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December 27, 2004
Today's sponsor: William J. Stecker, CPA

(Click on company name or banner to learn more.) 

A Practical Guide To Substantially Equal Periodic Payments And Internal Revenue Code §72(t)
New 4th edition by William J. Stecker, CPA with all of the updates needed
to reflect the issuance of Revenue Ruling 2002-62 in October, 2002 as well
as all Private Letter Rulings issued subsequently.
This text is a must read for anyone under age 60 who is contemplating
early retirement and has substantial 401(k) or IRA assets. This text
will teach the reader everything they need to know about avoiding the
10% surtax on early withdrawals as defined in IRC 72(t). All computational
methods are covered and how to plan and properly execute substantially
equal periodic payments. This is the definitive text on IRS 72(t) including
more than 190 footnotes citing all of the relevant legal authorities.
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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)
A Cost-Saving Alternative for Companies of All Sizes: Class-Based Pensions
Excerpt: "Class-based pension plans (also known as cross-tested or new comparability plans) group employees in different categories for purposes of determining the amount of contributions employers make on behalf of each employee. Larger organizations often use class-based plans to reward productivity and provide employee incentives. In small professional practices, a class-based plan can boost tax-efficient contributions on the owners' behalf.' (Journal of Accountancy)

It Might Take Some Work and Planning If You Want to Retire Early
Excerpt: "Workers considering early retirement should crunch the numbers first, financial planners say, to make sure that they will have enough income - typically about 70 to 80 percent of their preretirement earnings. They should also consider how they are going to cover their health care. Some buyout offers that are geared toward encouraging early retirement will offer medical insurance until Medicare kicks in at age 65, and might also sweeten employee pensions." (The New York Times; one-time registration required)

Pensions Evolving Into 401(k) Plans
Excerpt: "The days of workers putting in 30 years and taking home a gold watch, pension and fully paid health care from their employer are all but gone." (Los Angeles Daily News)

NYC's 457 Plan Forgoes Mutual Funds
Excerpt: "Ask any one of the 115,000 plan participants in the New York City Deferred Compensation Plan, 'What plan are you in?' and they are most likely to answer, 'New York City's,' rather than name an insurance company or mutual fund family. How did this come about?" (Plan Sponsor)

Comments on IRS Warning Letter on Abusive S Corporation ESOP Arrangements
Excerpt: "About 1700 business and retirement plan sponsors will be receiving something in the mail from IRS this season--and it won't be a holiday greeting. The IRS announced ... that it has recently issued letters to certain businesses and retirement plan sponsors (1) alerting them of a change in the law effective January 1, 2005 applicable to S corporation ESOPs and (2) warning them of the consequences of participating in abusive schemes involving ESOPs and S corporations." (Attorney B. Janell Grenier via BenefitsBlog.com)

SEC Subpoenas the City of San Diego for Pension and Finance Records
Excerpt: "A federal subpoena served on San Diego's city manager seeks a mountain of material on the city's pension underfunding, on possible conflicts of interest at the pension board and on financial reporting irregularities by city officials." (The San Diego Union-Tribune)

Total Retirement Administration Outsourcing Approach Cooks at World Kitchen
Excerpt: "When World Kitchen, the leading international supplier of kitchenware products, emerged from Chapter 11 bankrup.tcy a few years ago, a major objective was to alleviate its retirement administration burden." (Employee Benefit News)

Outcome of IBM Cash Balance Pension Plan Case Could Ripple Throughout Nation
Excerpt: "A court case pitting IBM against about 130,000 current and former employees is a ticking time bomb -- one that could produce shock waves for companies and employees in Colorado and nationwide. At issue: whether IBM discriminated against older workers when it replaced its traditional pension plan in 1995 with a new type of pension plan and then changed it yet again in 1999." (Rocky Mountain News)

Opinion: Personal Accounts Are Already Working, Which Might Be Why the Critics Are So Scared
Excerpt: "The Thrift Savings Plan proves that there's nothing too risky, too expensive, or too complicated about personal accounts for Social Security. So what are the critics really worried about? I think they're afraid that personal accounts are too empowering. Once a nation of voters becomes a nation of empowered investors -- there's just no telling what kind of empowerment they'll want next." (National Review Online)

