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February 8, 2005
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Employee Plans News, February 7, 2005, Special Edition on EP's Invigorated Enforcement Program (PDF)
2 pages. Excerpt: "Steven T. Miller, IRS Tax Exempt and Government Entities Commissioner, spoke before the Los Angeles Benefits Conference on January 28, 2005 and made the following key points about the EP Enforcement Program: I want to talk with you today about compliance. It is an important topic, a matter of special concern to the Commissioner and to Congress, and one that now receives a great deal of attention within the IRS ...." (U.S. Internal Revenue Service)
Bush Again Pushes for RSA, LSA and ERSA in Fiscal 2006 Budget
Excerpt: "President Bush sent lawmakers his proposed fiscal 2006 budget on Monday, February 07, 2005. As expected, the President has again proposed the Retirement Savings Account (RSA), which is intended to replace the array of retirement saving incentives currently in the tax code, such as IRAs, Roth IRAs, and similar saving vehicles. Also proposed again is the Lifetime Savings Accounts (LSA)." (401khelpcenter.com)
New DOL Web Site: Administration's Proposal for Single Employer Defined Benefit Pension Reform
Excerpt: "As indicated in the President's FY 2006 Federal Budget, this Web site hosted by the Department of Labor is the official location for all Administration documents pertaining to the President's single employer defined benefit pension reform proposal. It will be regularly updated to include new documents from other Federal Agencies as well as the Department of Labor." (U.S. Employee Benefits Security Administration)
Bush Budget Calls for Ban on Shutdown Pension Benefits
Excerpt: "The Bush administration is seeking a ban on the payment of so-called shutdown pension benefits. Under part of the proposal, outlined in the administration's fiscal 2006 budget package ..., the Pension Benefit Guaranty Corp. would eliminate guarantees for benefits payable as a result of plant shutdowns that occurred after Feb. 1, 2005. The effective date on the ban itself would depend on whether the benefits were promised as part of a collective bargaining agreement." (Business Insurance)
Higher Premiums to Insure Defined Benefit Pensions -- Increase Higher for Weaker Companies
Excerpt: "The Bush administration has been promising for some time to shore up the pension system, but retirement specia.lists were surprised to see the method proposed in yesterday's budget: a huge increase in the premiums companies must pay to insure their employees' pensions." (The New York Times; one-time registration required)
Overview: 401(k) and Other Retirement Plans -- Implementation of Automatic Rollover Requirements
Excerpt: "Under current law, qualified pension plans (including 401(k) plans, 403(b) plans, certain church plans and governmental plans) may provide for certain 'mandatory distributions' of vested balances of $5,000 or less without participant consent following termination of employment. Effective for eligible rollover distributions after March 27, 2005, mandatory distributions of accounts exceeding $1,000 must be automatically rolled over into an IRA established by the plan ...." (Perkins Coie)
Overview: After a Long Hiatus, IRS Proposes 403(b) Regulations (PDF)
7 pages. Excerpt: "Late last year, the IRS issued proposed regulations on Section 403(b) tax-sheltered annuity plans. This is the first comprehensive set of rules governing these plans since the initial 1964 regulations. In addition to the proposed regulations, the IRS released separate temporary regulations on the FICA taxation of elective deferrals made pursuant to a one-time irrevocable election. The proposed regulations are generally applicable for taxable years beginning in 2006, ...." (Mellon Financial Corporation)
Opinion: Consider the Changes the IRS Is Contemplating Making to 403(b) Retirement Plans...
