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| November 5, 2007 |
| Here are the Web's best new links about compliance and cost aspects of plan operation, design and policy. |
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(a) New Guidance Documents
(None today.)
(b) News
Possibility for Conflicts Among Pension Consultants in General Seems to Be Growing
Excerpt: "The Securities and Exchange Commission's investigation into possible conflicts of interest among advisers to pension funds has been going on so long -- two years -- that it's practically fallen off the radar screen. But last week, the investigation cropped up again, big time, when Merrill Lynch advised 100 of its pension fund clients in Florida that the S.E.C. has taken issue with its practices as a consultant." (The New York Times; free registration required)
Derivative Action Certification not Available for Fiduciary Breach Claim
Excerpt: "The U.S. District Court for the District of Connecticut has rejected a plan participant's motion to certify her fiduciary breach lawsuit as a derivative action on behalf of the plan." (PLANSPONSOR.com; free registration required)
3rd Circuit Finds Retirement Packages for Tenured Professors Are Taxable
Excerpt: "Ruling on an important tax question that has split the federal circuits, the 3rd U.S. Circuit Court of Appeals has ruled that the University of Pittsburgh's early retirement payments to its formerly tenured professors are taxable wages under the Federal Insurance Contribution Act (FICA)." (Law.com)
The Pitch: Retire Early -- the Catch: Brokers Want Your Cash
Excerpt: "From one case to the next, the pitches are similar: Employees are urged to retire early by brokers who claim they can earn them more money in retirement than they could make if they continued working. The employees are told they can withdraw up to 9% of their nest eggs a year in retirement because their portfolios -- often invested in high-cost, high-commission products -- will gain 15% or more a year. In many cases, they're persuaded to do so because some co-workers have done the same." (USA TODAY)
Class Action Filed Against State Street by Pension Fund
Excerpt: "Another pension fund has filed suit against State Street for 'investing purportedly conservative, risk-averse bond funds in high risk mortgage backed securities and exotic financial instruments.'" (PLANSPONSOR.com; free registration required)
(c) Summaries of Guidance; Filed Comments
Hewitt Federal Legislation Quick Guide Updated as of October 31, 2007, for Retirement Plans (PDF)
12 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding retirement plans. (Hewitt Associates)
Funds with Redemption Fees Can't Be QDIAs
Excerpt: "Mutual funds that charge redemption fees will not qualify as default investments under the Department of Labor's recently announced final rules." (Investment News; free registration required)
Overview: Final Rules for Qualified Default Investment Alternatives
Excerpt: "As a consequence of these finalized regulations, companies that move quickly and have not yet done so can implement automatic enrollment provisions effective January 1, 2008, not just for new employees but for existing employees who do not participate in the company's 401(k) or other form of individual account retirement plan." (Jones Day)
Segal Bulletin on PPA '06 Provisions of Interest to Multiemployer DC Plans (PDF)
Excerpt: "Sponsors of multiemployer DC plans should consider: Drafting and designing new participant communications, including individual benefit statements and notices of right to defer, Evaluating the appropriate level of fidelity bond for a fund and purchasing those bonds, Obtaining compliance assistance from their professional advisors, including drafting plan amendments, Considering PPA'06 Preliminary Assessments for DC plans, and Selecting and monitoring DC vendors." (The Segal Group, Inc.)
Overview: IRS Guide Helps Find, Fix, and Avoid 401(k) Plan Mistakes
Excerpt: "EBIA Comment: This user-friendly self-help tool will make it easier for employers, administrators, and their advisors to find, fix, and avoid common 401(k) plan compliance errors. Its appearance reminds us that those nightmare days -- when relatively minor errors could trigger plan disqualification and staggering tax and penalty amounts -- are now long behind us." (Employee Benefits Institute of America)
ERISA's Participant Benefit Statement Requirements: Current Rules Under PPA '06 and a Suggested Blueprint for Future Interpretations
25 pages. Published in the Tax Management Compensation Planning Journal, Vol. 35, No. 10, 10/05/2007, by The Bureau of National Affairs, Inc. Excerpt: "The author concludes that these new requirements will have a significant impact on the administrative burdens and costs of employee benefit plans, which unfortunately, in the defined contribution plan model, may be passed along to the participants and beneficiaries either directly or indirectly." (Kathryn J. Kennedy, Professor, The John Marshall Law School)
(d) Trends, Surveys, Research
New Options in 401(k)s: Immediate Annuities and Longevity Insurance Help Tackle Retirees' Income Conundrum
Excerpt: "The trend of using annuities and longevity insurance has heated up over the last few years as more retirees and those approaching retirement search for income generating investment solutions. 'With longevity insurance or an immediate annuity, the client is saying they want to take payments in the form of an income stream either now or at a later point in time,' says Steve Roth, a partner with Sutherland, Asbill & Brennan in Washington." (Investment Advisor)
Pension Plan Providers Become One-Stop Shops
Excerpt: "Companies that offer both defined-benefit and defined-contribution plans to employees often have to deal with two separate plan providers. Increasingly, they will only have to make one phone call. That's because plan providers that previously specialized in 401(k) plans are starting to wade into the defined-benefit space, and vice versa." (Financial Week; free registration required)
Overview: Final Default Investment Alternative Regulations (PDF)
3 pages. (Dechert LLP)
Blog: Ways & Means Takes a More Reserved Approach to 401(k) Fees
Excerpt: "I'm going to predict the House Ways & Means Committee will take a less stringent approach to 401(k) fee legislation than their colleagues on the House Education and Labor Committee." (Workforce Management; free registration required)
Retirees May Gain Advantage from Employer Stock Strategy
Excerpt: "Given the growth of employee-employer savings to meet retirement goals, it is common for employees to have a significant amount of employer stock in their qualified retirement plans. [At retirement], most are willing to directly roll over all qualified plan assets into a traditional individual retirement account. A traditional IRA rollover offers avoidance of an immediate income-tax consequence, the retiree remains in control of his or her retirement assets, and the benefits of tax deferral can continue. However, there may be another option available that should be considered, a type of combination approach." (HeraldNewsOnline.com)
Formula 401(k) for Education Costs?
