BenefitsLink Retirement Plans Newsletter June 14, 2005 Today's sponsor: ASPPA -- Working for America's Retirement (tm) (Click on company name or banner to learn more.) Meeting Midway Conference July 24-27, 2005 * San Diego, CA Health and welfare issues * 401(k) plans Employee compensation * Actuarial pension issues Health Savings Accounts * Legal & fiduciary issues You don't want to miss this one! Register online today. Brought to you by WP&BC and ASPPA. (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) Overview: Congress in Position to Improve 401(k) 'Autopilot' Features Excerpt: "Legislators are particularly interested in automatic enrollment, which enrolls workers in a savings plan unless they opt out. By the end of April, four bills were pending in Congress to enact automatic enrollment. Lawmakers are also looking into processes that would automatically increase employees' deferrals at regular intervals unless the employee indicates otherwise." (Watson Wyatt Worldwide) The ERISA Industry Committee's Position Statement on Automatic Enrollment Arrangements (PDF) 4 pages. Excerpt: "Automatic enrollment arrangements in § 401(k) and other employer-sponsored retirement savings plans increase employee participation and raise retirement savings levels among America’s workers. ERIC applauds efforts to support automatic enrollment arrangements and looks forward to working with the Administration and Congress to develop regulations and legislation ...." (The ERISA Industry Committee) Knowing the Score on 401(k) Plan Investments Excerpt: "Do the mutual funds in your 401(k) plan pass the close examination of a fiduciary â€' the person or group charged with making fund choices that may affect the quality of your diet in retirement? .... [Don Trone, founder of the Institute for Fiduciary Studies at the University of Pittsburgh] answers the question. He developed a scoring system that examines thousands of commonly owned funds." (Scott Burns via The Dallas Morning News; one-time registration required) More Workers Being Enrolled Automatically in 401(k) Plans, According to Hewitt Survey Excerpt: "American companies are trying to make it easier for their workers to save retirement funds. A study released Tuesday by Hewitt Associates Inc. found that a growing number of companies are automatically enrolling workers in their 401(k) retirement plans. They're also adopting systems to increase employee contributions as their salaries grow. And many are offering automatic rebalancing of accounts." (AP via The New York Times; one-time registration required) Demystifying Volatility, Part 2 -- Implied Volatility Excerpt: "This article will examine implied volatility and its applications to stock-based compensation valuation. FAS 123R requires the volatility assumption to be the volatility expected over the life of the option. Historical volatility can be a starting point for this assumption, but additional information may be needed to produce a reasonable assumption, ...." (Chicago Consulting Actuaries, LLC) Opinion: The Old and the Rested Should Work Longer for Everyone's Benefit Excerpt: "If the elderly were willing to work longer, there would be lower taxes on everyone and fewer struggling young families. There would be more national wealth and tax revenue available to help the needy, including people no longer able to work as well as the many elderly below the poverty line because they get so little Social Security." (The New York Times; one-time registration required) Recent Pension Funding and Sponsorship Trends among the FORTUNE 1000 Excerpt: "This article documents the evolving financial status and sponsorship trends among FORTUNE 1000 firms that sponsor defined benefit pensions through the end of 2004. The finances of defined benefit plans continue to improve, owing in part to large contributions from employers. The rate of defined benefit plan sponsorship has remained steady among large employers, although a handful of firms have frozen benefit accruals or closed their plans to new hires." (Watson Wyatt Worldwide) Overview: Boehner, Thomas Comprehensive Defined Benefit Funding Reform Bill Excerpt: "Representatives Boehner and Thomas have introduced the Pension Protection Act of 2005 into Congress. The Act, if passed, would overhaul pension funding rules and pension security rules." (Chicago Consulting Actuaries, LLC) Retirement Perspective: Financing the Future -- How Fit Is Your Pension Funding Policy? Excerpt: "In this Perspective, we take a look at why plan sponsors must take a more strategic, rather than a reactive, approach to pension funding to be prepared for future challenges and why contributing the minimum may not be a viable policy for many plan sponsors." (Mercer Human Resource Consulting; one-time registration required) Summary: Senate Committee on Finance June 7, 2005, Hearing on Preventing the Next Pension Collapse (PDF) Excerpt: "On June 7, 2005, the Senate Committee on Finance held a hearing titled “Preventing the Next Pension Collapse: Lessons from the United Airlines Case.” The Committee received testimony from two panels of witnesses." (American Benefits Council) Overview: President Bush Addresses the Projected Social Security Shortfall Excerpt: "On April 28, 2005, President Bush unveiled another piece of his plan for Social Security, addressing the criticism that his proposal for individual accounts ignores the projected long-term insolvency. The president outlined three goals for his proposal: (1) ensure that future generations receive the same or bigger benefits than today’s seniors ..., (2) ensure that benefits for low-income workers grow faster than benefits for higher-income workers and (3) allow younger workers ...." (Watson Wyatt Worldwide) Overview: IRAs Held Exempt from Bankrup.tcy in Rousey v. Jacoway Excerpt: "Under federal law, bankrup.tcy filers may retain certain assets. One such exemption exists for the bankrupt individual’s “right to receive ... a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of ... age ... to the extent reasonably necessary to support the debtor.” At issue in Rousey v. Jacoway was whether an IRA distribution satisfied the criteria for such an exemption, ...." (Watson Wyatt Worldwide) Swiss Referendum Approves Same Sex Partners' Pension Rights Excerpt: "On 5 June 2005, Switzerland approved by referendum new legislation governing 'same sex partnerships'. Based