Retirement Plans
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July 28, 2006
Today's sponsor: Employee Benefits Institute of America Inc. (EBIA)

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401(k) Plans Manual

Our 401(k) Plans manual is a must-have resource for employers with 401(k) plans and for administrators and advisors. Topics include eligibility, vesting, contributions, distributions, plan loans, hardship withdrawals, discrimination testing, fiduciary duties, plan investments, plan corrections, and much more. Sample documents and official guidance included.

"The 401(k) manual's absolutely wonderful. I would highly suggest you take a look."

For information on EBIA's seminars, please go to

(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)

Tax Breaks Pose Hurdle for U.S. Pension Overhaul
Excerpt: "Negotiations on legislation overhauling the U.S. pension system stumbled early this morning after lawmakers couldn't agree on whether to include $35 billion in tax breaks. " (Bloomberg News)

Investment Advice Accord Reached in Bill
Excerpt: "A compromise has been struck by congressional pension bill negotiators over how to provide investment advice to 401(k) and Individual Retirement Account plan participants. 'Members have drafted language on investment advice,' said Kevin Smith, spokesman for House Majority Leader John Boehner, R-Ohio, . . . ." (

Overview: IRS Issues Final Regulations on Exempt Organization and 401(k) Non-Discrimination Testing (PDF)
2 pages. Excerpt: "The final regulations generally provide that governmental or tax-exempt organizations who offer both a Section 403(b) plan and a Section 401(k) plan do not have to cover their employees under both plans in order to meet the requisite coverage rules." (Seyfarth Shaw LLP)

Overview: IRS Releases Final Regulations on Flat-Rate Withholding on Supplemental Wages (PDF)
3 pages. Excerpt: "Salary reduction deferrals (e.g., 401(k), 403(b), etc.) must be properly allocated to the gross regular wages or supplemental wages from which they are deducted before the amount of supplemental wages is determined. The IRS rejected the suggestion that employers should be allowed to take into account the gross amount of supplemental wages subject to pretax reductions." (Miller & Chevalier Chartered via American Benefits Council)

Judge Gives Final Approval to $37.5m Settlement Between Former Enron Employees & Northern Trust
Excerpt: "U.S. District Judge Melinda Harmon approved the plan this week, which brings to $264.3 million the total amount collected on behalf of former Enron employees who had 401(k) plans with company stock." (The Houston Chronicle)

McHenry Survey and Report Address New Retirement Advice Regulations if Passed (PDF)
11 pages. Excerpt: "It is possible that Congress will pass legislation that changes the nature of the relationships between plan sponsor, participant, retirement advisor and vendor. Over the last few months, McHenry has polled a mix of buy-side and sell-side market participants and have some data to share." (The McHenry Group, LLC)

Safe Investments: Part 1 -- Fiduciary Safe Harbor for Default Investments
Excerpt: "The most common default investment is a money market account. Unfortunately, in most cases it is arguable that the fiduciaries who use a money market account are breaching their responsibilities under ERISA, since a default investment must be consistent with the plan's purpose of providing retirement benefits. Arguably, a money market account is not a prudent vehicle for long-term investing." (Reish Luftman Reicher & Cohen)

Safe Investments: Part 2 -- Multi-Asset Class Investments and Default Accounts
Excerpt: "[Reish Luftman anticipates] that plan sponsors will embrace the concept of allowing employees to default, rather than encouraging them to direct their investments. After all, fiduciaries will be protected in safe harbor defaults, but will not have the same level of protection for participant-directed investments (unless a plan complies with the 20 to 25 requirements in the 404(c) regulation)." (Reish Luftman Reicher & Cohen)

Effective Retirement Plan Participation Strategies
Excerpt: "Clare Bergquist, director of service strategies for Charles Schwab and a discussion panel member on effective participation strategies at PLANSPONSOR's Plan Designs 2006 conference, told attendees that they should not be shy when they decide which auto features to implement." (; one-time registration required)

PBGC Extends Reporting Relief for Employers that Valued Benefits Using PFEA Interest Rate
Excerpt: "The Pension Benefit Guaranty Corporation has extended the waiver, granted in PBGC Technical Update 06-1 . . ., of reporting by certain employers of financial and actuarial information under ERISA 4010." (CCH Pension & Benefits)

