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September 20, 2007
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Here are the Web's best new links about compliance and cost aspects of plan operation, design and policy.


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ASPPA’s Annual Conference, October 21-24, 2007

Be a part of it all at ASPPA’s Annual Conference this year. Join over 1,500 retirement professionals, choose from over 60 workshops, attend numerous networking opportunities and participate in ASPPA’s bi-annual march to the hill. All this and more await you at the Hilton Washington, October 21-24, 2007. Register Now.

New Compliance Rules; News

IRS Ann. 2007-90: IRS to Temporarily Stop Determ. Letter Applications for Adopters of Pre-Approved DC Plans (PDF)
2 pages. Excerpt: "On December 18, 2007, the Service will temporarily stop accepting applications for determination letters for defined contribution plans that are filed on Form 5307, Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans. The Service is taking this action because all pre-approved (i.e., master and prototype and volume submitter) defined contribution plans are required to be restated to comply with the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107-16, ('EGTRRA') and to be submitted to the Service for a determination letter (if needed) using Form 5307 during the approximately two-year period which the Service expects to announce early in 2008. The temporary hiatus in accepting Form 5307 applications will allow the Service to prepare to receive the EGTRRA applications." (Internal Revenue Service)

NFL Agrees Pension System Is Flawed
Excerpt: "Responding to often-emotional testimony, several U.S. senators . . . threatened to step in and fix the NFL's pension and medical disability program if league and players' union officials don't quickly improve the system -- one that retirees increasingly describe as dysfunctional." (Los Angeles Times)

Bringing Federal Retirees Back to Work
Excerpt: "Legislation that would encourage federal retirees to come back to work in the government on a temporary basis was introduced in the House yesterday, giving the Bush administration a chance to push for one of its management priorities this year. Rep. Thomas M. Davis III (R-Va.), ranking minority member of the House Oversight and Government Reform Committee, sponsored the bill, which would permit federal retirees to return to the government and draw a paycheck without any reduction to their pension." (The Washington Post; free registration required)

Compliance Rule Summaries/Analysis/Filed Comments

Overview: DOL Releases Defined Contribution Plans from 'Safest Annuity Available' Standard
Excerpt: "[T]he Pension Protection Act ('PPA') of 2006 (P.L. 109-280) directed DOL to amend its guidance to clarify the 'safest annuity available' rule does not apply to defined contribution plans. The DOL on September 12, 2007 issued interim final rules (72 FR 52004) to satisfy this mandate, as well as a proposed safe harbor for defined contribution plan fiduciaries to follow when selecting annuity providers and contracts (72 FR 52022)." (Deloitte via BenefitsLink.com)

Overview: New Transfer Rules under Section 403(b) Regulations Effective September 24, 2007
Excerpt: "The final regulations contain similar rules for transfers between plans, also effective September 24, 2007, where the participant whose assets are being transferred is an employee or former employee of the employer maintaining the receiving plan. However, an information-sharing agreement is not required for plan-to-plan transfers." (The Segal Group, Inc.)

Overview: New 403(b) Regulations, New DOL Guidance on 403(b) Plans, and the End of 90-24 Transfers
Excerpt: "The new 403(b) regulations and guidance from the DOL clarify several issues regarding 403(b) plans and impose new requirements on employers." (Dorsey & Whitney LLP)

Overview: Treasury and IRS Change Position on Applying Combined Plan Limit
Excerpt: "A letter from key Members of Congress has prompted the Treasury Department and IRS to reconsider their interpretation of certain changes the Pension Protection Act ('PPA') of 2006 . . . made to the IRC § 404(a)(7) combined plan deduction limit. Employers that contribute both to defined benefit and defined contribution plans now will be able to take advantage of the 150 percent of current liability limit in 2006 and 2007 as long as their contributions to the defined contribution plan do not exceed six percent of compensation." (Deloitte via BenefitsLink.com)

PPA Allows Small Employers to Fund DB Plans More in Fatter Financial Times, Less So in Leaner Years
Excerpt: "Prior to PPA, employers could only fund up to 100% of their potential future liability. The extra deductible room gives companies more flexibility to fund at higher levels during profitable years and at lower levels during leaner years." (Employee Benefit News; free registration required)

