BenefitsLink Retirement Plans Newsletter August 17, 2005 Today's sponsor: ASC & The ASC Institute (Click on company name or banner to learn more.) ASC-- YOUR PREMIER SOURCE FOR RETIREMENT PLAN SOFTWARE, DOCUMENTS & EDUCATION For over 25 years ASC has helped pension professionals build their businesses by turning advances in technology into opportunities to increase efficiency and profitability. ASC Software includes DC/401(k) and DB administration and valuation systems, Compliance Testing, DV Direct Daily Valuation, Gemini Participant & Plan Sponsor Web Access, AIM - Case Management Database and Single-Step Processing. The ASC Institute offers Retirement Plan Documents, Education for pension professionals and ERISA Compliance Consulting. Contact us today! (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) Letter to IRS with Concerns about Section 415 Proposals (PDF) 5 pages. Excerpt: "On behalf of the Pension Practice Council of the American Academy of Actuaries, [the vice-chairperson submits] the following comments and requests for clarification on proposed regulations to amend Internal Revenue Code Sec. 415 with respect to limitations on benefits and contributions for qualified plans." (American Academy of Actuaries) Web Site on Integrating with PBGC's Premium E-Filing System Excerpt: "Currently, premium filers can create filings (via My PAA screens) and submit them electronically to PBGC. PBGC is planning to expand My PAA to accept private-sector software-prepared premium filings, in connection with an anticipated PBGC proposal to require electronic premium filing in the near future. The best estimate at this time is that the new e-filing method will be available to premium filers as an option starting in the Fall of 2005." (Pension Benefit Guaranty Corporation) White Paper: Cash Balance Equivalences (PDF) 7 pages. Excerpt: "This paper discusses various types of pension plans and how they can be imitated by a cash balance plan. The paper will also illustrate the similarities between cash balance plans and the U.S. Social Security benefit formula." (American Academy of Actuaries) The Administration's Retirement Savings Proposals: An Updated Analysis (PDF) 6 pages. Excerpt: "This paper is an update to the American Academy of Actuaries' Pension Committee's original analysis issued on Aug. 13, 2003." (American Academy of Actuaries) State Securities Regulators and Law Enforcement Intensify Scrutiny of Pensions Excerpt: "(This article is adapted from a speech entitled 'Pension Fraud: The Perfect Crime (Huge Gains, No One Complains)' presented at the Florida Department of Financial Regulation/North American State Securities Administrators Annual Broker-Dealer Training Conference in June 2005. ....)" (Benchmark Advisory Services, Inc., and Benchmark Financial Services, Inc.) Overview: How Employer Matching Contributions Can Increase Participant Savings Excerpt: "Although the presence of a match may encourage increased contributions, the size of the match doesn't seem to make much difference. In fact, larger matches have been found to negatively affect contributions5 since with the addition of the match employees don't need to save as much to reach their retirement goals." (Arnerich Massena Education via Kibble & Prentice) Behavioral Economics: Why Plan Participants Do the Things They Do Excerpt: "Research shows that while some choice encourages decision-making, options can also paralyze. .... Just as so many employees, when faced with the multiple decisions required to enroll in a retirement plan, will procrastinate indefinitely or simply toss their enrollment form in the recycling bin out of pure frustration." (Arnerich Massena Education via Kibble & Prentice) Retirement Plans -- Examining the True Costs of 401k Plans (PDF) 1 page. Excerpt: "All plan expenses, whether paid by the company, passed on to participants, or shared, should be clearly documented and -- as ERISArequires -- 'reasonable.' Reasonableness can be determined by evaluating the services included and by benchmarking against other plans with similar characteristics and features. [The article includes a list of participant questions 401(k) sponsors should be prepared to answer.]" (B & C Solutions) Employee Ownership Update for August 16, 2005 NCEO Executive Director Corey Rosen discusses proposed regulations on reimbursement for ESOP companies with federal contracts; Shell's settlement of a lawsuit over company stock in a 401(k) plan; a Mercer Human Resources survey finding a major decline in stock options but not in ESPPs; a new NCEO study of closely held ESOP companies finding that most use their entire board to set executive pay; and an employee ownership management program at the University of Wisconsin. (National Center for Employee Ownership) Overview: Final Regulations Permit Retirement Plans to Simplify Existing Distribution Options Excerpt: "IRS has finalized regs that allow plan sponsors that have many different payment options to reduce the number of options available, thus simplifying plan administration. The rules were initially issued in proposed form on March 24, 2004 ...." (Pension & Benefits Week) Is the Timing Right for Equity Indexed Immediate Annuities? Excerpt: "Is now the time to consider introducing an equity indexed immediate annuity (EIIA) to the market? Currently, many carriers are focusing on the retirement income market. They are trying to figure out how to address the many issues that continue to haunt current payout annuity products. One issue that the retirement income market faces is the lack of inflation protection." (Product Matters via Milliman) Report Shows Wisconsin State and Local Government Employee Pensions Ranked Near Top in U.S. Excerpt: "Wisconsin state and local government retirees got a better pension deal than almost all their counterparts across the country in the 2001-02 fiscal year, a report released [August 16, 2005] found." (AP via Star Tribune; one-time registration required) Many Retired Utah State Employees Double Dipping Excerpt: "Utah's Department of Corrections is a good place for a first career - and even better for a second. Utah law allows state employees to retire from one state job and take another and still