| BenefitsLink Retirement Plans Newsletter |   |
March 21, 2005
Today's sponsor: PenChecks, Inc.
(Click on company name or banner to learn more.)
New Federal Regulations Go Into Effect March 28,2005! We have the solution for Missing Participants, Automatic/Default Rollover IRA Programs...Simple, Affordable, Efficient. PenChecks, Inc. is the industry leader in Benefit Distributions, Missing Participant, and Automatic/Default Rollover IRA Programs. We consistently solve industry-wide problems regarding Missing Participants and Automatic/Default Rollover IRAs, as well as the complexities of processing Benefit Distributions. For more information Click Above or call 800-541-3938
(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Offering Company Stock in Firm's 401(k) Plan Can Be Risky Business
Excerpt: "Matching employee contributions in company stock in a 401(k) plan sounds like a surefire move. You gain a competitive tool for attracting and retaining talent and give employees more of a stake in the company's future success. At the same time, you give your share price a boost and get a tax break on the contribution without having to tie up precious cash." (Entrepreneur Magazine)
Overview: Proposed Roth 401(k) Regulations
Excerpt: "On March 2, 2005, the IRS issued proposed regulations for Roth 401(k) plans. The IRS issued proposed regulations for Roth 401(k) and 403(b) plans on March 2, 2005. The effective date for implementation is taxable years after December 31, 2005 and for plan years beginning on or after January 1, 2006. EGTRRA created Code Section 402A for the Roth 401(k) rules. Please note that the Roth type contribution is an optional plan design and is not required to be adopted by plan sponsors." (McKay Hochman Co., Inc.)
Overview: Final 401(k) Regulations
Excerpt: "The third article in our series on the final 401(k) regulations [see http://www.irs.gov/irb/2005-05_IRB/ar06.html] focuses on the nondiscrimination rules applicable to CODAs and on the nonforfeitability of elective deferrals." (McKay Hochman Co., Inc.)
Overview: 401(k) Final Regulations -- Targeted QNEC/QMAC Restriction
Excerpt: "The final regulations do not eliminate the use of the targeted QNEC but restrict their usage. If a targeted QNEC has been selected as part of the plan's design, it may still be used without restriction until the effective date of the final regulations -- which is for plan years starting on or after January 1, 2006. Once the final regulations are effective, targeted QNECs will be subject to new more limiting rules that will require a broader number of nonhighly compensated ...." (McKay Hochman Co., Inc.)
Is Your 401 OK? Plan Administrators Are Gradually Raising Fees
Excerpt: "Comptrollers, CFOs and other employees who monitor 401(k)s have been receiving some unpleasant surprises when they check the bottom lines and fine print for those retirement plans. The fees businesses pay mutual fund companies and other financial firms that administer 401(k) plans have been rising for several years. And financial pros who are designated fiduciaries for 401(k)s are scratching their heads to determine where the higher costs are coming from." (South Florida Business Journal via bizjournals.com; one-time registration required)
Should Your 401(k) Plan Allow, and Encourage, After-Tax Employee Contributors? (PDF)
2 pages. Excerpt: "One of the numerous changes to the rules governing tax-qualified plans made by EGTRRA was the addition of 'designated Roth contributions' under Code Section 402A. Under that Section, beginning in 2006, a plan may permit an employee who makes elective contributions under a 401(k) plan to designate some or all of those contributions as Roth contributions." (Winston & Strawn)
New Type 401(k) Takes Tax Cues from Roth Accounts
Excerpt: "No workplace retirement plan is perfect. But some 401(k) programs will get a makeover next year that will remove a big wart. Up until now, a main blemish for 401(k) plans has been a hefty tax bite on withdrawals. When people pull money out of these accounts, they must pay taxes as ordinary income, not at the lower capital-gains rates that otherwise would apply to long-term holdings." (The Arizona Republic)
Overview: Proposed New 403(b) Regulations -- Ten 2005 Compliance Considerations (PDF)
2 pages. Excerpt: "For the first time in 40 years, the IRS has issued comprehensive guidance on Section 403(b) plans - retirement plans ... which provide benefits through investments in annuity contracts, mutual funds, or both, .... This guidance is generally effective on January 1, 2006. Through this guidance, the IRS seeks to make 403(b) plans, usually sponsored by tax-exempt organizations, more like 401(k) plans that are typically sponsored by taxable entities." (Brown Rudnick Berlack Israels LLP)
Text: Amendment No. 262 to Budget Legislation Expressing Sense of the Senate on Pension Reform (PDF)
3 pages. Regards PBGC premiums. (American Benefits Council)
Survey Report: Attitudes of Individuals 50 and Older Toward Phased Retirement (PDF)