Overview of What You Need to Know About the New 403(b) Plan Regulations
Excerpt: "This update addresses the new regulations issued by the IRS for 403(b) plans as well as an update on scrutiny of fees under 403(b) plans." (Hanson, Bridgett, Marcus, Vlahos & Rudy, LLP)

Trends; Surveys; Research

A Big Company Match Can Mitigate a Poor 401(k) Plan
Excerpt: "While many companies have terrific savings plans with abundant options and outstanding funds, some cheap out and give workers the 'benefit' of a plan without providing a program that the workers truly benefit from. . . . 'When your choices are bad, run the numbers. ... And if you can save the same amount and come away thinking that you're better off without that bad retirement plan, then stay out of the plan, and tell your employer why you are doing it. ... Maybe it will help convince them to get better funds.'" (MarketWatch)

Sen. Joe Biden's Plan Lays Out Five Key Components to Preserving Retirement Plans
Excerpt: "Delaware Sen. Joe Biden said Wednesday that his new retirement security plan will not only protect Social Security and the senior citizens it serves, but also will put a patch on the nation's spendthrift habits by encouraging money-saving habits virtually from birth." (The Des Moines Register)

Summary of Working Paper: How Investment Options Affect Portfolio Choice in Individual Accounts
Excerpt: "The authors conclude that their study 'strongly suggests that average participants are not optimally allocating their portfolios according to standard finance theory predictions, but instead are following naive strategies that subject them to 'manipulation' by non-binding changes in the number and mix of investment options. A key policy implication is that the number and mix of investment options will have an important effect on overall asset allocation in the individual accounts.'" (National Bureau of Economic Research)

Higher Taxes on Carried Interest Would Be Borne by Private Equity Fund Managers, Not Pension Funds
Excerpt: "[O]pponents of changing the tax treatment of carried interest have turned to a different kind of argument. They have claimed that all is not as it seems. A tax increase on carried interest may appear to be a tax increase levied primarily on the extremely high-income individuals who manage multi-billion dollar private equity funds. But really, the burden of the tax (in economic terms, its 'incidence') would be shifted to more sympathetic groups, such as employees whose pensions are invested in private equity funds." (Center on Budget and Policy Priorities)

Your 401(k) Giveaway -- How Much of a Difference Can Fees Make?
Excerpt: "[M]any investors still don't understand how fees charged by their portfolio managers fit into the investment picture. They may know that fees play a part in their return, but they still haven't really paid much attention to the charges they incur from the people handling their retirement investments." (The Washington Post; free registration required)

Policy; Opinion; Advocacy

An Industry Analysis of the Fair Disclosure for Retirement Security Act of 2007 (PDF)
10 pages. Excerpt: "Although The SPARK Institute has publicly supported and promoted meaningful fee disclosure by employers, retirement plan service providers and investment providers, we are concerned about the unnecessarily burdensome and costly approach taken in the Bill, which will ultimately serve to weaken, not strengthen, the defined contribution system." (The Spark Institute. Inc.)

Retirement Income Projections Need Revisions
Excerpt: "There are many advisers who complete retirement income projections that consider the combination of an age-certain death, constant inflation, and level spending -- an impossible scenario that leads to uninformed spend-down approaches. This ignores much of the uncertainty in retirement, and, ultimately, the consequences of living beyond their anticipated life expectancy or surviving the consequences of a market turn." (PlanAdvisor)

EBRI testimony before ERISA Advisory Council Working Group on Financial Literacy and the Role of the Employer (PDF)
6 pages. Excerpt: "Does the plan sponsor have any responsibility for educating participants about their decisions at retirement? ERISA Sec. 404c, and implementing regulations, would seem to suggest that employers that want to treat plans as being self-directed must provide substantial financial education. Since most sponsors make the declaration of being 404c compliant, they seem to answer your first question themselves . . . ." (Employee Benefit Research Institute)

Review of Investment Issues on Congress' Radar Screen
Excerpt: "Recent publicity surrounding private equity firms, carried interest and hedge funds has drawn legislative attention to those issues. Key lawmakers have indicated that legislation is unlikely to advance in 2007, but the issues could move up the legislative agenda in 2008. Any new tax or disclosure rules for these investments could have significant implications for retirement plans." (Watson Wyatt Worldwide)


