BenefitsLink Retirement Plans Newsletter June 1, 2005 Today's sponsor: University of California Press (Click on company name or banner to learn more.) What's behind ERISA? In his new book, 'The Employee Retirement Income Security Act of 1974: A Political History,' Professor James Wooten provides a revealing look at the politics behind ERISA. Drawing on extensive research in unpublished documents and interviews with legislators and congressional and agency staffers, Wooten provides a comprehensive and detailed account of ERISA's evolution and enactment. For professionals in the field of employee benefits, Wooten's book will be both an engrossing read and an invaluable resource. (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) Overview: Roth 401(k)s Could Provide Employees New Plan Alternative in 2006 (PDF) 4 pages. Excerpt: "Even though the IRS has issued proposed regulations implementing Roth 401(k) plans, plan sponsors should be aware that there is some uncertainty as to the future of these arrangements. EGTRRA Sunsets December 31, 2010. While it is likely that the expiration date of many provisions of EGTRRA (December 31, 2010) will be extended, plan sponsors should at least consider that a Roth 401(k) plan implemented in 2006 may only be a five-year program." (Gardner Carton & Douglas LLP) Spoon-Feeding Employees 401(k) Plans with Automatic Signup and Contribution Increases Excerpt: "Automatic enrollment has been around since the late Nineties, but it lost some of its luster when it became clear that many employees who were enrolled automatically at a modest contribution rate, with the money invested conservatively, were still at the same savings rate and in the same conservative investment years later. Now, however, plan providers are linking it with automatic step-up and managed accounts, and the hope is that this will alleviate that problem." (Treasury & Risk Management) Legal Questions on Laws in 32 States Inhibit Automatic Enrollment Features in Retirement Plans Excerpt: "Automatic 401(k) enrollment has been shown to increase plan participation and improve nondiscrimination testing, but some employers are reluctant to adopt it because the practice runs up against state law. In some states, such as California, laws require employers to receive written notice from workers before wages are taken out of their paychecks. While these laws aren't specifically targeted at retirement plans, it is unclear whether state laws take precedence or if [ERISA] does." (Employee Benefit News) Warning on U.S. State Pension Funds Shortfall Excerpt: "US state pension funds are facing a shortfall of several hundred billion dollars and are in much worse shape than corporate pension funds, according to the head of one of the biggest state pension funds in the US. Orin Kramer, chairman of the $70bn New Jersey pension fund, warned that the underfunding in the state funds which provide pensions for teachers, fire and police officers and other public employees would grow if no action were taken, jeopardizing the entire pension system." (Financial Times via MSN Money) Overview: United Kingdom Scheme-Specific Funding – What, When and How? (PDF) 8 pages. Excerpt: "As expected from Part 3 of the Pensions Act 2004 which covers 'Scheme Funding', draft regulations and a draft Code of Practice have been issued for consultation on the replacement for the MinimumFunding Requirement. The consultation period ends on 6 June 2005." (Towers Perrin) GAO Report: Recent Experiences of Large Defined Benefit Plans Illustrate Weaknesses in Funding Rules (PDF) 62 pages. Excerpt: "This report examines: (1) the recent funding and contribution experience of the nation's largest private DB plans; (2) the funding and contribution experience of large underfunded plans, and the role of the additional funding charge (AFC); and (3) the implications of large plans' recent funding experiences for PBGC, in terms of risk to the agency's ability to insure benefits." (U.S. Government Accountability Office) Some Big Companies Failed to Add to Pensions in 1990's Excerpt: "More than half of the nation's biggest companies with pension plans sailed through the boom of the late 1990's and the bear market that followed without putting any cash into their pension funds, using loopholes in federal law to skirt a requirement for annual contributions, according to a new study by the [Government Accountability Office]. The study ... examined weaknesses in the federal pension rules in an effort to prevent cataclysmic failures like the one at United Airlines." (The New York Times; one-time registration required) Opinion: The Disappearing Defined Benefit Pension; Could It Revive Talk of National Pension System? Excerpt: "Back in the Carter administration, people started talking about a national pension system that would bridge or supplement what people got through Social Security, partly by sharing the financial risks across industries. It's time to revive that idea. Beyond the policy, though, is a powerful message: The security of a private defined-benefit pension, protected from the casino-like atmosphere typical of plans now in vogue, is part of the prosperity and opportunity that corporations ...." (TomPaine.com) Standard & Poor's Financial Communications to Provide Retirement Information in Spanish Excerpt: "Employers can cultivate deeper trust and better understanding among their Spanish-speaking workforce with some help from retirement plan providers, according to Standard & Poor's Financial Communications, which is working with Translations.com to offer retirement plan information in Spanish. The effort is aimed at a growing segment of the workforce that is currently underrepresented in company retirement plans, says Carol Goodwin, senior editor at S&P FC." (BenefitNews Connect) Regulations Summary: Proposed 415 Regulations Published in Federal Register May 31, 2005 (PDF) 2 pages. The summary includes information on the following issues: 1. Multiple annuity starting dates. 