BenefitsLink Retirement Plans Newsletter June 2, 2005 Today's sponsor: Employee Benefits Institute of America (EBIA) (Click on company name or banner to learn more.) Explore the Seven Wonders of the Benefits Compliance World No HR or benefits professional's library would be complete without EBIA's compliance manuals. Save time and steer clear of compliance traps by joining thousands of professionals who rely on our manuals. "I know I can rely on your manuals, above and beyond any others, to be clear, concise, easy to understand, and accurate!" -Director of Flexible Benefits (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) SPARK Institute Comments on IRS Proposed Roth 401(k) Regulations (PDF) 8 pages. Excerpt: "SPARK members include most of the largest service providers in the retirement plan industry and the combined membership services more than 95% of all defined contribution plan participants. Our members are the plan service providers that will be responsible for understanding and applying the Roth 401(k) rules and regulations for a substantial majority of retirement plans." (The NDCC/SPARK Institute, Inc.) Avoiding Redemption Fees in 401(k) Plans As More Mutual Funds Introduce Them Excerpt: "To combat the mutual fund timing problem, the Securities and Exchange Commission (SEC) has proposed that mutual fund companies assess shareholders a short-term redemption fee. In other words, if a shareholder buys and then sells shares in a fund within a short period of time, the SEC is strongly encouraging the fund company to assess the shareholder a 'redemption fee.' At this time, the fee is voluntary and varies by fund company." (Financial Advisor) American Benefits Council Comments to IRS on the Proposed Roth 401(k) Regulations (PDF) Excerpt: "The Council's primary concern is the pressing need for guidance on the basis recovery methodology for distributions that are not 'qualified distributions.' The proposed regulations do not provide any guidance with respect to the taxation of distributions of designated Roth contributions." (American Benefits Council) Retirement Plan Rollovers— and Rollover Options— likely to Soar in Coming Years Excerpt: "The amount of money your 401(k) participants roll over when they leave is poised to double in the next several years. So, get ready. Rollovers will double to $400 billion annually by 2010, predicts Chris Brown, Boston-based director of retirement market research at Financial Research Corp. 'It is really a combination of declining job tenure and the Baby Boomers hitting retirement,' he explains." (PLANSPONSOR.com; one-time registration required) Plan Sponsors Warm to the Notion of Automatic Rollovers for Terminated Participants' Small Balances Excerpt: "Recent changes in the law have made it illegal since March 28 for most employers to cash out anyone with an account balance in excess of $1,000 unless the plan participant authorizes the distribution. You still may remove terminated participants from your plan if their account balances are $5,000 or less, assuming they fail to elect a rollover into another qualified plan or a cash distribution, but only by rolling their plan assets into an Individual Retirement Account that you ...." (PLANSPONSOR.com; one-time registration required) Employee Ownership Update for June 1 NCEO Executive Director Corey Rosen discusses Cisco's proposal for a special security that mimics employee stock options as a way to create a market-based valuation of the awards; the IRS's dropping of complicated new attribution rules for S corporation ESOP anti-abuse testing; more results from the NCEO's survey of companies with employee stock purchase plans (ESPPs); and a Harvard Business Review article by Rosen and others on every employee being an owner. (National Center for Employee Ownership (NCEO)) DOL Factsheet: Tips for Selecting and Monitoring Service Providers for Your Employee Benefit Plan Excerpt: "To assist business owners in carrying out their responsibilities under ERISA to prudently select and monitor plan service providers, the Employee Benefits Security Administration has prepared [12 tips as a starting point.]' (U.S. Employee Benefits Security Administration) Text of DOL/SEC Guidance on Potential Conflicts of Interest by Pension Consultants (PDF) 4 pages. Excerpt: "To encourage the disclosure and review of more and better information about potential conflicts of interest, the Department of Labor and the SEC have developed the following set of questions to assist plan fiduciaries in evaluating the objectivity of the recommendations provided, or to be provided, by a pension consultant." (U.S. Department of Labor, Employee Benefits Security Administration; U.S. Securities and Exchange Commission) Overview of Retirement Planning Symposium -- Scenarios, Solutions, for the Coming Boomer Retirees Excerpt: "What will happen to Social Security? Is age 65 the 'new' 45? How much can a retiree withdraw without running out of money? What's the best way to invest for retirement, with modest returns predicted? Those and many other questions were the topics discussed by a host of well-known planning luminaries, such as Robert Pozen, Nick Murray, Mitch Anthony, Deena Katz, Roy Diliberto, Dan Moisand and many others, at The Financial Advisor Retirement Planning Symposium in Las Vegas April 20-22." (Financial Advisor) Issue Brief: Social Security Price Indexing Proposal Means Benefit Cuts for Workers Excerpt: "Pozen's suggested changes to Social Security include blending the current wage indexing of benefits with price indexing, a shift that will reduce Social Security benefits for middle-income workers by 22% in 2055 and by 28% in 2085. Indeed, the Pozen proposal will lead to substantial and ever increasing benefit cuts for well over 70% of Social Security beneficiaries, including retirees, widows, and surviving children." (Economic Policy Institute) Testimony: C. Eugene Steuerle on Social Security Reform, May 25, 2005 (PDF) 20 pages. Statement before the Committee on Finance of the United States Senate on May 25, 2005, by C. Eugene Steuerle on Social Security reform. (The Urban Institute) Updated June 2005: Bob Ball's Plan to Reform Social Security (PDF) 9 pages. Excerpt: "[T]here are several ways to bring the system into balance and pay benefits that are kept up-to-date with wages, changes that are desirable in any event and that I would favor whether or not there