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April 7, 2005
Today's sponsor: ASPPA • Working for America's Retirement™
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Immerse Yourself in ERISA Title 1 Issues April 25 - 26, 2005 * Washington, DC Get the latest regulatory and legislative updates on ERISA at "The DOL Speaks 2005 Employee Benefits Conference." Every session will feature both public and private sector speakers presenting their unique perspective on Title 1 issues. Featured Speaker: U.S. Secretary of Labor Elaine L. Chao
(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Lifecyle Funds Can Help Companies Mitigate Risk and Boost Employee Savings
Excerpt: "The funds, which rebalance based on the investor's retirement age, are gaining popularity. But getting workers to use them correctly has its own set of problems." (Workforce Management; one-time registration required)
Survey Findings: Hot Topics in Retirement for 2005 (PDF)
22 pages. A survey of human resource professionals to learn the likely areas of focus and action in 2005 regarding their companies' defined benefit plans, defined contribution plans, and retiree medical plans. (Hewitt Associates)
2004 Annual 401(k) Benchmarking Survey Results Show Increased Employee Participation (PDF)
34 pages. Excerpt: "For the fifth consecutive year, Deloitte Consulting LLP's Human Capital practice, in conjunction with Pensions & Investments magazine, has conducted its Annual 401(k) Benchmarking Survey. The survey results present the responses of human resources and benefits executives from 426 plan sponsors across the country regarding their 401(k) plans." (Deloitte Consulting and Pensions & Investments)
Working Paper: Better Plans for the Better-Paid: Determinants and Effects of 401(k) Plan Design (PDF)
56 pages. Excerpt: "This paper seeks to understand why plan sponsors design their 401(k) plans the way they do. Drawing on a rich dataset of several hundred 401(k) plans, we find support for the argument that these plans are principally a form of tax-motivated compensation. In other words, to appeal to better-paid workers, employers provide more generous matching contributions and non-cash plan design features." (Pension Research Council, The Wharton School, University of Pennsylvania)
Roth 401(k) Set to Launch in 2006; Time to Prepare Is Now
Excerpt: "[T]he provisions to allow Roth 401(k) plans were included in President Bush's 2001 income tax reform package. As part of that deal, Congress made sure that changes in the tax code enacted via the package would come with a 'sunset' provision -- some call it an expiration date -- where the changes would be eliminated and the old tax code rates re-implemented. If that holds, then Roth 401(k)s may not survive until Jan. 1, 2011." (Compensation & Benefits Forum via Society for Human Resource Management)
Lawmakers Move to Get Pension Underfunding Data
Excerpt: "U.S. lawmakers moved on Wednesday to seek details on hundreds of underfunded company pensions from the Pension Benefit Guaranty Corp., the agency that insures traditional corporate retirement plans. The request authorized by the House Committee on Education and the Workforce may help craft legislation to shore up the plans and allow workers and retirees to get a better picture of the health of many troubled company plans." (Reuters)
Audio: Examining Private-Account Pensions in Chile
Excerpt: "More than 20 years ago, Chile switched to a retirement system based on private accounts. The system has brought positive results for the country's economy. Other Latin American countries have followed in Chile's footsteps, with mixed success." (Morning Edition via National Public Radio)
United Kingdom: Changes to the Pensions Tax Simplification Regime Introduced by the Finance Act 2004 (PDF)
8 pages. Excerpt: "[L]ast November the Chancellor announced that this year's Finance Bill would contain several changes to the pensions tax simplification regime introduced by the Finance Act 2004. The Inland Revenue has now signalled the changes that it intends to make. These appear to be a mixture of concessions to industry lobby groups and measures to close perceived loopholes that have become apparent to the Revenue, although hopes of a simple tax framework seem to be disappearing...." (Towers Perrin)
Abstract of Working Paper: Design and Implementation Issues in Swedish Individual Pension Accounts
Excerpt: "Sweden's new multi-pillar pension system includes a system of mandatory fully-funded individual accounts. The Swedish system tries to keep administrative costs down through centralized management of the collection of contributions, switching among fund options, and record-keeping and communication with account holders. The Swedish system offers contributors more than 600 fund options." (Center for Retirement Research at Boston College)
Abstract of Working Paper: Investment Choice in the Swedish Premium Pension Plan
