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| September 4, 2007 |
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Official Guidance; News
Federal Register (Typeset) Version of Proposed IRS Regs on Benefit Restrictions for Underfunded Pension Plans (PDF)35 pages. Excerpt: "For periods following the issuance of these proposed regulations and before final regulations are issued, these proposed regulations may be relied upon for plan qualification purposes, provided that such reliance is on a consistent and reasonable basis." (Internal Revenue Service)
Court Hands CalSTRS Victory in $500M Funding Battle
Excerpt: "The California Third District Court of Appeal has upheld a lower court ruling ordering the state to pay the California State Teachers' Retirement System (CalSTRS) $500 million plus interest withheld in 2003." (PLANSPONSOR.com; free registration required)
Congress to Hear NFL Benefits Dispute
Excerpt: "The United States Senate Committee on Commerce, Science and Transportation announced yesterday that it would hold a hearing Sept. 18 to examine the compensation system for retired players in the N.F.L." (The New York Times; free registration required)
Canadian Board Decides Not to Change Pension Accounting
Excerpt: "The Canadian Accounting Standards Board's July 31, 2007, decision not to change accounting treatment for defined benefit (DB) plans at this time gives plan sponsors at least a three-year reprieve from dramatic changes to their balance sheets, debt covenants and other contractual arrangements." (Watson Wyatt Worldwide)
Summary/Analysis of Official Guidance
Overview: Proposed Regulations on PPA Benefit Restrictions (PDF)2 pages. Excerpt: "The proposed regulations highlight the need for sponsors of calendar year plans to consider making additional contributions by September 15, 2007 to avoid possible restrictions on benefit payments in 2008, as well as for 2008 funding purposes." (Buck Consultants)
Employer's Agreements with Union Ineffectual to Prevent Imposition of Withdrawal Liability
Excerpt: "In applying ERISA, courts have a nasty predilection for unhinging agreements outside the statutory scheme. Supervalu, Inc. provides an interesting example in the context of the Multiemployer Pension Plan Amendments Act of 1980 ('MPPAA'), 29 U.S.C. § 1381 et seq. and a claim for $4,316,996 of assessed withdrawal liability." (Health Plan Law blog by Attorney Roy F. Harmon III)
Commentary: IRS Resolves Part of the Cross-Testing Individual Classification Issue
Excerpt: "In a Special Edition of Employee Plan News, dated August 2007 and released by the IRS on August 28, 2007, the IRS may have resolved at least some of the controversy over cross-testing plan allocations by placing individuals in their own classification group. The Special Edition states that the Retirement Plans FAQ on Pre-Approved and Individually Designed Plan Programs has been updated . . . ." (Pension Protection Act Blog)
No Waiver of 60-Day Rollover Period Where Taxpayer Failed to Submit Substantiating Documentation
Excerpt: "In a private ruling, the IRS declined to waive the 60-day rollover requirement with respect to distributions from an individual retirement account (IRA) where the taxpayer failed to submit medical documentation substantiating the claim that his failure to make the rollover was due to medical impairment." (Wolters Kluwer Law & Business)
Another Question is Answered in the 401(k) Plans Q&A Column
Where does pension law require an annual valuation of a defined contribution plan? (BenefitsLink.com)
Another View on Whether a Cashed Out 401(k) Participant Has Standing to Sue for Losses Under ERISA
Excerpt: "In the decision, involving a putative class action against Boston Scientific, the judge surveyed case law from other jurisdictions on the issue and broke from the opinion of another judge of the circuit, who had found that such a participant, once cashed out, lacked standing to bring a claim for benefits. Judge Tauro reviewed case law from other circuits to the contrary, and elected to follow those rulings." (Boston ERISA Law Blog)
Audio: Understanding the 10% Penalty, and Its Exceptions
Excerpt: "It's no joke. Congress created the retirement plan tax penalty and then wrote 18 exceptions to it. Natalie gives an overview of how the 'funniest section of tax code' works and then tackles some of the exceptions. [Clicking on the target link will play the podcast on your computer.]" (Benefits Update with Natalie Choate via Morningstar Advisor Podcast Center)
Should Accounting Standards Reflect Current Events, or Should They Be Written for the Ages?
