| BenefitsLink Retirement Plans Newsletter |   |
April 10, 2007
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GM's High-Performance Pension Machine
Excerpt: "How did GM go from the most underfunded corporate plans in the country four years ago to the most overfunded? By putting a ton of money -- $18.5 billion -- into the funds in 2003, most of which it raised in a giant bond issue. It wanted to fix its pension problems once and for all . . . ." (The Washington Post; free registration required)
PPA Amendments for Ongoing Plans Can Wait
Excerpt: "PPA §1107 is very clear that PPA amendments are not due until the last day of the 2009 plan year. For governmental plans, the deadline is 2011." (SunGard Corbel LLC)
Income for Life? Sounds Good, but Do Your Homework
Excerpt: "WHAT if I outlive my money? The fear of such a thing happening haunts many older Americans. So when a reputable company, New York Life Insurance, teams up with AARP to offer an investment with the absolute promise of lifetime income, it can sound like an answered prayer." (The New York Times; free registration required)
Law Firm Takes Corporations to Task for High 401(k) Fees
Excerpt: "[A]s workers pour more money into their accounts, the money generated for this and other fixed costs can soar. A guy who has $100,000 in his 401(k) that charges 2 percent will pay $2,000 for the year, which will be $1,800 more than the guy in the next cubicle, who has only saved $10,000. And yet the services they receive are identical." (The San Diego Union-Tribune)
What Are the Statistics of Success for Your 401(k) Plan?
Excerpt: "It is a general premise of business management that, if something is important, a business will measure it. Stated inversely, if an activity is not measured, then the business probably doesn't think it's important. Elevate the importance of the success of your plan by measuring benefits, participation, deferrals, and investing." (Plan Sponsor via Reish Luftman Reicher & Cohen)
IRS Suggests Resolution Mechanism for Plans in 412(i) Audit Program
Excerpt: "The IRS has detailed a method by which defined benefit plans in the 412(i) audit program may resolve abusive tax avoidance transactions by recalculating contributions from the inception of the plan as if the minimum funding rules applied." (Wolters Kluwer Law & Business)
Overview: IRS Guidance on PPA Changes to Maximum Deductible Contribution Rules for 2006/2007
Excerpt: "One issue [Notice 2007-28] addresses is how and when the combined plan limit . . . applies. The statute could be read to require using the combined plan limit only if the employer's contributions to the defined contribution plan exceed six percent of compensation, but [the Notice] clarifies the combined limit applies to the employer's contributions to the defined benefit plan even if the employer's contributions to the [DC] plan are six percent of compensation or less." (Deloitte via BenefitsLink.com)
U.S. Pension Health Improves Slightly in the First Quarter of 2007
Excerpt: "The typical U.S. pension fund started 2007 with a funding ratio of approximately 103% and ended the quarter at 105%, mostly due to strong equity market performance, according to UBS Global Asset Management." (PLANSPONSOR.com; free registration required)
CRS Report for Congress: The Financial Health of the PBGC (PDF)
19 pages; March 23, 2007. Excerpt: "This report focuses on the financial condition of the PBGC and the effects of the Pension Protection Act; it will be updated upon major developments affecting the PBGC's financial condition." (Congressional Research Service of the U.S. Library of Congress)
Overview: Treasury and IRS Issue Final IRC § 415 Regulations
Excerpt: "In addition to updating the IRC § 415 regulations to reflect the current statutory limits, the final regulations address many other statutory changes . . . ." (Deloitte via BenefitsLink.com)
Overview: IRS Finalizes Updated Regulations under Code Section 415
Excerpt: "The regulations generally apply to limitation years beginning on or after July 1, 2007, which means that, for calendar-year 401(k) plans, the changes generally will first apply to plan years beginning January 1, 2008." (Employee Benefits Institute of America Inc.)
Building an Employee Stock Ownership Plan
Excerpt: "'The key idea of an ESOP is that it is a way that employees can acquire stock in their employer, but not by purchasing it with their own money,' Mr. Rosen said. 'That's an important concept, because employees would not become owners in significant numbers if they had to buy stock with their own money.'" (The New York Times; free registration required)
Employee Benefit Programs -- Why Should You Be Concerned?
Excerpt: "Governance of regulated employee benefit plans is as serious an issue as the corporate governance issues raised in the recent headlines. Like corporate governance the following questions are invariably asked: Where was the Board of Directors? How could this have happened? Didn't the management team really understand what they were doing? If they didn't know, how are we supposed to know? Where was Human Resources?" (West via ERISAdiagnostics Inc.)
