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August 8, 2005
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U.S. Personal Saving Rate Drops to Zero Percent
Excerpt: "The U.S. personal saving rate marked an inglorious milestone in June, dropping to zero percent, the Commerce Department's Bureau of Economic Analysis reported last week." (San Francisco Chronicle)

Congressional Bills Aim to Boost Retirement Savings
Excerpt: "Amid all the political wrangling, some congressional lawmakers are forging ahead with legislation to improve retirement security." (The Dallas Morning News; one-time registration required)

Americans Are Saving Zilch? Not Exactly
Excerpt: "It looks as if Americans finally have hit rock bottom in one economic measure: The government last week said the nation's personal savings rate slumped to zero percent in June. Actually, Americans did set aside about $1.9 billion for the month in savings accounts - about $6 for every man, woman and child. But as a percentage of disposable income, the figure, statistically speaking, came out to zilch." (azcentral.com)

Roth 401(k) May Be the Best Option Yet for Retirement Savers -- Or Maybe Not
Excerpt: "Survey after survey shows that employees know they should participate in 401(k) retirement accounts. But they're confused about how -- how much to contribute, which funds to pick, how much the company helps. Add a new option to the mix, one that so far has several financial experts still wondering whether it's a good choice. Starting Jan. 1, employers can offer a Roth 401(k), an account based on the popular Roth IRA private retirement account model ...." (Rochester Democrat and Chronicle)

CIGNA Settles 401(k) Plan Company Stock Suit
Excerpt: "Under the settlement pact, the company will pay as much as $950,000 for plaintiffs' legal fees and as much as $2,000 to each of the two named plaintiffs in the case, the Hartford Courant reported. Other employees won't get a monetary settlement, but CIGNA has agreed to lift certain K plan restrictions." (PLANSPONSOR.com: one-time registration required)

Companies Eliminate Employees' 401(k) Plan Participation Excuses by Default
Excerpt: "Laziness can actually help people save for retirement. At least that's what some companies are betting on. Knowing many workers never get around to joining their 401(k) plans, companies are increasingly signing people up automatically. Employees can choose to opt out -- but that would involve filling out some paperwork, which many also never get around to." (Newsday)

Instead of Retirement, Boomers Will Work Because They Have to
Excerpt: "Members of the generation that will be remembered for rock 'n' roll, antiwar protests and casual Fridays will begin turning 60 in January. Even more interesting than the increasing number of senior citizen discounts they will be receiving is what these people say they plan to do in the years ahead. The findings, as reported in the Fortune 2005 Retirement Guide, may surprise the members of younger generations ..: boomers may not be going anywhere." (The New York Times; one-time registration required)

Opinion: Revival of 30-Year Treasury Bond Will Not Solve the Pension Funding Dilemma
Excerpt: "Until 2004, even after Treasury discontinued its use in 2001, the interest rate on 30-year Treasury bonds had served for years as the statutory interest rate for calculating pension liabilities and returns on assets. Since 2004, the current interim rate for calculating such liabilities-the long-term corporate bond rate-has provided a more accurate reflection of long-term rates earned by pension plans." (HR Policy Association)

On Question of Public Pensions, New Jersey's Forrester Opts for Fiscal Conservatism
Excerpt: "[M]r. Forrester finds that one of the most vexing and politically delicate challenges he will face, should he become governor, is a familiar subject: the rising costs of pension benefits for public employees. The state treasurer estimates that these benefits, now totaling more than $2 billion, will consume $6.6 billion by 2010, or 20 percent of the budget." (The New York Times; one-time registration required)

Lawmakers Push for Solution to Delays in Full Pension Payments to Recent Federal Retirees
Excerpt: "Key House members have served notice at the Office of Personnel Management that they are concerned about delays in processing and approving full pension payments to federal employees who have filed their retirement papers. Some retirees have reported waiting several months for OPM to tally up the correct amount for their monthly checks and have questioned why." (The Washington Post; one-time registration required)