Excerpt: "The Financial Accounting Standards Board has embarked on a project that might plunk employers down squarely into such events as the subprime mess in an unexpected way: by requiring them to report in their balance-sheet footnotes how much of their pension assets are tied up in hedge funds, derivatives, and other 'alternative investments.'" (CFO.com)
Trends; Surveys; Research
401(k) Use by Participants Doesn't Add UpExcerpt: "Stepped-up efforts by financial firms and employers to get workers to steer more savings toward 401(k) plans have so far failed to help many employees, according to recent research." (The Wall Street Journal Online)
The PPA One Year Later -- Impact Huge in Target-Date Funds, Auto-Enrollment
Excerpt: "After just a year on the books, the Pension Protection Act of 2006 has changed life for defined contribution plan executives. The number of DC plans that have -- in remarkably short order -- adopted automatic enrollment and picked target-date funds as their qualified default option has shocked some industry experts." (Pensions & Investments)
Special Report on World's Largest Pension Funds
Excerpt: "The world's largest 300 pension funds grew 11.5% last year, with assets topping $10 trillion for the first time while keeping pace with the 2005 growth, according to an annual survey conducted by Pensions & Investments and Watson Wyatt Worldwide." (Pensions & Investments)
Developments in Retirement Programs in Spain
Excerpt: "The retirement system in Spain includes three pillars: a generous, almost universal Social Security program; employer pension and insurance plans, which are mainly sponsored by large companies and cover fewer people; and a moderate but significant penetration of individual retirement savings products. Spain's population is aging rapidly, and, like many developed countries, Spain must act soon to avert significant deficits later in its public retirement income programs." (Watson Wyatt Worldwide)
Hedge Funds: A Primer (PDF)
3 pages. Excerpt: "The modern day hedge fund was modeled after a fund created by Alfred Winslow Jones in 1949. The strategy was to sell short some stocks while buying others, making some of the market risk 'hedged'. Jones was the first to combine short selling, the use of leverage, and limited partnership structure to avoid regulation, and a 20% incentive fee as compensation for the managing partner." (National Association of Government Defined Contribution Administrators, Inc.)
Revenue-Sharing Disclosure Sought for Bundled Providers
Excerpt: "Pension consultants and third-party administrators want bundled providers, including industry giants such as Vanguard and Fidelity, to disclose their revenue-sharing arrangements with affiliated service providers, but the bundled providers are balking." (Investment News; free registration required)
Employee Ownership Update for August 31, 2007
NCEO Executive Director Corey Rosen discusses a new NCEO issue brief on employee ownership and corporate performance reporting that research consistently shows ESOPs improve performance in closely held companies but have a less clear impact in public companies; new data on who gets stock options; a PLR stating that a C corporation can contribute 25% of pay to repay a ESOP loan and another 25% to the same ESOP if not used to pay loan principal or interest; and a new NCEO management book club. (National Center for Employee Ownership)
New edition of An Introduction to ESOPs
The NCEO presents excerpts from An Introduction to ESOPs, a 50-page booklet that explains the rules, uses, benefits, and other aspects of employee stock ownership plans (ESOPs). The booklet is often handed out by service providers to their clients or by ESOP companies to employees. The new edition has not only been updated to cover the latest developments but also has been expanded; for example, a new 6-page chapter covers ESOPs for S corporations. (National Center for Employee Ownership)
New Tax Provisions for Isle of Man Pensions Expected
Excerpt: "The Isle of Man government is expected to publish details of the new tax regime for pensions this autumn. The changes, which will be included in a Pensions Bill, are likely to be effective from April 6, 2008. This follows its response to the consultation on a simplified tax regime, published in March 2007. The Isle of Man has reviewed its tax scheme to ensure it remains compatible with that of the United Kingdom." (Watson Wyatt Worldwide)
European Court Rules Against Differential Tax Treatment for Domestic Pensions
Excerpt: "The European Court of Justice has ruled that certain Belgian taxation provisions for pensions infringed EU Treaty Freedoms. The findings are expected to be helpful in developing pensions' case law relating to transfers and the requirement for a locally-based administrator/tax representative." (Watson Wyatt Worldwide)
Social Security Scandal Shakes Japan
Excerpt: "The pension mess, fully disclosed in May, has landed on one of the world's fastest-aging societies: 21 percent of its 127 million inhabitants are 65 or older and some 25 million retirees are collecting pensions, rising to 35 million by 2040." (AP via The New York Times; free registration required)
Policy; Opinion; Advocacy
Commentary: The Adoption by the House of Representatives of Two Divestment Bills (PDF)Page 2 of 4. Excerpt: "Just before Congress left town for its August recess, the House of Representatives adopted two divestment bills: H.R. 2347 (Iran Sanctions Enabling Act) aimed at certain investments in Iran, and H.R. 180 (Darfur Accountability and Divestment Act), dealing with business operations in Sudan." (National Council on Teacher Retirement)
