Retirement Plans
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July 31, 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."

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H.R. 4, Pension Protection Act of 2006, As of July 28, 2006
The target page links to a summary of the tax, trade and other provisions in the Pension Protection Act of 2006, as of July 28, 2006, and the legislative text in two parts. (U.S. House of Representatives, Committee on Ways and Means)

Overview: House-Passed Pension Reform Bill's Key Multiemployer Pension Plan Provisions (PDF)
2 pages. (The Segal Company)

Pension Reform Took an Unexpected Detour
Excerpt: "'Pension reform legislation took another interesting turn [last] Friday night. After conference committee negotiations got bogged down . . ., the House leadership decided to separate the pension provisions from non-related provisions . . . introduced by Senate negotiators, and passed the former . . . by a 279-131 vote just ahead of its five-week August recess. The Senate, which is still in session, is expected to take up the measure this week." (; one-time registration required)

Estimated Budget Effects of H.R. 4, The 'Pension Protection Act Of 2006,' As of July 28, 2006 (PDF)
8 pages. The report covers Fiscal Years 2007 - 2016. (Joint Committee on Taxation)

What's Inside the Pension Protection Act
Excerpt: "The pension reform bill passed by the House early Saturday morning 'represent[s] the most sweeping changes to America's pension laws in more than 30 years,' according to House Majority Leader John Boehner (R- Ohio), a bill sponsor and advocate of many of the pension reform provisions." (; one-time registration required)

A Glance at the Pension Bill
Excerpt: "[The target page summarizes t]he major provisions of the House pension protection bill . . . ." (AP via The Washington Post; one-time registration required)

GM and UAW Support Pensions Bill
Excerpt: "Final pension reform legislation headed for a vote in the U.S. Senate this week not only will help bankrupt airlines save their traditional retirement plans, but also is supported by General Motors Corp. and the United Auto Workers." (The Washington Post: one-time registration required)

Letter to the Editor: Legislation That's Good for Both Airlines and Pensions
Excerpt: "The legislative provisions you so strenuously object to would protect Pension Benefit Guaranty Corp., both by avoiding the immediate termination of several large pension plans and by preventing these airlines from incurring further unfunded pension liabilities." (The Washington Post; one-time registration required)

Targeted-Maturity Funds: New Research Supports Growing Popularity
Excerpt: "While there is likely no single retirement investment option that is perfect for everyone, targeted-maturity funds may come close, especially for novice investors, for those who can't afford professional advice, or for individuals who don't want to worry about adjusting their allocations over time." (The Vanguard Group, Inc.)

How to Celebrate 401k Day at Your Company (PDF)
3 pages. Excerpt: "Each year PSCA hosts 401(k) Day to provide companies a complete participant communication and education campaign that promotes the benefits of company-sponsored profit sharing and 401(k) plans. This year, PSCA's 401(k) Day theme is 'Trading Places' with the important byline that 'There's Life After Work... Your 401(k) Can Get You There.'" (Benefits & Compensation Solutions)

Report Chronicles Managed Account Transition to Advice Focus
Excerpt: "Plan sponsors in the market for managed account services will find a new movement among providers toward concentrating more on the quality of the advice being offered than on the vehicle through which that advice is delivered. That was a key conclusion of a new research report by Cerulli Associates about the state of the US managed account industry, according to a Cerulli report summary." (; one-time registration required)

Getting to the Bottom Line on Plan Fees
Excerpt: "'Nothing is free. You are paying for it whether it is being disclosed or not,' [a panelist at PLANSPONSOR's Plan Designs 2006 conference in Chicago said], noting that it is often difficult to get to the bottom line of plan fees, particularly for smaller and mid-size plans. He says that bundled fees need to be broken down to unearth the hidden fees." (; one-time registration required)

Getting a Handle on Fees Charged by Retirement Plan Service-Providers
Excerpt: "Those attending a recent discussion panel about ways to make defined contribution fees more transparent heard a simple suggested solution: demand change." (; one-time registration required)

New Statistical Profile of Employee Stock Ownership
The NCEO presents its newly updated Statistical Profile of Employee Ownership, which provides current and historical data for ESOPs, stock options, 401(k) plans, stock purchase plans, and related stock-based benefit plans. (National Center for Employee Ownership)

