Retirement Plans
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July 3, 2006
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Text of Rev. Rul. 2006-38: Application of Prohibited Transaction Excise Tax to Late 401(k) Deferrals (PDF)
6 pages. Excerpt: "What is the amount involved, for purposes of calculating the prohibited transaction excise tax under § 4975 of the Internal Revenue Code, if an employer does not timely pay elective deferrals to a qualified plan? ... Holding: Solely for purposes of calculating the prohibited transaction excise tax ... the amount involved if an employer does not timely pay the participant deferrals or contributions to a qualified plan is based on interest on those elective deferrals." (Internal Revenue Service)

Overview: Participation in Tax Shelters by Tax-Qualified Retirement Plans or VEBAs
Excerpt: "The Tax Increase Prevention and Reconciliation Act of 2005 (signed into law on May 17, 2006) imposes a $20,000 excise tax on each entity manager of a tax-qualified retirement plan that approves the plan as (or otherwise causes the plan to be) a party to a prohibited tax shelter transaction at any time during the taxable year and knows or has reason to know that the transaction is a prohibited tax shelter transaction." (Thelen Reid & Priest LLP)

Does State Government Belong in Retirement Plans?
Excerpt: "Under a Democratic proposal recently introduced in the Legislature, the state would set up 401(k)-style retirement plans for workers at small businesses to help make the accounts more affordable. But that appears to be the rub for business groups and key Republicans, who say government shouldn't meddle in the private sector." (The Oakland Press)

Retirement Tool Can Ease Departure from Firm
Excerpt: "A cash balance plan can be incorporated as an overlay to an existing 401(k) plan and create the opportunity for massive retirement plan contributions -- something in the neighborhood of $150,000 per year -- for people in their 50s or 60s." (The Contra Costa Times; one-time registration required)

Analysis: How Successful Is the Status Quo 401k? Brennan 'Untold 401k' Speech and Rebuttal (PDF)
5 pages. Excerpt: "Recently John Brennan (CEO of the Vanguard Mutual Fund Group) delivered a speech on May 2, 2006 at the annual conference of the Society of American Business Editors and Writers in Minneapolis-St. Paul, Minnesota ...: 'The Untold 401k Story'. .... In his article Brooks Hamilton posted a rebuttal to the Brennan analysis. .... Unified Trust Company, NA Retirement Success analysis concludes that Brooks Hamilton is right." (Gregory W. Kasten via Unified Trust Company, NA)

Two New Stock Drop Decisions -- Friendly Skies for ERISA Fiduciaries? (PDF)
4 pages. Excerpt: "[Last] week, courts issued rulings in two separate employer securities cases. The first decision, issued on June 26, involved the stock of US Airways held in a US Airways 401(k) plan. The second, issued on June 28, involved the stock of United Airlines held in an Employee Stock Ownership Plan ('ESOP') sponsored by United. Although favorable to the defendants, the decisions don't necessarily settle the debate over plan holdings of employer securities, ...." (Groom Law Group)

Arizona State Retirement System Pensioners Will Not Get Raise in Monthly Pension Checks This Year
Excerpt: "The Associated Press reports that this is the first time in a decade the 76,000 retired teachers, school district and non-public-safety city and state retirees will not get an annual increase." (; one-time registration required)

Overview: Don't Shoot Me, I Only Hired the ESOP Administrator
Excerpt: "[E]ven though you may hire an outside firm to take on the lowercase duties of the plan administrator, the uppercase Plan Administrator duties probably belong to you. That means, generally, that you have a responsibility to see that the outside administrator is doing their job correctly for your circumstances. You can't really do that unless you know what is supposed to be going on at every stage of the process." (Leading Companies Online Magazine via Beyster Institute)

Court Says No Remedy for Fiduciary's Failure to Follow Participant's Investment Instructions
Excerpt: "There are equitable remedies available in this situation, but they don't give participants the 'make whole' remedy they would prefer. The Fourth Circuit noted that a participant or beneficiary could sue under ERISA Section 502(a)(3) to seek either an injunction compelling compliance with his or her investment instructions or the fiduciary's removal." (Employee Benefits Institute of America Inc.)

