| BenefitsLink Retirement Plans Newsletter |   |
May 2, 2005
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Managed Accounts Emerge As a Solution for Participants Intimidated by Investment Choices
Excerpt: "With all the investment education alternatives from which plan sponsors can choose, a relatively new choice from providers that appears to be gaining momentum is managed accounts for individual participants. Managed accounts allow plan participants to have their deferrals invested by professionals based on a variety of profile data including age, risk tolerance, amount of money needed in retirement, and other savings available." (Plan Sponsor Magazine via PLANSPONSOR.com; one-time registration required)
Firms Giving Lifecycle Strategies for 401(k) Plans Another Look
Excerpt: "Some firms have started to rethink the lifecycle fund, a fixture of many 401(k) plans since the late 90s. While ordinary lifecycle funds simply change asset allocations based on age, the last few months have seen both AllianceBernstein and SunLife Financial tweak that model, in part to reflect increased life spans and address the issues of post-employment income and market risk." (Defined Contribution News via Institutional Investor)
401(k) Fund Selection: The 3 'P's of Prudent Fiduciary Action
Excerpt: "Regulatory and case law requires that retirement plan sponsors and their advisors act for the exclusive benefit of participants and with the skill, care and diligence of a prudent expert. As established in ERISA, the standard 'is not that of a prudent lay person but rather that of a prudent fiduciary with experience dealing with a similar enterprise.'" (The McHenry Group)
What Younger Workers Should Know about Asset Allocation and Diversification
Excerpt: "Asset allocation is the most important decision that a plan participant makes, since it accounts for a significant amount of the variability of portfolio returns. Asset allocation is the main determinant of both risk and return in many portfolios." (The McHenry Group)
Understanding Behavioral Finance: How to Minimize Plan Participant Investing Errors
Excerpt: "Behavioral finance researchers have catalogued a number of systematic errors that affect defined-contribution investment. There is now considerable evidence that plan participants as a whole don't act to maximize their financial self-interest when it comes to saving for retirement.' (The McHenry Group)
U.S. Representative Cardin's Pension Legislation Would Repeal Roth 401(k) Option
Excerpt: "US Representative Benjamin Cardin (D-Maryland) has introduced the Pension Preservation and Savings Expansion Act of 2005 that he says attempts to make it easier to save for retirement. The bill would remove the Roth 401(k) option, however. Under the proposed legislation, Roth 401(k)s - which are authorized under the Economic Growth and Tax Relief Reconciliation Act of 2001, and which employers can begin to offer on January 1, 2006 - would no longer be offered to employees." (PLANSPONSOR.com; one-time registration required)
Schwab Survey Shows Advice Increases 401(k) Savings Rate
Excerpt: "A new survey shows that 401(k) participants enrolled in advice and managed account services save more than 10% of eligible income in such accounts, over 3% above the national average." (PLANSPONSOR.com; one-time registration required)
ERIC Comments to IRS RE: Proposed Regulations Concerning Disclosure of Relative Value (PDF)
Excerpt: "The ERISA Industry Committee ('ERIC') is pleased to submit the following comments on the proposed amendments to the regulations regarding the content requirements that apply to explanations of qualified joint and survivor annuities ('QJSAs') and qualified preretirement survivor annuities ('QPSAs')." (The ERISA Industry Committee)
ERIC Update: Congress Passes Mixed Bag on PBGC Premiums
Excerpt: "A Congressional Budget Resolution passed both the House and Senate [April 28, 2005], including an assumed savings of $6.6 billion over the next five years from reforms (i.e., premium increases) to the Pension Benefit Guaranty Corporation (PBGC). The assumed savings from the PBGC are part of $35 billion in five-year mandatory spending reductions included in the new budget blueprint that will guide Congressional actions for the remainder of the year." (The ERISA Industry Committee)
Working Paper Abstract: A Shortfall Risk Analysis of Life Annuities in Retirement
Excerpt: "Retirees must draw down their accumulated assets in an orderly fashion, so as not to exhaust their funds too soon. We compare alternative phased withdrawal strategies to a life annuity benchmark using German data; one particular phased withdrawal rule seems attractive, as it offers relatively low expected shortfall risk, good expected payouts for the retiree during his life, and some bequest potential; results are similar for the US case." (National Bureau of Economic Research)
