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December 20, 2004
Today's sponsor: Actuarial Systems Corporation
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ASC - QUALITY SOFTWARE FOR THE PENSION INDUSTRY FOR OVER 20 YEARS ASC provides complete automation for the pension office, including: DC/401(k) and DB administration and valuation systems, sophisticated Compliance Testing, DV Direct Daily Valuation, Advanced Information Manager Database (AIM), and Single-Step Processing. All ASC Technical Support Members were experienced Pension Administrators or Actuaries before joining ASC -- and most have been with ASC for over 10 years.
(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Text of DOL FAB 2004-03: Fiduciary Responsibilities of Directed Trustees
Excerpt: "In the context of publicly traded securities, what are the fiduciary responsibilities of a directed trustee?" (U.S. Employee Benefits Security Administration)
Overview: IRS Releases Cumulative List of Changes in Qualification Requirements
[IRS Notice 2004-84 (Dec. 14, 2004)] For a copy: http://www.irs.gov/pub/irs-drop/n-04-84.pdf. Excerpt: "In this Notice, the IRS releases a list that identifies changes made by statutory, regulatory, and other guidance that the IRS will consider in reviewing pre-approved plans submitted to the IRS for opinion and advisory letters." (Employee Benefits Institute of America)
Pension Agency Wary of UAL Deal: $550 Million Note Offered in Trade for Pilots' Plan
Excerpt: "United Airlines parent UAL Corp. and leaders of its pilots union have agreed on a deal under which the pilots will not oppose termination of their pension plan but will receive a $550 million note convertible into company stock when the airline emerges from bankrup.tcy protection." (The Washington Post; one-time registration required)
Pilots' Union at United Airlines Makes Pension Deal Allowing Termination
Excerpt: "The union that represents pilots at United Airlines said yesterday that it had struck a deal that would allow the airline to terminate the pilots' ailing pension plan and partly compensate them for the loss. It is unclear, however, whether the agreement will withstand legal scrutiny." (The New York Times; one-time registration required)
Building a Nation of Savers by the Path of Least Resistance
Excerpt: "Americans seem to hate saving. In October, the nation's households saved just 0.2 percent of their income. And despite the tax advantages conferred by 401(k)'s, individual retirement accounts and other savings vehicles, most people simply refuse to stash much money in them. As of 2001, the most recent data available, only 8.4 percent of 401(k) investors made the maximum contributions, according to Alicia H. Munnell, director of the Center for Retirement Research at Boston College." (The New York Times; one-time registration required)
How Do You Calculate the Required Minimum Distribution (RMD) for an Off-Calendar-Year Plan?
Excerpt: "RMD calculations use the value of a participant's plan assets as of December 31 of the year immediately prior to the year for which the minimum distribution is being calculated. For a calendar year plan, the value of the participant's assets is determined as part of the annual statement preparation. Off-calendar-year plans are valued on a daily basis, including December 31, so the information for RMD calculations is readily available. However, calculating RMDs for a balance-...." (McKay Hochman Co.)
Overview: The Proposed 403(b) Regulations
Excerpt: "For the first time in more than 40 years, the IRS has proposed comprehensive regulations to update 403(b) plans. The new regulations would erase most of the differences between these plans and 401(k) plans. The IRS will be accepting public comments until February 15, 2005, and hopes to issue final regulations in time for the 2006 plan year." (McKay Hochman Co.)
Getting Out of a Variable Annuity Proves Arduous and Expensive
Excerpt: "Quick, a multiple choice test! Question: Husband-and-wife educators want to switch 403(b) plans. How easy is it? a. Easy as 1-2-3! b. A few glitches, but they are simply glowing about the overall process. c. Not so easy, but who cares! At least it was fun! d. Husband loses mind. Says, 'Hell with it!' Cashes in 403(b) plans. Runs away to a barter society in the Himalayas." (bWise Guys, LLC.)
