| BenefitsLink Retirement Plans Newsletter |   |
February 2, 2007
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Text of DOL EBSA Field Bulletin 2007-1 on Investment to Participants After the PPA
Says DOL's advisory opinions that found various activities not to be 'investment advice' for ERISA purposes are still in effect after the PPA. Also, "[I]t is the view of the Department that a plan sponsor or other fiduciary that prudently selects and monitors an investment advice provider will not be liable for the advice furnished by such provider to the plan's participants and beneficiaries, whether or not that advice is provided pursuant to the statutory exemption under section 408(b)(14)." (Employee Benefits Security Administration, U.S. Department of Labor)
Employee Benefits Security Administration Releases Field Assistance Bulletin on Investment Advice
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Fed. Register Version: Final IRS Regs on Updated Mortality Tables for Determining Current Liability
Excerpt: "PPA contains a comprehensive revision of the minimum funding requirements for single employer plans, based on the calculation of a funding target that replaces the current liability calculation under section 412(l). . . generally effective for plan years beginning after December 31, 2007. . . . [T]he Secretary is directed to prescribe by regulation the mortality tables used in determining present value or making any computation under the funding rules." (Internal Revenue Service)
Feb. 1, 2007 Edition of IRS Employee Plans News: Opening of Pre-Approved DB Program (PDF)
Articles: 'IRS Employee Plans Director Comments on Staggered Remedial Amendment Cycles', 'Determination Letter Program Open for Cycle B Individually Designed and Multiple Employer Plans', and 'Opening of the Pre-Approved (Volume Submitter and Master & Prototype) Defined Benefit Plans Program Announced.' Excerpt: "As of February 1, 2007, the IRS will begin accepting applications for advisory and opinion letters for defined benefit plans . . ." (Internal Revenue Service)
The 5 Biggest 401(k) Blunders
Excerpt: "The smallest mistakes you make now can cost you dearly in retirement. Here are the common mistakes -- and five ways to get your savings on track." (MSN.Money)
Opinion: Overview of a Syntheti(k) Pension Plan
Excerpt: "The creative and intelligent application of behavioral finance can guide a sponsor in designing and running a self-directed defined contribution plan so more of its core attributes resemble those of a pension plan. Plan design is the first prime factor in determining the success of a defined contribution plan." (Journal of Pension Benefits via 401khelpcenter.com)
Uncovering and Understanding Hidden Fees in Qualified Retirement Plans, 2nd Edition (PDF)
40 pages. Excerpt: "The level of concern over 401(k) fees is steadily increasing. The fact that the industry is not effectively working toward resolving those concerns could be indicative of an entrenched system that is unwilling or unable to change." (401khelpcenter.com)
Overview: PPA Helps Firms Boost Employee Retirement Savings
Excerpt: "The act eliminates any state law concerns by pre-empting or superceding any state payroll law, such as New Hampshire's RSA 275:48, that would prohibit automatic enrollment by requiring advance written consent from an employee prior to any payroll deduction. The act also contains provisions that will insulate plan fiduciaries from liability if participants fail to exercise investment options, which commonly occurs when automatic enrollment is utilized." (New Hampshire Business Review)
Employee Ownership Update for February 1, 2007
NCEO Executive Director Corey Rosen discusses how most of the companies in the Best Places to Work list have employee ownership; how accounting rules affect public company ESOPs; the SEC's approval of valuing employee stock options based on a tracking security; and the NCEO's annual report. (National Center for Employee Ownership)
Brewer's Office Crew, Members of Office and Professional Employees International Union, Feels Used
Excerpt: "Their main complaint is that the company wants to freeze their pensions and instead put money in a retirement savings plan. The net loss for future retirees will be significant, they say. Health benefits are eroding, too. But what bothers the women even more is that the mostly male unions in the breweries here and elsewhere are not being asked to accept a freeze, and their pensions are higher." (Milwaukee Journal Sentinel; free registration required)