Social Security Wins Over Personal Accounts Investing, Under One Man's Retirement Math
Excerpt: "He recorded all the payroll taxes he paid into the system (including the ... employer [match]), tracked down the return the Social Security Trust Fund earned for each of the 45 years, and then compared the result with what he would have gotten had he been able to invest the same amount of payroll tax money over the same period in the Dow Jones Industrial Average .... To his surprise, the Social Security investment won out: $261,372 versus $255,499, a difference of $5,873." (The Christian Science Monitor)

Opinion: How Would Social Security Savings Be Managed, and At What Cost?
Excerpt: "José Piñera -- the 'father' of pension privatization in Chile and a promoter of that approach throughout the world -- reportedly has been encouraging President Bush to apply the Chilean pres.cription to cure U.S. Social Security ills. Indeed, The New York Times quoted Piñera as saying that Chile's pension privatization has had ``no economic transition costs, because there is no harm to gross domestic product (on the contrary there is a huge benefit).'" (The Miami Herald; one-time registration required)

Opinion: Social Security Privatization Isn't Needed for a Public That Doesn't Want It
Excerpt: "The Bush administration appears determined to build on its 'mandate' and push Social Security privatization early in Bush's second term. This seems an ill-advised plan for several reasons. First, there is little compelling evidence that Social Security is in any kind of crisis and none at all that carving out private accounts will improve Social Security's fiscal position. In fact, it will almost certainly worsen that position." (Public Opinion Watch via The Century Foundation)

Opinion: Social Security Wage Cap Caution
Excerpt: "Although President Bush has said he would not raise Social Security taxes to pay for private accounts, some of his aides are nevertheless floating the idea of a stealth tax increase on the wealthy. On Dec. 19, White House Chief of Staff Andrew Card and Treasury Secretary John Snow were asked on different Sunday talk shows if the administration would support an increase in the Social Security wage cap and both pointedly refused to rule it out." (The Washington Times)

Opinion: The Risky Assumption in Social Security Change
Excerpt: "The familiar disclaimer in ads for investment vehicles and money managers of all sorts is: 'Past performance is no guarantee of future returns.' It probably sounds obvious to anyone who has ever played the markets. So why, in proposing changes to Social Security, has the White House ignored that counsel?" (The New York Times; one-time registration required)

Opinion: Social Security Privatization Theories Don't Hold Up
Excerpt: "[I]'m convinced that Social Security privatization is not merely a bad idea but a certain failure, and I offered to provide a logical proof, challenging supporters to find the flaw or give up. My argument, as condensed as possible, defines success as bringing in more money than the current system does. More money is necessary either to reduce the gap between projected benefits and revenue or to make retirees better off. Supporters variously promise both of these benefits." (Michael Kinsley via The Washington Post; one-time registration required)

Opinion: The Savings-Rate Myth
Excerpt: "The Wall Street Journal's David Wessel wrote last week that 'American people, businesses and government don't save enough.' Citing the Commerce Department's official U.S. personal savings rate, 0.2 percent, the Los Angeles Times's Bill Sing wrote, 'It doesn't help that people in the U.S. are spending like there's no tomorrow.' Sing's and Wessel's assumptions are as bogus as the government statistic on which they're based." (National Review Online)

Opinion: Washington Fiddling While Private Retirement System Burns
Excerpt: "Why has fixing Social Security become the epicenter of the U.S. retirement debate while the easily bolstered private retirement system is largely ignored? Social Security generously provides inflation indexing of benefits, which the private system largely lacks." (Bloomberg News)

Links to Items on Executive Comp, Benefits in General

Overview: New Deferred Comp Legislation Brings Less Flexibility and More Work
Excerpt: "'A very, very large percentage of these plans will have to be revised going forward,' says Susan Linder, Dallas-based general counsel in the executive benefits practice at Clark Consulting. 'There are few plans in existence now that would be compliant under this new rule.'" (Plan Sponsor)

