BenefitsLink Retirement Plans Newsletter June 13, 2005 Today's sponsor: www.ftwilliam.com (Click on company name or banner to learn more.) Register for our free on-line demo! www.ftwilliam.com offers the employee benefits professional the highest quality plan documents and forms at highly competitive prices. Plan documents on a per document basis are only $50/adoption agreement, or $100/volume submitter document (including cross testing). An annual subscription to all documents is only $1,500. The Form 5500 package and the IRS/PBGC form package are only $250 each. Prices include access for five concurrent users. (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) IRS Advisory Group Recommends Retirement Plan Practitioner Program Excerpt: "Several thousand TPAs, consultants and other retirement plan service providers would be expected to register with the Internal Revenue Service (IRS) if the agency creates a new practitioner category as is now being recommended. The Internal Revenue Service Tax Exempt and Government Entities Advisory Committee this week suggested to the tax agency that it set up a new practitioner program, Enrolled Retirement Plan Agents (ERPA)." (PLANSPONSOR.com; one-time registration required) Lifecycle Funds Let You Do the Retirement Investing 'One-Step' Excerpt: "'Lifecycle funds are gaining traction with 401(k) plans because they increasingly serve as a default option for younger workers,' says Ross Frankenfield, an analyst with Financial Research Corp in Boston. 'It's a good way for companies to discharge their fiduciary obligation without exposing workers to excessive risk in their nest eggs.'" (The Christian Science Monitor) DOL Eyes Sanctions to Expose 401(k) Consultant Conflicts Excerpt: "The Department of Labor may require consultants to reveal their non-401(k) plan income or face the excise tax which ERISA law imposes whenever a prohibited transaction occurs without an exemption. Robert Doyle, the department's director of regulations and interpretations, said the move is not definite. But should the excise tax be used, he thinks it will be 'adequate' to motivate those consultants who seem reluctant to be fully candid." (Defined Contribution News) Opinion: Don Trone Is Like an Action Hero for 401(k) Plans Excerpt: "The founder of the Institute for Fiduciary Studies in Pittsburgh, he has built an institution that is now coming of age, propelled by events such as the collapse of Enron Corp.'s 401(k) plan and the United Airlines bankrup.tcy case. In that case, the court called for an 'independent fiduciary' because it was clear that corporate management was not capable of acting in the best interests of the airline's employees." (Scott Burns via The Dallas Morning News; one-time registration required) Old Seems Younger As Time Goes By, and Putting Off Retirement Would Solve Social Security Problem Excerpt: "Sanderson said the looming Social Security shortfall would 'solve itself' if, beginning now, people put off retirement by two months for every year expected after 65. 'It would sustain the ability of the pension system to meet its promises. It would make Social Security viable for another hundred years.'" (NY Newsday) Pension Benefits Based on Costly Promises Are in Doubt Excerpt: "An increasing part of production costs in America comes from the price of promises. There are corporate commitments to provide a pension - some 44 million Americans get a monthly check - that add up to as much as $124 billion a year. There are also health-care benefits that many companies have agreed to provide, either voluntarily or by union contract, at a cost of billions more each year." (The Christian Science Monitor) Slowdown in Equity Market Hurts Pension Plan Funding Levels Excerpt: "As Congress works to fix the defined benefit system, pension funds worldwide reported mixed results in the first quarter with U.S. investment returns lagging behind six other markets studied, according to Towers Perrin. Equity returns for defined benefit plans in several countries showed slower gains following two years of higher-than-average returns, the report says." (BenefitNews Connect) Human Toll of a Pension Default Excerpt: "[U]nited pensioners and employees ... e-mailed their stories to Rep. George Miller (D-Calif.) in recent days for what he called an online hearing on the human impact of the default. In e-mails to Miller that his staff is posting online, and in interviews, United retirees recounted stories of job-hunting in their sixties and seventies, facing medical costs they no longer can afford, uprooting families to move to lower-cost communities, selling dream retirement homes and losing ...." (The Washington Post; one-time registration required) American Airlines Says One Pension Fix Option Does Not Fit All Excerpt: "American chief executive Gerard Arpey was not invited to testify at Tuesday's Senate hearing on the pension crisis but he sent a letter, co-signed by union leaders, urging the finance committee to find a solution that gives companies extra time to properly fund their pensions but does not force them to switch to a defined contribution plan. The letter also criticized a Bush administration proposal to tighten funding requirements on