| BenefitsLink Retirement Plans Newsletter |   |
April 1, 2005
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Overview: 401(k) Rules Enter the 21st Century: Regulations Finally Updated!
Excerpt: "[A]fter a decade of outdated regulations, the IRS released final 401(k) regulations on Dec. 29 .... These new rules incorporate both the changes in the law enacted by Congress and guidance issued by the IRS over the period since 1996. The final regulations follow the regulations proposed in July 2003 in most respects. The following discussion focuses on the major changes in the new regulations and especially on changes between the proposed regulations and the final version." (Thompson Publishing Group Inc.)
401(k) Automatic Enrollment -- Six Years of Experience
Excerpt: "Six years after the Internal Revenue Service (IRS) first let employers automatically enroll new employees in 401(k) plans, there are quite a few success stories, but several lingering challenges as well. Clearly, automatic enrollment can boost participation rates. As it does so, it improves retirement security for many employees and helps to assure plans' compliance with nondiscrimination rules." (Thompson Publishing Group Inc.)
March 22, 2005, Comment Letter on IRS Position on Crediting Contributions for Multiemployer Pensions (PDF)
2 pages. Excerpt: "We are concerned by any limitation on contribution borrowing. For example, if contributions made on hours (or some other basis) in a plan year aren't enough to meet the minimum funding requirement, employers would have an obligation to fund the deficiency, barring any available action the trustees can take to avoid the deficiency." (American Academy of Actuaries)
Backgrounder on Credit Balance Options for Defined Benefit Pension Funding Reform (PDF)
1 page. Excerpt: "The following is an excerpt on alternatives for the modification of credit balance rules from the Academy's paper 'Pension Funding Reform for Single Employer Plans' ...." (American Academy of Actuaries)
Opinion: Quit Planning Your Retirement -- It Won't Happen -- At Least on European Side of Atlantic
Excerpt: "In the U.K., once-generous retirement packages are being rolled back -- and that, in turn, may spread to the rest of Europe. People are starting to adjust to the idea that as they live longer, they will have to work longer. Yet there is a flaw to that -- and it is one that has been barely discussed. While working lives are being stretched out, careers are being shortened. Business is telling people to work through their 60s, yet age discrimination is widespread once people get ...." (Bloomberg News)
Overview: The Automatic Rollover Rules: A Haynes and Boone Benefits Alert Published January 31, 2005 (PDF)
2 pages. Excerpt: "At present, plans may have problems locating IRA providers who are willing or able to comply with the requirements for automatic rollovers. Other plans may wish to avoid the administrative cost and complications imposed by the new rollover rules. These new rules can be avoided altogether by amending the plan to either (i) completely eliminate mandatory cash-out distributions or (ii) require mandatory cash-out distributions only for amounts of $1,000 or less." (Haynes and Boone, LLP)
Analysis: Automatic Rollovers – March 28th Deadline is Here (PDF)
11 pages. Excerpt: "The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) added a new rule – section 401(a)(31)(B) of the Internal Revenue Code of 1986, as amended (the 'Code') – that requires plans with mandatory distributions over $1,000 to provide that, if a participant fails to elect to receive the distribution directly or have it paid to a designated plan or IRA in a direct rollover, the distribution must be made in a direct rollover to an individual retirement plan ...." (RIA via Groom Law Group)
Capitol Hill: A Mixed Bag for S Corporation ESOPs in 2005
Excerpt: "[W]e were reminded, upon the release by the Congressional Budget Office (CBO) - Congress' economic advisors - of its much-anticipated Budget Options 2005 Report, that Washington is likely to be a mixed bag for S corporation ESOPs this year." (Leading Companies Online Magazine via The Beyster Institute)
Employee Ownership Update for April 1, 2005
NCEO Executive Director Corey Rosen discusses new SEC guidelines on accounting rules for equity compensation plans (such as stock options and ESPPs), an IRS correction to anti-abuse regulations for ESOP S corporations, and 'canned' ESOPs. (National Center for Employee Ownership)
Retirement Security: The Unfolding of a Predictable Surprise (PDF)
64 pages. Excerpt: "We intend in this report to focus on the national goal of economic security in retirement, how it has evolved, what are the major public and private elements that work together to achieve that goal, what are the gaps that need to be addressed, and what are the challenges that face these elements in the future." (Social Security Advisory Board)
United Airlines Pilots' Dispute Reveals Generational and Active Older Workers vs. Retiree Schism
Excerpt: "Active pilots say that saving the bankrupt carrier takes priority over maintaining current benefit levels for retired fliers. The predicament facing United and its pilots, both past and present, is one that will be more prevalent as the number of older workers and retirees begins to outpace the number of younger employees." (Workforce Management; one-time registration required)
Proposed Ban on 'Shutdown' Pension Benefits Raises Need for Alternatives
Excerpt: "As part of its pension reform proposal, the Bush administration is seeking a ban on so-called 'shutdown' pension benefits, and employers should start thinking about alternatives to offer unions during contract negotiations if the measure is passed, consultants and labor attorneys say. These benefits, which are most common in the steel, tire, automotive and auto parts industries, are promised in employment contracts by companies in the event of a plant or division closure that ...." (Workforce Management; one-time registration required)
Comment: Social Security Solvency: A Crisis?