Pension Managers Need 'Innovative Solutions' to Funding Issues
Excerpt: "A new pension funding study suggests that government officials need to close payment loopholes, push up the level of employee contributions and rethink overall fund management." (; one-time registration required)

Illinois Public Pension Contribution Holiday Created $2.3B in Funding Setbacks
Excerpt: "Illinois will have to boost its pension contributions into the state's pension system by $10.3 billion over four years in part because of legislation that halted contributions for one fiscal year, according to a recent report." (; one-time registration required)

Judge Calls Pension Fund Handling 'Appalling'
Excerpt: "An administrative law judge gave initial approval for the sale of PG Energy to UGI Corp. for $580 million, but not without labeling the companies' handling of pension funds 'appalling.' If she had the legal authority to consider the pension funding issue, Judge Susan Colwell said she would have denied the sale application 'in the hope that the parties would renegotiate the sales agreement to include the pension.'" (Times Leader)

The Inside Edition: Research Round-Up -- The Latest in Retirement Industry Trends, July 2006
This edition comments on the following studies: 'Company Efforts Positively Impact U.S. Employees' 401(k) Saving Habits;' 'A New National Retirement Risk Index;' 'Will More of Us Be Working Forever? The 2006 Retirement Confidence Survey;' 'Americans Lack Knowledge About How to Turn Retirement Savings Into Sustainable Income;' and, 'With Increasing Competition for Talent, Benchmarking Data Helps Employers and Brokers/Consultants Better Understand How Benefits Programs Measure Up." (The McHenry Group, LLC)

Opinion: Is There a Retirement Crisis in the Future?
Excerpt: "As with most national 'crises,' part of this public gloominess is manufactured. You grab people with provocative opinions, not with dull statistics. And black-and-white is more appealing than shades of gray." (OnWallStreet)

DOL Seeks Greater Broker Compensation Disclosure
Excerpt: "In addition to its announcement that electronic 5500 filings will be required across the board beginning Jan. 1, 2008, the DOL has also indicated it would like to amend the form to include a special section detailing broker compensation in excess of $1,000." (The Advisor)

Overview: Disclosure of Fees -- A Regulatory Project
Excerpt: "The DOL is working on a regulatory project, the so-called '408(b)(2) project,' to require full disclosure of fees and expenses by advisors and plan providers. It is possible that a proposed regulation, together with a disclosure form, could be published by the end of this year." (Reish Luftman Reicher & Cohen)

Advisor Do's and Don'ts
Excerpt: "Do #1: Whether you are a financial consultant/broker or investment advisor, you should have an agreement (or letter or memo) with your fiduciary client that explains your services." (Reish Luftman Reicher & Cohen)

Does Your Retirement Plan Need an Investment Advisor?
Excerpt: "The need for financial planning and investment advice may be even more critical for smaller plans, where a plan sponsor must often wear many hats-- including many that have little to do with making decisions about participants' retirement savings." (; one-time registration required)

Links to Items on Executive Comp, Benefits in General

Overview: Stock Option Backdating Schemes (PDF)
6 pages. Excerpt: "For the purposes of this article, [the authors] will assume that if an option was backdated, the stated 'grant' date of the option is a date preceding the date on which all necessary corporate action was taken, with the result that the option holder received an in-the-money option -- although the option was reported as being granted at fair market value." (Trucker Huss)

Overview: Backdating and Other Issues Involving Stock Option Grants (PDF)
7 pages. Excerpt: "Internal controls over financial reporting have been a primary focus of publicly-traded companies since the passage of the Sarbanes-Oxley Act. Public companies should have already designed and implemented internal controls that eliminate the ability to manipulate option grant dates. If so, those internal controls should be tested periodically." (Kirkpatrick & Lockhart Nicholson Graham LLP)

What Backdating Means for Your Company's Financials and Your Personal Tax Return
Excerpt: "In much the same way that backdating is now prompting some companies to restate, corporate tinkering with options can damage the personal equivalent of a financial statement: your tax return.' (