companies whose credit ratings are below ...." (AP via Chicago Sun-Times) GOP Plan Offers Hope for PBGC Solvency Excerpt: "It would be relatively easy to insulate the Pension Benefit Guaranty Corp. from future big losses and prevent the federal pension insurance agency's $23.3 billion deficit from getting any larger. All Congress would have to do is to tighten funding rules to ensure that employers' pension plans always were fully funded." (Business Insurance) Credit Suisse First Boston Pension Funding Study Finds Winners and Losers Excerpt: "If the Bush administration's proposal to shore up the pension system were already in place, some large companies would have to double or triple the amounts they are putting into their pension funds this year but other companies would not have to contribute anything, a new analysis of corporate pension data found. The study, by David Zion of Credit Suisse First Boston who has made a specialty of analyzing the pension data that companies disclose in their annual financial ...." (The New York Times; one-time registration required) Trends and Directions in Canadian Pension Governance-- Are Plan Sponsors Picking Up The Pace? (PDF) 22 pages. Excerpt: "This survey was designed to provide Canadian retirement plan administrators with information on current and emerging practices in pension governance. It includes data from 127 Canadian employers and follows several years of intense industry scrutiny of governance practices. In addition to registered pension plans, our canvass covered other tax-deferred retirement plans such as Group RRSPs. Our references to pension plans cover those arrangements as well." (Towers Perrin) Who Is Watching the Store for Public Pensions? Excerpt: "When officials entrusted with public pension funds invest it in risky hedge funds or use it to purchase rare coins or take control of an airline, many taxpayers scratch their heads. Sometimes unusual investments work out. Sometimes they flame out. And sometimes the public has no knowledge of how the investments are made or how they fare. But they certainly raise the question of who's minding the store when it comes to the $2 trillion held in state and municipal pension plans ...." (Pittsburgh Post-Gazette) New Jersey Lawmaker Sees Lowering Part-Timer Benefits As Key to Fixing System Excerpt: "A bill landed on the desk of the state's Pension and Health Benefits Review Commission last year that could have saved the state millions of dollars annually by reducing the pensions of part-time workers. What happened? The commission turned it down, saying it was an admirable idea but too expensive to put into effect." (Courier News) Public Sector Workers under Fire: Schwarzenegger Targets a Last Bastion of Security Excerpt: "Policemen, firefighters, teachers, hospital nurses -- they still belong to the one part of the U.S. economy where the New Deal hasn't been repealed. Fully 90 percent of them have defined-benefit pensions as of old. In the private sector, just 60 percent of employees have retirement plans, and a scant 24 percent still cling to defined-benefit plans. Fully 86 percent of public employees are covered by on-the-job health insurance; in the private sector, the rate has fallen to 66 percent." (The Washington Post; one-time registration required) Majority of New Jersey State's Pension Bills Would Enhance Public Pension Benefits Excerpt: "In the last 18 months, lawmakers have introduced 136 pension bills, nearly two-thirds of which offer to sweeten retirement benefits for government workers or their spouses. So far, three have become law, all boosting pension benefits." (Asbury Park Press) Military Pay and Retirement Plan Would Be Modeled on Private Sector Excerpt: "The Defense Advisory Committee on Military Compensation has adopted an action plan to study changes to military pay and retirement that would bring them more in line with the private sector, something that Defense Secretary Donald Rumsfeld has endorsed for several years." (HeraldNet) Comments Submitted to Senate Hearing on Reforming Hybrid and Multi-Employer Pension Plans Excerpt: "[T]here are a number of significant legal uncertainties associated with cash balance plans because of the way benefits are accrued and distributed when compared to traditional defined benefit pension plans. Employers face uncertainty over how age discrimination rules apply to cash balance plans. Although these issues are technical in nature, they are critical to the legal operation of the plan." (American Society of Pension Professionals & Actuaries) Senate Holds Hearings on the Issue of Preventing Pension Fraud Excerpt: "The U.S. government cannot effectively investigate thousands of pension plans because it relies on out-of-date information that is not computerized, witnesses told a Senate committee Thursday. Five years after the country's largest pension plan fraud, the Department of Labor still uses paper records to track nearly 730,000 pension plans covering approximately 150 million workers, the Government Accountability Office reported." (Kansas City infoZine) ICC Plan Solutions Offers Retirement Plan Deferral Level 'Caution' Statement for Participants Excerpt: "A Charlotte-based investment education firm is now