BenefitsLink Retirement Plans Newsletter June 27, 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) IBM Strives for the Security of Defined Benefit Programs as It Shifts Focus to 401(k)s Excerpt: "Managed accounts, automated features and annuities are aimed at ensuring that employees have enough to last after retirement. [IBM] has been busy adding a suite of options to its 401(k) plan--now the only retirement savings vehicle available to new employees--to offer employees the same type of paternalistic help found in defined-benefit plans." (Workforce Management; one-time registration required) Retirement Fund Worries: Health of Plans Hard to Compare Excerpt: "A traditional pension is considered underfunded when its benefit obligations -- the amount it owes current and future retirees -- exceed the assets accumulated in the investment portfolio. .... In the last decade, unprecedented stock market gains allowed many companies to temporarily stop making contributions to their pension plans. That's not the case now. Each year, the Internal Revenue Service reviews pension funds to see whether they might be underfunded." (The Atlanta Journal-Constitution; one-time registration required) Letter of June 21, 2005, to Boehner and Johnson Re: H.R. 2830, the Pension Protection Act of 2005 (PDF) 2 pages. Excerpt: "It is essential that any pension reform proposal provide for funding predictability and limit the volatility associated with sudden interest rate shifts. Although we continue to have concerns about the complexity and transparency of the yield curve interest rate, H.R. 2830 is a measurable improvement over the Administration proposal in this regard because it provides for a three-year weighted average of the interest rate for the purpose of measuring assets and liabilities." (HR Policy Association) Colorado One of 45 States Failing to Properly Fund Pension Plans for Teachers and Other Employees Excerpt: "Though the debate over the future of Social Security has dominated headlines of late, states, too, are feeling the effects of the coming retirement boom. Colorado, in fact, is one of 45 states failing to properly fund its pension program for teachers and other public employees. In the case of the state's Public Employees' Retirement Association, a combination of poor investment returns and rising benefits have increased the plan's unfunded liabilities by $3 billion since 2003 ...." (Rocky Mountain News via The St Louis American) Defined Benefit Pension Plan Funding Rules, Accounting, and the P&L Statement Excerpt: "Some sponsors face a funding wild card in 2005, amid the pension-reform proposals under debate in Washington. The Bush Administration wants to kill the credit balance that lets sponsors get a credit and earn interest if they put in more than the minimum required (up to the maximum allowed), then, in a future year, pay the minimum contribution minus the credit and interest earned." (PLANSPONSOR.com; one-time registration required) Pension Plans' Funding Shortfall Exposes Need for More Retirement Options Excerpt: "Karen Friedman, policy director for the Pension Rights Center in Washington, said US workers and retirees shouldn't panic. Most retirement plans are healthy, and the fact that a firm might have an underfunded plan does not mean that it is in trouble. 'If the plan is underfunded and your industry is in trouble, then it is more likely that the plan will be terminated,' she said. 'However, if the economy goes up and interest rates pick up, your plan could be better off in the future.'" (The Boston Globe) West Virginia Voters Reject $5.5 Billion Pension Bond Plan Excerpt: "West Virginia voters in a special election Saturday rejected a plan to sell as much as $5.5 billion of bonds to help pay for unfunded pension liabilities. The measure failed by a vote of 86,657 against the proposal, or 54 percent of the total, to 73,871, or 46 percent, in favor, according to preliminary results posted on the Web site of West Virginia Secretary of State Betty Ireland." (Bloomberg News) Federal Bankrup.tcy Law Pre-Empts State Retirement Rules Excerpt: "The act adds a new exemption for debtors' retirement funds in 401(k), 403b, 457 501(a) or other tax-exempt retirement plan arrangements, available regardless of whether the debtor relies on exemptions allowed under federal or state law and whether or not the plan is subject to ERISA.The exemption also extends to rollover distributions. Therefore, the new law effectively preempts states from opting out of the federal exemption list relating to tax-exempt retirement funds." (Employee Benefit News) The Future of Retirement Plans and Fiduciary Issues -- Last of a Three Part Series Excerpt: "In this installment, [the authors] will discuss plan trends that are developing and will make a few predictions as well." (Employee Benefit News) Wolf Haldenstein Adler Freeman & Herz LLP Files an ERISA Class Action Lawsuit Against MBNA Excerpt: "On June 24, 2005, Wolf Haldenstein Adler Freeman & Herz LLP filed an ERISA class action lawsuit in the United States District Court for the District of Delaware, on behalf of all participants and beneficiaries of the MBNA Corporation 401K Plus Savings Plan ... established by MBNA Corporation ..., between January 7, 2005 and April 20, 2005, inclusive ..., and whose accounts included investments in MBNA Stock, against Defendant MBNA, ...." (Wolf Haldenstein Adler Freeman & Herz) Administration's Social Security Reform Plan Hits Shoals Excerpt: "After six months of presidential speeches, town meetings and maneuvering over White House plans to overhaul Social Security, Republicans are coming to grips with an unpleasant reality: The central pillars of President Bush's proposal have crumbled on Capitol Hill." (Los Angeles Times via Yahoo! News) Opinion: Privatized Social Security - Take 2 Excerpt: "[A] group of influential Republican members of Congress last week announced a plan to use the system's current cash surplus - rather than future payroll tax revenues - to finance these accounts. .... The 11 Republican senators sponsoring the new legislation bill it as 'Stop the Raid on Social Security.' Here's the logic: Social Security has big surpluses. For years, Congress