Overview: IRS Eases Transition Into New Deferred Compensation Rules (PDF)
3 pages. Excerpt: "The IRS has issued its eagerly awaited guidance on the new nonqualified deferred compensation rules ... created under the American Jobs Creation Act .... The good news for employers is that this first transitional guidance ... allays any concerns over having to amend plans, change deferral elections or implement resolutions by the end of this year. The IRS has made it clear that although plans should be operated in good faith compliance with the new rules throughout ...." (Mellon)

Overview: IRS Guidance on Nonqualified Deferred Compensation Legislation (PDF)
3 pages. Excerpt: "The guidance did not cover several important areas, including: Distribution issues (including application of the 5 year delay to changes in form of distribution, availability of alternative distribution events and timing of key employee determination); Off shore plan and trust issues; Stock appreciation rights issued by non-public companies; and, Severance plans that do not meet the limited 2005 exemption." (Gardner Carton & Douglas LLP)

Overview: IRS Issues Guidance on Nonqualified Deferred Compensation Plans in Notice 2005-1 (PDF)
2 pages. Excerpt: "In Notice 2005-1, the IRS provides initial guidance and temporary relief from a number of new requirements imposed on many existing nonqualified deferred compensation (NQDC) arrangements by the American Jobs Creation Act .... Although transitional relief is provided through 2005, plan sponsors must still operate their NQDC plans in 'good-faith compliance' with provisions of the new Internal Revenue Code section 409A and the guidance contained in the IRS notice during 2005." (Milliman)

Overview: EBSA Releases Its Semiannual Regulatory Agenda
Excerpt: "The Employee Benefits Security Administration (EBSA) has released its semiannual regulatory agenda, which outlines regulations that have been selected for review or development during the next year, as well as any regulations that have been finalized during the last six months." (CCH Pension & Benefits News)

List of Expiring Federal Tax Provisions: 2004-2014 (PDF)
Excerpt: "This document ... provides a listing of tax provisions (other than those providing time-limited transition relief after the repeal of an underlying rule) that are currently scheduled to expire in 2004-2014 (with references to the applicable section of the Internal Revenue Code of 1986 or other applicable law). For purposes of compiling this list, the staff of the Joint Committee on Taxation considers a provision to be expiring if, at some statutorily specified date in the future ...." (House Joint Committee on Taxation)

Overview: Pennsylvania's Governor Rendell Signs Common Law Marriage Bill (PDF)
2 pages. Excerpt: "On November 23, 2004, Governor Rendell signed into law HB 2719, abolishing common law marriage. The new law states that '[n]o common law marriage, contracted after January 1, 2005, shall be valid.' The law further provides that it does not invalidate an otherwise lawful common law marriage contracted on or before that date. As a result, most, but not all of the issues presented by a series of court decisions relating to common law marriage have been resolved." (Ballard Spahr Andrews & Ingersoll, LLP)

New Jersey Domestic Partners Can Take Advantage of New Legal Status
Excerpt: "Domestic partners also are entitled to certain health and pension benefits. They qualify for limited state income-tax benefits regarding deductions and exemptions. They are exempt from the state's transfer inheritance tax on the same basis as married spouses. And partners of people working for the state have access to the same insurance and pension coverage as conventional spouses." (Daily Record)

Overview: Expansion and Acceleration of Reporting Requirements Under Current Reports on Form 8-K (PDF)
18 pages. Excerpt: "This memorandum provides a guide to the Form 8-K requirements and integrates the new amendments with the current disclosure scheme. The discussion opens with a brief overview of the new Form 8-K items and is followed by comprehensive exhibits designed to acquaint you with the expanded disclosure items introduced by the SEC final rule (the 'Final Rule') adopting the new amendments." (Powell Goldstein LLP)

Movers and Shakers: Newly Posted Announcements of Promotions and New Personnel
(Post Yours!)

Caroll J. Iler
(Bryson Financial Group)

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

Benefit Plan Services Manager
for McDermott & Miller, P.C.
in NE

Benefits Administrator
for Jefferson County Public Schools
in CO

Senior Benefits Analyst
for Jefferson County Public Schools
in CO



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