Comments on Revised Regs Concerning Disclosure of Relative Values of Optional Forms of Benefit (PDF)
3 pages. Excerpt: "[The NCCMP comments relate to two questions that come to light in the course of plans' preparations for compliance with the original relative-values regulation. [NCCMP congratulates] the IRS and Treasury for taking action in this proposed regulation to solve the 417(e)(3) conundrum, with the hope that you will be similarly open to resolving those discussed [in the comments letter]." (National Coordinating Committee for Multiemployer Plans)

Does Your Participant-Directed Retirement Plan Put You at Risk for Fiduciary Liability under ERISA?
Excerpt: "[M]ost employers sponsoring 401(k) and profit sharing plans allow plan participants to direct the investment of some or all of their plan accounts. .... Regardless of the scope of the investment control, most plan sponsors believe that by providing this participant investment control, the plan sponsor is relieved of a portion of the fiduciary responsibility imposed by [ERISA]. [Originally published in March 2005.]" (Gallagher, Callahan & Gartrell, PC)

Fiduciary Liability Loss Prevention (PDF)
45 pages. Excerpt: "Chubb commissioned Dan A. Bailey, a partner in the law firm of Arter & Hadden LLP, to prepare Fiduciary Liability Loss Prevention to help fiduciaries and their employers protect themselves from litigation arising from their professional duties. It discusses the general principles governing fiduciary liability, reviews many potential exposures, and suggests step-by-step loss prevention procedures." (Chubb Group)

Commentary: 615 Social Security Questions Reduced to the Six that Everyone Needs Answered
Excerpt: "Got a question about government pension rules and supplemental security income? The Social Security Administration website's got your back. For answers to six burning questions that really matter for your future, ...." (The Motley Fool)

Hybrid Reform in S. 219 Pension Bill Leaves Existing Cash Balance Plans Open to Legal Attack (PDF)
2 pages. Excerpt: "Compared with S. 219, the cash balance reform clarification in H.R. 2830 approved by the House Workforce Committee is a simpler and much more direct approach, even though like the Senate bill, it is prospective only and requires other technical corrections." (HR Policy Association)

Retirement Fund Focus: Why Firms Really Switched from Defined Benefit to Defined Contribution Plans
Excerpt: "No wonder that the financing of retirement benefits has become a major issue, worldwide. At least the public sector can run on a pay-as-you-go basis, but private-sector employers come and go, so their obligations must be funded. For most of the post-1945 era, inflation and the long equity bull market, plus the fact that those who left retirement funds early were ripped off shamelessly, took care of this; many funds even built up huge surpluses." (Financial Mail)

Overview: Advance Form 5500 for 2005 Plan Year Reporting in 2006
Excerpt: "For plans preparing Form 5500 for the 2004 plan year, the early availability of these advance copies of the Form 5500 for 2005 may cause some confusion (for calendar-year plans, the normal filing deadline for the 2004 plan year is generally August 1, 2005 because July 31 is a Sunday). Filings for the 2004 plan year must be made on the Form 5500 for 2004 according to the instructions for that form--not on the newer form." (Employee Benefits Institute of America Inc.)

Managing the Load Fund: It's Not if You'll Pay Fees, but When
Excerpt: "You've committed to investing, figured out your asset allocation and chosen to buy mutual funds through a broker. Think all your big decisions are made? Not quite. If you're working with a typical broker, chances are you'll wind up buying load funds, and the share class you purchase will determine how you pay your adviser's fee: upfront, when you sell your shares, or over time for as long as you own the fund. Which share class is right for you depends on your investment strategy." (The Washington Post; one-time registration required)

Letter to NYT: Mgmt Firm Earned United's Pension Plan $4.71, Net of Fees, for Every $1 of Fees Rec'd
Excerpt: "Re 'How Wall Street Wrecked United's Pension' (July 31): Jacobs Levy Equity Management is proud of the investment services we have provided to United Airlines' pension plan beneficiaries. As a chart with the article showed, we earned $6.1 million in fees over five years, 1999 through 2003. Not mentioned is that the portfolio we managed during this period, invested in mid- and small-cap United States stocks, grew in value by $107.0 million. " (The New York Times; one-time registration required)

