Retirement Plans
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December 11, 2006

Sponsored by: Employee Benefits Institute of America Inc. (EBIA)

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EBIA's 401(k) Plans Manuals and Seminars!

A must-have resource for employers, administrators, and advisors, our 401(k) Plans manual explains the Internal Revenue Code and ERISA requirements for 401(k) plans, and it explores all sorts of plan design and administration issues. Subscribers love the depth of our legal analysis and our practical, real-world tips. Topics include eligibility, vesting, contributions, distributions, plan loans, hardship withdrawals, discrimination testing, fiduciary duties, plan investments, plan corrections, and much more.

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Text of Proposed Revisions to Form 5500 for 2008 Plan Year Required by the Pension Protection Act
Excerpt: "This supplemental proposal replaces the Schedule B, 'Actuarial Information,' with separate actuarial schedules for single-employer plans (Schedule SB) and multiemployer plans (Schedule MB) to reflect PPA changes in funding and annual reporting requirements . . . and proposes having the Form 5500-SF Annual Return/Report (Short Form 5500) included in the July 2006 Proposal serve as the simplified report required by the PPA for plans with fewer than 25 participants." (Employee Benefits Security Administration, U.S. Department of Labor; Internal Revenue Service; Pension Benefit Guaranty Corporation)

Regulators Unveil PPA Changes to Form 5500
Excerpt: "Federal pension regulators on Friday announced a series of proposed changes to the 2008 Form 5500." (; free registration required)

Overview: Transitional Guidance on Employer Stock Diversification Requirements
Excerpt: " Under the rules, participants must be allowed to: i) diversify any pre-tax and after-tax employee contributions invested in employer stock, and (ii) with respect to participants who have at least three years of service under the plan, diversify any employer contributions invested in employer stock . . . ." (Ice Miller LLP)

The PPA Employer Stock Diversification Notice -- If Your 401(k) Plan Already Permits Diversification (PDF)
4 pages. Excerpt: "[Notice] 2006-107 included a model form of a participant diversification notice, but that model is designed to inform participants of a 'new' diversification right; as worded, that notice would be confusing to participants in a plan that already permits diversification. Therefore, plan sponsors and administrators of such plans should gear up to provide a notice before year end and should consider tailoring the IRS model notice to avoid participant confusion." (Morgan, Lewis & Bockius LLP)

Overview: IRS Guidance on Plan Diversification Requirements Under PPA
Excerpt: "Defined contribution plans with assets invested in employer securities must permit applicable individuals to divest their investments in employer securities in a manner that does not impose restrictions on these rights which differ from restrictions on the investment of other types of plan assets, according to new guidance issued by the IRS." (Wolters Kluwer Law & Business)

Lawsuits Focus Attention on 401(k) Fees
Excerpt: "Many consumers don't realize it, but businesses and employees pay fees for the investment, maintenance and marketing of their retirement plans. People frequently overlook the charges because they're often hard to identify, but even slightly higher fees could mean thousands of dollars lost in savings when you retire." (AP via The Washington Post; free registration required)

Delinquent 401(k) Deposits: Labor Department's Tough Enforcement
Originally published Summer 2003. Excerpt: "Many conscientious plan sponsors reading these accounts may not realize that they too might be considered 'delinquent' in their 401(k) deposits under DOL standards, and that they could face possible sanctions for making delinquent contributions. Such sponsors see that the deposits appear on the employees' 401(k) statements and assume that the payroll department is therefore properly depositing employee contributions into the company's 401(k) plan." (Steptoe & Johnson LLP)

Protect Your 403(b) Plan Nest Egg from Con Artists
Excerpt: "Nearly half of all investment-fraud complaints filed with state securities regulators are made by seniors. Expecting a surge in fraud as baby-boomers retire, enforcement agencies are revving up campaigns to educate older individuals on how to avoid being scammed." (Kiplinger's Retirement Report via Insurance NewsNet)

