BenefitsLink Retirement Plans Newsletter May 26, 2005 Today's sponsor: DATAIR Employee Benefit Systems, Inc. (Click on company name or banner to learn more.) Software for 401(k), DB and Flexible Benefits DATAIR's IMPROVED BENEFIT ADMINISTRATION SOFTWARE for 401(k), Defined Benefit and Cafeteria/Flex plans. Designed for administrators and consultants. System modules include: 5500s Proposals Administration Plan Documents Client & Task Manager Training and support included. For free demo versions and pricing, contact sales@datair.com or call 1-888-328-2474. (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) Text of Proposed IRS Regulations on Section 415 Limits on Benefits and Contributions (PDF) 107 pages; better skip lunch today! Excerpt: "This document contains proposed amendments to the regulations under section 415 of the Internal Revenue Code regarding limitations on benefits and contributions under qualified plans. The proposed amendments would provide comprehensive guidance regarding the limitations of section 415, including updates to the regulations for numerous statutory changes since regulations were last published under section 415." (Internal Revenue Service) Broken Promises: United Airlines Pension Crisis -- An Online Hearing Sponsored by Rep. George Miller Excerpt: "[T]he first Online Congressional Hearing – using technology to allow expert witnesses, affected Americans and Members of Congress to discuss a high priority issue without the delay, expense and time restrictions of a traditional hearing. By employing email and the Internet, we can hold a hearing at any time, on any subject; we can invite the most well-informed participants regardless of their ability to travel or the congressional schedule." (House Committee on Education and the Workforce Democratic Staff) U.S. Rep. Miller Takes Pension Hearings to the Web Excerpt: "A prominent US House Democrat is sponsoring what is believed to be the first online hearing ever conducted by a House member - in this case regarding problems with the US private pension system. In the wake of the United Airlines pension struggle, US Representative George Miller (D-California) kicked off a weeklong e-hearing in which interested parties can submit testimony via e-mail." (PLANSPONSOR.com; one-time registration required) Question on 10% Excise Tax Penalty for Premature Plan Distributions in the Event of Disability Excerpt: "Does the 10% excise tax penalty for premature plan distributions apply when the reason for the distribution is a participant's disability? That depends. A plan may define disability in a number of ways and use those definitions as triggering events for a distribution. However, for a distribution to be exempt from the 10% penalty, the participant's disability must meet the Social Security Administration's (SSA) definition of disability." (McKay Hochman Co.) Commentary: Plan Mistake Highlighted in IRS's Spring 2005 Retirement News for Employers Excerpt: "In each edition of the IRS's quarterly newsletter for Retirement Plans, the IRS focuses on a 'common plan mistake' frequently turning up on audit. .... The IRS notes in its newsletter that a common plan mistake found on audit is that required minimum payments have not been paid at all from a plan or have not been paid on a timely basis." (Attorney B. Janell Grenier via BenefitsBlog.com) Opinion: Indian Pension Fund Is in Distress Excerpt: "In another country, financial recklessness of this magnitude would cause public uproar. Not in India, where politicians have duped people into believing that the country's state-owned pension fund isn't in distress even if it must use unclaimed deposits to make payments. That plan to use dormant accounts, reported this month by the Business Standard newspaper, is pathetic, and it's illegal." (Bloomberg News) Overview: Volume Submitter Guidance Excerpt: "The IRS has issued guidance stating that a document sponsor may amend a plan on behalf of their adopting employers. .... In Announcement 2005-37, the IRS addresses the authority of Volume Submitter Practitioners to amend plan language on behalf of adopting employers." (McKay Hochman Co.) Overview: IRS Closes GUST, Opens EGTRRA Excerpt: "The deadline for submitting GUST prototype and volume submitter defined contribution plans to the IRS for approval is June 15, 2005. The submission date for EGTRRA pre-approved plan documents (prototype and volume submitter) for both the drafters of those plans and their sponsor clients is October 31, 2005." (McKay Hochman Co.) Contents Page of Book: Retirement Income: The Crucial Role of Social Security Excerpt: "[S]ocial Security benefits are only one piece of the retirement income security puzzle. A truly accurate assessment of Americans' retirement security must consider all forms of wealth -- including private pensions, housing, financial assets, and Social Security -- and how they have changed over time for different groups. [The 72-page PDF of the book is at http://www.epinet.org/books/retirement_income/retirement_income-full.pdf.]" (Economic Policy Institute) Snapshot: Growth in Social Security Wealth Outpaces All Other Sources Excerpt: "The typical American nearing retirement (age 56 to 64) saw a 30% improvement in retirement security between 1989 and 2001, as their wealth grew from $438,900 to $569,100 (in 2001 dollars). Social Security provided a larger addition to this wealth than any other source." (Economic Policy Institute) Text of CBO Testimony: Options for Social Security -- Budgetary and Distributional Impacts (PDF) 18 pages. Statement of Douglas Holtz-Eakin, Director, before the Committee on Finance, United States Senate on May 25, 2005. (U.S. Congressional Budget Office) Opinion: New Chrysler Pensions Make Workers Accept Risk Excerpt: "Newly hired Chrysler