Overview of the Defined Benefit and Defined Contribution Provisions of the PPA of 2006 (PDF)
22 pages. Excerpt: "This article summarizes various provisions of the PPA and sets forth considerations for plan sponsors in implementing these provisions." (Wolters Kluwer Law & Business via Grant Thornton)
Practitioner Highlights Advantages of Cash Balance Plans After PPA
Excerpt: "The advantages of converting a traditional DB plan to a hybrid include the following: It satisfies employees' clamoring for DC plans. It allows underfunded DBs to continue to fund a shortfall over time. It allows overfunded DB plans to avoid excise tax on reversions and use the surplus to provide future benefits." (Wolters Kluwer Law & Business)
NFL Players Union Defends Ex-Players' Pensions
Excerpt: "NFL Players Association officials defended the league's pension plan [yesterday] after a group of former players attacked it as insufficient." (The Washington Post; free registration required)
Research Details: Designing Optimal Pension Payouts Using Life Annuities and Phased Withdrawals
Excerpt: "This research project will evaluate the key risk and return trade-offs of alternative ways of handling the payout phase of a defined contribution or Social Security personal account. This project will compare these outcomes for a life annuity versus a phased withdrawal." (Michigan Retirement Research Center)
A Discussion on Options, Pensions and the SEC
Excerpt: "It's hard to pick up a newspaper these days without reading some story about stock options - when they are granted, how often they are repriced, what portion of an executive's total compensation they represent and so on." (Pension Risk Matters)
International Update, January 2007
This monthly publication covers recent developments in foreign public and private pensions. (U.S. Social Security Administration)
Lower Savings Rate Poses Risk to Boomers
Excerpt: "People are saving at the lowest level since the Great Depression, and that could be a problem for the millions of baby boomers getting ready to retire. In fact, the Commerce Department reported Thursday that the nation's personal savings rate for all of 2006 was a negative 1 percent, the worst showing in 73 years." (AP via The New York Times; free registration required)
Paulson Says Social Security Reform Hopes Slim
Excerpt: "U.S. Treasury Secretary Henry Paulson conceded on [today] that chances were slim for agreeing on a way to reform Social Security financing but said he would keep trying to find bipartisan support for it." (Reuters via The Washington Post; free registration required)
IRS Won't Require G.ay-Inclusive Pension Rules
Excerpt: "Companies don't have to change their pension rules in ways that benefit g.ay employees, according to a new Internal Revenue Service decision. The decision, published in an IRS guide in January that explains sweeping pension law changes made last year, means that companies can continue to limit direct 401(k) rollovers to the spouses of straight, married employees." (The New York Blade)
Links to Items on Executive Comp, Benefits in General
S.E.C. Approves New Method for Companies to Value Stock Options
Excerpt: "Can an auction of a new type of security prove that stock options are not worth as much as financial models say they are -- and therefore allow companies to report higher profits while handing out options to employees and executives?" (The New York Times; free registration required)
Overview of Accounting Changes for Split Dollar Life Insurance Arrangements (PDF)
2 pages. Excerpt: "This change is applicable for calendar year companies in 2008, but earlier application is permitted. The change can be recognized as a cumulative-effect adjustment to retained earnings. If benefits are not fully vested at the time of adoption, further charges to earnings will be required as well. Companies will be required to discuss the impact of this recent accounting pronouncement in their upcoming annual reports." (The Cochlan Group, Inc.)
Overview of New Rules to Maximize Tax-Effectiveness of COLI Purchases (PDF)
2 pages. Excerpt: "Tax-deferred asset growth and, ultimately, the tax-free cash inflows are the two major reasons why companies purchase life insurance to informally finance their nonqualified benefit plans. Recognizing the advantages and widespread use of utilizing corporate owned life insurance ('COLI'), the Internal Revenue Service ('IRS') has recently added new rules . . . ." (The Cochlan Group, Inc.)