Comment Letter Regarding IRS Regulation on Disclosure of Relative Values of Optional Benefit Forms (PDF)
6 pages. Excerpt: "The Council commends the Department of Treasury and Internal Revenue Service (collectively referred to as 'Treasury') for delaying the effective date of the relative value regulations with respect to certain distributions. However, in addition to delaying the effective date of the relative value regulations, the proposed regulations would expand the scope of an entirely different set of rules, the rules governing the valuation of certain distributions under Section 417(e)." (American Benefits Council)
Opinion: How Employee Ownership Is Good for Business
Excerpt: "[T]he role that employee ownership can play in generating improved business performance is something we need to think about. .... In Equity: Why Employee Ownership Is Good For Business [we] conducted site visits to a wide range of exceptional, high-performing employee ownership companies in order to see if we could identify what it was about these companies that accounted for their impressive results. We came away with some valuable lessons learned." (Leading Companies Online Magazine via Beyster Institute)
Employee Ownership Update for April 29
NCEO Executive Director Corey Rosen discusses a new study of public companies with broad-based employee ownership that found productivity and other factors were worse than in other public companies; mixed evidence on whether companies are cutting back on employee stock purchase plans; and a new book by Rosen and others published by Harvard Business School Press. (National Center for Employee Ownership)
Brief for the Secretary of Labor As Amicus Curiae Re: Coan v. Kaufman (PDF)
36 pages. Excerpt: "Whether the district court erred in concluding that ERISA requires that a claim for breach of fiduciary duty under ERISA section 502(a)(2), 29 U.S.C. ยง 1132(a)(2), alleging imprudent investment of a pension plan's assets by defendants, proceed as a shareholder's derivative action under Rule 23.1 of the Federal Rules of Civil Procedure or a class action under Rule 23." (U.S. Department of Labor)
Overview of DOL Advisory Opinion: Plan Trustee Also Investment Advisor to Plan is ERISA Violation
Excerpt: "A plan trustee who causes a defined contribution plan to invest in a particular fund in which the trustee is an investment advisor to the fund would be violating the Employee Retirement Income Security Act (ERISA) sections on prohibited transactions. This is the Advisory Opinion of the Department of Labor's Employee Benefit Security Administration, 2005-04A and released [April 26, 20050." (PLANSPONSOR.com; one-time registration required)
Louisiana Legislators Consider Pension Overhaul Bill with Retirement Age Increase
Excerpt: "Louisiana state employees would not be eligible for retirement benefits until the age of 60 under legislation approved by a state House committee. [T]he House committee claims that the change would save the state $108 million a year. Under current law, members of the Louisiana State Employees Retirement System can retire with full benefits at any age, as long as they have spent 30 years on the job, or at age 55 once they've completed 25 years of service." (PLANSPONSOR.com; one-time registration required)
'55 and Out' Comes Home to Roost โ- An Examination of the Public Employee Pension System
Excerpt: "[S]tock prices are trending down, eroding 401(k) savings. The president says that the Social Security system is in trouble, suggesting that the retirement age must be increased or that benefits must be scaled back for the well-off. General Motors wants to rein in skyrocketing health costs for retirees. Retired coal miners have lost company-paid health insurance in bankrup.tcy proceedings. Even robust Fortune 500 companies are groaning under the weight of spiraling retirement costs." (The New York Times; one-time registration required)
Federal Update to NCTR Membership: President Proposes Benefit Cuts to Partially Offset SS Shortfall (PDF)
2 pages. Excerpt: "In his April 28 news conference, the President proposed a reduction in Social Security (SS) benefits for higher income workers. The change would partially offset SS's funding shortfall. Called 'progressive indexing,' the proposal would substitute price indexing for the current wage indexing in the calculation of SS benefits for middle and upper income workers. The use of wage indexing would continue, however, in the calculation of benefits for lower income workers." (National Council on Teacher Retirement)
Federal Update to NCTR Membership: Rep. Cardin Flying Solo on Pension Bill (PDF)
3 pages. Excerpt: "Rep. Ben Cardin (D-MD), one-half of the Portman-Cardin pension duo, introduced H.R. 1961, a broad ranging pension bill on April 28." (National Council on Teacher Retirement)
Mercer Perspective on Retirement: Defined Benefit Plans: Still a Good Solution?
