| BenefitsLink Retirement Plans Newsletter |   |
December 3, 2004
Today's sponsor: Kiplinger
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(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
The Automatic 401(k): It May Be a Revolution--or Merely Better Than Nothing
Excerpt: "J. Harold Williams, a CFP and CPA with Linscomb & Williams in Houston, recently did some consulting for a large local law firm whose investment committee members had started to worry about their 401(k) responsibilities. The planner's client has between 400 and 500 plan participants and close to $150 million in 401(k) assets. Yet many of the law firm's employees--too many, the committee felt--had failed to choose among the many investment alternatives on their plan menu." (Financial Planning)
Employees Still Invest Their 401(k)s in Company Shares and They Still Sue If the Stock Goes South
Excerpt: "For Merck & Co., one trigger was the withdrawal of Vioxx from the market. For Marsh & McLennan Cos., it was news that New York State Attorney General Eliot Spitzer had launched an investigation into alleged bid-rigging. And for Delta Air Lines Inc., it was simply investors' belief that management had mismanaged the company. The result for all three companies, however, was the same: after their stock price fell precipitously, employees hit them with class-action lawsuits citing ...." (CFO Magazine)
Report on Survey of Pension Participant Knowledge About Plan Fees
Excerpt: "Participants in defined contribution plans pay billions of dollars annually in fees to fund managers for the management of their investments and may pay other fees related to costs associated with their participation in the plans. This Data Digest presents results of a survey that provide insights into pension participants' knowledge of the fees they pay for their 401(k) plans." (AARP)
Technical Tip: IRS 1099-R Codes Changed for the 2004 Form
Excerpt: "The IRS has announced a change to the instructions for the 2004 Form 1099-R. Retirement plans file this form to report distributions. The revisions affect distribution codes 1 and 2 for Box 7 of the form. A plan uses these codes to report distributions to participants under age 59-1/2. In general, code 1 indicates that the distribution could be subject to a 10% early distribution penalty under Code 72(t), while code 2 indicates the distribution is exempt from the penalty." (SunGard Corbel)
IRS Announces Change to Form 1099-R Instructions
Excerpt: "The Internal Revenue Service (IRS) has announced a revision to the instruction for the 2004 Form 1099-R, which retirement plans file to report distributions. The changes affect distributions codes 1 and 2 for Box 7 of the form; a plan uses these codes to report distributions to participants under age 59-1/2. In general, code 1 indicates that the distribution may be subject to a 10% early distribution penalty under Code 72(t)." (PLANSPONSOR.com; one-time registration required)
Overview: IRS Enforcing IRA Required Minimum Withdrawals
Excerpt: "If you've hit your 70th birthday ... make sure you're taking the proper amount from your IRAs or risk a potential 50 percent tax on money that should have been withdrawn, the Wall Street Journal reported. The rules in question involve 'required minimum distributions' from individual retirement accounts, which are required once the IRA's holder reaches the age of 70[1/2]. The amount that has to be withdrawn is based on life expectancy." (AccountingWEB.com)
Current Report on SEC Form 8-K, November 23, 2004 -- Frequently Asked Questions
Excerpt: "The answers to these frequently asked questions represent the views of the staff of the Division of Corporation Finance. They are not rules, regulations or statements of the Securities and Exchange Commission. Further, the Commission has neither approved nor disapproved them. Note: Since the Commission's publication of Release No. 34-49424, Additional Form 8-K Disclosure Requirements and Acceleration of Filing Date, we have received a number of questions regarding the ...." (U.S. Securities and Exchange Commission)
Overview: Odds are Against You Choosing the Optimum Owner-Only Retirement Plan
Excerpt: "The choices for owner-only plans (including the so-called Solo(k) and Individual(k) plans) are numerous and far more complicated than one might suspect. Selecting the right plan type, benefits and features portends the plan's ultimate success or failure. Unless you are familiar with all of the plans and each of their respective forms shown below, the odds are that you will not choose the optimum plan." (Milberg Consulting LLC)
Opinion: a False Start on Social Security -- $1 Trillion Needed to Create Personal Accounts
Excerpt: "Even before the debate has truly begun over the centerpiece of President Bush's second-term domestic agenda - creating private retirement accounts within Social Security - White House and Congressional budget leaders have been floating the idea that it won't require a major increase in the federal budget deficit. This is dangerously misguided. Unwilling to raise taxes, Congress and the administration will have to borrow well over $1 trillion to turn the president's wish into reality." (The New York Times; one-time registration required)
IRS Advises Employers on Rules for Using Unenrolled Preparers in Employee Plan Submissions
