| BenefitsLink Retirement Plans Newsletter |   |
October 2, 2006
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Overview: Changes Made to Automatic Enrollment Arrangements by the Pension Protection Act
Excerpt: "Significant The key provisions of the PPA include preemption of state law and a nondiscrimination safe harbor." (Reish Luftman Reicher & Cohen)
After PPA, the Future of 401(k) is Automatic
Excerpt: "Congress recently passed legislation encouraging employers to automatically enroll workers in 401(k) plans, and last week the Labor Department proposed rules to implement the law." (The Dallas Morning News; one-time registration required)
Overview: EBSA Proposed Regulations on Default Investment Alternatives for Plans
Excerpt: "The Employee Benefits Security Administration (EBSA) has issued proposed regulations implementing provisions of the Pension Protection Act of 2006 (PPA, P.L. 109-280) that provide relief to plan fiduciaries who invest the assets of participants in 'qualified default investment alternatives' in the absence of participant investment direction." (CCH Pension and Benefits)
Overview: The New Participant Investment Advice Law
Excerpt: "Congress has wrestled with the issues surrounding investment advice for a number of years and considered various bills that would have addressed both plan level and participant level advice. In its final form, however, the PPA only deals with advice for participants." (Reish Luftman Reicher & Cohen)
Overview: DOL Issues Proposed Regulations on Default Investments
Excerpt: "The proposed rules shield fiduciaries of individual account plans from liability for automatic enrollment and default investment plan design features, provided the safe harbor conditions are met." (Trucker Huss)
New Law Provides Fiduciaries Relief from Liability
Excerpt: "The new choices outlined by the Labor Department are aimed at helping employees gain greater returns over the long term. However, Salisbury is concerned that employees who cash out of their retirement account in the short term will be subject to wild swings in the market and could end up losing money. Salisbury said the options should allow plan sponsors to default to the more conservative money market and stable value funds." (The Shreveport Times)
Opinion: Lawsuits on 401(k) Plan Practices -- Centered Around the Application and Reporting of Fees
Excerpt: "These suits are not just about revenue-sharing, though that is clearly a key element of the fiduciary abuses alleged. Rather, the charges all revolve around the disclosure of fees to participants -- more accurately, the lack of disclosure." (PLANSPONSOR.com; one-time registration required)
With Funds of Funds, A One-Stop Investing Advantage
Excerpt: "The primary advantages of funds of funds are diversification and simplicity, said James D. Peterson, vice president at the Schwab Center for Investment Research. 'I think the big point with these types of products is do you want to be involved?' he asked. 'Do you have the time or expertise to manage your investment portfolio or do you want someone else to do it for you?' Peterson contends that is why funds of funds have become so attractive . . ., particularly in 401(k) plans." (AP via The Washington Post; one-time registration required)
With the Exception of TIAA-CREF, Most Annuity Products Cost More than Mutual Funds
Excerpt: "As relatives of the 401(k) plan, 403(b)s are all too often ugly stepsisters. The plans are typically sold by brokers and insurance agents, carry above-average mutual-fund expenses and layers of other fees. Designed as supplemental retirement plans for teachers and other employees of non-profit institutions, they are among the costliest retirement vehicles on the market." (Bloomberg News)
GASB Project Pages: Fund Balance Reporting
Excerpt: "Primary Objective: The objective of this project is to consider whether GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, should be amended to conform to certain disclosures and required supplementary information presentations now required for other postemployment benefits by Statements No. 43 . . . and No. 45 . . . ." (Governmental Accounting Standards Board)
Cash Balance Plan Not in Breach of Age Discrimination Laws, Court Rules
Excerpt: "In dismissing the claims of four plaintiffs, the court rejected an actuary's interpretation of the phrase 'rate of benefit accrual' for cash balance plans as being the same as 'accrued benefit.' Two of the plaintiffs had relied on the actuary's interpretations for their claim." (PLANSPONSOR.com; one-time registration required)
Fee for Pension Estimate May Be Out of Line
Excerpt: "Once a year, pension-plan participants can request statements of their vested and accrued benefits free of charge . . . . That holds true even though your employer automatically furnishes you with a statement each year . . . ." (Chicago Tribune: one-time registration required)
Overview: Active-Duty Reservists Get Relief on Retirement Plan Distributions
Excerpt: "Military reservists called to active duty can receive payments from their individual retirement accounts, 401(k) plans and 403(b) tax-sheltered annuities, without having to pay the early-distribution tax, according to the Internal Revenue Service." (SmartPros Ltd.)