2. Post-employment payments. 3. Military differential pay. 4. Conversion to straight life annuity. 5. Social security supplement. 6. Determination of high 3 average compensation. 7. Partial QJSA. 8. Application of $10,000 exception. (American Benefits Council) The 'Employee' Ownership Culture: What's It All About? Excerpt: "You've heard the message: Employee ownership can boost business performance, but only if you develop something called an 'ownership culture.' So, what is this 'ownership culture' anyway, and how do you create one? At the National Center for Employee Ownership (NCEO)/Beyster Institute 2005 annual conference this spring, Martin Staubus of the Beyster Institute and Whitney Walpole of Culture Counts helped to turn this vague notion into a clear and attainable goal." (Leading Companies Online Magazine via The Beyster Institute) Thrift Savings Plan Retirement Accounts Offer Smart Options for Federal Workers Excerpt: "Although most feds are very familiar with the TSP eight out of 10 have accounts many don't realize that they can transfer other money into the TSP, or why they should consider doing it. Here's the deal: If you have a TSP account ... you can transfer pre-tax money from another source into the federal plan. That money can be an outside investment retirement account that you have set up or from the 401(k) plan of a company that you once worked for." (The Washington Times) NCPERS Adopts Legislative Positions on Nine Issues NCPERS adopted nine legislative positions at the annual meeting on May 12, 2005. The target page has links to copies of the legislative positions on: Opposing Mandatory Social Security Coverage; Social Security System and Private Retirement Accounts; Health Care for All Americans; Raiding Pension Funds; Defined Contribution Plans; GASB Accounting Standards; Retirement Benefits; Guaranteed Retirement Benefits; and, America's Retirement Security. (National Conference on Public Employee Retirement Systems) 2005 New Zealand Budget Introduces New Workplace Savings Plan Excerpt: "In the 2005 Budget speech presented to Parliament by the Minister of Finance on 19 May, the introduction of a new workplace savings plan was announced. 'KiwiSaver' accounts are intended to assist employees in saving for a first home deposit and in saving for retirement and will become available from 1 April 2007." (Watson Wyatt Worldwide) The ERISA Audit Report, May 2005 Edition (PDF) 4 pages. Contents: Prohibited Transactions: It's All in How You Look at It; If You Think Correction under EPCRS Is Routine, Think Again; IRS to Step Up Its Enforcement Program and Crack Down on Unethical Practices; New IRS Examination Procedures Impact Ability to Use SCP; and, DOL Fines Employer $75,000 for Late 5500s. (Reish Luftman Reicher & Cohen) Opinion: Why Bush's Private Accounts for Social Security Are a `Dead Shark' Excerpt: "Yesterday, President George W. Bush promised that his strategy for selling his now sinking Social Security private accounts proposal will eventually cut through opposition 'like water through a rock.' Perhaps a more fitting of water-related metaphors for Bush's proposal could be found at the end of the movie 'Annie Hall' when Woody Allen, as Alvy Singer, declares: 'A relationship, I think, is like a shark. You know? It has to constantly move forward or it dies. ....'" (Bloomberg News) Testimony on Alternatives to Strengthen Social Security by Dr. Lawrence A. Hunter Testimony Presented before the U.S. House of Representatives Committee on Ways and Means on Alternatives to Strengthen Social Security by Dr. Lawrence A. Hunter, Vice President and Chief Economist of the Free Enterprise Fund and Senior Research Fellow at the Institute for Policy Innovation on May 12, 2005 (Institute for Policy Innovation) Opinion: Can the Rich and Famous Save Social Security? Excerpt: "The idea that rich and poor are treated alike in retirement programs is so central that Kennedy tried to block the Medicare pres.cription drug benefit in 2003 because it charged the rich more than the poor. 'Hold on to your hat,' he declared. 