BenefitsLink Retirement Plans Newsletter July 18, 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) ABC Key Concerns Regarding the Funding Rules of H.R. 2830 As Passed by the House Committee (PDF) 5 pages. Excerpt: Reduction of plan assets by credit balances. Under new ERISA section 303(f)(4), plan assets are reduced by credit balances for numerous purposes, such as at-risk determinations, benefit restrictions, and several disclosure rules (but not all disclosure rules). This erroneously treats many well-funded as underfunded based on a flawed 'double-counting theory' that has previously been considered and rejected by Congress. Plan assets should be reduced by credit balances only ...." (American Benefits Council) Summary: Pension Protection Act, H.R. 2830, as Passed by House Education and Workforce Committee (PDF) 10 pages. Excerpt: "The bill replaces the current funding rules with new funding rules. Generally, these new rules require contributions equal to the 'target normal cost' of the plan for the plan year and require amortization of any underfunding over a 7-year period. This is substantially shorter than current law normal funding rules. The bill eliminates the higher deficit reduction contribution required for underfunded plans, but the benefit liability amount that plans have to ...." (Groom Law Group via American Benefits Council) Policy Brief: House Pension Funding Reform Bill Would Increase PBGC Premiums by 58 Percent (PDF) 2 pages. Excerpt: "Pension reform legislation recently approved by the House Education and the Workforce Committee (H.R. 2830), would substantially increase the annual pension insurance premiums employers pay to the Pension Benefit Guaranty Corporation (PBGC). The bill increases the annual flat-rate premium paid by all employers 58 percent from $19 per worker to $30 per worker." (HR Policy Association) Energy Firm Workers Challenge Cash Balance Conversion; Allege 'Disparate Impact' on Older Workers Excerpt: "The latest battle over a cash balance conversion has popped up in a Los Angeles court as two Southern California Gas Co. workers claimed in a lawsuit that their firm's 1998 pension conversion illegally discriminated against older employees." (PLANSPONSOR.com; one-time registration required) Overview: IRS Proposal of New Section 415 Regulations (PDF) 2 pages. The newsletter addresses: Adjustments for Alternative Forms; Adjustments for Automatic Cost-of-Living (COLA); 415 Limitation Fundamentals; Adjustments for Early or Late Commencement; Effective Date; and, Practical Implications of the proposed regulations with a focus on defined benefit plans. (Milliman) Negative Unfunded Liability: Confusion and Relief (PDF) At page 4 of 8. Excerpt: "Many actuaries working on qualified pension plans are ignoring parts of Revenue Ruling 81-213. Rev. Rul. 81-213 tells us how to set up new minimum funding amortization bases if the old bases have been eliminated due to full funding in the prior plan year." (American Academy of Actuaries) Bill Proposed for Charitable IRA Distributions Excerpt: "A bill has been introduced in Congress to allow tax-free distributions from Individual Retirement Accounts (IRAs) for gifts to charity. The bill, referred to as the Public Good IRA Rollover Act (S. 1366), is an amendment to the Internal Revenue Code of 1986." (PLANSPONSOR.com; one-time registration required) Human Resource Director Earns Mother of All Pensions: Using System Brings $100,000 Annually for Life Excerpt: "[This Michigan] county's newly retired human resources director will collect an apparent record pension - nearly $100,000 per year for the rest of his life despite having worked just 12 years at his county job. Two great salary years sent Steven B. Stratton's annual pension through the roof - to $98,902 annually, ...." (The Flint Journal via mlive.com) IRA RMDs Are Not Eligible for Rollover -- Reporting Responsibility for Financial Organizations Excerpt: "This article discusses the rollover rules regarding RMDs and examines a financial organization's reporting responsibility when an IRA owner mistakenly rolls over an RMD." (Bankers Systems, Inc.) As Costs Soar, California Lawmakers Are Split on Whether Proposals Go Far Enough to Repair System Excerpt: "Despite the multitude of bills moving through the Legislature to rewrite the rules on government pensions, lawmakers still disagree whether they go far enough to curtail runaway costs. .... One bill ... would require governments to put pension investment windfalls in reserve accounts would now be cutting costs by 30 percent to 40 percent, ...." (The Sacramento Bee) Social Security Reform Could Hurt Small Businesses, According to Democrats Excerpt: "Democrats released a study asserting that President Bush's Social Security reform proposal would hurt small businesses by cutting their retirement benefits and adding administrative costs." (The Phoenix Business Journal