salaried employees now can expect a different sort of retirement account, similar to a 401(k): Chrysler contributes to it; workers decide how to invest the money in their accounts; and they may take the proceeds of the account at retirement or with them to another job. [C]hrysler's manager of retirement and savings, says the new pension is 'cost neutral.' [I]t's costing Chrysler as much as a conventional pension; ... it's unlikely to blow up into a huge liability." (Bloomberg News) Opinion: Exposing the Myth of Participant Education -- Build It and They Won't Come Excerpt: "Most people will inherently understand that the education program described here will work better than statement stuffers and web sites. We need to break the passive education paradigm in retirement education planning and get actively involved with our participants. It will get your employees motivated, make them feel better about their decisions, and most of all - will provide them with a more comfortable retirement in the future." (401khelpcenter.com) ORES Working Paper: Social Security as a Retirement Resource for Near-Retirees (PDF) 78 pages. Excerpt: "This paper analyzes Social Security benefits as a retirement resource for near-retirees. It looks at how the average values of several measures of benefits such as Social Security wealth and earnings replacement rates have changed from earlier cohorts to today's near-retiree cohort, examines differences among demographic and socioeconomic groups within cohorts, and discusses reasons for these changes and differences." (U.S. Social Security Administration) Projected Effects of Various Provisions on Social Security's Financial and Distributional Outcomes (PDF) 23 pages. Excerpt: "The attached tables present projected changes to financial and distributional outcomes under various provisions. .... The outcomes presented here are based on the Social Security trustees' 2004 demographic assumptions and CBO's January 2005 economic assumptions. They correspond to the outcomes that CBO released in March 2005. These provisions are stylized concepts of various individual changes to SocialSecurity." (U.S. Congressional Budget Office) Links to Items on Executive Comp, Benefits in General Overview of the New Bankrup.tcy Law - Part Two and a Correction to an Earlier Bankrup.tcy Law Article Excerpt: "The new bankrup.tcy law provides clearly defined (and often enhanced) protection against creditors for retirement plan participants and IRA owners who have filed for bankrup.tcy. However, creditor protection for plan participants or IRA owners who have not filed for bankrup.tcy remains unchanged. .... In our earlier Bankrup.tcy Law article, we erroneously mixed up the bankrup.tcy and non-bankrup.tcy situations." (McKay Hochman Co.) Overview: Initial IRS Guidance on New Deferred Comp Rules Leaves Many Unanswered Questions (PDF) 5 pages. Excerpt: "Even though the IRS guidance is incomplete, employers must operate any plans they maintain that are subject to Section 409A in good faith compliance with Section 409A and Notice 2005-1. If an employer fails to do so, each plan participant covered by the non-compliant provision will be subject to a 20% penalty tax on the amount deferred at the time of deferral or vesting (if later) and interest on any resulting underpayment of tax, in addition to immediate income tax." (The Hay Group) Overview: DOL Clarifies the Reporting of Fees & Commissions on Form 5500 Excerpt: "The Schedule A (Form 5500) Information You Received From Your Insurance Company May Not Be Accurate. In response to allegations that some insurance companies have been underreporting commission and fee payments to brokers and agents, the Department of Labor (DOL) has issued an advisory opinion clarifying its views regarding the current Schedule A reporting requirements." (Ice Miller) Overview: U.K. Tax Authorities Publish Further Guidance on Share Options (PDF) 5 pages. Excerpt: "The comments [in the target document] are restricted to the matters of tax and NIC [national insurance contributions] on unapproved (i.e., not provided for by tax legislation in the United Kingdom which affords favorable tax treatment), 'American-style' share options." (KPMG LLP) Newly Posted Events 8th Annual Recruiting & Staffing Summit in Georgia on September 19, 2005 presented by International Quality & Productivity Center (IQPC) Newly Posted Press Releases Groundbreaking IRS Ruling Regarding FSA Claims: DataPath, Inc. conducts survey of plan providers regarding impact (DataPath, Inc.) DataPath issues online survey to gather industry response to IRS Notice 2005-42. (DataPath, Inc.) TE/GE Advisory Committee to Hold Public Meeting (Internal Revenue Service (IRS)) Mellon Financial Completes Transaction with ACS (Mellon Financial Corporation) The Principal Financial Group Unveils Trade-Specific Retirement Plan Programs for Taft-Hartley Market (Principal Financial Group) ACLI Unveils Retirement Security Agenda (American Council of Life Insurers) Treasury And IRS Propose Regulations On Retirement Plans - Proposed Rules Allow Members of the National Guard and Reserve to Contribute to Retirement Plans While on Active Duty (U.S. Treasury Department and Internal Revenue Service) The Bordeaux Group Launches Its Financial Benefits Packages (The Bordeaux Group) Newly Posted or Renewed Job Openings Compliance Consultant for Milliman, Inc. in TX Relationship Manager - Employee Benefits for Reliance Trust Company in GA Senior Relationship Associate for Reliance Trust Company in GA Handy Links: View Today's Active Message Threads Search BenefitsLink Using the Web for Employee Benefits Research (hypertext article) Employee Benefits Library 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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