'Today, Medicare. Tomorrow, Social Security.'" (USA TODAY via Yahoo! News) Opinion: Delaying Social Security Reform Will Make Problems Far Worse Excerpt: "As Social Security costs escalate, those of Medicare and Medicaid are projected to rise much faster. Those three programs alone are on pace to far exceed all federal taxes in 2030, even before interest on the debt or any other spending, a Government Accountability Office analysis found. To the extent you avoid cutting Social Security, you'll need deeper cuts in health care spending on the elderly and poor, ...." (Investor's Business Daily via Yahoo! News) Retirement Plan Fees Falling: Report Finds Best Funds Are Charging Less Excerpt: "Retirement-plan participants should not have to pay more than 0.58% of assets for the investment-management fees in their plans, according to a benchmarking study released Tuesday." (MarketWatch, Inc.) United Airlines' Mechanics Ratify Deal for New Five-Year Contract Excerpt: "United Airlines' mechanics union ratified a five-year contract Tuesday, .... A 5 percent defined-contribution pension plan is part of the new contract, replacing the former defined-benefits plan. .... A replacement pension plan for the defined-benefits plan that United is terminating was believed to be the biggest sticking point in the talks with the machinists' union as they came down to the wire." (AP via The Bismarck Tribune) Information on OASDI Financial Effects of the Social Security Guarantee Plus Act of 2005 (H.R. 750) (PDF) 32 pages. Excerpt: "This memorandum [to Rep. E. Clay Shaw, Jr.] provides long-range estimates of the financial effects on the Social Security(OASDI) program assuming enactment of the Social Security Guarantee Plus Act of 2005 (H.R. 750), which was introduced on February 10, 2005. .... These estimates are based on the intermediate assumptions of the 2004 Trustees Report -- estimates based on the intermediate assumptions of the 2005 Trustees Report are not yet available, but are not expected ...." (U.S. Social Security Administration) Links to Items on Executive Comp, Benefits in General Application of an EITF Issue to Freestanding Financial Instruments Originally Issued as Compensation (PDF) 3 pages. Excerpt: "The Board directed the FASB staff to issue this FASB Staff Position (FSP) to clarify the application of EITF Issue No. 00-19, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,' to freestanding financial instruments originally issued as employee compensation that can be settled only by delivering registered shares." (Financial Accounting Standards Board) Audio: How Sarbanes-Oxley Has Affected Corporate Culture Excerpt: "Linda Thomsen, director of enforcement at the Securities and Exchange Commission, discusses how the Sarbanes-Oxley Act has changed corporate culture. The law is meant to protect investors by providing more accountability and transparency of investments." (Morning Edition via National Public Radio) Novel Ideas and Benefits at Borders Lure Older Workers Excerpt: "To further attract and retain these employees, Borders recently added medical and dental benefits for part-time workers. Now the firm is planning to add a corporate 'passport' program by which employees could work half the time in a store in one part of the country and the other half at a different store." (Workforce Management; one-time registration required) Joint Committee's Explanation of Tax Bills During 108th Congress: Links to Principal Benefits Laws (PDF) This 24-page document is the complete table of contents for the Joint Committee's 591-page document entitled 'General Explanation of Tax Legislation Enacted in the 108th Congress' (May 2005); BenefitsLink has marked the principal employee benefits laws in red. Those red marks are clickable hypertext links to separate PDF documents we've prepared for you, containing the Joint Committee's explanations of each of those employee benefits laws. (U.S. Congress, Joint Committee on Taxation) Reduced Price on Materials from 2003 ALI-ABA Conference: Representing the Closely-Held Business $49 direct from ALI-ABA; presentations included 'New Planning Opportunities for Defined Benefit Plans' by Bruce Temkin, 'New Planning Opportunities for Defined Contribution Plans' by Paula Calimafde and presentations by Roberta Casper Watson. (ALI-ABA) Newly Posted Events "Managing Migraine: The Employer's Role" Web cast in District of Columbia on June 7, 2005 presented by National Business Coalition on Health Newly Posted Press Releases Statement Of Executive Director Bradley Belt On Government Accountability Office Pension Study (Pension Benefit Guaranty Corporation (PBGC)) The Principal Financial Group Defined Benefit Statement Used as Best in Class Model to Improve Social Security Statement; Congress Asked to Make Changes Based on Review (Principal Financial Group) National Business Coalition on Health Partners with National Headache Foundation to Address Migraines in Employer Community (National Business Coalition on Health) U.S. Assistant Secretary of Labor Ann L. Combs Commends GAO Report On Pension Funding Rules (U.S. Department of Labor, Employee Benefits Security Administration) U.S. Department of Labor and Securities and Exchange Commission Issue Guidance Addressing Potential Conflicts of Interest of Pension Consultants (U.S. Department of Labor, Employee Benefits Security Administration) The 412i Summit adds major corporate sponsors (412iCompany, The) Newly Posted or Renewed Job Openings Associate Attorney - ERISA & Employee Benefit Funds for Blitman & King LLP in NY Director, New Business Programming for Well respected Philadelphia based Financial/Life Insurance Consulting Firm in PA Defined Benefit Pension Plan Administrator for PenSys, Inc. in NC Administrator/Operations Manager for Alliance Benefit Group of New England in NH Benefits Manager for Southern California Edison in CA Pension Administrative Consultant - Woodland Hills (Los Angeles) for Polycomp Administrative Services, Inc. in CA Pension Administration Manager - San Diego for Polycomp Administrative Services, Inc. in CA Benefits Analyst for Target in MN Enrolled Actuary for Pentec, Inc. in CT 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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