Working Paper: Funding, Asset Allocation, and Risk-Taking in German Public Sector Pension Reform
Excerpt: "This paper analyzes the risks and rewards of moving to a (partially) prefunded pension system for most civil servants in the German federal state of Hesse." (Pension Research Council; registration required to download full-text of paper)
Virginia Changes to Auto Enrollment for State Employees on January 1, 2008
Excerpt: "Brian Goodman, Legal Affairs and Compliance Coordinator for the Virginia Retirement System (VRS), said the passage of the Pension Protection Act (PPA) cleared the plan sponsor from liability by automatically enrolling employees into DC plans . . . ." (PLANSPONSOR.com; free registration required)
The Cost of Retirement and How to Pay for It
Excerpt: "[Ibbotson] Associates released its own savings guidelines for typical investors with different ages, income levels and initial accumulated wealth." (Registered Rep)
Replacing a Defined Benefit Plan with a Pension Equity Plan
Excerpt: "In a pension equity plan, the amount an employee gets is based on a percentage of the average salary earned in the final few years on the job." (The New York Times; free registration required)
Defined Benefit Plans Heading Toward Retirement
Excerpt: "The Federal Reserve board's recently released report on the flow of the nation's financial assets provides new evidence that defined benefit plans are in their golden years while the defined contribution system is still in its dewy-eyed youth. [Originally posted March 19, 2007.]" (Pensions & Investments)
Geriatric Retirees a Growing Pension Problem
Excerpt: "Financial firms are working on new ideas to help pension executives hedge against the risk of unexpectedly large liabilities from geriatric retirees. This market could be the next frontier for financial derivatives, said David Cule, principal at actuarial consultant Punter Southall & Co. in London." (Pensions & Investments via Financial Week; free registration required)
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Links to Items on Executive Comp, Benefits in General
Text of Final Regs: Application of Section 409A to Nonqualified Deferred Compensation Plans (PDF)
Three hundred and ninety seven (397) pages; effective April 17, 2007 (have a good week!). (A shorter, typeset version from the Federal Register appears at https://benefitslink.com/taxregs/07-1820.pdf.) The first 186 pages are a helpful preamble explaining differences in the final regulations from the 2005 proposed regulations. (Internal Revenue Service)
Text of IRS Notice 2007-34: Application of Section 409A to Split-Dollar Life Insurance Arrangements (PDF)
8 pages. Excerpt: "This notice also provides that certain modifications of split-dollar life insurance arrangements necessary to comply with, or avoid application of, section 409A will not be treated as a material modification for purposes of § 1.61-22(j) of the Income Tax Regulations." (Internal Revenue Service)
In No-Fault Insurer and Plan Dispute, SPD Provision that Conflicts with Plan Document Controls
Excerpt: "EBIA Comment: This case allows us to emphasize, once again, the importance of an accurate and complete SPD. More importantly, though, this is apparently the first reported case in which the rule that an SPD's terms will be enforced when they conflict with the terms of a plan document is applied to a dispute between a plan and an insurer." (Employee Benefits Institute of America Inc.)
ERISA Plan Benefit Waiver: Judicial Interpretation of Complex Statute May Hinder Statute's Purpose (PDF)
31 pages. Excerpt: "At issue is 'whether administrators of an ERISA plan are required to recognize a beneficiary's waiver of his or her benefits.' The issue has been addressed in numerous federal appellate decisions over the last fifteen years." (University of Pennsylvania Law Review)
Milliman's Monthly Benefit News and Developments, April 2007 (PDF)
2 pages. The newsletter provides a summary of the previous month's legislative, regulatory, and judicial information on employee benefits. (Milliman)
Newly Posted Events
The American's with Disabilities Act: Legal Update and What Employers Need to Know Free and open to the public
Nationwide on April 24, 2007
presented by Davidson Marketing Group -- FutureOffice Network
The Economics of Healthcare: Boom or Bust for Our Region?
in Ohio on April 19, 2007
presented by Worldwide Employee Benefits Network (WEB) - Cleveland Chapter
Newly Posted Press Releases
Stock Market Rise, Higher Rates Contributed to Improved Funding Status of U.S. Pension Plans in March, According to Mellon Financial
Mellon Financial Corporation
Treasury, IRS Issue Final Regulations on Nonqualified Deferred Compensation
U.S. Treasury Department and Internal Revenue Service
Newly Posted or Renewed Job Openings
401k Plan Administrator/Trust Officer
for City National Bank
in CA
Benefits Coordinator (Sr. Human Resources Representative)
for CAE USA Inc.
in FL
Retirement Services Sales Consultant
for Administaff
in TX
Director, Compensation & Benefits
for Novartis Vaccines and Diagnostics
in MA
Actuary/Defined Benefit Analyst
for Findley Davies, Inc.
in NC, OH
Sr. EB Recordkeeper/Tester
for Wachovia
in NC
EB Recordkeeper/Tester
for Wachovia
in NC
System Migration Specialist
for Milliman, Inc.
in TX
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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