Excerpt: "In 1998, Sweden passed a pension reform that introduced a second tier of mandatory individual accounts, the Premium Pension, in the public system. Of the total contribution rate of 18.5 percent, 2.5 percentage points go to the accounts. The first investment selections in the Premium Pension plan took place in the fall of 2000 when all Swedes born after 1938 were able to choose how to invest their contributions from a menu of about 650 mutual funds." (Center for Retirement Research at Boston College)
Congressional Research Service Report Tries to Fill in Information Gaps on Social Security Reform
Excerpt: "In the distant future, retirees eventually could rely entirely on profits from individual investment accounts and get no traditional Social Security checks if they participate in a Social Security plan like the one President Bush proposes, according to a nonpartisan congressional report issued Wednesday." (Knight Ridder Newspapers via The Contra Costa Times; one-time registration required)
The Death of Social Security: Debating Bush's Plan for Private Retirement Accounts
Excerpt: "Is privatization necessary? Preferable? Politically viable? In January, with Bush's second inaugural in the offing, Reason invited James K. Glassman, a fellow at the American Enterprise Institute and host of TechCentralStation.com, to discuss and debate the ins and outs of Social Security reform with Tyler Cowen, the Holbert C. Harris professor of economics and director of the Mercatus Center at George Mason University." (James K. Glassman and Tyler Cowen via Reason Online)
IRS Weighted Average Interest Rate Table Updated for April 2005
Weighted average for April 2005: 5.05% (U.S. Internal Revenue Service)
IRS Composite Corporate Bond Rate Table Updated for April 2005
Corporate Bond Weighted Average Interest Rate = 6.01 for April 2005 (U.S. Internal Revenue Service)
Links to Items on Executive Comp, Benefits in General
Overview: SEC and FASB Guidance on Option Valuation under Statement 123(R) (PDF)
4 pages. Excerpt: "The Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) have released additional guidance in regard to the new stock option expensing provisions of Statement 123(R) that are scheduled to become effective this July. While there have been recent press reports suggesting the SEC may be sympathetic to a further delay in Statement 123(R)'s effective date, neither the SEC nor the FASB to date have initiated steps to effect such a delay." (Frederic W. Cook & Co., Inc.)
Valuation of Employee Stock Options -- Models for FAS 123(R): Lattice vs. Black-Scholes
Excerpt: "The biggest problem with expensing stock options -- and the main objection of opponents of the revised standard -- is that the value of an option is in some fundamental sense speculative. Exchange-traded options have a value set by a (generally) liquid and transparent market. Participants in options markets have developed a set of tools (valuation formulas) for valuing options which are generally regarded as useful." (Chicago Consulting Actuaries)
American Bar Association March 28, 2005, Letter to the Internal Revenue Service on Code Section 409A (PDF)
18 pages. Comments on Code Section 409A Regarding the Definition of Nonqualified Deferred Compensation Focusing on Foreign Plan Issues (American Bar Association)
Court Rules At&t Did Not Violate Fiduciary Duty Over Voluntary Retirement Incentive Program
Excerpt: "AT&T has been cleared of violating its fiduciary duty by a federal appeals court in a case involving former employees who felt they were cheated out of retirement benefits. The US 3rd Circuit Court of Appeals has ruled that the communications giant did not violate its fiduciary duty under the Employee Retirement Income Security Act (ERISA) because a plan that gave workers an extra incentive to retire was not under serious consideration at the time of their retirement." (PLANSPONSOR.com; one-time registration required)
Towers Perrin's 23rd Benefits Survey of the Brazilian Market (PDF)
40 pages. Excerpt: "This report presents the results of the 23rd Benefits Survey, conducted by Towers Perrin in 2004. The survey involved the participation of 234 companies representing different business segments ofthe Brazilian market. The purpose of the survey is to identify the main trends in employee benefits offered in Brazil and to provide the participating companies with information to help them manage increasingly efficient benefit packages." (Towers Perrin)
Newly Posted Events
How to Implement a Successful Consumer Driven Health Plan
in Illinois on May 3, 2005
presented by Principal Resource Group
The INs & OUTs of Cafeteria Plans
in Georgia on April 20, 2005
presented by Swerdlin & Company
Newly Posted Press Releases
State/Local Government Pay & Benefits Much Higher Than in Private Sector, But Jobs, Skills Differ
(Employee Benefit Research Institute (EBRI))
CPI Opens Cincinnati Consulting Office
(CPI Qualified Plan Consultants, Inc.)
Newly Posted or Renewed Job Openings
Account Manager
for SunTrust Bank
in VA
ERISA Consultant
for BISYS Retirement Services
in MN
Account Executive
for Transamerica
in CA, GA
TPA Specialist-Eastern Region
for Transamerica
in MA, PA
Retirement Plan Specialist
for Diversified Investment Advisors
in MI
Benefit Administrator
for Independent Benefit Services
in MD
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