30 pages. Excerpt: "This survey of individuals ages 50 and older was designed to gauge reactions to the concept of phased retirement and to determine the extent to which phased retirement would encourage workers near traditional retirement age to remain in the workforce longer than they would have otherwise. The sample included respondents who are working as well as respondents who are retired." (AARP)
Washington Regulatory Wrap Up, 2005, As of March 18, 2005 (PDF)
2 pages. The chart of federal regulatory proposals concerning employee benefits of interest to NCTR members has been updated to be current as of March 18, 2005. The federal updates referenced in the chart are available at http://www.nctr.org/federal/index.html. (National Council on Teacher Retirement)
Federal Update of March 19, 2005, of Interest to National Council on Teacher Retirement Membership (PDF)
3 pages. Includes discussion on 'Who will replace Rob Portman (R-OH) as the GOP pension champion in the House of Representatives?' and 'Senate GPO/WEP Elimination Bill Introduced' and 'Bankrup.tcy Bill Speeds through Congress; Pension Protections Intact' Excerpt: "You probably heard that the Senate passed a controversial bankrup.tcy bill, S. 256, on March 10. From the standpoint of the pension community, the bill has a helpful provision affecting retirement plans and arrangements." (National Council on Teacher Retirement)
California State Association of Counties Advances Pension Reform Alternatives
Excerpt: "Final salary pension determinations for California public employees would be based on a three-year rather than a one-year average under a slate of reform proposals from a Golden State government group. Also on the plan released Thursday by the California State Association of Counties was a proposal to limit lucrative public safety retirement formulas to employees who actually face physical danger as a police officer, firefighter or other public safety worker, ...." (PLANSPONSOR.com; one-time registration required)
A Model for the Bush Proposal: A Texas County Opted Out of Social Security
Excerpt: "County workers here were confronted with a momentous choice nearly a quarter-century ago when Social Security's financial problems prompted ominous warnings that the program was headed toward bankrup.tcy. The employees could either ride out the federal retirement program's problems or leave the system altogether. After a series of emotional meetings, Galveston County's 2,000 workers voted overwhelmingly to abandon Social Security in 1981." (The Washington Post; one-time registration required)
Report: UK Occupational Pension Provision in the Public Sector (PDF)
56 pages. Excerpt: "This paper has been prepared to give factual background to the important political debate now taking place on reforming public sector schemes. .... After a brief introduction to the UK public sector schemes, the first chapter of this paper examines how much they cost. The paper then goes on to assess the value of their benefits, before and after reform, compared to those in the private sector." (Pensions Policy Institute)
Canadian Pension Sponsors Favor Low-Risk Default Funds
Excerpt: "Nearly 40% of Canadian pension plan sponsors automatically place participants who do not elect an investment option into conservative investments, a survey concludes. In a survey of Canadian employers, Toronto-based human resource consulting firm Morneau Sobeco found that 39% of capital accumulation plan sponsors focused on managing potential participant dissatisfaction by placing nonelecting individuals into low- or no-risk investments." (Business Insurance)
SBC Shift to Pension Plan Shows Defined Benefit Plans Aren't Quite Dead Yet
Excerpt: "SBC Communications' decision to offer new management employees a pension instead of a cash-balance plan may be a sign that the much-hyped death of the traditional pension plan may not happen as quickly as some had predicted." (Workforce Management)
Overview: PBGC Releases Final 4010 Regulations
Excerpt: "In March, the Pension Benefit Guaranty Corporation (PBGC) released final revised 4010 regulations. The new rules will affect plan sponsors that are subject to the reporting requirements of ERISA section 4010, which include many of the nation's largest plan sponsors and their subsidiaries. Section 4010 requires annual reporting whenever a controlled group's total unfunded vested benefits exceed $50 million." (Watson Wyatt Worldwide)
Opinion: The Perfect Solution for Social Security
Excerpt: "Here's a simple and non-controversial plan to finance the start of individual personal accounts within Social Security by just changing who gets the bonds that are issued when Congress grabs the excess of income from payroll taxes over the payments of Social Security benefits each year and classifies it as coming from general revenues." (Sun-Sentinel)
Overview: IRS Examination Process Guide for Employee Plans
Excerpt: "This Examination Process Guide is a user-friendly collection of information not only for plans in the throes of an IRS audit but also for plans seeking day-to-day compliance assistance." (Employee Benefits Institute of America Inc. (EBIA))
