Retirement Plans
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November 20, 2006
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Rolled-Over Retirement Funds Might Not Be Secure
Excerpt: "As brokerages vie for the right to manage billions in rollover individual retirement accounts, the New York Stock Exchange's enforcement arm is warning them that some of their employees could be jeopardizing their clients' retirement security. The NYSE's enforcement unit has seen an increase in complaints from investors who've suffered big losses after money they rolled from their former employer's 401(k) plan to an IRA was invested in high-risk stocks and mutual funds." (USA TODAY)

Commentary Lawsuits Will Force Probes Into 401(k) Expenses
Excerpt: "In what is unfolding as a new era of disclosure, employees will discover that several third parties are reaping profits and passing along their expenses in the form of higher annual expense ratios on 401(k) mutual funds. That reduces total investment returns." (John F. Wasik via Bloomberg News)

Overview: Deadlines for Notices -- Automatic Enrollment & Fiduciary Relief for Default Investments (PDF)
2 pages. Excerpt: "The Pension Protection Act (PPA) has created opportunities for plan sponsors to improve the level of participation in their plans, as well as to improve the quality of participant investing. In addition, the law offers protection for fiduciaries who use 'qualified default investment alternatives.'" (Reish Luftman Reicher & Cohen.)

Overview: Deadline Approaching for Participant Diversification Requirements
Excerpt: "For calendar year plans, the deadline for implementing the new diversification rights is fast approaching and employers must act quickly to determine the manner in which their plans will comply. While the Act permits a phased-in approach with respect to employer contributions, employers may find this approach to be administratively burdensome." (BNA Tax Management)

Equities Finally Pull Ahead to Win 401(k) Assets
Excerpt: "While the number of net transfers by 401(k) participants was equally split among fixed income and equity funds for the month of October, overall net assets moved toward equities, according the Hewitt 401(k) Index." (; free registration required)

Employee Ownership Update for November 17, 2006
NCEO Executive Director Corey Rosen discusses a case where the court strongly agreed with the Moench doctrine that investments in company stock can be presumed to be prudent unless the company is in serious difficulty; reports from Pearl Meyer & Partners and PriceWaterhouse that large companies have reduced the use of options; evidence supporting the economic theories of Louis Kelso, the creator of the modern ESOP; and a proposal from Knight Kiplinger to fix excessive CEO pay. (National Center for Employee Ownership)

Funding Volatility Is One Big Problem with Public Pension Plans
Excerpt: "Do the funding and disclosure rules for public-sector pension plans need an overhaul like private-sector plans are getting via the Pension Protection Act and Financial Accounting Standards Board (FASB)? Of course, public-fund officials think not." (; free registration required)

New Hampshire Taxpayers on the Hook for Underfunded Public Pensions
Excerpt: "The pension system currently is only 67 percent funded -- a shortfall of about $2 billion, according to Kim France, spokesman for the NHRS. And under current law, the only way to make up the difference is to raise the rates employers pay." (

Opinion: The Effect of the Pension Protection Act
Excerpt: "One hopes that someone in the Administration talked to an economist as the PPA solution to PBGC's deficit problem was being crafted. I hope they ran all of this through some kind of model and applied a reasonable amount of stress to it. In any case, I expect lenders to be modeling these risks and taking action to deal with them." (Michael Barry via; free registration required)

Commentary: Three Myths About State and Local Government Pension Plans
Excerpt: "Significant misinformation is circulating in recent media reports about state and local government pension plans. These reports claim that most public pension plans are in a state of financial crisis, that they lack oversight and standards and, therefore, that they should be replaced with defined contribution plans." (Paul Zorn/Keith Brainard via; free registration required)

Age-Discrimination Claims Against Cash Balance Plans Still Have Life
Excerpt: "Two recent decisions show there is still life in age-discrimination claims against cash balance plans. In In Re J.P. Morgan Chase, the [court] denied the plan's motion to dismiss an age-discrimination claim, applying an analysis that considers all cash balance plans inherently age-discriminatory. In Richards v. FleetBoston, the [court] denied FleetBoston's motion for reconsideration of the court's original denial of a motion to dismiss an age-discrimination claim earlier this year." (Watson Wyatt Worldwide)

Overview: IRS Final Regulations on Electronic Notices, Elections, and Consents
Excerpt: "This recently finalized regulation provides the exclusive rules for the use of electronic media to satisfy requirements that an employee benefit plan communication concerning a participant's rights under the plan be in written form. It also provides a safe harbor for any communication not required to be in the form of a written paper document." (McKay Hochman Co., Inc.)

Overview: IRS Final Rules on Electronic Notices and Elections for Benefit Plans
Excerpt: "The new rules apply to certain communications made through technology having electrical, digital, magnetic, wireless, optical, electromagnetic, voice-recording systems or similar capabilities, such as a web site, e-mail, telephone, magnetic disk or CD Rom." (Ballard Spahr Andrews & Ingersoll, LLP)

Time Running Out for Dutch Employers to Change Early Retirement Arrangements
Excerpt: "By the end of the year, Dutch employers must confirm to the tax authorities that they no longer have early retirement pension programs that do not comply with the tax law passed in 2005." (Towers Perrin)

New Zealand Government Adds Tax Incentive for New National Work-Based Savings Plan
Excerpt: "The KiwiSaver Act, which is now final, requires employers to give all permanent employees access to the new work-based national savings plan. The aim is to help employees save for retirement and a first-home down payment. In addition to the subsidies originally announced in 2005, the government announced in August that employer contributions to the plan would be exempt from tax, up to a certain limit." (Towers Perrin)

Overview of the PPA and Getting Ready for January 2007
Excerpt: "This article is a recap of Pension Protection Act (PPA) provisions effective in plan years beginning on or after January 1, 2007, and a discussion of where they stand regarding guidance and implementation." (McKay Hochman Co., Inc.)