Overview: Proposed Bill Amends ERISA Plan Asset Rule (PDF)
2 pages. Excerpt: "[Currently] under the Plan Asset Regulation, there are a number of circumstances in which an entity's assets will not be treated as plan assets when a plan invests in that entity." (Dechert LLP)

Will Exchange-Traded Funds Shift Into Retirement Plans?
Excerpt: "Though they occupy a small segment of the overall investment universe, ETFs are garnering more attention as investors look for alternatives to traditional mutual funds. Traded like stocks, ETFs resemble index-tracking mutual funds, but allow investors to buy and sell at will. Unlike traditional mutual funds, which are priced at the end of each trading day, ETFs enable investors to take advantage of quick swings in the market.' By Evan Pondel | Contributor to (The Christian Science Monitor)

My Portfolio Is on Autopilot. Well, Part of It Is
Excerpt: "Every once in a while, the mutual fund industry manages to mass-produce a newfangled product that's actually useful for a broad swath of the investing public. An example is found in asset allocation funds - premixed portfolios that give investors instant exposure to stocks and bonds through a single fund. .... But in reality, the vast majority of people who invest in asset allocation funds do not use them the way they were intended, ...." (The New York Times; one-time registration required)

Retirement Planning Firm Acquired by National Investment Managers Inc.
Excerpt: "Stephen H. Rosen and Associates Inc., a retirement and pension plan firm based in Haddonfield, N.J., has been acquired by National Investment Managers Inc. Stephen H. Rosen and Associates does retirement planning and pension design and administration. It represents more than 550 retirement plans with more than $800 million under administration and management." (Philadelphia Business Journal)

Opinion: Pension Reform Leg. Should Mandate Protection for Older Workers from Cash-Balance Plans
Excerpt: "Congress is considering sweeping reforms in federal regulations governing the troubled world of corporate pension plans. These reforms are especially relevant to tens of millions of Americans covered by traditional defined-benefit pension plans, as well as those workers' families. Among the powder-keg issues being debated in Washington is the manner in which controversial 'cash-balance' pension plans will be treated under the reform legislation." (Star Telegram.com; one-time registration required)

Congress to Tackle Hybrid Pensions: Guidance Needed on Legality of the Controversial Plans
Excerpt: "At issue are two types of hybrid pension plans -- cash balance and pension equity plans -- that calculate retirement benefits differently than the traditional plans and typically offer the option of a lump-sum payout to retirees. But they also operate under the same federal law. Since 1999, the Internal Revenue Service has had a moratorium on issuing new rulings on whether individual pension plan conversions to hybrids are legal." (The Springfield News-Leader)

Florida Legislature Expands Pension Money Exemption
Excerpt: "Section 222.21, Florida Statutes, which exempts pension money from legal processes, has been expanded to include additional tax-exempt funds or accounts. Funds or accounts exempt from taxation under §§414, 457(b) or 501(a) of the Internal Revenue Code have been added to previously-exempt §§401(a), 403(a), 403(b), 408, 408(A) and 409 of the Internal Revenue Code." (Cypen & Cypen)

Links to Items on Executive Comp, Benefits in General

Stock Options: So Who's Counting?
Excerpt: "For every Microsoft and I.B.M., embedding its options expense into earnings even though it necessarily depresses profits ..., there are many more companies that are playing games as the deadline draws near. One small example: ... some companies are quietly lowering the 'volatility' assumptions they had previously used to calculate their options expense. With stock volatility near historic lows, this move may not give investors a true long-term picture of a company's options burden." (The New York Times; one-time registration required)

Employment During the 2001-2003 Recovery -- An Analysis with Reference to Employee Benefits (PDF)
23 pages. Excerpt: "Employers' costs for benefits, especially for health insurance, have grown rapidly over the past several years (see Figure 10).17 Such costs are essentially fixed per worker regardless of the number of hours worked, provided that the worker meets a minimum threshold for hours worked. Thus, any increase in those costs will induce some employers seeking to boost output to extend the hours of their current workforce rather than to hire additional workers." (U.S. Congressional Budget Office)

