| BenefitsLink Retirement Plans Newsletter |   |
September 19, 2005
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| Retirement Plans: What Every Employer Must Know |
| 8 Cities -- October - December
Employers - Do you understand your retirement plan fiduciary and administrative responsibilities? Financial scandals over the past few years remind us that plan sponsors bear primary responsibility for their plans. Tasks may be delegated to others, but ultimate responsibility lies with you. Join us for a day of enlightenment where you'll gain a comprehensive understanding of every employer's plan responsibility. Practical case studies provide insight, skills, and tools that enable employers to supervise retirement plans effectively. Relius Education by SunGard. |
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Five Reasons Why Highly Compensated Employees Should Choose the Roth 401(k)/403(b)
Excerpt: "In determining if the new Roth 401(k)/403(b) option is preferable when compared to the traditional pre-tax option, the key factor for participants to consider is the tax rate they pay today versus their future tax rate on distributions following retirement. However, participants who wish to maximize their retirement savings (and can afford to) have another factor to consider, one that mitigates the need for predicting future tax rates and simplifies this very complex decision." (Milberg Consulting LLC)
Summary: Grassley-Baucus Tax Relief Package for Individuals Affected by Hurricane Katrina (PDF)
5 pages. Excerpt: "The proposal would waive the 10% penalty tax for premature distributions from IRAs and qualified retirement plans (including defined benefit plans, 401(k) plans and 403(b) plans) for individuals whose principal residence is in a federally declared natural disaster area. Individuals eligible for this waiver because of Katrina would be permitted to pay income tax on such distributions ratably over a three-year period." (American Benefits Council)
Modifications to S. 1696: Hurricane Katrina Tax Relief Act of 2005 (PDF)
1 page. Excerpt: "2. Early Withdrawals from Retirement Plans: Limited to Hurricane Katrina with an expanded definition of the disaster area." (American Benefits Council)
Lifestyle Funds -- Pre-Mixed Offerings Ease Participant Concerns, but What about Plan Sponsors'?
Excerpt: "With the many varied options out there, how does a plan sponsor decide which type of fund to offer? Currently, there are approximately 473 target retirement or target risk funds, from 28 fund families, which can be overwhelming to sort through, ...." (PLANSPONSOR.com: one-time registration required)
Special Report: Lifestyle Funds -- Plan Sponsors Still Have Difficult Decisions
Excerpt: "We all know that one of the hardest decisions for many plan participants is choosing how to invest their retirement savings. These days, a widely touted solution is the asset allocation fund, or the lifestyle fund ([the terms are used] interchangeably here, but there are differences) -- an option that allows a participant to make a single investment choice: a fund pre-mixed to match an asset allocation deemed appropriate for a particular risk tolerance and/or retirement date." (PLANSPONSOR.com: one-time registration required)
Special Report: Lifestyle Funds -- Managed Account Options Proliferate, but Concerns Linger
Excerpt: "A growing number of defined contribution plan sponsors, dismayed and frustrated that their employees are not adequately diversifying or building up their retirement savings assets, are offering participants the option of professionally managed accounts. Other sponsors, however, have been reluctant to jump on the managed account bandwagon, often because of fiduciary concerns." (PLANSPONSOR.com: one-time registration required)
IRS Officials Report that Proposed 403(b) Regs Will Not Be Effective Before January 1, 2007
Excerpt: "Proposed regulations regarding IRC Sec. 403(b) will not take effect until 1-1-07, according to Treasury Acting Benefits Tax Council Tom Reeder. The Regs had been scheduled to be effective 1-1-06. Final regs should be issued in first half of 2006, to be effective 0n 1-1-07." (403bWise)
Opinion: Colorado's Public Employees Retirement Association's Problems Are Real, but Not Unique
Excerpt: "State employees - and taxpayers, in general - are rightly concerned about the long-term health of the Colorado Public Employees Retirement Association. Unfortunately, PERA's predicament isn't unique. In fact, it's entirely too typical among public pension plans nationwide. A Wilshire and Associates survey of state retirement systems found that a stunning 93 percent don't have enough assets to meet existing liabilities and that 16 states have pension deficits that exceed their ...." (Rocky Mountain News)
California Public Employee Pension Fallout Nigh: Liabilities Foreshadow Bankruptcies
