BenefitsLink Retirement Plans Newsletter October 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) Roth 401(k) Plan Contributions: What Will Their Impact Be? Excerpt: "In early March, the Internal Revenue Service (IRS) issued proposed regulations that would allow plan participants to make after-tax Roth IRA-like contributions to their 401(k) plans. 401(k) plans may offer this optional election to plan participants beginning in 2006." (Invesmart, Inc.) E&O Policies May Not Cover 401(k) Sales Excerpt: "Brokers who sell 401(k) plans and take on a fiduciary role might not be covered under their broker-dealer's errors-and-omissions policy, according to some plan experts. That has been a topic of concern in the industry, and it has left some financial advisers scratching their heads as to whether they actually are covered should they face a lawsuit." (Investment News; registration or subscription required) Fund Option Catches On with Small Investors Excerpt: "Exchange-traded funds have a fast-growing fan club whose membership includes pension plans, hedge funds and professional investors and traders. .... Other companies are bringing ETFs to 401(k) accounts, which is the way millions of workers gain access to the markets by investing small sums from each paycheck." (The Hartford Courant; one-time registration required) Roth 401(k) Plan Amendment Update Excerpt: "Richard Hochman, President of McKay Hochman, has prepared a special message to address the Roth 401(k) plan amendment issue." (McKay Hochman Co., Inc.) Overview: Introduction of 401(k) Automatic Enrollment Bill Protecting Default Investments Excerpt: "Although the legality of automatic enrollment of 401(k) plans is generally accepted, some employers are concerned about potential ERISA liability for placing employees into 401(k) plans by default. Senator Rick Santorum (R-PA) recently introduced legislation (S. 1819) that seeks to clarify the ability of employers to adopt automatic enrollment and encourage them to do so." (HR Policy Association) Value of Automatic Rollover from Retirement Plans Into IRAs Is Unclear Excerpt: "To comply with Department of Labor regulations, employers are changing their retirement plans this year to automatically roll over balances of more than $1,000 into an individual retirement account unless an employee elects to cash out. For many, however, it will be an exercise in frustration." (Employee Benefit News) Who Will Bail Out the Bailer? Excerpt: "Already there is talk of the need for a savings-and-loan-style bailout for the PBGC. But the House and Senate are trying to forestall a massive taxpayer bite by considering two related bills that would tighten the rules for companies that make contributions to defined benefit plans for employees. First, they'd raise premiums companies pay to the fund, and set stricter rules for below-investment-grade companies paying into the fund." (Forbes.com) Letter on Administration's Pension Reform Proposal & H.R. 2830, The Pension Protection Act of 2005 (PDF) 2 pages. Excerpt: "As you requested, the Congressional Budget Office (CBO) has estimated the effect on the 10-year net costs of the Pension Benefit Guaranty Corporation (PBGC) of enacting theAdministration's pension reform proposal and H.R. 2830, the Pension Protection Act of 2005." (U.S. Congressional Budget Office) Text: S. 1825 -- Multiemployer Plan Funding and Deduction Reform Act of 2005 (PDF) 85 pages. Excerpt: "To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to revise the funding and deduction rules for multiemployer defined benefit plans, and for other purposes." (U.S. Senate via American Benefits Council) Consideration of the DeWine Mikulski Amendment to S. 1783, the Pension Security and Transparency Act (PDF) 8 pages. Excerpt: "The Senate is expected to consider the Pension Security and Transparency Act (S. 1783) the Week of October 17, 2005. There are two aspects of the bill that are particularly troublesome with respect to the funding rules for defined benefit plans: the use of a company's credit rating to determine whether the plan is at risk of termination, and the adoption of interest rate averaging over a 12-month period, which will increase volatility." (HR Policy Association) Chart on Hurricanes Katrina and Rita -- IRC Section 401(a) Extensions (PDF) 1 page. Excerpt: "The ... chart includes a list of key activities