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September 28, 2007

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


Today's sponsor is ASPPA

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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.

(a) New Guidance Documents

(None today.)

(b) News

Third Circuit Affirms Dismissal of 401(k) 'Stock-Drop' Case (PDF)
Excerpt: "The United States Court of Appeals for the Third Circuit has affirmed the dismissal of a case against our client Avaya Inc., in which plaintiff alleged defendants breached their fiduciary duty by (1) imprudently offering employer stock as an investment option to 401(k) plan participants and (2) failing to disclose material information to those plan participants. Edgar v. Avaya, Inc., et al., __ F.3d __, 2007 WL 2781847, Case No. 06-2770 (3d Cir. Sept. 26, 2007)." (Alston & Bird LLP)

District Court Finds Discount Rate Used in Cash Balance Conversion not Up to Plan Sponsor
Excerpt: "The U.S. District Court for the Eastern District of Missouri has found that a company's use of an 8% discount rate instead of the 30-year treasury rate to calculate opening balances at the time it converted its defined benefit plan to a cash balance plan was illegal." (PLANSPONSOR.com; free registration required)

Court Says Bad Corporate News Not Dire Enough to Dump Company Stock
Excerpt: "The U.S. 3rd Circuit Court of Appeals ruled that a communications networks company did not breach its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by failing to get rid of the company stock option in its retirement plan when corporate developments led to a stock price drop." (PLANSPONSOR.com; free registration required)

(c) Summaries of Guidance; Filed Comments

Overview: Final Roth 401(k) Distribution Rules (PDF)
6 pages. Excerpt: "WHO'S AFFECTED This information applies to sponsors of and participants in 401(k) plans, including multiemployer plans, governmental plans, and non-electing church plans. BACKGROUND AND SUMMARY On April 30, 2007, the Internal Revenue Service issued final rules providing comprehensive guidance on the taxation, rollover, and reporting of distributions from designated Roth accounts in 401(k) plans. These rules generally follow the proposed rules from January 26, 2006, with a few modifications." (Prudential Financial)

Overview: Final Regs in Long-Anticipated Overhaul of Rules that Govern 403(b) Tax-Sheltered Annuities
Excerpt: "Employers that have 403(b) programs will have to get a lot more involved in their setup and in ensuring their ongoing compliance. 'A hands-off management approach will no longer be an acceptable practice,' says Ralph Marsh, President of the National Association of Government Defined Contribution Administrators, Inc. (NAGDCA)." (PLANSPONSOR.com; free registration required)

Overview; IRS Confirmation of Tax Consequences of New Vesting Restrictions on Fully Vested Stock
Excerpt: "The IRS recently issued Revenue Ruling 2007-49, which provides guidance on the tax consequences of certain transactions involving new vesting restrictions on fully vested stock. This update provides a brief background on Section 83 of the Internal Revenue Code, summarizes the key highlights from the revenue ruling and offers practical tips." (Perkins Coie LLP)

Overview: IRS Guidance on In-Service Payments from Pension Plans (PDF)
3 pages. Excerpt: "Generally, defined benefit and money purchase pension plans cannot pay benefits to participants before retirement. However, a provision in the Pension Protection Act of 2006 (PPA) allows pension plans to make in-service payments to employees who have reached age 62. These in-service payments are first available for plan years beginning after December 31, 2006." (Prudential Financial)

(d) Trends, Surveys, Research

Companies that Have Changed Their Defined Benefit Pension Plans
Excerpt: "[The target page] is a list of employers that have announced significant changes to their defined benefit pension plans since December 2005. Changes include plan terminations, plan freezes for new and/or current employees, and changes to the formula by which pension benefits are calculated. For specifics, [you can] click on the employer's name to see the company's press release, SEC filing or news story announcing the change." (Pension Rights Center)

Fidelity Fighting for 403(b) Plan Market: 'Renewed Attention' to Unseating Giant TIAA-CREF
Originally published July 23, 2007. Excerpt: "The Boston-based firm ranks second in 403(b) plan assets, significantly behind TIAA-CREF Inc., New York. Now, Fidelity executives want to change that. While Fidelity clearly has a stronghold in the corporate 401(k) market -- it is top dog, with about $397 billion in 401(k) assets as of Dec. 31 -- the firm had just $49.8 billion in 403(b) assets under management, a fraction of TIAA-CREF's $370.8 billion . . . ." (Pensions & Investments)