Excerpt: "Years of bestowing lavish pensions and benefits on public employees has left dozens of the state's largest agencies with billions of dollars in unpaid liabilities that experts warn could start a cascade of bankruptcies, service cuts and tax increases. According to a Daily News review of agencies in Los Angeles and across the state, California's largest public agencies face setting an extra $108 billion aside in the coming years to pay for promised retiree pensions, health care ...." (LA Daily News)
Whoops! There Goes Another Pension Plan
Excerpt: "[S]hedding pensions - and pensioners' health care obligations - is turning into an irresistible way to make a high-risk investment pay off. 'It's become a kind of system to bail out companies,' Thomas Conway, ... of the United Steel Workers of America, said of the pension corporation, which Congress created in 1974 to protect retirees if their employers went bust. 'People have been able to use it tactically, as a business strategy, and I don't think that's what Congress meant.'" (The New York Times; one-time registration required)
Pensions May Not Be Able to Cover Staff in Event of Major Terrorist Attack
Excerpt: "Many corporate pension funds do not have sufficient insurance to cover their death-in-service promises in the event of a major terrorist attack, Europe's biggest risk-management adviser warned ...." (Reuters via Tiscali.Money)
Court Denies Ex-Wife's Waiver of Survivor Benefits
Excerpt: "The US 3rd Circuit Court of Appeals decided that a retiree could not change his surviving spouse election even after she signed a waiver of benefits in their divorce settlement." (PLANSPONSOR.com: one-time registration required)
Commentary: Social Security Time Bomb Won't Blow Up Private Pensions
Excerpt: "The United States, like all other developed nations, faces a demographic time bomb. The population is aging, the number of retirees will grow relative to the working population and pension plans, particularly Social Security and other defined benefit plans, will come under strain." (InvestmentNews.com)
The Game of Life Expectancy: How Long You'll Live Is the Critical, but Elusive, Planning Guide
Excerpt: "Life and death, though, is not an exact science. Financial planners consult mortality tables and note individual clients' health and family history, but guesswork is inevitable. 'I'd love to say we have a wonderful scientific way to approach it,' said Linda Lubitz, a certified financial planner and president of Lubitz Financial Group, in Miami. She uses 95 as a mortality age for most clients, though for younger clients she'll add on as much as 10 years to account for medical advances." (MarketWatch)
Employee Ownership Update for September 16, 2005
NCEO Executive Director Corey Rosen discusses a survey finding that ESOP company executives are paid less than their peers; the SEC's rejection of Cisco Systems' proposal to value its options based on a market in employee options the company would create; proposed IRS regulations that would make ESOP redemptions not deductible and limit ESOP deductions for foreign companies to the parent company; and a new NCEO staffer, Loren Rodgers. (National Center for Employee Ownership)
GAO Report: Federal Pensions -- Judicial Survivors' Annuities System Costs
Excerpt: "GAO is not making any recommendations in this report. The Administrative Office of the United States Courts (AOUSC) believes that GAO should be recommending a reduction in the judges' contribution rate. GAO disagrees with AOUSC's interpretation of the act's requirements. [Highlights of the report are at http://www.gao.gov/highlights/d05955high.pdf.]" (U.S. Government Accountability Office)
Proposed Bill Could Bring Retirement Equity to Federal Law Enforcement Officers
Excerpt: "A bill making its way through Congress might be the best shot in a decade of getting pay equity for some federal law enforcement officers, American Federation of Government Employees officials said ...." (National Journal Group Inc. via GovExec.com)
Overview: Large Premium Increases on United Kingdom Company Pension Plans Lie Ahead (PDF)
2 pages. Excerpt: "Employers with defined benefit plans are facing massive premium increases next year when the risk-based levy required by the Pensions Act of 2004 goes into effect. The new premiums are payable to the Pension Protection Fund (PPF) beginning in April 2006. A recent government consultation document setting out the rationale and methodology for the new levy suggests that it could range on average from £320 (US$587, €474) to as high as £30,000 per £1 million of liabilities, ...." (Towers Perrin)
Overview: Remedial Amendment Procedure
Excerpt: "The IRS has issued Revenue Procedure 2005-66, which revises the restatement process (allegedly, forever). The procedure is the culmination of many efforts, including a study of the remedial amendment process, two White Papers, practitioner involvement, and comments on a draft procedure." (McKay Hochman Co.)