Unpopular Oregon PERS Reform Rule Revisited: Bill Would Kill Break-In-Service Rule Dating to 2003
Excerpt: "A new study shows that ... 3,000 Oregon public employees to run afoul of the 'break-in-service' rule enacted with the Public Employees Retirement System reforms of 2003. When those people returned to PERS-covered jobs after breaks of more than six months, they were pushed out of the pension system's lucrative Tier 1 and Tier 2 benefits schemes and into the slimmed-down pension plan created in 2003 for new hires." (Statesman Journal)

Overview: New IRA Conversion Rules -- Everyone Is Eligible to Convert After 2009
Excerpt: "On May 17, 2006, President Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA).... [A provision] removes the income limit for IRA conversions in tax years beginning after 2009. The new rules will make it possible for anyone, including individuals currently not eligible for a conversion, to convert their traditional IRA assets to a Roth IRA. The new rules also provide a loophole that effectively will allow otherwise ineligible individuals ...." (Wolters Kluwer Financial Services)

Overview: IRS Revises Form 8717 to Reflect User Fee Increases Effective July 1, 2006
Excerpt: "In a News Flash dated June 23, 2006, the IRS reminded the retirement plans community that many user fees will increase on July 1, 2006 and announced the release of revised Form 8717 (User Fee for Employee Plan Determination, Opinion, and Advisory Letter Request) (June 2006). The user fee increases were announced in Revenue Procedure 2006-8 .... The new fee schedule takes effect in two phases: ...." (Employee Benefits Institute of America Inc.)

SIA Research Reports: Retirement Savings -- By the Numbers (PDF)
Pages 3-40 of 52 pages. Excerpt: "The SIA retirement study uses current measures employing data sources such as the Federal Reserve's triennial report, the 2004 Survey of Consumer Finances as well as the Federal Reserve's quarterly Flow of Funds Accounts and other sources to assess the adequacy of retirement savings." (Securities Industry Association)

Links to Items on Executive Comp, Benefits in General

Perils and Pitfalls of ERISA Summary Plan Descriptions -- Part II
Excerpt: "The first part of this series appeared in the June 15 issue. It can be accessed online at The Summary Plan Description informs the plan participant of the benefit plan terms, one of which is that there is a plan administrator other than the employer. Many employee benefit plans, especially insured plans, delegate decision-making authority to a separate party, the claim administrator." (Employee Benefit News)

Court Says Employer Liable for ERISA 502(c) Penalty Due to Close Relationship to Plan Administrator
Excerpt: "The penalties for ignoring requests for information required by ERISA can be severe -- plan administrators that fail or refuse to furnish the information within 30 days after the request may be liable for up to $110 per day from the date of such failure or refusal." (Employee Benefits Institute of America Inc.)

CEOs Shell Out Nearly 6 Figures to Secure the Perfect Nanny
Excerpt: "Salaries of top nannies aren't the only thing being driven by the CEO search. Those at the high end also get benefits such as health insurance, meals at fine restaurants, country club passes, cars with free gasoline, education stipends, cellphones, working trips aboard corporate jets to places like Hawaii and personal trips compliments of the CEO's frequent-flier miles. All that, plus room and board in a mansion, can make leaving the profession a lifestyle decision." (USA TODAY)

Working Paper: Timing of Employee Stock Option Exercises and the Valuation of Stock Option Expense
Excerpt: "This study examines the degree to which employees' idiosyncratic early option exercise behavior affects firms' employee stock option valuation estimates. Prior research suggests that utility-based valuation models that account for early employee exercise do not yield different value estimates than models that simply adjust for coarse early exercise timing estimates. [The 56 page PDF of the paper may be downloaded from the target page.]" (Social Science Research Network)

Audio: Investigations Expanded into Back-Dating Stock Options
Excerpt: "A growing list of publicly-held companies are being asked by the government to re-examine their stock options programs. One area of concern is the practice of back-dating, .... NPR's Scott Simon talks to New York Times columnist Joe Nocera about the practice." (Weekend Edition via National Public Radio)

Newly Posted Press Releases
(Post Yours!)

ASPPA Fall EA-2(A) Review Courses
(ASPPA (American Society of Pension Professionals & Actuaries))

IRS Announces Temporary Change of Address for Determination Letter Requests, Ruling Requests
(Internal Revenue Service (IRS))

Putnam Introduces First Health Reimbursement Account Services for Labor Unions
(Putnam Investments)

The SPARK Institute Issues Best Practices for Frequent Trading Monitoring by Retirement Plan Recordkeepers
(SPARK Institute)

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

401(k) Administrators
for Pension Development Corporation
in NY

Pension Administrator
for Moran & Associates, Inc. / G. Russell Knobel & Associates
in HI, WA

Group Employee Benefits Account Manager (Service)
for The Protector Group Insurance Agency, Inc.
in MA

Employee Benefit Consulting Champion
for Clifton Gunderson LLP
in IL

Director of Pension Operations
for 1199SEIU Benefit and Pension Funds
in NY

Senior Plan Administrator
for Advanced Benefits Consulting
in MO

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