Overview: Group Annuity Contracts -- What You Need to Know
Excerpt: "Unfortunately, fiduciaries sometimes ignore the cost structure of these contracts -- a problem made worse by the fact that some insurance companies issue their contracts well after the contract actually takes effect. This article discusses some of the fees and charges associated with group annuity contracts, and ways to minimize your fiduciary risk." (Reish Luftman Reicher & Cohen)
What Kinds of Stock Ownership Plans Should there be? Of ESOPs, Other SOPs and Ownership Societies
Excerpt: "This article [demonstrates] how the Employee Stock Ownership Plan, or 'ESOP,' in effect replicates our home and education spreading programs in piecemeal fashion. But piecemeal replication, the article shows, is not sufficient; a completed ['ownership society'] requires complete replication." (Cornell Law Review via Social Science Research Network)
Comments on Pension Fiduciaries and Conflicts of Interest
Excerpt: "Asking investment advisors to disclose campaign contributions whenever they present to the board is another suggestion." (Pension Risk Matters)
Comments and Questions on Pension Governance
Excerpt: "What motivates some organizations to stop at minimum compliance versus others who go the extra mile? Is it because we're accustomed to measuring explicit costs instead of foregone opportunities? Is it because knowing who owns the retirement issue is anyone's guess? (As I wrote in 'Searching for Hidden Treasure', identifying names of pension fiduciaries is often a Herculean task.)" (Pension Risk Matters)
Text of EBSA Advisory Opinion 2006-07A on Purposes of Prohibited Transaction Exemption 91-38
Excerpt: "[DOL was asked w]hether Chevy Chase Trust Company (CCTC) would be considered a bank, and whether certain collective investment funds for which CCTC acts as trustee would be considered to be maintained by a bank for purposes of PTE 91-38." (U.S. Employee Benefits Security Administration)
Overview: The PPA -- Some Significant Tax Provisions Impacting Nonprofits and Donors (PDF)
Excerpt: "Breakthrough in IRA Charitable Gift Rollover: The new law allows owners of IRAs, at least 70-1/2 years of age, to distribute up to $100,000 out of their traditional IRA or Roth IRA, to charitable organizations for which deductible contributions would otherwise be allowed, without recognizing tax." (Briggs and Morgan)
The Upcoming Election and Employee Benefits
Excerpt: "The outcome of the Nov. 7 election could have a profound effect on reform of entitlements, such as Social Security. Divided control of government often produces more accountability -- and more legislative action." (Dallas Salisbury via Human Resource Executive Online)
Eighth Circuit Case Highlights Fiduciary Issues Relating to Pension Benefit Estimates
Excerpt: "A pension plan administrator did not violate any ERISA fiduciary duties in connection with making available to a participant a series of automated benefit estimates that later proved to be wrong, according to the Eighth Circuit Court of Appeals." (Deloitte)
Investment Company Institute Comment Letter to EBSA on the Revision of Form 5500
Excerpt: "The Institute's comments relate primarily to the clarity and scope of the changes proposed for Schedule C (Service Provider Compensation). As proposed, the changes will double count some service provider compensation and, as a consequence, result in reports that are confusing and misleading." (Investment Company Institute)
Working Paper: Understanding Baby Boomers' Retirement Prospects
Excerpt: "[The authors] conclude that Baby Boomers can expect to have higher real incomes in retirement than current retirees and lower poverty rates. Yet the gains in family income are not equally distributed, so, for instance, never-married Boomer women will be relatively better off, and high school Boomer dropouts will be relatively worse off than current retirees." (Pension Research Council; registration required to download full-text of paper)
Overview: SEC Narrows 'Soft Dollars' Safe Harbor
Excerpt: "The release describes eligibility for the safe harbor of: (i) publications, (ii) market research obtained through order management systems, (iii) data services, and (iv) proxy services." (White & Case LLP)
Pilots' Group Contests 'Age 60' Retirement Rule Analysis
Excerpt: "The Allied Pilots Association (APA), collective bargaining agent for the 13,000 pilots of American Airlines, claimed in a news release that the estimated $10-billion benefit over 15 years in the analysis is based on flawed economic assumptions." (PLANSPONSOR.com; one-time registration required)
Prominent Tax Attorney Poses Pointed Questions to IRS on the PPA
Excerpt: "'[Questions on Section 828] Does the amendment apply to employees who separated from service after age 50 but before August 17, 2006, date of enactment? Will a plan need to file two 2006 Forms1099R with respect to a public safety employee who received one or more 2006 distributions before enactment and one or more distributions in 2006 after enactment that would have been subject to the tax in the absence of enactment?" (Cypen & Cypen)
Addressing PPA's Requirements for Faster Vesting and Diversification of Company Stock
Excerpt: "This Regulatory Briefs Alert highlights specific provisions of the Pension Protection Act of 2006 -- faster vesting and diversification of company stock -- that may require immediate attention by plan sponsors. Also covered are practical tips to consider when addressing these requirements." (The Vanguard Group, Inc.)
Working Paper: Baby Boomers vs Their Parents -- Economic Well-being and Health Status
Excerpt: "[The authors'] projections indicate that boomers will enjoy higher levels of economic well-being and health than their parents, yet the distribution of income and wealth is more unequal among Boomers." (Pension Research Council; registration required to download full-text of paper)
Working Paper: Are Baby Boomers Living Well Longer?
