| BenefitsLink Retirement Plans Newsletter |   |
June 6, 2005
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Text: Government Actions Could Improve the Timeliness and Content of Form 5500 Pension Information
61 pages. Excerpt: "This report examines: (1) the information reported on the form and how it is used, (2) factors that affect the timeliness of Form 5500 information, and (3) issues affecting the content of the form." (U.S. Government Accountability Office)
Five Easy Pieces on Section 401(k) Plans in the May 2005 Edition of Employee Benefits Bulletin (PDF)
6 pages. The pieces are: IRS Issues Final 401(k) Regs; Troubling News from the Department of Labor for Automatic-Enrollment 401(k) Plans; IRS Proposes Roth 401(k) Regulations; Fifth Circuit Court of Appeals Decides an Important but Controversial 401(k) Case; and, The Accidental Origins of the 401(k) Plan. (Adams and Reese LLP)
Complimentary Teleconference: Putting the 401(k) Plan on Autopilot -- 2005 Trends and Experience
Excerpt: "For many companies, defined contribution plans have gone from being supplemental savings plans to key retirement income vehicles. .... Join this complimentary one-hour Hewitt teleconference to hear about the latest trend in 401(k) plan design and delivery: automation. [Register for the June 22, 2005, teleconference at the target page.]" (Hewitt Associates)
Overview: Proposed Regs under Code Sec. 415 Would Replace Existing Regulations Beginning in 2007
Excerpt: "[T]he IRS has issued proposed regulations that ... would replace existing final regulations under Code Section 415. For defined contribution plans, including 401(k) plans, Code Section 415 imposes overall limits on the annual additions that can be made on behalf of each participant." (Employee Benefits Institute of America Inc.)
Boomers Are Switching Out of Their 401(k) Accounts -- and Mutual Funds Are Hurting
Excerpt: "[F]or an industry just 20 years old, the 401(k) business is already over the hill. That's causing big headaches for mutual-fund companies, which administer half of the $3.2 trillion in workplace savings plans. When an employee retires or switches jobs, the industry manages to hold on to just 30 cents of every dollar in a 401(k) or similar plan. Now, the rate of rollovers out of fund companies is set to explode, from $198 billion in 2003 to $401 billion in 2010, ...." (BusinessWeek)
Lower Costs or Hidden Problems: The Legal Concerns for ETFs in 401k Plans
Excerpt: "Investment in Exchange Traded Funds ('ETFs') is growing, to the tune of nearly $250 billion, but we have not seen corresponding growth in 401k plans. This is in part because mutual funds dominate the 401k business, but also because ETFs as an investment option are misunderstood as to their risk and reward for 401k plan sponsors and plan investors. However, there are many legal issues to consider when offering ETFs in a 401k plan or offering ETFs as part of your 401k platform." (Bullivant Houser Bailey PC via 401khelpcenter.com)
San Diego Pension Woes -- Underfunding, Felony Charges Facing Board Members, & Bankrup.tcy Talk
Excerpt: "San Diego's municipal pension fund ... is about $1.4 billion short of the money it needs to pay city retirees over time. [T]he Securities & Exchange Commission, the FBI, and the U.S. Attorney's office were investigating allegations of securities fraud and public corruption in connection with the fund. Some civic agitators have even called for America's seventh-largest city to declare bankrup.tcy to help it get out of its financial bind." (BusinessWeek)
Borrowing Aimed at Boosting the Assets of New Jersey's Pension Plans Went Awry
Excerpt: "Back in 1997, New Jersey borrowed $2.7 billion in pension obligation bonds to fill a gap in its plan funding. These bonds –- sometimes called POBs -- are general obligation debt much like any other municipal borrowing, but they're issued in order to put the proceeds into the pension funds, not the general government coffers. The issuing city, county, or state bets that the borrowed money can be invested to earn more than the interest rate that the bonds must pay." (BusinessWeek)
Asia's Pensions Time Bomb
Excerpt: "In this article, we look at some of the broad characteristics of the existing Asian pension environment, and the forces driving change. We then turn to individual countries and examine to what extent these changes will meet governments' objectives." (Watson Wyatt Worldwide)
Overview: DOL, SEC Issue Guidance Addressing Potential Conflicts of Interest of Pension Consultants
Excerpt: "The tips include a series of questions that DOL and SEC believe plan sponsors should ask their pension consultants. In the interest of full disclosure, we've reproduced these questions, and our responses, below:" (Schultz Collins Lawson Chambers, Inc.)