applicable to qualified Internal Revenue Code section 401(a) plans, the performance of which have been extended. Unless otherwise indicated ..., the extensions apply to disaster areas identified by FEMA as individual and public assistance areas." (Transamerica Retirement Services) Overview: Congress Passes Katrina Tax Relief Bills (PDF) 2 pages. Excerpt: "The IRS already has addressed some of the concerns reflected in the bills. OnSeptember 15, 2005, the IRS announced relief from some of the limitations on participants..ability to take distributions and loans from tax qualified plans." (Dow, Lohnes & Albertson, PLLC) Overview of the Relaxation of Retirement Plan, Filing & Disclosure Rules for Katrina Victims (PDF) 5 pages. Excerpt: "On September 23, 2005, President Bush signed H.R. 3768, the Katrina Emergency Tax Relief Act of 2005 (KETRA), into law, which also includes provisions that facilitate distributions and loans from eligible retirement plans. The new law also extends earlier filing and disclosure relief granted by the IRS. This For Your Information discusses KETRA, guidance issued by the IRS, and how they interact." (Buck Consultants) ERISA Issues in Insurance Company Demutualizations (PDF) 6 pages. Excerpt: "A 'demutualization' occurs when a mutual life insurance company changes its structure to a stock life insurance company owned by its shareholders. .... Upon conversion to a stock company, policyholders receive compensation (in the form of stock, cash, or 'policy credits') in exchange for their membership interests. The receipt of this compensation for policies held by or in connection with employee benefit plans raises various ERISA, state law, and tax implications." (Groom Law Group) Life-Cycle Funds Could Become federal Thrift Savings Plan Default Investment Option Excerpt: "Thrift Savings Plan participants who don't specify how they'd like to allocate their retirement savings are likely to see them placed in a sophisticated blend of investments, a TSP official said Monday." (GovExec.com) Oregon Governor's Public Employees Retirement System Proposal May Not Pay Off Excerpt: "Republican governor candidate Ron Saxton's proposal to dissolve the state pension system and force public employees into a less-costly retirement plan might not bring taxpayers the promised savings. Bill Hallmark, the new actuary for the Public Employees Retirement System, said Saxton's plan could wind up costing more than the current system for most veteran employees because of recent reforms and court decisions." (Statesman Journal) 2005 Social Security Summary Incorporating Changes to January 1, 2005 (PDF) 51 pages. The guide is an authoritative summary of eligibility and benefit rules for the Social Security, Medicare, and Supplemental Social Security Income programs. (Hay Group; one-time registration required) Mutual Fund Redemption Fees: Short Term Redemption Fee Information for Retirement Plan Participants Excerpt: "Invesmart, Inc. has posted this document in order to help you gain a fundamental understanding of how these fees are determined and what fund companies have begun imposing them." (Invesmart, Inc.) Financial Illiteracy and Retirement Planning (PDF) 2 pages. Excerpt: "Evidence continues to mount that most Americans across all age groups are in dire need of financial education and planning assistance. A recent investor survey sponsored by Eaton Vance shows that many lack even an elementary understanding of sound investment practices.The average investor in this survey expressed both the desire and expectation to retire at about age 61." (Benefits & Compensation Solutions) Talking Points on Senate HELP Committee Cash Balance Approach (PDF) 3 pages. Excerpt: "Congress is currently considering as part of an overall retirement security measure legislative language to clarify the legal status of cash balance and pension equity plans (hybrid plans). Many companies that already have existing plans are concerned that the legislation will apply only prospectively, will apply retroactively but with mandatory changes to their long-established plans, or will exclude plans from protection that are already in litigation." (HR Policy Association) Employee Ownership Update for October 17, 2005 NCEO Executive Director Corey Rosen discusses new deferred compensation rules allowing a broader use of stock appreciation rights (SARs) and