New Jersey Legislature Considering Public Pension Changes to Help Reduce Property Taxes
Excerpt: "Gov. Jon S. Corzine yesterday challenged New Jersey's top two legislators to change the state's pension and health benefits system, four days after telling them they should not be taking up the issue." (The New York Times; free registration required)

Overview of the Pension Protection Act Impact on Single-Employer Defined Benefit Pension Plans
Excerpt: "Although the Act is designed to make funding and, hence, retirement benefits more secure, the Act may increase the cost of maintaining defined benefit plans as a result of heightened reporting and disclosure obligations (leading to greater administrative costs) and higher premiums for underfunded plans." (Hanson, Bridgett, Marcus, Vlahos & Rudy, LLP)

Bank of Can.ada Report Optimistic on Canadian Defined Benefit Funding Status
Excerpt: "Running deficits among Can.ada's corporate defined benefit plans is not a threat to the country's financial system, but funding requirements for Canadian defined benefit plans could deter companies from sponsoring plans. Such was the message in a recent report published by the Bank of Can.ada, which suggested stringent government regulations unfairly target corporate plans." (; free registration required)

New IRS Minimum Distribution Regulations: Roadmap for the Weary (PDF)
18 pages. Originally published Spring 2003. Excerpt: "The IRS has issued final regulations under section 401(a)(9) . . . . The Service has provided practitioners with a model plan amendment setting forth these requirements. Both the regulations and the Model Amendment are quite dense and sometimes difficult to comprehend because of their length. This article tries to explain the basics of these rules and how the Model Amendment applies to both defined contribution and defined benefit plans." (Steptoe & Johnson LLP)

Bond Demand Influenced by Pensions
Excerpt: "In the aftermath of the Pension Protection Act of 2006, many plan sponsors, under pressure to address funding gaps, are adopting an active stance towards interest rate risk management. While strategies can and do vary, trading in bond markets in the U.S. and elsewhere have been affected by a surge in demand for longer-term bonds." (Pension Risk Matters)

Summary of Major Public Sector Provisions in the Pension Protection Act of 2006
Excerpt: "PPA 06 expands the IRS authority to work out corrections and allows the IRS to waive or reduce 'any income, excise or other tax' to 'ensure that any tax, penalty, or sanction is not excessive and bears a reasonable relationship' to the noncompliance." (Hanson, Bridgett, Marcus, Vlahos & Rudy, LLP)

The Exchange-Traded Fund -- A Time for Active Management? (PDF)
3 pages. Excerpt: "In some ways, recent product innovations have brought us closer to active management of ETFs. These product innovations have in many ways solved the transparency and public interest concerns expressed in the Concept Release and provide, perhaps, a framework for the truly active-managed ETF, i.e. the non-index ETF." (Bloomberg Law Reports via Paul, Hastings, Janofsky & Walker LLP)

Overview: Renewed Vigor for Hybrid Plans After Enactment of Pension Protection Act
Excerpt: "[T]he Code now protects sponsors from what is commonly referred to as the 'whipsaw' effect. For purposes of calculating lump sum and other additional optional forms of payment, a plan can treat the present value of a participant's accrued benefit as being equal to the participant's hypothetical account balance or an accumulated percentage of the participant's final average compensation." (Hanson, Bridgett, Marcus, Vlahos & Rudy, LLP)

American Benefits Council Cash Balance Plan Litigation Chart Updated as of December 6, 2006 (PDF)
11 pages. The chart is a summary of hybrid plan litigation filed since 1991. (Davis & Harman LLP via American Benefits Council)

The Trade off between Mortgage Prepayments and Tax-Deferred Retirement Savings (PDF)
58 pages. Originally published August 2006. Excerpt: "[The authors] show that a significant number of households can perform a tax arbitrage by cutting back on their additional mortgage payments and increasing their contributions to tax-deferred accounts (TDA)." (Federal Reserve Bank of Chicago)