Overview: DOL and SEC Guidance Addressing Potential Conflicts of Interest of Pension Consultants
Excerpt: "[A] recent report ... indicated that potential conflicts of interest may affect objectivity of the advice pension consultants are providing to their pension plan clients ....... DOL and SEC have developed a set of questions to assist plan fiduciaries in evaluating objectivity of recommendations provided ... by a pension consultant. [Cypen & Cypen] are providing the full set of questions, together with the substance of the agencies' commentaries: ...." (Cypen & Cypen)
Letter to EBSA on the Voluntary Fiduciary Correction Program (PDF)
3 pages. Excerpt: "[T]he Council recommends that EBSA make certain changes and additions to the program. .... Specifically, the Council recommends that EBSA (1) expand the list of errors covered by the program, (2) seek more coordination with the Internal Revenue Service (IRS), (3) implement a self-correction method similar to the IRS's self-correction program, and (4) make limiting modifications for multiple employer plans." (American Benefits Council)
Fifth Third Bancorp 401(k) Participants' Suit Can Proceed
Excerpt: "Fifth Third Bancorp has agreed to change a $17 million shareholder's class-action lawsuit settlement announced in April to allow a separate lawsuit on behalf of current and former employees in the bank's 401(k) retirement plan to proceed, according to attorneys." (The Cincinnati Enquirer)
Overview: Court Approves Settlement with Some Defendants in Enron Fiduciary Breach Litigation
Excerpt: "A proposed settlement has been approved by the court in this class action against fiduciaries of three Enron Corporation ERISA plans, despite objections from the nonsettling defendants .... Under the terms of the settlement, various fiduciaries, including officers, directors, and administrative committee members are released from ERISA claims in return for payment of an amount equal to the limits on two fiduciary liability policies ($85 million)." (Employee Benefits Institute of America Inc.)
How Public Pension Promises Are Draining State and Local Budgets
Excerpt: "State and local governments, hard hit by the economic downturn of 2001, find themselves in a financial bind. While sharp anti-tax sentiment constrains revenue and governments face new outlays for everything from homeland security to No Child Left Behind, there's a growing feeling that the retirement promises made to everyone from office workers and state patrols to firefighters and legislators may simply be unbearable." (BusinessWeek)
Issue in Brief: The Chilean Pension Reform: The Good, The Bad, and The In Between (PDF)
10 pages. Excerpt: "Care must be exercised when extrapolating from the Chilean experience to other countries. At the time of the reforms, Chile met a singular set of conditions: the Chilean markets were incipient; the pension system was chaotic and increasingly unfair; and the non-pension part of the Chilean government ran surpluses. Other particularities of the Chilean case include the size of its informal economy, and the apparent acceptance of government-funded welfare programs." (The Center for Retirement Research at Boston College)
Opinion: Blaming the Boomers for the Need for Social Security Reform
Excerpt: "The current Social Security debate is filled with ideologically derived premises that seem to make little economic or factual sense but are great political slogans. One of my favorites is that, with the retirement of the huge baby boomer generation, we just 'won't be able to afford the program any more.'" (Richard C. Leone via The Century Foundation)
IRS Weighted Average Interest Rate Table Updated for June 2005
Weighted average for June 2005: 5.00% (U.S. Internal Revenue Service)
IRS Composite Corporate Bond Rate Table Updated for June 2005
Corporate Bond Weighted Average Interest Rate = 5.94 for June 2005 (U.S. Internal Revenue Service)
Links to Items on Executive Comp, Benefits in General