Excerpt: "A change in IRS practice regarding the use of Form 2848 (Power of Attorney and Declaration of Representative) may affect employers and plan sponsors. [T]he IRS advises employers of the changes in the rules for eligibility to represent a taxpayer before the IRS and discusses the implications of those changes for employers who use unenrolled preparers to make submissions to the EP determination letter program or to take part in the Employee Plans Compliance Resolution Program...process." (CCH Pension & Benefits News)
IRS Weighted Average Interest Rate Table Updated for December 2004
Weighted average for December 2004: 5.11% (Internal Revenue Service)
IRS Composite Corporate Bond Rate Table Updated for December 2004
Excerpt: "Excerpt: Note: In determining whether a plan is subject to quarterly contributions under section 412(m)(1) for the plan year beginning January 1, 2004, the funded current liability percentage for 2003 may be recalculated using the corporate weighted average interest rate. However, for purposes of computing the required installment under section 412(m)(4) for plan years beginning in 2004, the required amount for plan years beginning in 2003 may not be recalculated using the ...." (Internal Revenue Service)
Gliding into the Golden Years: New Proposed Phased Retirement Rules Allows Gradual Reduction
Excerpt: "Many Americans say that instead of retiring full-time, they want to ease into their nonworking years. A recent study by consulting firm Watson Wyatt Worldwide finds that nearly two-thirds of surveyed workers over 50 hope to scale back their jobs or work in a more flexible environment before retiring for good. Phased retirement is also attractive to many employers. 'Workers with niche experience are hard to find,' ...." (Ellen Hoffman via BusinessWeek Online)
Phased Retirement - Proposed Regulations Define a New Alternative to Full Retirement (PDF)
3 pages. Excerpt: "The proposed regulations define a 'bona fide phased retirement program' as a written, employer adopted program pursuant to which employees may reduce the number of hours they customarily work beginning on or after a specified retirement date and begin to receive phased retirement benefits. A bona fide phased retirement program must be limited to employees who have attained age 59-1/2. However, a plan is permitted to impose further requirements for eligibility to ...." (Dechert LLP)
Issue Brief: a Bird's Eye View of the Social Security Debate by Alicia H. Munnell (PDF)
10 pages. Excerpt: "This Issue in Brief is intended to highlight the key points in the debate. First, it documents the magnitude of the Social Security financing problem. .... Second, it clarifies that the privatization debate usually encompasses two separate issues -- how to close Social Security's financing gap and how to structure benefits. Third, it addresses the slightly esoteric, but quite important, issue of how to account for the higher expected returns earned on more risky assets." (Center for Retirement Research at Boston College)
Warning on Social Security Benefits from Bush Aide
Excerpt: "Calling the current system of Social Security benefits unsustainable, a top economic adviser to President Bush on Thursday strongly implied that any overhaul of the system would have to include major cuts in guaranteed benefits for future retirees. 'Let me state clearly that there are no free lunches here,' said N. Gregory Mankiw, chairman of the Council of Economic Advisers, at a conference on tax policy here." (The New York Times; one-time registration required)
Foreign Firms May Avoid Fully Funding UK Pension Plans
Excerpt: "Firms based outside Britain may shun calls to fully fund the employee pension plans of their UK subsidiaries, although some will pick up the bill to avoid damaging publicity, a senior pension lawyer said on Thursday. The newly-passed UK Pensions Act gives a regulator powers to make British firms shoulder their pension responsibilities, but their foreign parent firms may be beyond its reach, Hugh Arthur, head of pensions at law firm Macfarlanes, said." (Reuters)
Links to Items on Executive Comp, Benefits in General
Implication of New Definition of Dependent for Employer-Sponsored Plans
Excerpt: "In the absence of any further guidance ..., it may be prudent to communicate the new definition of dependent to participants in dependent care spending account plans and permit those employees who planned to submit expenses for non-qualifying individuals to revoke and/or revise their elections so as to avoid any forfeitures. In addition, employers should review their hardship withdrawal procedures under 401(k) and 457 plans to determine whether any changes are required." (McDermott Will & Emery LLP)
Overview: Provisions Affecting Deferred Compensation in the American Jobs Creation Act of 2004 (PDF)
Excerpt: "The Act makes vested nonqualified deferred compensation taxable on a current basis unless certain requirements, which are significantly different than the requirements currently in effect, are met. As a result of the broad coverage of what is considered to be 'nonqualified deferred compensation,' the Act has implications that affect traditional deferred compensation plans, as well as stock appreciation rights, restricted stock units and nonqualified retirement plans." (Frederic W. Cook & Co., Inc.)