Overview: IRS/Treasury Issue New Standards for Attorneys, Accountants and Other Tax Professionals
Excerpt: "This announcement from Treasury [on December 17, 2004]: As part of an ongoing effort to improve ethical standards for tax professionals and to curb abusive tax avoidance transactions, the Treasury Department and the Internal Revenue Service today issued final regulations amending Treasury Department Circular 230." (Attorney B. Janell Grenier via BenefitsBlog.com)
U.K. Pension Regulator Gets Expanded Authority
Excerpt: "U.K. employers with defined benefit pension plans could face mandatory contributions if corporate restructurings impair the plans, under new powers granted to the pension regulator, a recent government update notes. .... 'Avoiding Pension Liabilities -- Implications of the Pensions Act 2004 for Employees and Trustees, Update 10,' is available at www.opra.gov.uk." (Business Insurance)
Text: 2nd Annual CFO Pension Management Survey and Pension Outlook 2005 (PDF)
16 pages. Excerpt: "The 2ND Annual CFO Pension Management Survey represents SEI's most recent in-depth study on the current impact of pensions on corporate America's financial health. It also provides a glimpse into the industry's outlook for 2005 and beyond." (SEI Investments)
Letter to the Editor: Social Security Debate Should Include G.ays, All Groups With an Interest
Excerpt: "Re 'G.ay Groups Are Debating Social Security' (news article, Dec. 11): The Human Rights Campaign does not support Social Security privatization. We believe strongly, however, that any debate on Social Security must include les.bian, g.ay, bise.xual and transgender families, as should any discussion about pensions or the tax code, for that matter." (The New York Times; one-time registration required)
The Public Company ESOP in 2004 (PDF)
18 pages. Excerpt: "[T]here are a number of ... ESOP issues and technical questions that have arisen in recent years, many unique to ESOPs maintained by public companies. Issues affecting private company ESOPs ... have continued to evolve as well, but in our view have already received a fair amount of attention in the tax press. ESOP issues of public companies have not received as much attention. This article will attempt to remedy that.' (Journal of Pension Planning and Compliance via Groom Law Group)
Overview: IRS Issues S Corporation ESOP Guidance on Employee Plans Abusive Tax Transactions
Excerpt: "The office of Employee Plans of the Tax Exempt and Governmental Entities Division of the IRS recently sent out letters to the adopters of certain Employee Stock Ownership Plans (ESOPs) to make them aware that: Their ESOP may be affected by a change made to the Internal Revenue Code applicable to S corporation ESOPS that is generally effective on January 1, 2005, and The Service has identified a number S corporation ESOPs that have entered into abusive transactions." (Internal Revenue Service)
Overview: Institutional Shareholder Services' 2005 Policy Changes (PDF)
7 pages. Excerpt: "Institutional Shareholder Services ('ISS') recently released its 2005 policies for voting recommendations on proxy proposals, which include changes from prior policies in several important executive compensation areas. The most significant changes that will be of concern to companies pertain to equity compensation plans covering employees or directors." (Frederic W. Cook & Co., Inc.)
Federal Update, December 18, 2004, to NCTR Membership from Cindie Moore, Washington Counsel (PDF)
2 pages. Excerpt: "2004, an otherwise uneventful year, ended with a little excitement. Rep. Rob Andrews (D-NJ) dusted off a PEPPRA bill from 2001 and re-introduced it on November 19. The Retirement Enhancement Revenue Act of 2004, H.R. 5398, would impose extensive federal reporting and disclosure on state and local government plans. Among other things, it would require states to set up qualified review boards that could overturn enacted state law on employer contributions." (National Council on Teacher Retirement)
Text of July 20, 2004, Hearing on H.R. 4391, the 'Public Servant Retirement Protection Act'
Excerpt: "[T]oday's hearing will give us an opportunity to understand how H.R. 4391, the 'Public Servant Retirement Protection Act,' will ensure fair treatment of government employees and how it will affect Social Security's long term financing." (House Committee on Ways and Means, Subcommittee on Social Security)
Opinion: Social Security Reform without Illusion-- The Five Percent Solution
Excerpt: "Consequences of Reform. After about three decades, the reformed Social Security system will finance itself. At this point, workers' Social Security payroll taxes and contributions will be more than sufficient to pay benefits and make contributions to PRA accounts. As a result, government can reduce the Social Security payroll tax, and over the next three decades, the combined contribution rate could be cut in half." (National Center for Policy Analysis)
Opinion: Bush's Social Security Plan Would Fix Nothing and May Make the Problem Worse
Excerpt: "Not once ... did Bush acknowledge that the creation of private accounts actually would do nothing to make Social Security solvent in the long run. In fact, by itself, diverting a portion of payroll taxes makes the problem worse, not better. Nor did Bush mention that, with the federal budget already deep in deficit, the government would need to borrow an additional $100 billion or more a year from the public to buy the private sector assets going into the private sector accounts." (Bloomberg News)
Opinion: Social Security and the Retirement Age Crunch -- Earlier Retirement and Longer Life
Excerpt: "At last week's White House economic conference, there was considerable discussion of the need to reform Social Security. The primary reasons given were to improve fairness for younger workers and put the system on a sound financial footing. As important as these are, however, I think there is an even more important reason to reform Social Security, and that is to keep older workers in the labor force." (The Washington Times)
Six Letters to the Editor of the New York Times on the Social Security Privatization Issue