Very Brief Comparison of Public and Private Benefits in Wisconsin
Excerpt: "Fringe benefits for public employees are generally seen as exceeding those for private workers. As the cost of these perks -- most notably health insurance -- rises, it places financial strain on state and local governments, as well as on taxpayers." (Wisconsin Taxpayers Alliance)

In China, Pensions Increase for Retirees from Enterprises
Excerpt: "Government-financed pensions for retirees from private and state-owned enterprises have increased and are expected to grow further under a policy announced by the Ministry of Labor and Social Security." (Watson Wyatt Worldwide)

Pension Risk Insights -- Focus: Plan Annuitization
Excerpt: "In this Pension Risk Insights newsletter, Towers Perrin will periodically examine pension risk issues, potential risk management solutions and market trends." (Towers Perrin)

(e) Policy, Opinion, Advocacy

CRS Report to Congress: Consumer Spending by Older Americans, 1985 to 2005 (PDF)
72 pages. Excerpt: "Because of the demographic trend toward an older population and the decline in income that occurs as people leave the labor force for retirement, both the amount and the composition of consumption spending by American households could change substantially as the 76 million members of the baby boom reach retirement age. As Congress considers reforms to Social Security, Medicare, Medicaid, tax-deferred retirement savings plans, and other programs that provide income and benefits to older Americans, it may be helpful for policymakers to consider how older individuals spend their income and how this spending has changed over time." (Congressional Research Service, U.S. Library of Congress)

Letter to U.S. Treasury Dept from House Ways and Means Committee Members Regarding Backloading and Hybrid Plans (PDF)
4 pages. (U.S. House Ways and Means Committee via American Benefits Council)

Letter from U.S. Senators on Hybrid Plans - How DB Conversions Should Have Been Structured in Past (PDF)
Excerpt: "The PPA neither mandated nor prohibited specific conversion methods. It has come to our attention, however, that the Internal Revenue Service is now interpreting prior and current law regarding backloading to prohibit 'greater of' conversion methods. And we further understand that the Service may soon be ruling adversely on the qualification of plans that used a 'greater of' approach." (U.S. Senate via American Benefits Council)


Links to Items on Executive Comp, Benefits in General

Not Notice 2007-90: Death of Service Provider; Application of Section 409A to Nonqualified Deferred Compensation Plans (Humor) (PDF)
This just in, from an unknown source; 7 pages. Excerpt: "This notice provides additional guidance on the definition of a service provider's death for purposes of the application of section 409A of the Internal Revenue Code to nonqualified deferred compensation plans. This guidance includes: A more precise definition of death ('separation from life'); Presumptions the Service will apply in determining whether a service provider has experienced a separation from life under § 409A; [and] Examples to help illustrate the Service's position on separation from life." (Not the Internal Revenue Service)

Text: Estimates of Federal Tax Expenditures for Fiscal Years 2007-2011 (PDF)
46 pages. (U.S. Joint Committee on Taxation)

Employers May Need to Reconsider Their Form 5500 Filings
Excerpt: "The new IRS mailings should cause employers to reconsider filing any delinquent Form 5500s under the Delinquent Filer Voluntary Compliance Program. If an employer files under this program, prior to the initiation of any action by the IRS, the penalties are minimal, compared to the draconian penalties that could have previously be imposed -- such as IRS penalties of $15,000 per plan year and DOL penalties of $1,100 per day." (Employee Benefit News; free registration required)

Integrated Disability and Retirement Systems in Chile (PDF)
29 pages. Excerpt: "Chile has successfully integrated disability insurance into its retirement system. It is prefunded and it provides financial incentives (and opportunities) for private firms to control costs. If a worker becomes disabled before retiring, he receives a defined benefit. Part of this benefit is covered by his or her own retirement account." (National Center for Policy Analysis)


Newly Posted Events

Specialty Medication Coverage: Plan Design Decisions Teleweb
Nationwide on October 11, 2007
presented by International Foundation of Employee Benefit Plans


Newly Posted Press Releases

NAGDCA Elects 2007-2008 Executive Board
NAGDCA (National Association of Government Defined Contribution Administrators, Inc.)

New Frontier or Familiar Ground? Opportunities and Challenges for Institutional Asset Managers Post PPA and FAS 158
Chatham Partners

Wells Fargo Survey Finds Sharp Increase in Automatic 401(k) Plans and Diversified Default Funds
Wells Fargo


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