Pennsylvania Governor Rendell Vetoes Nonqualified Deferred Compensation Plan Legislation
Excerpt: "In a major set back for Pennsylvania businesses and their employees, Governor Rendell has vetoed legislation that would have adopted the federal constructive receipt rule for purposes of applying Pennsylvania's personal income tax to nonqualified deferred compensation plans. While the governor's veto has likely put an end to any further developments on this matter for 2004, it very likely that Pennsylvania's General Assembly will revisit this issue when it reconvenes in 2005." (Buchanan Ingersoll PC)
Bush Board Overrules M.B. Sturgis Rule Regarding Bargaining Units that Include Leased Employees
Excerpt: "In a 3-2 decision ..., the National Labor Relations Board ... overturned a controversial 2000 ruling that had shaken one of the foundations of the temporary employment industry. As a result of the decision, the NLRB has returned to the position that temporary agency employees who are jointly employed by supplier ... and user ... employers cannot be made part of a single bargaining unit without the consent of both employers. H.S. Care L.L.C. , 343 NLRB No. 76 (2004)." (Littler Mendelson)
IRS Notice 2004-62 Providing Relief in Connection with Certain Employee Benefit Plans in Florida (PDF)
3 pages. Excerpt: "The Internal Revenue Service, the Department of Labor's Employee Benefits Security Administration ... and the Pension Benefit Guaranty Corporation ... are providing relief in connection with certain employee benefit plans because of damage in Florida caused by Tropical Storm Bonnie, Hurricane Charley and Hurricane Frances ('Florida Storms'). The relief provided by this notice is in addition to the relief already provided by the Service to victims of the Florida Storms." (Internal Revenue Service)
Newly Posted Events
Current Health Care Trends – 2005 and Beyond
Nationwide on December 16, 2004
presented by International Foundation of Employee Benefit Plans
Estate and Income Tax Planning for Qualified Plans and IRAs
in Pennsylvania on February 3, 2004
presented by SunGard Corbel
Estate and Income Tax Planning for Qualified Plans and IRAs
in Oregon on February 3, 2004
presented by SunGard Corbel
Estate and Income Tax Planning for Qualified Plans and IRAs
in Pennsylvania on February 3, 2005
presented by SunGard Corbel
Estate and Income Tax Planning for Qualified Plans and IRAs
in Oregon on February 3, 2005
presented by SunGard Corbel
Estate and Income Tax Planning for Qualified Plans and IRAs
in Massachusetts on February 4, 2005
presented by SunGard Corbel
Newly Posted Press Releases
Health Policy Fellowship - Don't Delay: Application Deadline January 10, 2005
(AcademyHealth)
Independent Fiduciaries Formalize Profession with Creation of the "ERISA Fiduciary Guild"
(ERISA Fiduciary Guild)
Newly Posted or Renewed Job Openings
Record Keeper/Tester
for WySTAR Global Retirement Solutions
in MN
Regulatory Oversight Consultant
for Merrill Lynch
in NJ
Consultant - New Business Manager
for Benefit Systems, Inc.
in CA, LA, OR, TX
Client Services Manager/Trust Associate
for WySTAR Global Retirement Solutions
in MN
Customer Service Representative
for Emjay Corporation
in WI
International Benefits Consultant
for Apple Computer, Inc.
in CA
Motivated Sales Representative
for Primark Benefits
in CA
Defined Contribution/401(k) Administrator
for Professional Capital Services, LLC
in PA
Association 401(k) Plan Consultant
for Independent Insurance Agents and Brokers of America
in DC, MD, VA
401(k) / Pension Administrator
for NestEgg Consulting, Inc. (a subsidiary of INTRUST Financial Corporation)
in KS
Contract Consultant
for The Paragon Consulting Group, Inc.
in ANY STATE
Marketing Communications Manager
for ADP
in GA
Defined Benefit Plan Administrator
for EMJAY Retirement Services, A Great-West Company
in WI
Principal Administrative Analyst
for University of California, Office of the President
in CA
Plan Consultant - Defined Contribution Services
for Franklin Templeton Investments
in FL
Daily Valuation Senior Conversion Specialist
for Fiserv Investment Support Services
in CO
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