Working Paper Abstract: Americans' Dependency on Social Security
Excerpt: "This paper determines the standard of living reductions that young, middle aged, and older households would experience were the U.S. government to cut Social Security benefits (but not taxes) to deal with its well documented (see Gokhale and Smetters, 2005) long-term fiscal crisis." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve full text)

Editorial: The President's Bad Choice for Social Security
Excerpt: "[Mr. Bush has] nominated Andrew Biggs, a zealous advocate of privatizing Social Security, to a six-year term as the next deputy commissioner of Social Security." (The New York Times; free registration required)

Links to Items on Executive Comp, Benefits in General

The Aging Workforce: Challenge or Opportunity? (PDF)
10 pages. Excerpt: "Stated briefly, the research suggests organizations that adhere to the conventional wisdom about older workers -- specifically, the notion that older workers are more expensive and less productive than younger groups -- may miss a critical opportunity to maximize their talent base." (WorldatWork via Towers Perrin)

Overview of ERISA Plan Information Requests: 'Who Is Entitled To Request Plan Information?'
Excerpt: "The treatment of this issue [is] taken up in three parts, as follows: 1. Who is a participant or beneficiary? 2. When may third parties advance statutory claims for participants or beneficiaries? and 3. Who are the proper parties to whom such requests must be directed?" (Health Plan Law blog by Attorney Roy F. Harmon III)

Employee Fired for Plan Inquiry Awarded Damages
Excerpt: "The US District Court for the District of Minnesota has awarded damages and attorney's fees to a former Midwest Telephone Sales & Service, Inc. employee who claimed she was fired for questioning her employer about company match contributions for her SIMPLE IRA plan account." (; free registration required)

Caregivers Tap Retirement and Other Sources to Cover Expenses
Excerpt: "According to a John Hancock news release, 15% of those polled admitted to using money they had set aside for retirement to help cover care giving expenses. Other responses to a question about funding the caregiving activities included: 27% used money set aside for immediate goals such as a new car or vacation. 13% used current income/money out of pocket. 12% gave up a job to care for them . 7% used savings." (; free registration required)

Same-Sex Domestic Partner Benefits -- Current Legal and Plan Drafting Issues (PDF)
Excerpt: "Recent events around the country have brought same-sex domestic partnerships to the forefront of many states' and localities' legislative agendas. Wrapped up with this focus on same-sex domestic partnership issues are the federal, state, and local laws that govern many of the employee benefits provided by employers to their employees. With the legal landscape constantly changing, plan sponsors are frequently asking what, if any, steps they should take . . . ." (Groom Law Group)

Meeting the Challenges of Drafting a Compensation Discussion and Analysis
Excerpt: "This article tries to provide an easily digestible summary of the rules, along with Watson Wyatt's perspective on elements that should appear in the CD&A. We also discuss whether to disclose performance goals in the proxy and, for companies that decide not to explicitly disclose these goals, how to describe them." (Watson Wyatt Worldwide)

The SEC's New Executive Compensation Rules: Compensation Discussion and Analysis (PDF)
7 pages. Excerpt: "The final rules include a list of six matters that must be discussed in the CD however, we, along with a number of other securities lawyers, recommend that a company begin preparing the CD&A by focusing on main principles rather than using the list of six matters as a checklist to draft the CD&A." (Gardner Carton & Douglas LLP)

Non-Employee Director Compensation at the 100 Largest NASDAQ & New York Stock Exchange Companies (PDF)
20 pages. Excerpt: "This year's study continues to monitor how director compensation programs are responding to the changes in the complexity and accountability of the role and the environment in which directors operate." (Frederic W. Cook & Co., Inc.)

Knowing Your Retirement and Health Plans Can Help Avert Disaster
Excerpt: "Savvy employees are proactive in monitoring their benefits." (Pamela Yip via The Dallas Morning News; free registration required)

Preliminary Legislative and Public Policy Outlook for the 110th Congress, 2007-2008 -- Health Care (PDF)
Pages 7-8 of 17 pages. Excerpt: "The purpose of this advisory is to provide clients with a snapshot of the key issues that we believe are likely to appear on the new congressional policy agenda in January, and to provide context for those issues given the change in political control." (Alston & Bird LLP)

Overview: Delinquent Filer Voluntary Compliance Program
Excerpt: "Eligibility for the program is limited to employers who have not been notified in writing that they have failed to timely file an annual report. In addition, program eligibility is limited to plans subject to Title I of ERISA. Thus, employers filing Form 5500-EZ are not eligible." (McKay Hochman Co., Inc.)

Written Comments Submitted for the Record on H.R. 6264, the 'Tax Technical Corrections Act of 2006'
Excerpt: "On Friday, September 29, 2006, Chairman Thomas introduced H.R. 6264, the 'Tax Technical Corrections Act of 2006.' The legislation contains technical corrections needed with respect to recently enacted tax legislation. . . . Although the Tax Technical Corrections Act of 2006 does not include any technical corrections to the Pension Protection Act of 2006, [the committee is] interested in receiving any proposals for technical corrections to this important legislation.'" (U.S. House of Representatives, Committee on Ways and Means)

Prevalence of Long-Term and Stock-Based Grant Practices for Executives at the 250 Largest Companies (PDF)
34 pages. Excerpt: "[I]t appears that long-term incentive practices for executives are starting to stabilize, based on recent Frederic W. Cook & Co. research on practices at the 250 largest U.S. companies. Key findings from the Frederic W. Cook & Co. 2006 Top 250 report include the following: The prevalence of long-term incentive grant types continue to change (including a shift away from stock options towards restricted stock and performance awards), but at a slower pace than last year." (Frederic W. Cook & Co., Inc.)

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