on this new law, members of such a partnership can formalise their relationship legally in a cantonal registry. Once this occurs, partners have duties and rights that are similar to those under marriage." (Watson Wyatt Worldwide) Overview: DOL & SEC Publish Tips for Plan Fiduciaries on Selecting & Monitoring Pension Consultants Excerpt: "In light of the issues raised by the SEC report, these tips offer plan fiduciaries practical guidance to help them prudently monitor their current pension consultants and select new ones. Each question is followed by brief commentary that plan fiduciaries also will find helpful. This guidance is a must-read for plan fiduciaries, pension consultants, money managers, and other service providers to understand potential areas of conflict and necessary disclosure of business relationships." (Employee Benefits Institute of America Inc.) Bank of Scotland Offers Web Site As Guide to the New UK Pensions Simplification Legislation Excerpt: "The ... guide is designed to help you understand the potential impact of A-Day on your retirement plans." (Bank of Scotland) Overview: Hybrid Pension Plan Legislation Introduced Excerpt: "Representative Boehner (R-Ohio), chairman of the House Education and the Workforce Committee, has introduced the Pension Preservation and Portability Act, which would clarify that cash balance and other hybrid plans do not violate age discrimination laws. As the first legislative proposal that recognizes the legitimacy of hybrid defined benefit plans, it will likely serve as a lightning rod or test case for other hybrid plan legislation." (Watson Wyatt Worldwide) Opinion: Reforming the Social Security System Vital to Business, Workers and Retirees Excerpt: "Any Social Security reform must meet four core principles: setting the program on a path to permanent solvency, protecting benefits for retirees and those about to retire, giving younger workers the option of investing part of their payroll taxes in personal retirement accounts, and ensuring that taxes are not raised on employers or employees." (Knight Ridder/Tribune News Service via CentreDaily.com) Opinion: Why My Plan to Fix Social Security Will Work Excerpt: "Social Security is facing a long-term deficit of $3.8 trillion because there will not be enough active workers to support the large number of baby boomers reaching retirement age. Is there a fair way to bring the system back toward solvency? Yes, through progressive indexing - an approach that I have developed and which has been favored by President Bush." (Robert Pozen via USA TODAY) Opinion: Security Is Missing from the Social Security Debate Excerpt: "Something is missing from the ongoing debate over Social Security's future and, oddly enough, it appears to be security. While news coverage has overwhelmingly focused on the political disputes surrounding private accounts and benefit cuts, an opportunity is being lost to consider the prevailing social objectives that should guide policy pres.criptions." (The Christian Science Monitor) NCPERS Testifies Against Mandatory Social Security Coverage at Ways and Means Committee Hearing (PDF) 4 pages. Excerpt: "NCPERS submitted testimony to the House Ways and Means Committee opposing mandatory Social Security coverage for non-covered state and local government workers. The subcommittee on Social Security held a series of hearing on retirement issues, and the June 9 hearing focused on mandatory coverage. NCPERS stressed that public pension plans are solvent, but mandatory coverage would undermine these plans and place unnecessary financial burdens on employers and employees." (National Conference on Public Employee Retirement Systems) NCPERS Submits Letter on Retirement Issues to President's Advisory Panel on Federal Tax Reform (PDF) 7 pages. Excerpt: "NCPERS, along with NASRA and NCTR, submitted a position paper to the President's Advisory Panel on Federal Tax Reform. The advisory panel is to issue its final report to President Bush in July." (National Conference on Public Employee Retirement Systems) Links to Items on Executive Comp, Benefits in General Overview: SEC Delays Effective Date for Expensing Stock Options Excerpt: "Last month, U.S. companies received two important â€' and mostly welcome â€' messages from the Securities and Exchange Commission (SEC) regarding the new stock option accounting rules under FAS Statement No. 123R. The SEC has given companies more time to begin treating stock options as a business expense. Companies are not required to follow the new rules until the first fiscal year, rather than the first accounting period, beginning after June 15, 2005." (Watson Wyatt Worldwide) Overview: Supreme Court Permits Disparate Impact Claims under ADEA Excerpt: "In Smith v. City of Jackson, the U.S. Supreme Court resolved a split in the circuits, ruling that the Age Discrimination in Employment Act (ADEA) permits disparate impact claims. The ruling could affect cash balance plan litigation. In a separate case involving a hybrid plan, a district court has created a split in the courts by ruling that the prohibition against decreasing the rate of benefit accruals applies to employees of all ages." (Watson Wyatt Worldwide) Newly Posted Press Releases Immigrants Make Up a Growing Share of U.S. Population Without Health Insurance, Study Finds (Employee Benefit Research Institute (EBRI)) Leggette Selects ICC Plan Solutions as Enrollment Kit and Retirement Plan Communication Provider (Metrics Partners) FreeERISA.com Announces Addition of the Complete Compensation Database (FreeERISA.com) J. Smith Lanier Offers Legal Insurance to Its Workforce (ARAG) Newly Posted or Renewed Job Openings Employee Benefits Consultant II for Wachovia in MD Retirement Plan Coordinator for American Funds, a part of the Capital Group Companies, Inc in TX Health Benefits Program Administrator for City of Bellevue in WA Healthcare Consultant for Employee Benefit Solutions, Inc. in TX Compliance Analyst for Great-West Retirement Services in CO Data Processor for PFS in GA Administrative Assistant for PFS in GA Defined Contribution Administrator for Meridian Benefits Administration in PA Consultant, Actuarial Services for Clark Consulting in GA Compliance Specialist, Retirement Plans for The Newport Group in NC 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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