Overview: Exclusion under §401(k) and (m) for §403(b) Participants
Excerpt: "The IRS . . . issued regulations on the relationship between § § 403(b) and 401(k)/(m). The regulations change was to the § 410(b) definition of excludible employees, and although it technically affects only the related §401(k)/(m) plans, it clearly affects both the design and the operation of §403(b) plans and arrangements." (Thomas L. Geer, J.D., LL.M. on

The Federal Government Has Mounting Employee Retirement Worries
Excerpt: "With substantial numbers of baby boomers likely to leave government for retirement in the next 10 years, the Bush administration and Congress are looking for ways to keep experienced hands." (The Washington Post; one-time registration required)

Agreement Reached to Hike NFL Player Benefits
Excerpt: "The NFL and NFL Players Association finally broke a stalemate by reaching an agreement on benefits for retired and current players. The revamped package that the NFL and NFLPA jointly announced . . . includes an increase in the pension benefits of retired players by 25% for seasons played before 1982 and a 10% hike for 1982 and after." (; one-time registration required)

GAO Report: Retirement of Baby Boomers Is Unlikely to Precipitate Dramatic Decline in Market Returns (PDF)
70 pages. Excerpt: "[GAO] examined (1) whether the retirement of the baby boomers is likely to precipitate a dramatic drop in financial asset prices; (2) what researchers and financial industry participants expect the effect of the boomer retirement to have on financial markets; and (3) what role rates of return will play in providing retirement income in the future." (U.S. Government Accountability Office)

Employee Ownership Update for July 28, 2006
NCEO Executive Director Corey Rosen discusses new estimates on the number of employee stock ownership plans (ESOPs) and related plans; a new study showing that companies are granting more stock options to top executives; and a new study suggesting that 29% of companies granting options to executives or directors between 1996 and 2002 may have engaged in backdating or other manipulative practices. (National Center for Employee Ownership)

ERISA Assets Demand Focus on Valuation
Excerpt: "Hedge funds that accept investments from pension plan sponsors subject to the Employee Retirement Income Security Act of 1974 (ERISA) should take extra care to ensure security valuations are accurate and fair, that they are carried out by independent parties, and that valuation policies are clearly disclosed to and understood by plan sponsors." (Daily News; White Plains via

A New Loophole in the Roth IRA
Excerpt: "Under current rules, individuals who earn more than $110,000 a year and married couples earning more than $160,000 cannot contribute to a Roth. That hasn't changed. But starting in 2010, anyone -- -regardless of income -- will be able to convert a traditional IRA into a Roth. That means if you start making the maximum nondeductible contributions to a regular IRA right now . . ., you will be able to turn a chunk of change into a Roth in just four years." ( via Human Resource Executive Online; one-time registration required)

Sticky Issues Surround Pension Reform
Excerpt: "Undoubtedly, reform in some format will occur. But what are the larger issues at stake for DB plan sponsors, and some of the major sticking points in the reform movement?" (The Vanguard Group)

Opinion: Let Employees Control Future Of Retirements
Excerpt: "If your company provides you with a pension, chances are it's underfunded. Although the federal government provides you with some insurance via the Pension Benefit Guarantee Corp., chances are that any future systemic problems will require taxpayers to come to the rescue. Is there a nifty market-based solution to all of this? While we'd like to think so, we're skeptical. Defined benefit pensions can't and shouldn't be saved." ( via Cato Institute)

Hewitt Federal Legislation Quick Guide Updated as of July 25, 2006, for Retirement Plans (PDF)
13 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding retirement plans. (Hewitt Associates)

Links to Items on Executive Comp, Benefits in General

Employee Benefits Developments, July 2006
The newsletter covers the following issues: IRS issues guidance on revoking Section 83(b) election; Accountant/TPA as ERISA fiduciary; Court finds no serious consideration of early retirement; No retroactive exhaustion requirement for plan lacking a claims procedure; QDRO may be entered after death of alternate payee; Failure to respond to plan information request leads to employer penalties; U.S. Airways stock approved as 401(k) investment; Teachers' early retirement payments are FICA wages. (Hodgson Russ LLP)

Commentary: Backdating Executive Stock Options -- The Role of Volatility, Part I
Excerpt: "As demonstrated in 'Model Risk and Valuation' by this blog's author, Dr. Susan M. Mangiero, the volatility number can have a dramatic impact on the computed value of an option. Moreover, the relationship between volatility and option value is not proportional." (Pension Risk Matters)