Links to Items on Executive Comp, Benefits in General

IRS Developing 457 Plan Guidance, Official Says
Excerpt: "The IRS is involved in several guidance projects affecting Code Sec. 457 deferred compensation plans, according to a senior IRS attorney. The IRS projects include developing guidance on the definition of a governmental plan under Code Sec. 414(d) and the relationship between Code Sec. 457 and the Code Sec. 409A deferred compensation rules, said senior IRS attorney Cheryl Press of the Office of Associate Chief Counsel (Tax Exempt and Government Entities)." (Wolters Kluwer Law & Business)

Stock Option Experience Study to Investigate the Motivating Factors Contributing to the Exercise of Stock Options
SOA is seeking data contributions from companies that offer stock option plans as part of their compensation packages. The target page has information on contributing data. (Society of Actuaries)

Overview: Extension of Section 409A Documentation Deadline – Action Still Required by December 31, 2007
Excerpt: "Significantly, Notice 2007-78 extends only the date for documentary compliance. As a result, with respect to certain plan rules, there is the need for certain written terms to be in place before 2008. Further, the Notice does not extend the date upon which full operational compliance with these rules is required – that is still January 1, 2008. In other words, the good faith compliance period ends December 31, 2007." (Littler Mendelson P.C.)

Overview: Limited Code Section 409A Transitional Relief (PDF)
Excerpt: "A plan is treated as being amended to comply with Code Section 409A retroactively to January 1, 2008, only if the written plan, as amended, contains all the provisions required by the final regulations and accurately reflects the operation of the plan on and after January 1, 2008, through the date of the amendment." (Dechert LLP)

Option Rewards in 2006 Among CEOs of 465 U.S. Companies
Excerpt: "I looked at the 465 companies with market caps of $3 billion or more to find the gains from exercising options and how much unexercised options increased paper profits for CEOs, or what I call option wealth-change." (Graef Crystal via Bloomberg News)

Former American Home Employees Fight to Save Deferred Compensation Funds
Excerpt: "Some highly paid former employees of bankrupt American Home Mortgage are fighting the company's attempt to seize millions they set aside in a non-qualified deferred compensation plan. Newsday reports the case is being brought by 43 employees who had a total of $11.6 million in the retirement trust." (PLANSPONSOR.com; free registration required)

Overview: Additional Section 409A Transition Relief and Guidance
Excerpt: "The Notice provides detailed transition rules for designating a compliant time and form of payment designation made by December 31, 2007. There is no extension of transition relief beyond the existing compliance deadline of December 31, 2007 for taxpayers (or the existing December 31, 2006 deadline for certain compensation amounts paid to certain Section 16 insiders)." (Deloitte via BenefitsLink.com)

Study of Employee Benefits: 2007 and Beyond (PDF)
52 pages. Excerpt: "[From Business Wire] As companies grapple with competing objectives--managing benefits costs while attracting and retaining skilled talent--the link between employee benefits strategies and business and financial goals is expected to increase by 2012, according to . . . a new report . . . by Prudential Financial, Inc. . . . that explores current and future employee needs and how employers plan to respond to those needs. The report highlights employers' need to improve the perceived value of the benefits . . . ." (Prudential Financial)


Newly Posted Events

Annual Fall Employee Benefits Law and Practice Update - Webcast
Nationwide on November 8, 2007
presented by ALI-ABA (American Law Institute-American Bar Association)

New IRS Cafeteria Plan Rules: What You Need To Know
Nationwide on October 16, 2007
presented by Thompson Interactive, A Division of Thompson Publishing Group

Pension Protection Act of 2006 - Are You Ready?
in District of Columbia on October 18, 2007
presented by Capital Chapter ISCEBS


Newly Posted Press Releases

Older Hispanics Rely on Social Security as Primary Source of Retirement Income
AARP

Great-West Retirement Services Appoints Three To Regional Sales Staff
Great-West Retirement Services

The SPARK Institute Issues Analysis Of "401(k) Fair Disclosure For Retirement Security Act”
SPARK Institute

Retailers Welcome Senate Passage of Mental Health Parity Bill, Urge House to Adopt Senate Version at Subcommittee Markup
National Retail Federation


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