was a long-run shortage of funds. It is not true that hard choices have to be made and painful measures taken to restore balance to long-range Social Security financing. Changes do need to be made but the choices are not hard nor the measures painful." (The Century Foundation) Another Question is Answered in the Who's the Employer Q&A Column I am interested in the audit aspect of a multiple employer plan. In my situation there are several small employer plans aggregated into a multiple employer plan. Individually none of the plans would meet the audit requirement; but as a multiple employer plan there are over 100 participants, so the plan files Schedule H to Form 5500. Small employers should weigh in the audit cost associated with the multiple employer plan in considering administrative costs. (BenefitsLink.com) White Paper: The Case for Investing in Fixed Income -- Myths, Misconceptions, and Realities of Bonds (PDF) Excerpt: "[F]or every well-known truth about bonds, there seems to be a myth that has yet to be dispelled. This paper seeks to address that, by examining how bonds have behaved relative to equities and cash, and by discussing a variety of functions that bond investments can perform in an investment portfolio." (Fidelity Investments) Links to Items on Executive Comp, Benefits in General Abstract of Book: Sarbanes-Oxley: Best Practices for Private and Nonprofit Health Care Entities Excerpt: "This 'how-to-do-it' workbook clarifies why private and nonprofit health care organizations need to pay very close attention to this revolutionary corporate responsibility law. It describes specific action steps and includes 16 highly useful templates (in print and on CD) you can adapt for use in your organization." (AISHealth.com) Over-60s Are Choosing the Workforce -- Retirement Is Not Dead, It's Just Being Redefined Excerpt: "According to the Bureau of Labor Statistics, more than 32 percent of men and 22 percent of women ages 65 to 69 are still working, full or part time, some for the money, others for the health insurance, still more for the satisfaction. 'Retirement is now a transition point,' said John Diehl, a certified financial planner with the Hartford Financial Services Group in Hartford, Conn. For the financially fit, he said, 'it can be a time to pursue a vocation you always dreamed of.'" (Knight Ridder Newspapers via Rutland Herald) Hay Benefits Advisor, Spring 2005 -- Information on Benefit Program Compliance and Developments (PDF) 12 pages. Contents: Social Security Financing -- The Real Story; IRS Grants 2½ Month Extension for Cafeteria Plan Claims; Complying with the New Deferred Compensation Rules; Prepare Now for Medicare Pres.cription Drug Part D Benefits; Bush Administration Proposes Major Overhaul of Pension Funding Law; The New Automatic Rollover Requirements. (The Hay Group) Providers Are Offering New Investment Options to Nonqualified Plans -- Mirroring 401(k) Options Excerpt: "It really is the DC-ification of the deferred comp industry,' says Tom Johnson, chief marketing officer at Springfield, Massachusetts-based MassMutual Financial Group, about what is happening with nonqualified plans these days. Many now have investment options a lot like those available in 401(k) plans. Nonqualified plans have seen a boom in recent years. Ninety-three percent of the Fortune 1000 had one of these plans in 2003, ...." (PLANSPONSOR.com; one-time registration required) New Regulations Could Dampen Enthusiasm for Deferred Compensation Programs Excerpt: "From the late 1990s through the end of 2004, there was phenomenal growth in the amount of executive compensation diverted into nonqualified deferred compensation (NQDC) plans. That growth, however, is unlikely to continue in light of new rules for NQDC plans by the American Jobs Creation Act of 2004 (AJCA), which added Section 409A to the Internal Revenue Code. The AJCA requires design changes to these plans and placed additional administrative burdens on companies that sponsor them." (PLANSPONSOR.com; one-time registration required) Incentive Programs Energize Employees — Just Ask HSBC – North America Excerpt: "Five- and six-figure cash awards aren't unusual for employees with great ideas that save the financial services firm money. And, says HSBC vice president of compensation Chuck Dwyer, you don't have to be a senior executive to win one." (Workforce Insights) Hewitt Federal Legislation Quick Guide Updated as of May 31, 2005 Excerpt: "Hewitt's Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding health and welfare benefit plans, retirement plans, and human resources and employment law." (Hewitt Associates) Microsoft Recants on Use of Stock Options and Now Has an Equity Ownership Program Excerpt: "In an interview with the Society of American Business Editors and Writers Conference on May 3rd, Microsoft's Bill Gates indicated that he regretted ever offering stock options as part of Microsoft's compensation package and that Microsoft's current approach was 'much better'." (Leading Companies Online Magazine via Beyster Institute) Newly Posted Events Deciphering the Laws on Employee Leaves of Absence in California on June 22, 2005 presented by Precept Human Capital Management Health and Welfare Cost Containment in New Jersey on June 15, 2005 presented by International Society of CEBS - Northern New Jersey Chapter Newly Posted or Renewed Job Openings Health Insurance National Account Executive for Great-West Healthcare in CA Retirement Plan Education Consultant for Charles Schwab in CA, CO, OH Client Relationship Manager for Great-West Retirement Services in FL Benefits Analyst for Siebel Systems in CA Enrollment Strategist/Specialist for Kaiser Permanente in MD Employee Benefits Trust Officer for Regions Financial Corporation in AL Sales Director, Financial Services for Employee Benefits Firm in MA Retirement Plan Specialist for American Funds in VA 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. Published by: BenefitsLink.com, Inc. https://benefitslink.com/about.html 1298 Minnesota Avenue, Suite H Winter Park FL 32789 (407) 644-4146 Fax: (407) 644-2151 Editor and Publisher: David Rhett Baker, J.D. Housekeeping: How to Sponsor an Issue Subscribe to a Daily Email Announcing Publication of Each Day's Newsletter Privacy Policy Archive of Previous Newsletters If you'd like to STOP this newsletter, just click on this link: STOP sending this newsletter to me