Excerpt: "Most retirement occurs well before the onset of work-limiting disability, leaving a large reserve of potential for longer worklives. Baby Boomers will likely have to draw on this reserve, yet its health is not demonstrably better than that of persons born a dozen years earlier." (Pension Research Council; registration required to download full-text of paper)
Links to Items on Executive Comp, Benefits in General
Overview: New Accounting Rules for Pensions and Other Retiree Benefits (PDF)
2 pages. (Milliman)
Overview of FAS 158: Defined Benefit Pension and Other Postretirement Plans
Excerpt: "On Sept. 29, 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 158, 'Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans' (FAS 158)." (Financial Executives International)
Overview: Major Changes to Pension and Postretirement Benefit Accounting (PDF)
2 pages. Excerpt: "The principal changes to current accounting are [listed]." (Buck Consultants)
Future Pension Cost Becomes a Liability on Corporate Books
Excerpt: "The new rule will increase balance-sheet liabilities of the largest U.S. companies by $466 billion, reducing their net worth by 7 percent, according to estimates by Howard Silverblatt, an analyst at Standard & Poor's." (The Washington Post; one-time registration required)
Corporate America's Pension Promises Thrust Into the Spotlight by New Accounting Regulations
Excerpt: "New rules from U.S. Financial Accounting Standards Board will force companies to report the status of their pensions and other post-retirement employee benefits -- as an asset or, for most, a liability if they are underfunded -- on their balance sheets rather than have them buried in a footnote to the financial statements." (AP via The Washington Post; one-time registration required)
Opinion: California Public Employees Gain Generous Benefits While Taxpaying Public Sleeps
Excerpt: "Generous public employee pensions in California and excessive health benefits for the retirees are examples of the public not giving a thought to costly programs that could fundamentally change the mission of public agencies. But who cares about actuarial tables and unfunded liabilities?" (ScrippsNews)
Disclosure of Employee Personal Data: What are an Employer's Legal Obligations?
Excerpt: "Employee Benefit Records. There is a growing awareness that certain information regarding benefit plans and participants in plans constitutes an 'asset' of the plan that is not to be given away or misused in a manner that is not in the best interests of the participants in that plan." (Faegre & Benson LLP)
Text of the Description of the Tax Technical Corrections Act of 2006 (PDF)
13 pages. Excerpt: "This document, prepared by the staff of the Joint Committee on Taxation, provides a description of the Tax Technical Corrections Act of 2006, as introduced on September 29, 2006, in the House of Representatives as H.R. 6264, and in the Senate as S. 4026." (Joint Committee on Taxation)
Newly Posted Events
Annual Fall Employee Benefits Law and Practice Update - Webcast
Nationwide on November 9, 2006
presented by ALI-ABA (American Law Institute-American Bar Association)
Fiduciary Issues Facing Plan Sponsors
in Pennsylvania on October 12, 2006
presented by Central Pennsylvania Chapter - ISCEBS
Fundamentals of Employee Benefits Law
in Louisiana on February 22, 2007
presented by ALI-ABA (American Law Institute-American Bar Association)
Fundamentals of Employee Benefits Law - Webcast
Nationwide on February 22, 2007
presented by ALI-ABA (American Law Institute-American Bar Association)
Pension Protection Act 2006-Dallas Friday Oct.6
in Texas on October 6, 2006
presented by Executive Benefits Design Group
Newly Posted Press Releases
Buck Consultants Survey Indicates Slower Trend in Health Care Costs for Employers
(Buck Consultants, an ACS Company)
Newly Posted or Renewed Job Openings
Defined Contribution Administrator
for Pension Plan Professionals, Inc.
in FL
Client Service Rep
for Milliman
in TX
Tele Sale Professionals (Inside Sale - Business to Business)
for Corporate Synergies Group, Inc.
in NJ
Benefit Consultant (Sales Agent)
for Corporate Synergies Group, Inc.
in NJ
Senior Account Management Specialist - # 9885
for Securian Financial Group
in MN
Plan Consultant Opportunity
for Weaver Partners, Inc.
in ANY STATE
Participant Services Representative
for Sentinel Benefits Group
in MA
Defined Contribution Analyst
for Benefit Strategies, LLC
in ME
Client Service Representative
for Sentinel Benefits Group
in MA
Health & Welfare Manager
for Sentinel Benefits Group
in MA
401k / Defined Contribution Retirement Plan Administrator
for Sentinel Benefits Group
in MA
Paralegal / Legal Assistant
for Vaccaro & Prisco, LLP
in NY
Assistant Pension Administrator
for The Benefits Consulting Group, Inc.
in IL
Sr. Benefits Analyst - Health and Welfare
for Automobile Club of Southern California
in CA
Pension Administrator
for The Benefits Consulting Group, Inc.
in IL
Pension Administrator
for FBD Consulting, Inc.
in KS
Account Manager
for WHA Financial Solutions
in WI
Actuary
for The Angell Pension Group, Inc.
in ANY STATE
Trust Associate II
for Wachovia
in NC
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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