Excerpt: "For the first time in 40 years, the government is proposing regulations that are shaking up how retirement plans for teachers, churches, and other not-for-profit organizations are administered. The proposals being suggested will ultimately make them more like 401(k) plans, the retirement plans for private-sector employees, and that has many people worried." (The Motley Fool)
Working Paper Abstract: Structural Reform of Social Security
Excerpt: "Governments around the world have enacted or are currently considering fundamental structural reforms of their Social Security pension programs. The key feature in these reforms is a shift from a pure pay-as-you-go tax-financed system, in which taxes on current workers are primarily distributed to current retirees, to a mixed system that combines pay-as-you-go benefits with investment-based personal retirement accounts." (National Bureau of Economic Research)
Overview: Profit Sharing Plan Allocations to Employees with Less than 1000 Hours
Excerpt: "A profit sharing plan provides that each eligible participant who is credited with 1,000 hours of service is employed on the last day of the plan year is entitled to receive an allocated share of the discretionary employer contribution. The plan intends to satisfy the general test using the cross-testing rules, and will provide each NHCE with a minimum allocation of 5% of compensation." (Reish Luftman Reicher & Cohen)
Citigroup Sued Over Cash Balance Plan -- Suit Alleges Plan Violates Minimum Accrual Rules
Excerpt: "A lawsuit seeking class-action status filed in federal court is alleging that Citigroup's cash-balance pension plan violates minimum accrual rules. The lawsuit, filed in Brooklyn, alleges that the Citigroup plan - which was created in 2000 with the merging of multiple plans - violates 'backloading' rules, which are minimal accrual stipulations that make it illegal to use a pension formula that gives disproportionately high benefits in later years, according to the Wall Street Journal." (PLANSPONSOR.com; one-time registration required)
Working Paper Abstract: Reducing the Risk of Investment-Based Social Security Reform
Excerpt: "This paper describes the risks implied by a mixed system of Social Security pension benefits with different combinations of pay-as-you-go taxes and personal retirement account (PRA) saving. The analysis shows how these risks can be reduced by using alternative private market guarantee strategies. The first such strategy uses a blend of equities and TIPS to guarantee at least a positive real rate or return on each year's PRA saving." (National Bureau of Economic Research)
Working Paper Abstract: Social Security Privatization with Elastic Labor Supply & Second-Best Taxes
Excerpt: "This paper shows that many common methods of privatizing social security fail to reduce labor market distortions when taxes are second best, challenging a key reason to privatize. Ironically, providing 'transition relief' to workers alive at the time of the reform, in an effort to protect their previous contributions, undercuts potential efficiency gains." (National Bureau of Economic Research)
Unpopular Options Underlie Ideas to Fix Social Security
Excerpt: "That is why many on both sides are exploring an alternative known as 'add-on' accounts that attach savings accounts to Social Security, but do not divert payroll taxes to do so. The question is, however, how to pay for these accounts. 'The whole idea is that you want to preserve Social Security as an antipoverty program and provide an added incentive for lower-income people to salt away resources,' said David Richardson, a former Treasury official who helped design the 'USA' ...." (San Francisco Chronicle)
Opinion: Social Security - 'Tier 2 Solution'
Excerpt: "What American workers need is a Conservative 'New Deal' for the 21st Century. First we grandfather everyone born before 1975 into the old Social Security system (Tier One). Secondly, we develop a new three-legged stool for all the children and grandchildren of Tier One generation and provide them with the 'Tier 2 Solution'." (The Conservative Voice)
Opinion: What the President Didn't Say about Social Security Reform with Private Accounts
Excerpt: "One critical detail of the president's plan that reporters learned about in a background briefing is that workers who open accounts would get to keep only investment returns that exceed the returns that the money would have accrued in the traditional system. That means that upon retirement, workers would be given only money above a 3 percent inflation-adjusted return." (The Century Foundation)
Opinion: Jabbing the Spear into the 'Soft Underbelly of the Welfare State' -- Social Security
