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August 22, 2005
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From Cities to School Districts, Public Employee Pension Liabilities Can Be Staggering
Excerpt: "San Diego was the site for a seminar on the troubled status of public-employee pension systems, one of a series of discussions called 'Making California Work: How State Government Can Be More Effective and Responsive.' The series is sponsored by the Commonwealth Club and seven California newspapers." (The Mercury News; one-time registration required)
Opinion: Public Pension Plan Out of Whack in Wisconsin
Excerpt: "Perhaps Gov. Jim Doyle thought he could get away with a little-publicized veto of an amendment added late to the state budget. The addition would have required non-union state employees to pay 1.5 percent of their earnings toward the Wisconsin Retirement System. That would have saved employers-i.e. you, the taxpayers-more than $42 million over two years." (GazetteExtra)
Illinois Officials Try to Reform Complicated State- Funded Pension Systems
Excerpt: "Perhaps the best word to describe the myriad of state-funded pension systems in Illinois is 'complicated.' The state has 15 retirement systems. All but two are set up to allow employees to mix services from different government agencies such as school districts, universities and other state employment. The retirement plan also allows an employee to move his or her years of service into the most lucrative plan available in order to garner the highest possible monthly pension." (The Southern Illinoisan)
Report: Mutual Funds and the U.S. Retirement Market in 2004 (PDF)
8 pages. Excerpt: "ICI combines data from the U.S. Department of Labor, Federal Reserve Board, and other trade associations with ICI's own mutual fund survey information to estimate the employer-sponsored retirement plan arena and annuities not held in retirement plans. In addition, detailed total IRA asset information from the Internal Revenue Service (IRS) Statistics of Income Division helps complete the picture of the total U.S. retirement market." (Investment Company Institute)
IRS Plans More Guidance for 401(K) Plans, Including Amendment and Restatement of EPCRS
Excerpt: "The Department of the Treasury and the IRS have issued their 2005-2006 Priority Guidance Plan listing regulations and other guidance currently under development. .... Here are some of the most significant items affecting 401(k) plans: ...." (Employee Benefits Institute of America Inc.)
RRC Conference Paper Presentation: Effects of Portfolio Choice on Retirement Wealth Outcomes (PDF)
22 pages. Excerpt: "Is it a good idea to increase the number of investment options available to plan participants? Should 401(k) plan providers offer lots of options, or very few? If personal accounts were added to Social Security, how many options should people have?" (Center for Retirement Research at Boston College)
RRC Conference Paper: $100 Bills on the Sidewalk -- Suboptimal Saving in 401(k) Plans (PDF)
27 pages. Excerpt: "In this paper, we identify a sizeable group of employees whose observable choice set in an important retirement savings vehicle, the 401(k), includes actions that are clearly precluded by normative economic theory. These individuals, who are over 59-1/2 years old, have their 401(k) contributions matched by their employer; that is, for every dollar they contribute up to a certain threshold, their employer will make an additional proportional contribution." (Center for Retirement Research at Boston College)
Only 13 Percent of Those 50 or Older Made Catch-Up Contributions to Their 401(k) Last Year
Excerpt: "Allowing the over-50 crowd to make catch-up contributions to their 401(k) plans was supposed to help soon-to-be-seniors fatten their nest eggs. But very few are taking advantage of one of the major provisions of the tax relief package Congress approved in 2001." (Pittsburgh Post-Gazette via The Detroit News)
KPMG's Dealings with Los Angeles Agency Show Complexity of Allegedly Abusive Tax Shelters
Excerpt: "When two executives of accounting giant KPMG came calling on Los Angeles pension officials in 1999, they pitched what sounded like a cost-free way to fatten the city's retirement kitty." (Los Angeles Times; one-time registration required)
Accounting Shift Boosts PERA Fund: Consultants Recommend Change that Revalues Assets
Excerpt: "Colorado PERA added $1.5 billion to its assets Friday - through an accounting change. As a result, the largest division of Colorado's Public Employees' Retirement Association is now funded at 73.6 percent, not 70.1 percent, as of the end of 2004." (Rocky Mountain News)
Overview: Pension Reform Law Alters Rules for Employers in Ireland (PDF)
2 pages. Excerpt: "Employers in Ireland will have to adapt to new minimum funding rules, along with new plan administration and trustee oversight rules, under the Social Welfare and Pensions Act 2005. The new law is designed to strengthen the security of the country's pension plans and incorporates changes to comply with the EU pensions directive. Multinational employers will also be interested in the new tax relief measures for members of overseas plans who are transferred to Ireland." (Towers Perrin)
Regulators Tighten Roth IRA Annuity Valuation Rules
Excerpt: "The Internal Revenue Service wants taxpayers to be reasonable when they are moving variable annuities into Roth individual retirement accounts. The IRS has issued a temporary regulation forbidding taxpayers from cutting their taxes by using complicated strategies to temporarily reduce the stated value of annuities shifted into Roth IRAs." (National Underwriter Life & Health; free one-time registration or paid subscription required)