specifying rules for valuing stock in closely held companies; a new study on the impact of executive and broad-based options on company performance; and the First Annual Employee Ownership Innovation Awards. (National Center for Employee Ownership) Links to Items on Executive Comp, Benefits in General Fiduciary Duty to Withhold Payment from Designated Beneficiary Indicted for Participant's Murder Excerpt: "The court's opinion is a good discussion of the fiduciary duty to act prudently in determining the legitimate beneficiary when the named beneficiary is under a criminal indictment and to 'initiate an interpleader action if the proper beneficiary is unknown.' This case addressed a state slayer statute and federal common law -- but note that some plans by their terms include a 'slayer' provision that denies benefits to a beneficiary convicted of, or under indictment for, ...." (Employee Benefits Institute of America Inc.) ERISA Plan Expenses Overview and Checklist (PDF) 7 pages. Excerpt: "The assets of an ERISA plan may be used for two purposes: (1) to pay benefits, and (2) to pay the reasonable expenses of administering the plan. ERISA §§403(c)(1) and 404(a)(1)(A). The decision to pay expenses from the assets of a plan is a fiduciary decision subject to the fiduciary rules of ERISA. See DOL Adv. Op. 2001-01A (Jan. 18, 2001); DOL Adv. Op. 97-03A (Jan. 23, 1997)." (Groom Law Group) Fiduciary Issues in ERISA-Covered Plans (PDF) 22 pages. Excerpt: "A fiduciary's liability under ERISA generally flows from his responsibility with respect to plan assets (or administration). DOL has indicated that when a plan invests in the following entities, the plan's assets include its interest in the entity (e.g., a share or a unit) but not the underlying assets owned by the entity: ...." (Groom Law Group) Contact Information of Employee Benefit Plan Sponsors Located in the Hurricane Disaster Areas Excerpt: "EBSA has developed this database to provide up-to-date contact information for those benefit plan sponsors whose operations have been disrupted by the disaster. This search [page at http://askebsa.dol.gov/SponsorLocator/UI/search.aspx] is intended to help pension plan participants whose former or current employer has been relocated due to disaster." (U.S. Employee Benefits Security Administration) Newly Posted Press Releases Tax Favored Treatment for Early Distributions from IRAs and other Retirement Plans for Victims of Hurricane Katrina (Internal Revenue Service (IRS)) Erosion of Job-Based Health Insurance Continues: Less Than Two-Thirds of All Americans Had Coverage Through Work in 2004 (Employee Benefit Research Institute (EBRI)) 2005 Health Confidence Survey Released: Most Americans Satisfied With Quality of Health Care, But the Public Does Not Link Cost to Quality (Employee Benefit Research Institute (EBRI)) ERIC Urges HELP Committee Chairman and Ranking Democrat Against Using Pension Reform as Springboard for PBGC Budget Deficit Reduction (ERIC (ERISA Industry Committee)) Employee Benefits Litigation Update (Worldwide Employee Benefits Network (WEB) - NJ) Labor Department Web Site Assists Hurricane Victims Locate Employee Benefit Plan Sponsors (U.S. Department of Labor, Employee Benefits Security Administration) Financial Services Firm Revamps Website (ICMA-RC) CCA Acquires W. Alfred Hayes & Company, Changes Name to CCA Strategies (CCA Strategies LLC) Newly Posted or Renewed Job Openings 401(k) Plan Administrator for Pollard & Associates, Inc. in MD Assistant Plan Administrator for Pollard & Associates, Inc. in MD HR Benefits Generalist for Source Interlink Companies, Inc in FL Senior Due Diligence Analyst for Vanguard in PA Alliance Relationship Manager for Morgan Stanley in NY DC Plan Administrator for Acuff & Associates, Inc. in TN Health Benefits Consultant/Account Manager for Financial Directions Group in NC Senior Benefits Administrator - Section 125 Cafeteria Plans for Brandywine Benefits Company, LLC in DE New Business Account Manager/Sr. (Defined Contribution Transition and Implementation) for Standard Insurance Company in OR Production Technician for SunGard in AL Senior Application Engineer for SunGard in AL Benefits Administrator I for Fifth Third Bank in OH Benefits Manager for Capital Group Companies, Inc. in CA 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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