Overview of Proxy Statements 2007: SEC Responds to Executive Compensation Disclosure Issues
Excerpt: "Those preparing 2007 proxy statements received welcome guidance from the Securities and Exchange Commission (SEC) on January 24, 2007, when the SEC updated its interpretations relating to Item 402 of Regulation S-K. This action follows the SEC's recent regulatory overhaul of its executive compensation disclosure requirements." (Paul, Hastings, Janofsky & Walker LLP)
Lawmakers Probably Will Change Non-Qualified Deferred Compensation Plan Provisions in H.R. 2
Excerpt: "The non-qualified deferred comp provisions that the Senate Finance Committee added to the minimum wage bill turned out to be broader than senators had expected, Sen. Ron Wyden, D-Ore., a Democratic committee member of the Senate Finance Committee, said Wednesday on CNBC." (National Underwriter Life & Health; free registration or paid subscription required)
Taxation of Stock Options and Restricted Stock: The Basics and Beyond (PDF)
Excerpt: "[I]t is important that executives fully understand the income tax treatment of options and restricted stock in order to maximize the after-tax value. This article presents the basic tax rules that apply to stock options and restricted stock, but also goes beyond the basics to discuss certain more complex issues and planning considerations." (Grant Thornton)
Overview: SEC Executive Compensation Disclosure Rules Effective for 2007 Proxy Season (PDF)
3 pages. Excerpt: "Included [in the target document] is a brief overview of the major components of the revised requirements and how the final rules in these areas differ from the rules as proposed, along with some practical considerations for those grappling with these enhanced requirements in the upcoming months." (The Cochlan Group, Inc.)
A 2007 Checklist for Transition Relief Under Section 409A (PDF)
1 page. Excerpt: "Generally, this transition relief moved certain deadlines to December 31, 2007. Final regulations will be effective January 1, 2008. In the meantime, use the checklist [on the target page] to assist you in this final transition period." (The Cochlan Group, Inc.)
Overview: Annual Information Statements for Incentive Stock Options & Employee Stock Purchase Plans
Excerpt: "The Internal Revenue Code requires companies to furnish, by January 31, 2007, annual information statements to any person who, during the 2006 calendar year, (1) exercised an incentive stock option (we refer to these options as 'ISOs') or (2) transferred a share of stock that such person previously purchased pursuant to a tax qualified employee stock purchase plan (we refer to these shares as 'ESPP Stock')." (Orrick, Herrington & Sutcliffe LLP)
Opinion: The Graying of the Boomers: Retirement Paradise Lost (and How to Regain It)
Excerpt: "The impending retirement of at least 82,826,479 baby boomers is expected to stress the federal budget as they collect Social Security and Medicare benefits. Social Security, Medicare and Medicaid, which cost $1 trillion in 2005, are expected to eat up 75% of the total federal budget by 2030. By 2050, people over 85 will rise to 19 million." (InsuranceNewsNet.com)
Compensation Costs in Private Industry Up 3.2 Percent in 2006
Excerpt: "The components of compensation differed in their rates of change. While increases in wages and salaries became greater, the sharp increases in benefit costs seen over the past several years slowed to a more moderate pace." (U.S. Bureau of Labor Statistics)
Newly Posted Events
First Quarter 2007 Update - Webcast
Nationwide on February 13, 2007
presented by McKay Hochman Co., Inc.
Form 5500 Update - 2007 - Webcast
Nationwide on April 3, 2007
presented by McKay Hochman Co., Inc.
Introduction to Retirement Plans - Webcast
Nationwide on April 17, 2007
presented by McKay Hochman Co., Inc.
Introduction to Retirement Plans - Webcast
Nationwide on April 24, 2007
presented by McKay Hochman Co., Inc.
Newly Posted Press Releases
Hewitt Associates Survey Reveals New Employer Trends in Retirement
Hewitt Associates LLC
U. S. Labor Department Obtains Judgment Restoring More Than $500,000 to Pay Health Benefits of Bankrupt Minneapolis Firm
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
New HSA Data Reveal Greater Use of the Bank Account when Employers Integrate their Health & Financial Solutions
UnitedHealth Group
Directors and Investors Back Majority Voting in Board Elections; Clear Links Between CEO Pay and Performance
National Association of Corporate Directors
New Website Educates Individuals on Value of Fixed Annuities in Strengthening Retirement Portfolios; Offers Access to Innovative Fixed Annuities
ELM Income Group, Inc
Newly Posted or Renewed Job Openings
401(k) Plan Administrator/Analyst
for The Pension Group, Inc.
in CA
Relationship Manager
for New York Life Investment Management - Retirement Plans Services
in MA
Senior Benefits Manager
for Hewitt Associates
in IL
Senior Budget Analyst
for University Of California, Office Of The President
in CA
Defined Benefit Department - Benefit Calculator
for The Angell Pension Group, Inc.
in ANY STATE
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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