Federal Appellate Court Clears Trustee, U.S. Trust Co., in ESOP Suit
Excerpt: "Upholding a lower court ruling, federal appellate judges have cleared an employee stock ownership plan (ESOP) trustee of wrongdoing in connection with the 1995 purchase of the ESOP sponsor's stock from its officers and directors. The US 7th Circuit Court of Appeals turned aside arguments by ESOP participants that trustee U.S. Trust Co. had failed to adequately determine whether sweepstakes promotions put on by the ESOP's sponsor impacted the company's share price." (PLANSPONSOR.com: one-time registration required)
Overview: DOL and SEC Tell Pension Plan Fiduciaries to Assess Third Party Consultants (PDF)
5 pages. Excerpt: "The joint DOL-SEC guidance goes to the heart of ERISA's requirement that fiduciaries of employee benefit plans administer and manage their plans prudently and for the exclusive benefit of plan participants and beneficiaries. Anyone who exercises discretionary authority or control over the management or administration of an ERISA plan, or who exercises any authority or control over the management or disposition of plan assets is a fiduciary." (Haynes and Boone, LLP)
Risk Management Tips from Plan Sponsors Who Take 401(k) Investment Options Seriously
Excerpt: "Investment committee members at a large Texas law firm were biting their nails recently when they realized that, rather than choosing from the plan menu, a good many of their 401(k) plan participants were defaulting into the firm's 'one-size-fits-all' 401(k) investment option -- a balanced fund with a 60% stock allocation and a 40% bond and cash component." (PLANSPONSOR.com: one-time registration required)
The Monitoring of Lifestyle Investment Options in 401(k) Plans
Excerpt: "Many 401(k) fiduciaries who are serious about their responsibility for the prudence of participant investing ... are using lifestyle funds as the primary solution for the lack of participant investment knowledge. However, from a legal perspective, lifestyle funds, like any other investment or service, must be monitored. While the law does not provide specific guidance on monitoring lifestyle funds, it seems obvious that fiduciaries must evaluate at least these three issues: ...." (PLANSPONSOR.com: one-time registration required)
Thrift Savings Plan Board Agrees to Research Real Estate Investment Fund Option
Excerpt: "The board of the Thrift Savings Plan is responding to pressure from Congress to investigate the feasibility of adding a real estate investment fund to the plan, but is not making any promises on the outcome." (National Journal Group Inc. via GovExec.com)
City of San Diego Accuses Callan Associates of Pay to Play Conflicts
Excerpt: "The city of San Diego has sued a San Francisco pension consulting firm that has helped invest the city pension fund for 23 years, saying it had undisclosed conflicts from a pay to play scheme." (PLANSPONSOR.com: one-time registration required)
State Teachers Retirement Board of Ohio Hands Staff $3.8M as Investment Performance Bonuses
Excerpt: "The State Teachers Retirement Board (STRS) of Ohio announced in a news release that its latest award of Performance-Based Incentive (PBI) Awards are determined based on the calculation of the 'additional value' brought to the fund by the investment managers." (PLANSPONSOR.com: one-time registration required)
Indiana Public Pension Fund Opens Coffers: $506M Could Be Boon for Venture Capitalists
Excerpt: "The Public Employees' Retirement Fund, Indiana's largest pension system, is preparing to unleash half a billion dollars into venture capital, real estate and other private-equity investments. And the fund's managers aim to put the bulk of it to work inside state lines." (Indianapolis Business Journal Online)
Reference Site for the Employee Plans Compliance Resolution System (EPCRS)
Excerpt: "The [EPCRS] is a comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of sections 401(a), 403(a), 403(b), 408(k) or 408(p) of the Internal Revenue Code, but which have not met these requirements for a period of time. This system allows plan sponsors to correct these failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis. The components of EPCRS ...." (U.S. Internal Revenue Service)
'Grow Accounts' Bond Investment Bill Has the Full Support of House Republican Leaders
Excerpt: "It's now almost certain the House will vote this fall on a Social Security reform bill to let workers invest part of their payroll taxes in U.S. Treasury bonds they would own." (The Washington Times)
Appendix to ICI Report: Additional Data on Mutual Funds and the U.S. Retirement Market in 2004 (PDF)
12 pages. Excerpt: "The August 2005 issue of Fundamentals covers mutual funds and the U.S. retirement market in 2004. The report highlights data collected by the Investment Company Institute (ICI), government agencies, and other trade associations to characterize the U.S. retirement market and mutual funds' role in managing retirement assets. This Appendix provides supplementary tables and charts with additional detail for the August 2005 Fundamentals." (Investment Company Institute)
Owner of New Jersey Contracting Company Accused of Pension Plan Embezzling
Excerpt: "A Monmouth County grand jury has indicted the owner of the Knight Contracting Co., Clarksburg, Millstone Township, on one count of theft, accusing him of embezzling about $500,000 in employee contributions to the company's pension plan." (Asbury Park Press)
Americans' Savings Going Bust: Congress Is Looking at Tax Breaks As the Savings Rate Hits Zero