via bizjournals.com; one-time registration required) Opinion: Here's a Social Security Plan That's Really Two Plans Excerpt: "It's no surprise that President Bush can't seem to gain enough allies in Washington for his Social Security plan. The program pits two very different constituencies against each other, and trying to please both with the same policy changes is a thankless task. It's time for a healing dose of new ideas." (The New York Times; one-time registration required) Checking on Your 401(k) Plan Involves More than Following the Performance of Your Funds Excerpt: "Most people assume their plans are being run honestly, but last year alone, the Department of Labor concluded 3,137 investigations into 401(k) and other defined-contribution plans. Of those, 2,293 ended with some type of enforcement action, resulting in $765 million in restitution and other 'monetary results.' Larkspur Data Resources Inc. has just introduced a service that makes it easier to spot danger signs in 401(k) and other defined- contribution plans." (San Francisco Chronicle) Leading House Social Security Bill Would Raise Debt; Could Also Create Private Accounts Excerpt: "The leading House bill to overhaul Social Security would marginally extend the program's solvency, but it would add $851 billion to the national debt over 11 years. That is according to an analysis released Friday by the system's chief actuary." (AP via The Kansas City Star; one-time registration required) The Distributional Consequences on Social Security of a 'No-Action' Scenario: Updated July 2005 (PDF) 5 pages. Excerpt: "This brief updates results from the February 2004 Policy Brief of the same title and presents additional findings." (U.S. Social Security Administration) Links to Items on Executive Comp, Benefits in General Settlement Reached in Minnesota School District Age Discrimination Lawsuit Excerpt: "The Equal Employment Opportunity Commission (EEOC) announced that the Wells School District in Minneapolis has agreed to pay $98,000 to 12 teachers to settle an age discrimination lawsuit .... From June 1998 through 2000, the district provided retiring employees a cash incentive for retiring early, then reduced that benefit based on the employee's age .... As a result, certain teachers who retired during that time before they were 65 years old received fewer benefits than ...." (PLANSPONSOR.com; one-time registration required) Overview: IRS Comments on Stock Sales, Dependent Coverage, and HSA Issues Excerpt: "[ABA Joint Committee on Employee Benefits, Meeting with IRS and Department of Treasury Officials (May 21, 2005)] The JCEB report has not been reviewed by the IRS or Treasury, and the responses to the questions are 'unofficial, individual views of the government participants as of the time of the discussion, and do not necessarily represent agency policy.' Nevertheless, these Q/As provide helpful insight into the government's approach to the issues addressed." (Employee Benefits Institute of America Inc.) Employee Ownership Update: New Deloitte Equity Comp survey and more In his Employee Ownership Update for July 15, NCEO Executive Director Corey Rosen discusses a new Deloitte survey that found most respondents are cutting equity grants in response to new accounting rules and shareholder pressure. In other news, Publix Supermarkets, an ESOP company with over 120,000 employees, tops the next revision of the Employee Ownership 100 list. Finally, the NCEO is conducting a survey on executive compensation in ESOP companies. Respondents will get free access to results. (National Center for Employee Ownership) Newly Posted Events ERISA Workshop Nationwide on September 21, 2005 presented by SunGard Corbel Newly Posted Press Releases Judith R. Starr Named General Counsel Of PBGC (Pension Benefit Guaranty Corporation (PBGC)) New WorkplaceOptions Service Helps Family Members Coordinate Caregiving for Older Loved Ones (Workplace Options) New Online NCQA Reports Show How Well Health Plans Treat Key Illnesses (National Committee for Quality Assurance (NCQA)) Harris, Rothenberg International Appointed to the New York Business Group on Health's Mental Health Task Force (Harris, Rothenberg International (HRI)) HRmarketer.com to Create Online Community for Human Resource Suppliers (HRmarketer.com) Newly Posted or Renewed Job Openings Defined Contribution Professionals for John Mulligan & Associates in CA, CT, FL, GA, MA, MD, NJ, NY, SC, TX Director, Technical Marketing Support Life Insurance (COLI) for Well respected Philadelphia based Financial/Life Insurance Consulting Firm in Client Services Specialist, Pensions, ESG for CUNA Mutual Group in WI Sales Consultant for Benetech, Inc. in ANY STATE WySTAR Retirement Services Relationship Manager 1 for WySTAR Global Retirement Solutions in MN 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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