has 'borrowed' them to make the 'unified' budget deficit look smaller. Their plan ... would end that." (The Christian Science Monitor) U.S. House of Representatives Votes to Block UAL Pension Defaults Excerpt: "The House of Representatives on Friday voted to block United Airlines, which is trying to reorganize in bankrup.tcy court, from defaulting on its pension plans and shifting them to the Pension Benefit Guaranty Corporation, the federal agency that guarantees benefits." (Reuters via The New York Times; one-time registration required) Overview of New Retirement Savings Accounts Proposed: ERSAs, RSAs and LSAs (PDF) 2 pages. Excerpt: "This Bulletin discusses proposed legislation that would create the following new retirement savings accounts: Employer Retirement Savings Accounts (ERSAs), which would replace §401(k) and §403(b) plans and eliminate future contributions to those types of plans, Retirement Savings Accounts (RSAs), which would replace all other types of individual retirement accounts (IRAs) or annuities, and Lifetime Savings Accounts (LSAs)." (The Segal Company) SSA Memorandum: Effects of Financing Individual Accounts with the OASDI Cash Flow Surplus (PDF) 19 pages. Excerpt: "This memorandum presents estimates for the plan .... being introduced today as the 'Stop the Raid on Social Security Act of 2005.' The plan would fund individual accounts with the OASDI annual cash-flow surplus and provide for a benefit offset for plan participants. In addition, the plan would provide for transfers from the General Fund of the Treasury to the OASDI Trust Funds sufficient to maintain solvency until 2041." (U.S. Social Security Administration) Links to Items on Executive Comp, Benefits in General Overview: Currently Taxed Unvested Restricted Stock Counted for Some Golden Parachute Rules Excerpt: "A new revenue ruling concludes that unvested shares of restricted stock that are taxed currently as a result of a Code Sec. 83(b) election are treated as outstanding shares in determining whether (1) a corporation has experienced a change in ownership or control, and (2) a shareholder is a disqualified individual, under the Code Sec. 280G golden parachute rules. (Rev Rul 2005-39, 2005-27 IRB)" (Pension & Benefits Week via RIA) Employee Plans' Abusive Tax Transactions -- Listed Transactions Excerpt: "Recently, the IRS finalized regulations on abusive tax shelters. The regulations provide that a taxpayer must disclose certain transactions know as 'listed transactions' by filing a disclosure statement (Form 8886) with its tax return. A 'listed transaction' is a transaction that is the same as or substantially similar to one that the IRS has determined to be a tax avoidance transaction and identified by IRS notice or other form of published guidance." (U.S. Internal Revenue Service) New NQDC Guidance Expected by Late Summer Excerpt: "A second set of regulatory guidance about nonqualified deferred compensation programs under Internal Revenue Service (IRS) Code 409A could be out by August, according to a US Treasury Department official." (PLANSPONSOR.com; one-time registration required) Breach of Fiduciary Duty Claim Denied Class Certification by Federal Court for the District of Maine Excerpt: "A federal judge has turned down a request by a group of former employees of a paper and lumber company to certify as a class action their lawsuit that charges the company breached its fiduciary duty by not properly informing them that responsibility for their retiree benefits was being transferred to a new undercapitalized owner. US District Judge Gene Carter of the US District Court for the District of Maine, however, approved three other claims against Bowater Inc. ...." (PLANSPONSOR.com; one-time registration required) Highlights of Hewitt Report, Human Resource Outsourcing: Trends & Insights, 2005 (PDF) 6 pages. Excerpt: "Today, research confirms that HR outsourcing provides organizations with access to better expertise, better customer service, lower costs, and greater value. Freed from time-consuming administration, HR is more able to realize its full potential and deliver greater strategic value to the organization." (Hewitt Associates) Top 10 Mistakes When Outsourcing Benefit Plan Administration Excerpt: "The increasing interest in outsourcing benefits reflects a determination for businesses to focus on achieving core objectives rather than being tied up with overhead and administration. Any business can achieve this by leveraging the expertise and resources of external partners, who can provide more flexibility and expertise than would be possible to provide on their own internally." (Employee Benefit News) Letter to House Committee Re: Exclude Taxation of Deferral on Stock Option Gains from Conference (PDF) 2 pages. Excerpt: "On behalf of HR Policy Association, I am writing to urge you to reject section 5515 of the Senate passed version of H.R. 3 in the final conference report on the bill. Section 5515 requires immediate taxation of deferred stock option gains. A similar provision was deleted from the final version of the American Jobs Creation Act last year." (HR Policy Association) Newly Posted Events HIPAA Privacy and Security Regulations Nationwide on June 28, 2005 presented by Association of Trial Lawyers of America (ATLA) Teleweb: LM-30s--How DOL's New Enforcement Program Affects Your Funds Nationwide on June 29, 2005 presented by International Foundation of Employee Benefit Plans Newly Posted Press Releases Benefit Advisors Network Announces Strategic Alliance With Gen 4 (Benefit Advisors Network) Newly Posted or Renewed Job Openings Defined Benefit Plan Administrator for Ingham Group in FL Asset Allocation Specialist (Premier Services) for ICMA-RC in DC Investment Consultant for Stanley, Hunt, Dupree and Rhyne (a subsidiary of BB&T Corporation) in NC Retirement Plan Services Relationship Officer for First Citizens Bank in NC Regional Service Coordinator for Standard Insurance Company in OH Senior New Business Consultant for New York Life Investment Management LLC in MA Implementation Manager for Great-West Financial Services in CO 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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