collect government retirement checks." (The Salt Lake Tribune) Virginia Firm Pursuing Pension Investment Business Was Target of Alleged Extortion Try Excerpt: "In May 2004, JER Partners, a McLean-based real estate firm headed by local philanthropist Joseph E. Robert Jr., was pursuing an $85 million investment from an Illinois pension fund when a fax arrived from the Turks and Caicos Islands. The document requested an $850,000 finder's fee for a consulting firm that had not done any work for JER." (The Washington Post; one-time registration required) Fees Are Used to Get Pension Fund Investment Business Excerpt: "Investment firms trying to do business with a major Illinois pension fund often pay big fees for the aid of consultants, according to records released Tuesday amid federal scrutiny of the money paid to an influential lobbyist and Republican official." (AP via Chicago Sun-Times) Study Finds Hispanic Americans Ill-Prepared for Retirement Excerpt: "Hispanic Americans, the fastest-growing segment of the U.S. population at or near retirement, are among the least prepared to live off their savings, according to a recent report by the Retirement Security Project and the National Council of La Raza. Forty-three percent of Latino workers say they know nothing about investing and saving for retirement, compared with 12 percent of all workers, according to the study." (Workforce Management; one-time registration required) Are Firms or Workers Behind the Shift Away from Defined Benefit Pension Plans? (PDF) 28 pages. Excerpt: "[The authors] estimate reduced form equations of the change in DB or DC coverage for 2-digit industries, using SUR. Pension coverage and demographic data are taken from the Current Population Survey and the Survey of Income and Program Participation. [Paper originally published July 2004.]" (U.S. Employee Benefits Security Administration) Links to Items on Executive Comp, Benefits in General Many Plan to Keep Working Into Retirement Excerpt: "Nearly 7 in 10 workers plan to stay on the job past retirement age -- including a growing number who say the decision will be driven by financial need, a new survey finds. .... But the nationwide poll, by the John J. Heldrich Center for Workforce Development at Rutgers University, taps into increasing concerns among many workers -- particularly Baby Boomers -- about the need to supplement their income once they leave their primary job." (AP via The New York Times; one-time registration required) Overview: Tech Companies Scale Back Use of Stock Options Excerpt: "The Towers Perrin Equity Compensation Strategy Pulse Survey, which incorporates responses from 30 major U.S. technology companies with average annual sales of $4.4 billion, also provides evidence that technology sector companies are starting to reevaluate and change the mix of their equity incentive programs for all levels of employees, although they continue to favor stock option grants for top executives." (Towers Perrin) Overview: Pennsylvania Law Provides Clarity on State Taxation of Nonqualified Deferred Compensation (PDF) 3 pages. Excerpt: "Pennsylvania has enacted a law that clarifies the taxation of elective deferrals to nonqualified deferred compensation plans for state tax law purposes, generally retroactive to 2003. That is, amounts deferred under nonqualified plans will not be taxed at the time of deferral, but will be taxed along with earnings at the earlier of actual or constructive distribution." (Buck Consultants LLC) Watson Wyatt Human Capital Index® -- Human Capital As a Lead Indicator of Shareholder Value Excerpt: "Do better people management strategies actually create higher market value? Or do financially successful companies simply have more resources to allocate to human capital initiatives? .... .... The results are in and they are dramatic. Superior human capital practices are not only correlated with financial returns they are, in fact, a leading indicator of increased shareholder value." (Watson Wyatt Worldwide) Overview: IRS Says No to Medical Reimbursement Accounts in Profit Sharing Plans (PDF) 2 pages. Excerpt: "The IRS recently issued a revenue ruling in which it states that medical reimbursement accounts in a nongovernmental profit sharing plan will result in the plan's disqualification because the minimum vesting requirements of Section 411 are not satisfied. This ruling puts the kibosh on many arrangements that have been suggested or implemented to help employers provide retiree medical benefits for their employees." (Buck Consultants LLC) Research Brief: Simulating the Effect of Changes to the OASDI and Medicare Programs 2 pages. Excerpt: "In this paper, [the authors] report estimates of a dynamic programming model that addresses the interplay among health, financial resources, and the labor market behavior of men nearing retirement age." (University of Michigan Retirement Research Center) Newly Posted Events The New Determination Letter Program in Illinois on September 8, 2005 presented by ASPPA Benefits Council of Chicago Newly Posted Press Releases Two Step Announces Hosting Service for Corporate Focus Entity, Ownership and Minute Book Software (Two-Step Software, Inc.) BenefitStreet Rolls Out New Branded Enrollment Solution (Metrics Partners) Scudder Expands Fiduciary Toolkit for Retirement Advisors (Scudder Investments) Newly Posted or Renewed Job Openings 401(k) Enroller (Bi-Lingual) for 401(k) Advisors in CA 401(k) Employee Communications Specialist (Bi-Lingual) for 401(k) Advisors in CA Retirement Plan Specialist for American Funds, a part of the Capital Group Companies, Inc. in TX Benefits Administrator/Night Trading for Buck Consultants, an ACS company in GA Tax Attorney for Frost Brown Todd in OH Attorney---Employee Benefits for Willis in MO, PA 401(k) Education Meeting Coordinator for CitiStreet in MA Benefits Manager for Capital Group Companies, Inc. in CA Pension Administrator for Tax Sheltered Compensation, Inc. in MN Client Services Analyst - QDRO for Mercer HR Services in TX Employee Benefits Client Manager for Employee Benefits Brokerage and Consulting Firm in KS 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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