FEI Summary: PCAOB Audit Practice Alert: Timing and Accounting for Stock Options Grants
Excerpt: "On July 28, 2006, the Public Company Accounting Oversight Board (PCAOB) announced issuance of an Audit Practice Alert entitled, 'Matters Relating to Timing and Accounting for Options Grants (the 'APA'). The APA was issued two days after the U.S. Securities and Exchange Commission (SEC) approved final rules for disclosure of Executive Compensation, including disclosures relating to options grants." (Financial Executives International)

GAO Report: Nonprofit Hospital Systems -- Survey on Executive Compensation Policies and Practices
65 pages. Excerpt: "[GAO was asked] to review executive compensation issues at selected private, nonprofit hospital systems to gain an understanding of the policies and practices related to the salaries, benefits, travel, gifts, and entertainment expenses paid by these hospital systems." (U.S. Government Accountability Office)

Overview: Landmark 'Disney' Decision Provides Guidance for Compensation Governance (PDF)
3 pages. Excerpt: "The June 2006 landmark decision by the Delaware Supreme Court over the $130 million severance payout by The Walt Disney Company to Michael Ovitz provides guidance on possible legal protection for compensation committees that use termination tally sheets when approving employment agreements for senior executives." (Frederic W. Cook & Co., Inc.)

Research Paper Abstract: Reforming the Taxation of Deferred Compensation
Excerpt: "This Article addresses potential legislative reforms that would remedy [the flawed federal tax rules] problem by neutralizing the tax treatment of current and deferred compensation. . . . There has been little serious academic analysis of how to implement a set of tax rules that would create neutrality while avoiding undue complexity. This Article attempts to fill that void." (North Carolina Law Review, Forthcoming via Social Science Research Network)

Overview: SEC Executive Compensation Disclosure Rules and'Backdated' Options (PDF)
3 pages. Excerpt: "According to the SEC's press release, the new rules will require tabular disclosure of (1) grant date fair value, (2) the grant date determined under FAS 123R, (3) the closing market price of the underlying stock if greater than the option exercise price, and (4) the date the compensation committee or full board took action to grant the award, if that date differs from the grant date." (Sutherland Asbill & Brennan LLP)

Overview: New Law Impacts 2006 Income Tax Liability of U.S. Citizens Working Abroad (PDF)
1 page. Excerpt: "The Act modified the income exclusion limit and provided for earlier inflation indexing in 2006. The Act also modified the amount of the housing exclusion allowance for individuals working abroad, and modified the tax rates applicable to non-excluded income." (Haynes and Boone, LLP)

Hewitt Federal Legislation Quick Guide as of July 25, 2006, on Human Resources and Employment Law (PDF)
9 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding human resources and employment law. (Hewitt Associates)

Commentary: Forthcoming Entitlement Explosion
Excerpt: "Serious as the consequences will be, they won't be immediate, but build over time as resources increasingly drain from the private sector to cover public sector obligations. As Japan, the world's second-largest economy, demonstrated for well more than a decade, repercussions as serious as minimal economic growth can be endured for some time. Whether America would be so patient remains to be seen." (The Washington Times)

Overview: EBSA Releases Final Rule on Electronic Filing of Annual Reports
Excerpt: "'We are moving to a wholly electronic filing system that will be streamlined, cost-effective, and more efficient for plans. This new state-of-the-art system will increase the accuracy of information used by the public and the government,' said Ann L. Combs, Assistant Secretary of Labor for EBSA." (CCH Pension & Benefits)

IRS Plans Its Own Stock Options Inquiry
Excerpt: "The head of the Internal Revenue Service said [July 28, 2006] that the agency will examine stock option awards to executives at some companies for possible tax-law violations, as the controversy over suspect timing of option grants spreads through corporate America." (The Washington Post; one-time registration required)

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

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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 Press Releases
(Post Yours!)

National Conference on Public Employee Retirement Systems Statement on Deloitte Public Employee Pension Research Study
(National Conference on Public Employee Retirement Systems)

Teamsters Oppose Flawed Pension Bill, Fight for Retirement Security
(International Brotherhood of Teamsters)

Newly Posted or Renewed Job Openings
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Manager, Alliance Plan Administration
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Relationship Manager
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Recordkeeping Services Manager
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Retirement Plan Service/Participant Management in Metro St. Louis
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Risk Manager
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Senior Employee Benefits Program Analyst (Ref.# JP23961-JN)
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Marketing Director
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Copywriter - Marketing
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Client Relationship Manager (CRM)
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Pension Administrator/Consultant
for Third Party Administrators, Inc.
in NH

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