Excerpt: "Americans have always been voracious consumers but indifferent savers, and their rate of savings during the past few months has plunged to just about zero. Alarmed by the astounding decline in personal savings, leaders of both major parties in Congress are proposing tax breaks and other incentives to entice American workers to set aside more of their disposable income and invest for their retirement." (Orlando Sentinel)
Initiatives to Promote Savings from Childhood Catching On
Excerpt: "Legislation has been introduced in Congress that calls for the government to open a KIDS Account of at least $500 for every baby born in the United States. And President Bush's first Treasury secretary, Paul H. O'Neill, has been giving speeches around the country, promoting an even bolder plan he has devised for children's accounts that he says would guarantee every American at least $1 million by age 65, eventually eliminating the need for Social Security." (The Washington Post; one-time registration required)
RRC Conference Paper: Retirement/Saving/Benefit Claiming & Solvency under Voluntary Personal Accts (PDF)
22 pages. Excerpt: "[The authors] focus on three features of a system of personal accounts: whether personal accounts replace only a part of, or all traditional Social Security benefits; whether personal accounts are voluntary or mandatory; and the share of benefits that may be taken [as] a lump sum rather than as an annuity." (Center for Retirement Research at Boston College)
Links to Items on Executive Comp, Benefits in General
Stock Option Administration: FASB Rule Change Sets Off Quest for a Better Valuation Model
Excerpt: "Even in the midst of the pension funding crisis, the actuarial sciences have often seemed to be relegated to the nether reaches of developing workable solutions. However, recent directives on stock option expensing from the Financial Accounting Standards Board (FASB) may bring a new luster to that expertise. In a nutshell, FASB's March 2004 ruling said that all forms of share-based payments to employees would be treated the same as other forms of compensation by recognizing the ...." (PLANSPONSOR.com: one-time registration required)
Letter to the Editor of NYT: Executive Compensation and Pension Loses
Excerpt: "'Announcing an Award for Greed' (column, Aug. 14), by Nicholas D. Kristof, criticizes the Fog Cutter Capital Group's board for compensating its former chief executive, Andrew Wiederhorn, during his incarceration. In doing so, Mr. Kristof does not mention critical facts." (The New York Times; one-time registration required)
Commentary: Third Circuit ERISA Opinion -- In re: Schering-Plough Corporation ERISA Litigation
Excerpt: "In 2004, a district court in New Jersey held that certain plaintiffs could not recover damages for defendants' alleged breaches of fiduciary duty because such recovery was really for individual participants rather than the plan. In re Schering-Plough Corp. ERISA Litig., 2004 WL 1774760 at 6 (D.N.J. June 28, 2004). The Third Circuit has now reversed and remanded the case in a landmark decision which you can access [on the target page]." (Attorney B. Janell Grenier via Benefitsblog.com)
Access to Benefits at Small Businesses May Be Declining
Excerpt: "The cost of employee benefits and the wherewithal to offer them are sizable problems for all small businesses, according to a new survey by the Small Business Administration. That study laments that small businesses find themselves at a competitive disadvantage with larger companies that can offer broader benefits packages for less cost per employee." (SignOnSanDiego.com)
Editorial: A Salary-Benefits Package that Anyone Would Take
Excerpt: "So here's the package: Base salary, $81,050; fully paid health care plan with an annual premium of about $13,500; a $50,000 annual pension for those who retire in 2008 with 20 years service; a $39,800-a-year expense allowance to run the office and pay expenses; and $4,000 to cover constituent newsletters and other mailings. We're guessing you'd take that package if you could get it." (Williamsport Sun-Gazette)
Newly Posted Events
National Symposium on Self-Directed IRAs
in California on October 20, 2005
presented by PENSCO Trust Company
Network of Executive Women Leadership Summit
in Georgia on September 26, 2005
presented by Network of Executive Women
Newly Posted Press Releases
ASPPA President Rosen Cautions Internal Revenue Service on Proposed Section 415 Retirement Plan Regulations
(ASPPA (American Society of Pension Professionals & Actuaries))
Mark O. Sullivan Joins Stanton Group As Practice Leader
(Stanton Group)
Labor Department Finalizes Qualified Professional Asset Manager Exemption
(U.S. Department of Labor, Employee Benefits Security Administration)
New Report Details Costs Of Employee Benefits
(U.S. Small Business Administration (SBA))
Chicago Consulting Actuaries Aggressively Expands Offices, Expertise
(Chicago Consulting Actuaries, LLC)
Newly Posted or Renewed Job Openings
Account/Client Services Manager (Seattle)
for Zenith Administrators
in WA
Technical Manager
for Retirement Strategies, LLC
in NM
401(k) / Defined Contribution Administrator
for Retirement Plan Consultants, Inc.
in TN
Pension Plan Administrator
for Professional Business Consultants, Inc.
in IL
ERISA Associate
for Kraw & Kraw
in CA
Compensation Analyst - KLC Corporate, Portland
for Knowledge Learning Corporation
in OR
Employee Benefits Specialist - Third Party Retirement Plan Services
for Goodman & Company
in VA
Consultant
for High Point Consulting & Staffing, LLC.
in ANY STATE
401(k) Plan Administrator
for Pollard & Associates, Inc.
in MD
Assistant Plan Administrator
for Pollard & Associates, Inc.
in MD
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