Equity Compensation Plans Should Be Amended to Include Mandatory Antidilution Adjustment Provisions (PDF)
4 pages. Excerpt: "[A]ccounting firms have begun to focus on the effect of the new FASB accounting standard for equity compensation (FAS 123(R)) on adjustments made to equity grants pursuant to plan provisions that permit the board to make adjustments at the board's discretion. Under the old accounting standard (APB 25), this sort of discretionary adjustment did not result in an adverse accounting result, as long as the economic result to the optionee was not improved in the adjustment." (Morgan, Lewis & Bockius LLP)

Overview: SEC Adoption of Final Disclosure Rules (PDF)
3 pages. Excerpt: "There will be a new compensation discussion and analysis (CD&A) section that will give companies the opportunity to explain their compensation policies and decisions. The section will be similar in concept and design to narrative disclosure in the management discussion and analysis section in today's reports. The CD&A will be filed and will be part of the disclosure subject to certification by the CEO and CFO." (Buck Consultants)

SEC Approves Executive Compensation Rules; Reproposes Non-Executive Compensation Rules
Excerpt: "The proposed rule amendments required compensation disclosures for up to three non-executive employees whose pay exceeded that of the named executives. . . . In response, it made substantial changes to the proposal and will be reissuing this one area for public comment to allow for complete vetting of the issue." (Financial Executives International)

In the UK, Age Discrimination Legislation Could Affect Many Benefit Programs
Excerpt: "With anti-age discrimination legislation set to take effect Oct. 1, 2006, companies in the United Kingdom should examine current policies where age might be a factor in employee benefits or they risk being liable paying unlimited compensation for non-compliance." (Watson Wyatt Worldwide)

We thank and invite your attention to our additional sponsor: The Center for Tax Law and Employee Benefits at The John Marshall Law School

(Click on company name or banner to learn more.)
Banner ad for The Center for Tax Law and Employee Benefits at The John Marshall Law School

You Have the Potential. We Have the Programs.

Are you working in human resources? Are you dealing with health insurance plans or pension benefits? Learn how you can broaden your experience with an M.S. degree (for non-lawyers) or LL.M. degree (for attorneys) in employee benefits from The John Marshall Law School in Chicago during an information session from 5 to 7 p.m., Wednesday, August 2. Learn how these unique programs can help advance your career.

(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)

Newly Posted Events
(Post Yours!)

HR Strategies - Practical Insights on Pressing Employee Benefits and Labor and Employment Law Issues
in Illinois on September 12, 2006
presented by Ogletree Deakins

Price Transparency - Webcast
Nationwide on July 27, 2006
presented by

Newly Posted Press Releases
(Post Yours!)

Poll Examines Seniors' Experiences with Medicare Drug Benefit
(Kaiser Family Foundation)

Schwab Cautions Investors: It's More Important Than Ever to be Aware of Investment Fees
(Charles Schwab & Co., Inc.)

Retirement Advice Legislation Subject Of Survey & Report
(McHenry Group, The)

Buck Consultants Survey Identifies Leading Success Factors In Consumer-Driven Health Care
(Buck Consultants)

Business Roundtable Supports SEC Rule on Transparency and Timely Disclosure of Executive Compensation Information
(Business Roundtable)

Pension Specialists, Inc. Opens Chicago Office
(Pension Specialists, Inc.)

DailyAccess Corporation Adopts Newkirk/MasteryPOINT GuidancePlus Solution
(Newkirk Products, Inc.)

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

Participant Services Center Supervisor
for New York Life Investment Management LLC
in MA

Product Manager
for New York Life Investment Management LLC
in NJ

Plan Consultant Opportunity
for Weaver Partners, Inc.

Pension Administrator
for Pension Administrator
in NJ

Plan Design Analyst
for Clark Consulting
in TX

Senior Pension Analyst
for MassMutual Financial Group
in MA

Project/Commission Analyst ~ Financial Services
for CitiStreet
in NJ

Benefits Accountant
for Archdiocese of Seattle
in WA

401k Defined Contribution Administrator
for TPA / Plan Provider
in NY

Handy Links:

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