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Links to Items on Executive Comp, Benefits in General
Listing of IRS Published Guidance for January-August 2007
The target page links to guidance published by the Service relating to retirement plans: Treasury Regulations; Revenue Rulings; Revenue Procedures; Notices; and, Announcements. (Internal Revenue Service)
Companies Try to Retain Older Workers
Excerpt: "[S]ome employers are worried that they will lose too many people -- and are pioneering policies to make the workplace more friendly to older employees. 'I think we're beginning to see a much broader range of options and opportunities for mature workers,' said Diane Piktialis, a specialist in older-worker issues . . . . 'This is an area where there's just enormous room for creativity in terms of how companies can adapt.' Concerns are particularly acute in the areas of manufacturing, healthcare and government." (Los Angeles Times)
Working, Even After Retirement Age
Excerpt: "While financial security remains the primary reason Americans are working longer, it's not the only one, retirement experts say. Many people who could probably afford to retire comfortably fear that full-time retirement would erase a key part of their identity." (USA TODAY)
Workers Face More Stress As Out-of-Pocket Benefits Costs Rise, Retirement Savings Rates Fall, Survey Shows
Excerpt: "Recording increased stress in every category measured, a study has found that the highest stress factors continue to be saving for retirement and paying for healthcare in retirement. Sources of financial stress have increased considerably for U.S. workers since 2005, according to survey results released August 20 by the Ameriprise Financial." (Wolters Kluwer Law & Business)
California Supreme Court Upholds the Lawfulness of Certain Profit-Based Incentive Compensation Plans
Excerpt: "On August 23, the California Supreme Court issued its opinion in Prachasaisoradej v. Ralphs Grocery Company, Inc. (Ralphs). In this important decision, the Court held that a compensation plan, designed to reward employees if their collective efforts increased their employer's profitability, was not illegal simply because ordinary business expenses were part of the calculation of 'profitability' on which payments under the plan were based." (Morgan, Lewis & Bockius LLP)
As Young Workers Prepare for Worst in Retirement/Health Benefits, Benefit Design Changing to Fit Expectations
Excerpt: "Today, workers tell the pollsters they assume change and assume they will need to provide for themselves. The result is heightened worker demand for 401(k) plans, not pensions. Young worker interest in the portability of a health-savings account, even if it may mean a less generous basic health benefit, shows up in the sign-up patterns among employers offering this benefit design as one option." (Human Resource Executive Online; free registration required)
Overview: SEC Releases Interpretive Guidance on New Executive Compensation Disclosure Rules (PDF)
5 pages. Revised August 31, 2007. Excerpt: "[M]uch of the guidance lacks interpretation, such as not providing more clarity on when companies may omit disclosure of specific performance targets, and merely recites the seemingly obvious requirements of the new disclosure rules. The interpretative guidance is briefly summarized [in the target page] with the August 8 guidance presented in italics." (Frederic W. Cook & Co., Inc.)
An Unlikely HR Manager Took on Morale at Microsoft
Excerpt: "Over the next two years, [the new manager] tore up Microsoft's HR playbook. In the process, she has begun to sculpt a new HR that is junking a one-size-fits-all approach for a system tailored to the needs of individual employees. In Brummel's HR, her people are supposed to act less like cops and more like concierges." (BusinessWeek)
Overview: Nonqualified Def Comp, Code Section 409A: Potential Pitfalls and One Last Opportunity (PDF)
Excerpt: "Under the final regulations, it will still be possible to terminate a deferred compensation plan without causing a bad tax result for participants, but only if certain requirements are satisfied." (The Metropolitan Corporate Counsel, Inc.)
Court Finds Document Made from PowerPoint Slides is Not an SPD
Excerpt: "The U.S. District Court for the District of Kansas has rejected the accidental death benefit claim by the parents of a deceased employee who argued a document they had was a Summary Plan Description and was relied upon by their daughter when choosing benefits, and therefore should override plan language." (PLANSPONSOR.com; free registration required)
Newly Posted Events
2007 Meet and Greet
in Illinois on September 6, 2007
presented by ASPPA Benefits Council of Chicago
Current Developments and Fiduciary Regulatory Update Workshop with Sal Tripodi, APM
in Illinois on October 10, 2007
presented by ASPPA Benefits Council of Chicago
Legislative Update with Brian H. Graff, Esq, APM
in Texas on September 13, 2007
presented by ASPPA Benefits Council of Dallas/Fort Worth
Newly Posted Press Releases
ADP Shows American Workers How to Get More From Their Paycheck
ADP
Newly Posted or Renewed Job Openings
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Nurse Case Manager
for Standard Insurance Company
in OR
Participant Communication Consultant
for Standard Insurance Company
in FL
Director of Benefits Administration
for Aecom
in CA
Disability Benefits Analyst
for Standard Insurance Company
in NY
Supervisor, Disability Benefits
for Standard Insurance Company
in NY
Service Representative
for Standard Insurance Company
in MN
Defined Contribution Plan Administrators
for The Benefit Practice
in CT
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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