Excerpt: "Here's how it would work. First, workers with private accounts would be subject to a 'clawback': in effect, they would have to mortgage their future benefits in order to put money into their accounts. Second, since private accounts would do nothing to improve Social Security's finances - something the administration has finally admitted - there would be large benefit cuts in addition to the clawback." (The New York Times; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Text: Employee Benefits in Private Industry in the United States, 2002-2003 (PDF)
135 pages. The 2003 data contain information on the incidence and key provisions of selected benefit plans. The 2002 data contain detailed provisions of health care and retirement benefits. (Bureau of Labor Statistics, U.S. Department of Labor)
European Union Adopts Stock Option Expensing Rules Retroactive to January 1
Excerpt: "The European Union has adopted new accounting rules that will require European-listed companies to expense stock option awards. The head office of the EU has decided that the new rules will apply retroactive to January 1, .... The standards, which preempt their American counterparts by nearly six months, are part of a larger reform of business accounting standards undertaken by the EU to combat fraud and mismanagement, according to the news agency ...." (PLANSPONSOR.com; one-time registration required)
December 28, 2004, Overview: First Round of Guidance on New Tax Rules for Deferred Compensation
Excerpt: "On December 20, 2004, the Treasury Department and the Internal Revenue Service issued Notice 2005-1 providing the first installment of guidance for the deferred compensation provisions of the American Jobs Creation Act of 2004, which are contained in new Section 409A of the Internal Revenue Code." (Perkins Coie)
October 20, 2004, Overview: Congress Imposes Significant New Restrictions on Deferred Compensation
Excerpt: "Congress recently approved the American Jobs Creation Act of 2004 ..., which includes provisions that impose significant new restrictions on deferred compensation. If these restrictions are not satisfied, deferred compensation amounts are taxable when vested and subject to tax penalties. President Bush is expected to sign the Act, but as of October 19th has not done so. This Update highlights the Act's key changes to deferred compensation requirements and offers practical guidance." (Perkins Coie)
ERIC and PSCA Join Forces to Ask for Delay in March 15 Deadline for NQDC Mirror and Excess Plans (PDF)
3 pages. Excerpt: "[Posted] is a copy of joint letter sent today by The ERISA Industry Committee and the Profit Sharing/401(k) Council of America urgently asking that the Treasury and IRS modify Notice 2005-1 as soon as possible to extend the period that the Notice now gives to defined contribution mirror and excess plans to meet the requirements of the new law governing nonqualified deferred compensation." (The ERISA Industry Committee and The Profit Sharing/401(k) Council of America)
Newly Posted Press Releases
Clark Consulting is pleased to announce that David E. Gordon, J.D. has been appointed as a senior vice president and managing director
(Clark Consulting)
Statement by PBGC Executive Director Bradley D. Belt on Pension Reform Proposal in Administration's Budget Submission
(Pension Benefit Guaranty Corporation (PBGC))
DataPath and drugstore.com, inc. Work To Improve Flexible Spending Benefits
(DataPath, Inc.)
Unintended Consequences: Longer Tours Changing What Employers Pay Guard and Reserve Employees on Military Leave – Compensation.BLR.com Reports
(Business and Legal Reports, Inc.)
United Benefit Advisors (UBA) Outlines 'Phase II' Organizational Strategy, Introduces New Strategic Alliances & Members
(United Benefit Advisors)
United Benefit Advisors Outlines 'Phase II' Organizational Strategy, Introduces New Strategic Alliances and Members
(United Benefit Advisors)
Invesmart Experiences High Demand For RightPath Plan Participant Discretionary Advice Service
(Invesmart, Inc.)
Treasury Releases Blue Book
(U.S. Department of Treasury)
Job-Based Health Coverage Drops for All Californians
(UCLA Center for Health Policy Research)
New Deferred Compensation Rules
(Bell, Boyd & Lloyd LLC)
Newly Posted or Renewed Job Openings
Vice President - Relationship Management
for BISYS Retirement Services
in PA
Retirement Rotation Advisor
for Merrill Lynch
in NJ
401(k) Enroller/Contractor – Part-Time
for Diversified Investment Advisors
in ANY STATE
Pension Specialist
for PFS
in GA
Daily Valuation Specialist/DC Record-Keeper
for R-Tech Consultants, Inc.
in CA
Sr. Benefits Design Specialist
for DTE Energy
in MI
Experienced Pension Administrator
for Matthews, Gold, Kennedy & Snow, Inc.
in AZ
Defined Benefit Client Account Manager
for New York Life Investment Management LLC
in MA
Retirement Plan Specialists
for Diversified Investment Advisors
in CO, DC
Conversion Department Manager
for First Mercantile Trust Company
in TN
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