Excerpt: "This brief first attempts to survey the backdrop of the present economic situation more broadly than just demographics. After setting a context in that way, it suggests a two-part answer to the question in its title. Finally, it briefly discusses the relation of one frequently mentioned possible reform, the introduction of so-called personal accounts, to Social Security's current difficulties." (University of Michigan Institute for Social Research)
Another Question is Answered in the Who's the Employer Q&A Column
A guy owns 100% of a construction company: "LargeCo." Then he forms another company (an "S" corporation for tax purposes) named "SmallCo," which leases equipment and real estate to LargeCo. He owns 79.9% of SmallCo; the other 20.1% is owned by an unrelated party. Now SmallCo installs a qualified plan that covers only SmallCo employees. Does the plan have to cover the employees of LargeCo? (BenefitsLink.com)
Retirement and Social Security -- the Management of Investment Risk
Excerpt: "One of the points in the debate about Social Security is whether it's safe to transfer financial risks to individuals -- risks they may not have the wherewithal to accept and manage. Moreover, it's not clear if a typical worker can save enough to retire comfortably even if the risks are well managed." (BusinessWeek Online via Yahoo! News)
Bush Social Security Personal Accounts / Thrift Savings Plan Analogy Questioned
Excerpt: "Out on the hustings, President Bush likes to make a case for allowing younger workers to invest some of their Social Security taxes by citing the example of the Thrift Savings Plan, private investment accounts available to members of Congress and other federal employees." (AP via The New York Times; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Overview: SEC Staff Accounting Bulletin 107 Regarding the Revised Standard on Share-Based Payment (PDF)
2 pages. Excerpt: "On March 29, 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB 107) to provide interpretive guidance regarding the interaction between revised Statement of Financial Accounting Standards No. 123 (FAS 123(R)) and certain SEC rules and regulations." (Powell Goldstein LLP)
Proposed FASB Staff Position No. EITF 00-19-A (PDF)
3 pages. Excerpt: "The Board directed the FASB staff to issue this FASB Staff Position (FSP) to clarify the application of Issue 00-19 to freestanding financial instruments originally issued as employee compensation. The guidance in this FSP is consistent with the Board's intent in issuing FASB Statement No. 123 (revised 2004), Share-Based Payment." (Financial Accounting Standards Board)
Overview: Supreme Court Permits Disparate Impact Claims Under ADEA
Excerpt: "The Supreme Court held today that plaintiffs may bring age discrimination claims against their employer for instituting policies which have an adverse impact on older workers. Smith v. City of Jackson (544 U.S. _(2005), Case No. 03-1160)." (The ERISA Industry Committee)
The End of Stock Appreciation Rights As We Know Them?
Excerpt: "The American Jobs Creation Act of 2004, signed last fall by President Bush, significantly changed the landscape for deferred compensation plans. As is often the case with new legislation, however, many details were left to be resolved through the Treasury Department/Internal Revenue Service rule-making process." (Leading Companies Online Magazine via The Beyster Institute)
Overview: Colleges and Universities Get Final Rules on FICA Tax Withholding for Student Workers
Excerpt: "The IRS recently issued final regulations and a new safe harbor addressing when student employees of colleges and universities are exempt from FICA tax withholding." (Ice Miller)
Newly Posted Press Releases
Fort Worth TPA Firm Approved by MFS
(Pension Planning Associates, Inc.)
Former Retirement Plan Director of Fortune 200 Company added to Pension Consultants, Inc. Staff
(Pension Consultants, Inc.)
401(k) Advice Professional Launches Investment Selection Review
(The Scarborough Group, Inc.)
Head of Enron Investigation Slated to Speak at the 2005 Pension Focus Conference about “Getting It Right – Knowing Your Fiduciary Responsibilities”
(Pension Focus, Inc)
Newly Posted or Renewed Job Openings
Retirement Plan Specialist
for Benefit Consultants Group
in NJ
Plan Consultant/Senior Administrator
for Benefit and Consulting Firm in the New Orleans area
in LA
Benefits Consultant
for Sony Corporation of America
in NY
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- Using the Web for Employee Benefits Research (hypertext article)
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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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