offering a report designed to encourage greater plan deferrals. A news release from ICC Plan Solutions said the report, 'Caution: you may run out of money during retirement!' is being offered through an agreement with Pittsburgh-based Investment Horizons, which designed and created it. According to the announcement, the bright yellow documented is intended to be distributed periodically to participants who are not making adequate ...." (PLANSPONSOR.com; one-time registration required) Hearing Shows Consensus on Need to Clarify Legal Status of Cash Balance Plans but Not on Solution Excerpt: "In addition to a cash balance bill being introduced in the House this week ..., the Senate HELP Subcommittee on Retirement Security held a hearing in which there was widespread agreement that the law must be changed to accommodate cash balance plans. However, there was little agreement on what changes ought to be made." (HR Policy Association) Comments Presented to House Committee on Ways & Means Hearing on Tax Reform Excerpt: "On June 7, 2005, ASPPA submitted comments for the record to the House committee on Ways & Means, Tax Reform hearing, which expressed concerns about the potential detrimental affect certain reform options could have on the employer-sponsored retirement plan system." (American Society of Pension Professionals & Actuaries) Text: Pension Preservation and Portability Act, H.R. 2831, Introduced by Boehner (PDF) 10 pages. Excerpt: "To amend title I of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to make improvements in benefit accrual standards." (U.S. House of Representatives via American Benefits Council) In Overhaul of Social Security, Age Is the Elephant in the Room Excerpt: "Policy experts across the political spectrum, who agree on little else, have told Congress in recent weeks that any effort to improve Social Security's long-term finances should somehow deal with [the] jump in life expectancy - by adjusting benefits, raising the retirement age, increasing taxes or creating new incentives to work longer." (The New York Times; one-time registration required) Links to Items on Executive Comp, Benefits in General Christopher Cox Should Start Off at the SEC by Doing Right on Stock Options Excerpt: "[T]he first issue [Cox is] going to face - and one that has the potential to set the tone for [his] chairmanship - is the expensing of stock options." (The New York Times; one-time registration required) Employers Not Yet Giving Up on Stock Compensation, but Are Making Changes Excerpt: "Increased regulatory attention to stock options including new expensing rules have not yet led employers to give up on equity compensation, according to a new survey. According to the 2005 Global Equity Incentives Survey by PricewaterhouseCoopers (PwC), companies are still using options as their primary reward vehicle, but many are adding performance-based standards, are restricting employee eligibility for those plans, and are cutting the overall number of options awards." (PLANSPONSOR.com; one-time registration required) Overview: June 30 Deadline for Deferrals under Calendar Year Performance Plans (PDF) 2 pages. Excerpt: "New Internal Revenue Code Section 409A ... generally requires that elections to defer compensation under a nonqualified deferred compensation plan be made in the year prior to the taxable year in which the underlying services are performed. However, there is an exception to this general rule for elections related to certain performance-based compensation." (Womble Carlyle) Benefits Update: Bonus Deferral June 30 Deadline for Calendar-Year Deferred Compensation Plans Excerpt: "New Code Section 409A imposes strict deadlines for making elections to defer compensation. In general, elections to defer compensation must be made before the beginning of the calendar year in which the services for which the compensation is payable are performed. Thus, under the general rule, an election to defer a bonus for services performed in 2005 would have to have been made by December 31, 2004." (Ice Miller) Newly Posted Press Releases ICC Plan Solutions Offers Participant "Wake-Up Call" (ICC Plan Solutions) American Pension Services, Inc. Celebrates 5 Year Anniversary (American Pension Services, Inc.) Newly Posted or Renewed Job Openings Client Relations Manager for RSM McGladrey Retirement Resources in IL Retirement Professionals for Mercer Human Resource Services in MA Retirement Plan Coordinator for American Funds in IN Director, Employee Benefits for Raley's in CA Conversion Manager for ADP in KY, OH Retirement Plan Conversion Tech I for Southeastern Employee Benefit Services a division of First Charter in NC Legal - Retirement Plan Specialist for Great-West Corporate in CO Defined Contribution Administrator for Howard Simon & Associates, Inc. in IL Vice President, Retirement Services for Invesmart, Inc. in PA Regional Vice President - Northern California for BISYS Retirement Services in CA Regional Vice President - Raleigh/Durham, North Carolina for BISYS Retirement Services in NC Regional Vice President - Chicago, Illinois for BISYS Retirement Services in IL 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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