Excerpt: "[F]or the first time, a corporation is planning to provide a 401(k)-type program whereby employees could contribute to an interest-bearing education account. The account, which would be supplemented by company-paid matches, would be used for any professional skill development not related to the employees' existing job. And it's not just any corporation, but the one whose human-capital strategies arguably draw more attention than any other: IBM." (CFO.com)
Will Your Retirement Money Last?
Excerpt: "Standard & Poor's suggests you consider these five risks to your retirement income, including outliving your assets and higher health-care costs" (Standard & Poor's via BusinessWeek)
Avoid Losing the Tax-Deferred Status of Your IRA
Excerpt: "Has your father, or another blood relative, ever asked you to trade securities on behalf of his or her individual retirement account? If so -- and you earned even as little as a $1 commission -- the transaction is considered prohibited under federal tax laws." (TheStreet.com)
Changes Ahead for Almost Half of United Kingdom DC Schemes
Excerpt: "Some 45 percent of U.K. employers with defined contribution (DC) pension schemes are considering making changes to their retirement arrangements." (Watson Wyatt Worldwide)
Revisiting USERRA Requirements in ERISA Plan Documents
Excerpt: "[A new] article provides a very good general review of USERRA as it applies to employee benefits, and is a quick read. The article is a good reminder to take a look at the language in the plan document on USERRA, especially for cross-tested plans, while working on contribution projections for next year." (Pension Protection Act Blog)
Why You Pay Taxes on Social Security Benefits
Excerpt: "The policy argument was that, while workers paid taxes on the amounts they contributed to Social Security, nobody paid taxes on the amounts their employers put in. The employer received a benefit, however -- a reduction in taxable income equal to the amount contributed. Advocates of the change argued that taxes on that money should be paid when it was received, just as taxes are paid on traditional pension checks." (The Washington Post; free registration required)
(e) Policy, Opinion, Advocacy
PSCA Testimony at the Hearing on the Appropriateness of Retirement Plan Fees (PDF)
10 pages. Excerpt: "Fee disclosure and transparency present complex issues. Amending ERISA through legislation to prescribe specific fee disclosure will lock in disclosure standards built around today's practices and could discourage product and service innovation. The DOL has announced a series of regulatory initiatives that will make significant improvements to fee disclosure and transparency." (Profit Sharing/401(k) Council of America)
Fiduciary Focus: Fleecing 403(b) Plan Participants
Excerpt: "The ideal 403(b) plan should (1) operate solely in the interest of plan participants and their beneficiaries for the exclusive purpose of providing them with retirement plan benefits, (2) have transparent costs, each of which is reasonable vis a vis the service provided in return, and (3) feature broadly diversified investment options designed, within a portfolio context, to reduce risk and increase return." (Morningstar)
House Approves Expatriate Tax Provision
Excerpt: "A similar provision is pending in the Senate. The Senate's version would include the present value of qualified retirement plans, 457(b) plans and foreign pension plans (to the extent provided in the regulations) in the expatriate's property and subject it to the mark-to-market tax, rather than to the withholding regime proposed under the House bill." (Watson Wyatt Worldwide)
ASPPA Comments on Technical Corrections to Pension Protection Act (PDF)
9 pages. Excerpt: "There are a significant number of technical and other corrections needed to ensure that the Congressional goals of the PPA are fulfilled and that there is an efficient implementation of the provisions of PPA. Many of these corrections are addressed in the pending PPA technical corrections bill (H.R. 3361), which ASPPA supports. However, ASPPA also recommends that the bill be modified to address the following 9 issues, which are of particular importance to small and medium-sized qualified plan sponsors." (American Society of Pension Professionals & Actuaries)
Policy Brief: Portfolio Theory, Life-Cycle Investing, and Retirement Income (PDF)
6 pages. Excerpt: "There has been much discussion recently about life-cycle funds and their role in providing a secure retirement income for older Americans. These funds, which gradually shift account assets from broad-based stock funds to bond funds as a participant ages, are becoming an important vehicle for retirement savings. This policy brief explores the economic rationale behind the life-cycle approach and the advantages and limitations of life-cycle funds." (U.S. Social Security Administration)
Policy Brief: Considerations for Potential Proposals to Change the Earliest Eligibility Age for Retirement (PDF)
