said Monday its board adopted a plan that will pay hefty severance packages to more than 200 employees in the event that a change of control of the company takes place. The contingency plan comes as the pharmaceutical company is facing huge legal liabilities due to heart problems linked to its pres.cription painkiller Vioxx, investigations by the U.S. Securities and Exchange Commission and the Justice Department, and growing concerns about the company's future." (The Porterville Recorder)
Newly Posted Events
ASPPA Benefits Council of Greater Cincinnati's Annual Meeting and a Presentation by Debbie F. Reiss regarding the changes to Nonqualified Deferred Compensation Arrangements.
in Ohio on December 8, 2004
presented by ASPA Benefits Council of Greater Cincinnati
Benefits Communication and Technology Institute
in California on March 6, 2005
presented by International Foundation of Employee Benefit Plans
Certificate of Achievement in Public Plan Policy - Pensions & Health Part I
in Florida on February 28, 2005
presented by International Foundation of Employee Benefit Plans
Certificate of Achievement in Public Plan Policy - Pensions & Health Part II
in Florida on March 2, 2005
presented by International Foundation of Employee Benefit Plans
Certificate Series - 401(k) Plans
in Florida on February 16, 2005
presented by International Foundation of Employee Benefit Plans
Certificate Series - Basic Compensation Concepts
in Florida on February 16, 2005
presented by International Foundation of Employee Benefit Plans
Certificate Series - Choice Based Benefits
in Florida on February 18, 2005
presented by International Foundation of Employee Benefit Plans
Certificate Series - Health Benefit Plan Basics
in Florida on February 14, 2005
presented by International Foundation of Employee Benefit Plans
Certificate Series - Health Care Cost Management
in Florida on February 16, 2005
presented by International Foundation of Employee Benefit Plans
Certificate Series - Investment Basics
in Florida on February 14, 2005
presented by International Foundation of Employee Benefit Plans
Certificate Series - Retirement Plan Basics
in Florida on February 18, 2005
presented by International Foundation of Employee Benefit Plans
Estate and Income Tax Planning for Qualified Plans and IRAs
Nationwide on January 20, 2005
presented by SunGard Corbel
Fiduciary Liability: Best Practices for Plan Governance to Manage ERISA Related Risks
in New York on December 2, 2004
presented by WEB (Worldwide Employee Benefits Network) New York Chapter
Fundamentals of Employee Benefits Law
in Texas on March 3, 2005
presented by ALI-ABA (American Law Institute-American Bar Association)
Trustees and Administrators Institutes
in Florida on February 14, 2005
presented by International Foundation of Employee Benefit Plans
Newly Posted Press Releases
CitiStreet Launches Personalized Resource Center; Participants Can Get Financial Curriculum Tailored to Their Needs
(CitiStreet)
Newly Posted or Renewed Job Openings
ERISA Attorney/ Consultant
for Towers Perrin
in MA
Pension Administrator
for Flynn, Shojinaga & Associates, Inc.
in CA
CS Project Manager
for Hewitt Associates
in IL
Product Specialist
for Merrill Lynch
in NJ
Retirement Plan Administrator
for PensionOne Advisors, Inc.
in CA
Health Insurance & Group Insurance Sales Executive
for Alliance Benefit Group of Kansas City, Inc.
in IA, KS, MN, MO
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- Employee Benefits Library
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