Commentary: The Great Benefits Shift
Excerpt: "During the third quarter of the 20th century, the United States was confident it had a uniquely successful way of providing people with health and pension benefits by delegating the task to employers. As other industrialized nations sponsored government programs to achieve this goal, the United States moved toward a society where everyone would get health insurance and pension promises on the job." (The Philadelphia Inquirer; one-time registration required)
Data Show Declining Stock Mutual Fund Management Fees
Excerpt: "Americans who own U.S. stock mutual funds are paying about 6 percent less in annual management fees than they did before New York Attorney General Eliot L. Spitzer began his assault on industry-wide trading abuses. Today, holders of actively run U.S. stock funds overseen by the 100 biggest fund companies pay an average $9.80 for every $1,000 invested, down from $10.40 two years ago, according to data compiled by Chicago-based Morningstar Inc." (Bloomberg News via The Washington Post; one-time registration required)
Links to Items on Executive Comp, Benefits in General
Overview: FASB Provides Relief on Grant-Date Communication Issue (PDF)
1 page. Excerpt: "The Financial Accounting Standard Board (FASB) on September 14 decided to add a project to its technical agenda that would reverse the FASB staff's view that the grant date for equity compensation under Statement 123(R) cannot occur until the key terms and conditions of the award are communicated to employees. The relief is in the form of proposed FASB Staff Position (FSP) FAS-123(R)-b (released September 16), ...." (Frederic W. Cook & Co., Inc.)
Proposed FASB Staff Position No. FAS 123(R)-b on Practical Exception to Application of Grant Date (PDF)
Excerpt: "This FSP is in response to recent inquiries from constituents to provide guidance on the application of grant date as defined in FASB Statement No. 123 (revised 2004), Share-Based Payment." (Financial Accounting Standards Board)
Hurricane Katrina Tax Resources
The Blog carries a list of Congressional and IRS Hurricane Katrina tax information. (TaxProf Blog)
Section 409A Guidance Delayed; What Employers Should Do Now
Excerpt: "[D]espite the expected transition period extension, there are still some actions that employers should be preparing to take before December 31, 2005 to comply with section 409A.... Given the timing requirements for deferral elections, employers should provide for a deferral election process this fall for salary and other non-performance based compensation to be earned next year." (Deloitte)
Overview: IRS Priority Plan for Guidance in 2006
The following subjects are included on the priority list: Guidance on the tax treatment of distributions from Roth Retirement Plans; Final Regulations on compliance with in-service withdrawal distributions from pension plans in connection with phased retirement arrangements; Final Regulations on transmission of notices to participants through electronic means; Revenue Procedure amending and updating the EPCRS program; and, Guidance on benefits not permitted in a defined benefit plan. (McKay Hochman Co.)
Newly Posted Press Releases
Operations Restored at New Orleans TPA Business
(SunGard Corbel)
National Business Coalition on Health Supports Value-Based Purchasing Legislation to Modernize Medicare
(National Business Coalition on Health)
Dallas-Fort Worth Business Group On Health Launches Outpatient Care Quality Improvement Initiative
(Dallas-Fort Worth Business Group on Health)
U. S. Labor Department Helps Hurricane Katrina Victims Preserve Health Benefits
(U.S. Department of Labor, Employee Benefits Security Administration)
ERISA Expertise Releases Roth 401(k) Guidebook and Analyzer
(ERISA Expertise LLC)
Newly Posted or Renewed Job Openings
Administrative Assistant
for retirement advisory services corp
in PA
401(k) Pension Administrator
for Retirement System Group Inc.
in NY
Senior Health Benefits Analyst
for Segal Company
in MA
Senior Benefits Analyst
for Howrey LLP
in DC
Account Representative
for Great-West Retirement Services
in CA
401(k) /DC Client Administrator
for EPIC Advisors, Inc.
in NY
Pension Administrator
for Pension Administration firm
in PA
RFP Consultant
for Diversified Investment Advisors
in NY
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