Retirement Income Secure for Congress: Members Get Generous Pensions and Social Security
Excerpt: "Lawmakers' pensions are in addition to their Social Security checks. Because payroll taxes are levied only on the first $90,000 of income, nearly half their salary is not subject to those taxes." (Asbury Park Press)
Tax Reform Could Spell Trouble for Employer-Sponsored Retirement Plans
Excerpt: "Social Security reform will probably not come to fruition during President Bush's second term, but fundamental tax reform could happen, according to Brian Graff, Executive Director and CEO of ASPPA, .... At the 401(k) SUMMIT in San Diego, California, .... Graff guessed that although Bush has been pushing a Social Security reform agenda, the reform more likely to succeed this term is fundamental tax reform, and this, Graff warned, could have huge implications for retirement plans." (PLANSPONSOR.com; one-time registration required)
Private Accounts Questioned: Paper by Economist Robert J. Shiller Challenges Expected Benefits
Excerpt: "Nearly three-quarters of workers who opt for Social Security personal accounts under President Bush's 'default' investment option are likely to earn less in benefits than those who stay with the traditional Social Security system, a prominent finance economist has concluded." (The Washington Post; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Overview: Plan's Deadline for Claims Appeal Enforced Despite Attorney's Mistake
Excerpt: "This decision is a textbook example of clear plan communications helping to ensure that a plan can be operated according to its terms. It is worthwhile reading for anyone charged with drafting SPDs or claim denial notices because the court quotes the language from the plan's denial notice and SPD that it found persuasive." (Employee Benefits Institute of America Inc. (EBIA))
Alzheimer's Trends Make Case for Retirement Preparation
Excerpt: "A study on the financial ravages of Alzheimer's and other forms of dementia asserts that these diseases could bankrupt the nation's health care system if a breakthrough in prevention or treatment is not found, making it necessary for advisers to make sure their clients' employees prepare for retirement and old age expenses." (The Adviser)
General Motors Offering Buyout Deals to Some White-Collar Workers to Help Cut Rising Costs
Excerpt: "General Motors Corp., the world's biggest automaker, has offered buyout and early retirement packages to some of its nonunion, salaried workforce in North America as the company grapples with cutting costs. The offers were sent in the first quarter in hopes of speeding the normal amount of attrition the company usually has, Toni Simonetti, general director of financial and international communications, said yesterday in an interview." (Bloomberg News via The Washington Post; one-time registration required)
Newly Posted Events
Final 401(k) Regulations: A Discussion With the IRS
in New York on March 23, 2005
presented by WEB (Worldwide Employee Benefits Network) New York Chapter
The World Congress 1st Annual Human Capital Management Congress
in District of Columbia on October 31, 2005
presented by World Congress
Movers and Shakers: Newly Posted Announcements of Promotions and New Personnel
(Post Yours!)
Vince A. Daboul
(Banknoth Insurance Group)
Newly Posted or Renewed Job Openings
Defined Benefit Calculation Specialists
for Constantin Control Associates
in NJ
Benefits Project Manager
for Hewitt Associates
in IL
Pension Administration Assistant
for Corporate Plans & Services
in NC
ERISA Associate
for Trucker Huss, APC
in CA
Actuarial Apprentice
for Pacific Coast Actuaries, Inc.
in CA
Pension Professionals
for Associated Pension Consultants
in CA
Assistant Administrator - Pension Services
for Aris Corporation of America
in PA
Account Manager - Benefits Consultant - Southern New Jersey
for Commerce Insurance Services
in NJ
Account Executive - Small Group Sales - Southern New Jersey
for Commerce Insurance Services
in NJ
Retirement Assistant Director, Member Services
for San Diego County Employees Retirement Association
in CA
Benefits Training Manager - Southern New Jersey
for Commerce Insurance Services
in NJ
HM Pharmacist Consultant
for Hewitt Associates
in IL
Client Services Representative
for WHA Financial Solutions
in WI
Time/ Labor Require Analyst
for Hewitt Associates
in IL
Account Executive - Large Group Sales - Northern New Jersey
for Commerce Insurance Services
in NJ
Compliance Manager
for CDM Retirement Consultants, Inc.
in MD
Director, Employee Benefits
for Raley's
in CA
ERISA Tax Associate - Part-Time
for Potter Anderson & Corroon LLP
in DE
Senior Manager, Client Services
for Craford Benefit Consultants
in CA
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Copyright 2005 BenefitsLink.com, Inc.; except that you may reprint this newsletter in full (including this sentence) without obtaining our permission.
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