How to Keep More of What You Make
Excerpt: "It's not what you make, it's what you keep. Taxes matter -- a lot -- and folks who plan their portfolios without adjusting for them will end up with less cash than they think. That's the conclusion of a study published in a recent issue of the Financial Analysts Journal by William Reichenstein, a financial analyst and investment management professor at Baylor University in Waco, Texas." (Reuters via The New York Times; free registration required)

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Links to Items on Executive Comp, Benefits in General

Working Paper: State Age Protection Laws and the Age Discrimination in Employment Act
Excerpt: "Some anti-discrimination laws have the perverse effect of harming the very class they were meant to protect. This paper provides evidence that age discrimination laws belong to this perverse class. . . . These findings suggest that in an anti-age discrimination environment, firms seek to avoid litigation through means not intended by the legislation -- by not employing older workers in the first place." (Center for Retirement Research at Boston College)

Working Paper: Age, Women, and Hiring -- An Experimental Study
Excerpt: "As the baby boom cohort reaches retirement age, demographic pressures on public programs such as Social Security may cause policy makers to cut benefits and encourage employment at later ages. This prospect raises the question of how much employer demand exists for older workers. This paper reports on a labor market experiment to determine the hiring conditions for older women in entry-level jobs . . . ." (Center for Retirement Research at Boston College)

Overview: IRS Guidance on Reporting and Withholding for Nonqualified Deferred Compensation (PDF)
Excerpt: "The Notice emphasizes that the rules for reporting and withholding for 2005 and 2006 are on an interim basis only, and that the IRS is now in the process of formulating permanent rules for future years." (Sutherland Asbill & Brennan LLP)

Overview: Exec Comp Disclosure: Related Party Transactions & Beneficial Ownership of Stock Reporting (PDF)
4 pages. Excerpt: "As amended, Item 404 of Regulation S-K streamlines related person disclosure requirements, making it much less prescriptive and more principles-based." (Powell Goldstein LLP)

Top Ten Things to Remember As You Draft Your 2007 Proxy Disclosures (PDF)
55 pages. Excerpt: "One of the most significant changes: new 'Compensation Discussion and Analysis' section. Intended to be the compensation disclosure centerpiece. Should be analytical, describing the results, decisions and compensation objectives. Include material factors that the compensation committee reviewed." (Baker & McKenzie International)

Milliman's Monthly Benefit News and Developments, December 2006 (PDF)
2 pages. The newsletter provides a summary of the previous month's legislative, regulatory, and judicial information on employee Benefits. (Milliman)

Contingent Workforce: Challenge for Benefits Managers
Originally published Winter 2004. Excerpt: "Cautious service recipients define these new arrangements by contracting with any such contingent workers to ensure that they understand the consequences of this arrangement. Controversies often arise, however, when a worker, the IRS, or a court decides to challenge these arrangements by reclassifying the previously agreed-upon status of the worker." (Steptoe & Johnson LLP)

Newly Posted Events
(Post Yours!)

16th Annual National Health Benefits Conference & Expo (HBCE)
in Florida on January 25, 2007
presented by Health Benefits Conference & Expo

Consumer-Driven Health Benefits
Nationwide on December 8, 2006
presented by Kaiser Family Foundation

Newly Posted Press Releases
(Post Yours!)

Council Applauds Senate Passage of Health Savings Account Legislation
American Benefits Council

National Business Coalition on Health Releases 2007 eValue8 RFI
National Business Coalition on Health

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

ERISA Associate
for Baker & McKenzie LLP
in CA

Retirement Plan Processor
for Heaton and Eadie, PSC
in IN

Daily Valuation Manager
for Fringe Benefits Design
in MN

Data Analyst
for Vanguard
in PA

401(k) Administrator
for R-Tech Consultants, Inc.
in CA

Benefits Communications Consultant - Arlington, VA
for Watson Wyatt Worldwide
in VA

Internal Wholesaler
for Securian Financial Group
in MN

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