Excerpt: "Despite serious challenges, a well-designed and well-communicated DB plan actually creates substantial value for both employer and employee, and can be a source of competitive advantage for the employer. This Perspective on Retirement discusses how." (Mercer Human Resource Consulting; one-time registration required)
Understanding the President's Proposed Cuts to Social Security Benefits
Excerpt: "Over time, Social Security would transform from an insurance program in which benefits are tied to each worker's past incomes to a welfare system that provides only a minimal baseline payment to everyone regardless of their career earnings." (The Century Foundation)
Social Security: Help for the Poor or Help for All?
Excerpt: "In attempting to fix Social Security's long-term problems without raising taxes, President Bush has chosen to recast the 70-year-old retirement program as one that would keep the lowest-income workers out of poverty but become increasingly irrelevant to the middle class and the affluent." (The New York Times; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Overview: New Bankrup.tcy Act Contains Provisions on Retirement and Other Employee Benefit Plans
Excerpt: "The expenses that can be deducted from a debtor's monthly income include 'reasonably necessary health insurance, disability insurance, and health savings account expenses for the debtor, the spouse of the debtor, or the dependents of the debtor.'" (Employee Benefits Institute of America Inc. (EBIA))
Summary of FASB Statement 123R on Share-Based Payment (PDF)
13 pages. Excerpt: "Financial Accounting Standards Board (FASB) Statement No. 123 (revised 2004), Shared-Based Payment (Statement 123R) repeals the longstanding 'intrinsic value' method of accounting for equity compensation prescribed by APB Opinion No. 25 (Opinion 25), and replaces original Statement 123 with a mandate that generally all equity awards granted to employees be accounted for at 'fair value.'" (Frederic W. Cook & Co., Inc.)
Text of S. 256 Language on Bonus and Severance Pay Restrictions (PDF)
3 pages. Excerpt: "Purpose: To expand the authority of bankrup.tcy courts to limit retention bonuses and severance pay to corporate insiders." (U.S. Senate via The ERISA Industry Committee)
Newly Posted Events
Basic Law of Pensions, Welfare Plans, and Deferred Compensation
in Massachusetts on August 15, 2005
presented by ALI-ABA (American Law Institute-American Bar Association)
Current Developments in Employment Law
in New Mexico on July 28, 2005
presented by ALI-ABA (American Law Institute-American Bar Association)
Fiduciaries Under Scrutiny โ Plan Management Issues for 401(k) and Other ERISA Plans in the 21st Century
Nationwide on May 26, 2005
presented by ALI-ABA (American Law Institute-American Bar Association)
Pension, Profit-Sharing, Welfare, and Other Compensation Plans
in District of Columbia on October 20, 2005
presented by ALI-ABA (American Law Institute-American Bar Association)
Retirement, Deferred Compensation, and Welfare Plans of Tax-Exempt and Governmental Employers
in District of Columbia on September 8, 2005
presented by ALI-ABA (American Law Institute-American Bar Association)
Newly Posted or Renewed Job Openings
Marketing Manager, Retiree Health Services
for ICMA-RC - Building Retirement Security
in ANY STATE, DC
Communications Specialist
for Invesmart, Inc.
in OH
Actuarial Assistant
for Swerdlin & Company
in GA
Chief Information Security Officer
for Major multi-employer Taft-Hartley Benefit and Pension Fund
in NY
Account Executive โ Retirement Services
for The Principal Financial Group
in AL
Marketing Consultant
for Principal Financial Group
in CO
Institutional Trust Consultant
for Branch Banking and Trust Co. (BB&T)
in VA
Recordkeeper Relationship Consultant
for Northern Trust Company
in IL
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