August 2005 Human Resources Bulletin -- Overview of Recent Information on Employee Benefits (PDF)
9 pages. This issue includes articles titled: Pension Funding ReformLegislation Overview; New Guidance Addressing Potential Conflicts ofInterest of Pension Consultants; Taxation of Domestic Partner Benefits; and, Coming Soon: The Second Round of 409A Guidance. (Dow, Lohnes & Albertson, PLLC)

Welcome to BenefitsLink advertiser About Your Benefits, Inc.
Excerpt: "Your full-service provider for Employee Benefit Statements, Online Benefits Communication and other personalized communication for your employees. Extensive in-house resources and highly experienced staff assure a cost-effective and timely response to your benefit communication requirements. It's Only a Benefit If Your Employees Know About It!" (BenefitsLink.com)

IRS Nixes Profit-Sharing Plan Providing Nontaxable Med. Exp. Reimbursement from Separate Med. Acct.
Excerpt: "Employers sponsoring these types of plans will want to take prompt corrective action as outlined in the ruling, if it is available to them. Remember that profit-sharing plans can include in-service distribution provisions for medical expenses, but those distributions are subject to taxation; employers that are interested in making tax-advantaged medical reimbursement accounts available to employees might want to consider choosing from among various IRS-approved arrangements, ...." (Employee Benefits Institute of America Inc.)

Stock Option Plans Draw New Fire from Foes
Excerpt: "Here's some fresh ammunition for critics of companies that dole out stock options to top executives -- a new study has found a link between handsome option grants and financial shenanigans at businesses.When large option packages are handed out to chief executives, there's a greater likelihood that accounting misrepresentations will be uncovered at the company, according to the University of Minnesota study." (Reuters)

Some Victories in CalPERS' War to Tie CEO Pay to Performance
Excerpt: "In addition to pushing 'pay-for-performance,' CalPERS wants to eliminate some of the more outrageous CEO perks, such as accelerated vesting of options in takeovers and so-called 'gross-ups' that cover the owed taxes on those windfalls. The fund is also calling for vesting periods of at least four years on stock awards and wants to limit the top five officers of a company to a total of no more than 5% of the stock grants given each year." (BusinessWeek)

Nominees Sought for Pension Benefit Advisory Council
Excerpt: "Oct. 1 is the deadline to nominate people to fill five three-year vacancies on the Advisory Council on Employee Welfare and Pension Benefit Plans, also known as the ERISA Advisory Council." (Society for Human Resource Management)

Overview: Plan Terms May Shorten Period for Giving Notice of a Material Modification
Excerpt: "The employer in this case amended its severance plan to make its sales employees ineligible for benefits, but waited seven months to notify the sales employees, giving them notice of the amendment four days before terminating a number of them. The severance plan stated that employees would be notified of any material changes to the plan 'within a reasonable amount of time.'" (Employee Benefits Institute of America Inc.)

Newly Posted Events

Medicare Part D: The Next Steps (Teleweb)
Nationwide on August 18, 2005
presented by International Foundation of Employee Benefit Plans

Newly Posted Press Releases

Health Care Access and Coverage Steady - From 1997-2002, EBRI Review Reports
(Employee Benefit Research Institute (EBRI))

National Investment Managers Acquires Stephen H. Rosen & Associates, Inc. Retirement Consulting, Pension Plan Design And Administration Services
(National Investment Managers Inc.)

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

Benefits Manager
for Capital Group Companies, Inc.
in TX

Qualified Plans Manager
for Ralcorp Holding, Inc.
in MO

Pension Administrator/Consultant/Actuary
for Chambers Benefit Group, APC
in NM

Customer Service Representative
for Great-West Corporate
in KS

Sr. Relationship Manager
for Principal Financial Group
in IA

Pension Service Representative
for Milliman, Inc.
in WA

Senior Pension Analyst
for Milliman, Inc.
in WA

Manager, Compliance and Benefits Administration
for Kansas City Based Defined Benefits Plan Administrator
in MO

Director I
for Fidelity Investments
in MA

Benefits Service Manager (HW)
for Hewitt Associates
in IL



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