4 pages. Excerpt: "The earliest eligibility age (EEA) interacts with many other Social Security program rules, including the benefit formula and insured status requirements. Proposals to increase the EEA could affect some or all of these other rules depending on how policymakers design the proposal. By using a hypothetical proposal that increases the EEA, this policy brief illustrates how these interations work and discusses the options that policymakers would need to consider." (U.S. Social Security Administration)
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| (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) |
Links to Items on Executive Comp, Benefits in General
Legislation Would Change Tax Treatment of Stock Options
Excerpt: "Senator Carl Levin (D-Michigan) has introduced legislation to change the corporate tax treatment of stock options. Under the Ending Corporate Tax Favors for Stock Options Act (S.2116), companies could not deduct more than the amount they had claimed as an expense against earnings, and the expense would have to be recognized and deducted in the same period. Stock options could no longer be considered performance-based compensation and would be subject to the $1 million compensation limit." (Watson Wyatt Worldwide)
Listing of IRS Published Guidance for January-October 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)
Hewitt Federal Legislation Quick Guide for October 31, 2007, on Human Resources & Employment Law (PDF)
12 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding human resources and employment law. (Hewitt Associates)
Office of Solicitor General Files Amicus Briefs on Scope of Relief and Standing Issues
Excerpt: "The Department of Labor Office of the Solicitor has posted the amicus brief filed in Tullis v. UMB Bank, N.A. wherein the district court, citing the Fourth Circuit's opinion in LaRue v. DeWolff, Boberg & Assocs., 450 F.3d 570, 572 (4th Cir.2006), took a similarly narrow reading of 29 U.S.C. § 1132(a)(3)." (Health Plan Law blog by Attorney Roy F. Harmon III)
Chart: Compensation Costs in State and Local Government, September 2007
Excerpt: "Benefit costs increased 0.7 percent, compared to 1.7 percent in the previous quarter." (U.S. Bureau of Labor Statistics)
Section 409A: What Needs to Be Done Now (PDF)
4 pages. Excerpt: "Many of the transition relief provisions include incentives for early action, in particular: (i) the ability to change payment elections, subject to the 'no acceleration – no deferral rule' and (ii) the ability to 'fix' outstanding stock rights to comply with Section 409A or to replace the stock right with a stock right not subject to Section 409A, both subject to the 'no acceleration – no deferral rule.'" (Holme Roberts & Owen LLP)
Kerry/Emanuel Legislation Would Prohibit Offshore Deferred Compensation
Excerpt: "Under the Offshore Deferred Compensation Reform Act, compensation deferred under a nonqualified deferred compensation (NQDC) plan of a foreign corporation would be treated as taxable income unless there was a substantial risk of forfeiture." (Watson Wyatt Worldwide)
Newly Posted Events
401(k) Plans: Beyond the Basics
in Georgia on November 29, 2007
presented by SunGard Relius
401(k)Plan: Beyond the Basics
in Minnesota on November 14, 2007
presented by SunGard Relius
Newly Posted Press Releases
Don't Ignore Annual Enrollment Process, Says Aon Consulting Worldwide
Aon Consulting
Meritis and FI360 Announce Strategic Affiliation
Fiduciary360 (fi360)
Fringe Benefit Services, Inc. & Professional Benefit Services, Inc. Choose Benefit Informatics' for Online Benefit Plan Solutions
Benefit Informatics
The Online 401k Expands Retirement Network
Online 401k
Index Fund Based 401k Platform Launched
Huntleigh Capital Management, Inc.
Newly Posted or Renewed Job Openings
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Actuarial Benefit Consultant
for Fidelity Investments
in MA, NC, NY
Pension Administrator
for AKT Retirement Plan Services
in CA
Client Data Management Processor
for Milliman, Inc.
in WA
Pension Administrator
for Pension Administration Firm located in Westchester, NY
in NY
Qualified Plan Specialist
for DST Systems
in MO
Retirement Plan Specialist
for Progressive Retirement Plan Services Firm
in IL, TX
401(k) Administrator
for Uniglobal Pension Planning, Inc.
in VA
Retirement Plan Enrollment and Education Specialist
for MBM Advisors, Inc.
in TX
401k Administrator
for Faulk & Winkler, LLC
in LA
Retirement Plan Administrator
for Retirement Plan Services, Inc.
in NC
Entry Level 401 (k) Administrator
for Scholz, Klein & Friends Enlightened Retirement Group, Inc.
in TX
401(k) Plan Administrator
for GHBA, a division of Carroll Enterprises, Inc.
in MA
Employee Benefits Paralegal
for Chang, Ruthenberg & Long
in CA
Plan Relationship Manager
for ePlan Services, Inc.
in CO
Employee Benefits and Human Resources Consultant
for Benefit Consulting Group
in NY
Experienced Employee Benefits Attorney
for Warner Norcross & Judd LLP
in MI
Director of ERISA
for July Business Services
in TX
Handy Links:
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- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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