United Kingdom Banking Company Extends Work to Age 75
Excerpt: "A UK financial services company will allow employees to continue working until age 75, the firm announced Thursday. A Web site statement posted by Nationwide Building Society said the new policy, which went into effect Thursday, extended the company's 2001 rule allowing employees to stay on the job until age 70." (PLANSPONSOR.com; one-time registration required)
Update on Nonqualified Deferred Compensation Guidance (PDF)
3 pages. Excerpt: "This new Section 409A dramatically changes how nonqualified deferred compensation arrangements operate. It applies to 457(f) plans, SERP plans, bonus deferral plans and many other types of programs. On December 20th, the IRS provided initial guidance on the new nonqualified deferred compensation rules. While the guidance answers some questions and provides a liberal transition period, it leaves many questions unanswered. [Newsletter was originally published February 2005]" (The Cochlan Group)
Overview: Nonqualified Benefit Plan Administration and the American Jobs Creation Act of 2004 (PDF)
3 pages. Excerpt: "The American Jobs Creation Act of 2004 has created quite a stir with those who have established nonqualified benefit plans for key executives and directors. Now that we have received guidance on this legislation from the Treasury and the IRS, we have a clearer picture of what needs to be addressed in these plans. What plan sponsors may not be thinking about, however, is how these new rules have impacted their plan administration provider." (The Cochlan Group)
Overview: Nonqualified Benefit Plans Best Practices and the American Jobs Creation Act of 2004 (PDF)
2 pages. Excerpt: "The recently enacted American Jobs Creation Act of 2004, signed into law by President Bush on October 22, 2004, makes dramatic changes to the tax rules for nearly all nonqualified deferred compensation arrangements with the addition of Section 409A to the Internal Revenue Code. Section 409A indicates that unless specified requirements are met, all amounts deferred may now be includable in a participant's gross income." (The Cochlan Group)
Employee Benefit and Executive Compensation Practitioner's Forum Discussion on IRS Circular 230
Excerpt: "The [target page] is the transcript of an informal discussion of employee benefit practitioners held in Washington, D.C. on May 9, 2005. The topic focuses on what steps (if any) employee benefit and executive compensation practitioners are taking in order to meet the new requirements of updated IRS Circular 230, regarding the practice of law before the IRS." (BNA Tax Management)
Text: Real Compensation, 1979 to 2003: Analysis from Several Data Sources (PDF)
20 pages. Excerpt: "The National Compensation Survey, the Current Employment Statistics survey, the Quarterly Census of Employment and Wages, the Current Population Survey, and the real hourly compensation series from the BLS productivity statistics program each offer strengths and limitations in analyzing real compensation" (Monthly Labor Review)
Newly Posted Press Releases
United Benefit Advisors (UBA) Members Tackle the Forces Shaping Future Healthcare Delivery, Welcome 12 New Member Firms
(United Benefit Advisors)
Newly Posted or Renewed Job Openings
Actuarial Student
for Nyhart
in IN
Advanced Sales Professional
for National Life Group
in VT
401(k) Specialist
for CoAdvantage
in FL
Benefits Specialist
for CoAdvantage
in FL
Pension Analyst
for T. Rowe Price
in MD
Associate Manager-Client Services
for Great-West Retirement Services
in WI
Employee Benefits Specialist
for Principal Financial Group
in IL
Retirement Plan Administrator
for CDM Retirement Consultants, Inc.
in MD
Defined Contribution Administrator
for a third party administration firm located in one of the most affordable cities in the country
in OK
Transaction Processing Manager-Balance Forward
for Great-West Retirement Services
in WI
Vice President of Operations
for BISNet
in CA
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