Excerpt: "People must awaken to the true goals of privatization. Even if someone could guarantee that the market will always be 'up' no matter when you retire (an obvious impossibility), little attention has been paid to other consequences. Widows, orphans and the disabled would be denied the protection the present plan offers. We must not be silent in the face of the destruction of our social safety net." (The New York Times; one-time registration required)
Hedge Fund Contracts Warrant Closer Look, Some Experts Say
Excerpt: "Pension managers investing in the hedge fund hybrid known as a fund of funds would do well to take a close look at their contract wording to ensure they are not in violation of ERISA, an industry expert says." (Employee Benefit News)
Bush Lauds Federal Thrift Savings Plan as Outline for Future Social Security Program
Excerpt: "Once again, a program created for federal employees is being held up as a model for reform. President Bush, in his closing remarks at the White House economic conference last week, suggested that the Thrift Savings Plan could be a starting point for overhauling Social Security to allow the nation's workers to shift some of their payroll taxes into personal investment accounts." (The Washington Post; one-time registration required)
Editorial: Social Security Reform Dodge –- Details, Effects, Cost, Not Being Addressed
Excerpt: "'The crisis is now,' President Bush declared of Social Security at the economic conference called by the White House last week. The president's language may have been a bit hyperbolic -- the funding shortfall in Social Security is big but not insurmountable, and in any event Medicare is a far more daunting problem -- but his fundamental point is sound. However dire your view of the Social Security situation, it's far better to deal with the problem now than wait until it's bigger ...." (The Washington Post; one-time registration required)
Social Security Tax Limit on Incomes May Go Up
Excerpt: "Two of President Bush's top advisers refused on Sunday to rule out the possibility that wealthy people might have to pay more to help cover the cost of his move to partially privatize Social Security. Neither Treasury Secretary John Snow nor Andrew Card, the White House chief of staff, would say whether Bush's ideas about overhauling the federal retirement program would include raising the limit on incomes subject to Social Security taxes." (AP via The New York Times; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Analysis: Notice 2005-1-- A Glidepath to Compliance with Section 409A (PDF)
Excerpt: "Treasury and IRS released today Notice 2005-1, their initial guidance on new Code section 409A ('409A'), a statutory provision that makes sweeping changes in the rules for nonqualified deferred compensation plans.... Plan amendments to comply with 409A may be made as late as December 31, 2005. In the meantime, operational compliance with 409A, using Notice 2005-1 and good faith, is sufficient." (Kilpatrick Stockton LLP)
Text of IRS Guidance on New Nonqualified Deferred Compensation Arrangement Rules (PDF)
Notice 2005-01; 36 pages. Excerpt: "[T]his notice provides the first part of what is expected to be a series of guidance with respect to the application of § 409A.... The notice first provides definitions of a nonqualified deferred compensation plan, a plan and the deferral of compensation.... This notice provides a definition of a substantial risk of forfeiture.... [A] rule is provided for calculation of the amount of deferrals before January 1, 2005 ..." (Internal Revenue Service)
FAQ on Statement of Financial Accounting Standards No. 123 (Revised 2004) on Share-Based Payment (PDF)
27 pages. Excerpt: "This document was prepared to respond to questions related to the Board's decisions on accounting for share-based payment transactions as presented in the Statement referenced above. Following the Frequently Asked Questions is a summary description of the Statement's provisions. This material is presented for discussion purposes only." (Financial Accounting Standards Board)
Dec. 17 News Scan, with Analysis of Employee Benefit Issues, from Gabriel, Roeder, Smith & Company (PDF)
6 pages. The news summaries in this edition cover: IRS Issues 403(b) Proposed Regulations; IRS Announces Cost-of-Living Adjustments for HSAs; IRS Proposes Rules for Phased Retirement Arrangements; Final Safe Harbor Rule for Automatic Rollovers is an Improvement, But Concerns Remain; Nonqualified Deferred Compensation Transitional Relief; and, Missouri Joins Drug Importation Program." (Gabriel, Roeder, Smith & Company)
Text: Recruitment, Retention, Retirement: Compensation and Employment Policies for Higher Education (PDF)
15 pages. Excerpt: "This paper examines existing human resources policies and considers potential modifications that will enable institutions to recruit, retain, and retire faculty in the coming years. The analysis reviews the soaring cost of health insurance for active and retired faculty and how these plans are being amended. It also reviews the widespread adoption of phased retirement plans and the use of early retirement programs as components of HR policy." (TIAA-CREF Institute)
Washington Legislative Wrap Up, 108th Congress (2003-2004) As of December 8, 2004 (PDF)
7 pages. The chart of federal legislative and regulatory proposals concerning employee benefits of interest to NCTR members has been updated to be current as of December 8, 2004. The federal updates referenced in the chart are available at http://www.nctr.org/federal/index.html. (National Council on Teacher Retirement)
Newly Posted Events
The 403(b) Regulations - A Whole New Ballgame
Nationwide on January 13, 2005
presented by SunGard Corbel
The Gold Standard and What It Means for You
Nationwide on January 11, 2005
presented by SunGard Corbel
Newly Posted Press Releases
Pinal County Community College District Selects Gilsbar, Inc. to Provide Health Plan Administration Solution
(Gilsbar, Inc.)
The Principal Financial Group and Ameripay to Provide Seamless Payroll, Retirement Plan and Financial Consulting Services
(Principal Financial Group)
Newly Posted or Renewed Job Openings
Retirement Plan Service & Sales Support
for Pinnacle Financial Group
in MA
Compliance Specialist: Retirement Services
for Citizens Bank
in MA
Actuary
for Benetech, Inc.
in AZ, CA, GA
Retirement Specialist
for Nationwide Insurance
in AZ, CA, FL, IL, KS, MD
Handy Links:
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