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| November 14, 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
Text of Final IRS Regs Defining 'Salary Reduction Agreement' for FICA Purposes, Including One-Time 403(b) Elections (PDF)
12 pages. Excerpt: "The final regulation provides guidance to employers (public educational institutions and section 501(c)(3) organizations) purchasing annuity contracts described in section 403(b) on behalf of their employees. . . . This regulation finalizes the temporary and proposed regulation without change. The final regulation provides that the term 'salary reduction agreement' includes . . . a plan or arrangement whereby a payment will be made if the employee elects to reduce his or her compensation pursuant to a one-time irrevocable election made at or before the time of initial eligibility to participate in such plan or arrangement (or pursuant to a similar arrangement involving a one-time irrevocable election), and . . . a plan or arrangement whereby a payment will be made if the employee agrees as a condition of employment (whether such condition is set by statute, contract, or otherwise) to make a contribution that reduces the employee's compensation." (Internal Revenue Service)
(b) News
Texas Teacher Retirement System to Study Governor's Request to Sell Shares of Companies with Links to Iran
Excerpt: "Next year, the state's two largest public pension funds could start selling shares they hold in companies doing business in Sudan and Iran. Trustees of the $113 billion Teacher Retirement System said Friday that they would study Gov. Rick Perry's request to sell shares of companies with links to Iran." (The Austin American-Statesman)
Law Firm Abolishes Retirement Age of 70
Excerpt: "Partners in the law firm Kirkpatrick & Lockhart Preston Gates Ellis have thrown out the firm's mandatory retirement age of 70. A Legal Times news report said the firm felt the move was in keeping with the latest employment practices regarding older lawyers." (PLANSPONSOR.com; free registration required)
Oral Argument Date Set for Supreme Court LaRue ERISA Case
Excerpt: "The Legal Information Institute (LII) of Cornell Law School is reporting that oral argument has been set in the ERISA remedies case of LaRue v. DeWolff, Boberg & Assoc. (06-856) for Monday, November 26th . . . . At stake, the scope of remedies available in the 401(k) plan context under ERISA Sections 502(a)(2) and 502(a)(3)." (Workplace Prof Blog)
(c) Summaries of Guidance; Filed Comments
Overview: Proposes Guidance on More PPA Provisions Relating to Automatic Enrollment
Excerpt: "Coming on the heels of the Department of Labor's final qualified default investment alternative (QDIA) regulations, the IRS on November 7, 2007 issued proposed guidance on other key Pension Protection Act (PPA) provisions designed to encourage 401(k), 403(b), and governmental 457 plan sponsors to adopt automatic enrollment arrangements. 72 FR 63144 (November 8, 2007). The [target page] is a high-level summary of the IRS's proposed regulations; a more in-depth analysis will be published in a future edition of Washington Bulletin." (Deloitte via BenefitsLink.com)
Overview: Automatic Contribution Arrangements -- Proposed Regulations (PDF)
6 pages. Excerpt: "This Legal Alert will highlight and summarize key provisions of the Proposed Regulations relating to both Qualified and Eligible Automatic Contribution Arrangements, noting items that clarify the rules relating to qualified contribution levels, the design-based safe harbor from ADP and ACP testing, and the rules for withdrawing automatic contributions." (Sutherland Asbill & Brennan LLP)
Overview: Guidance on Actuarial Assumptions for Defined Benefit Plan Lump Sums (PDF)
2 pages. Excerpt: "The PPA amended Code Section 417(e) to replace the 30-year Treasury rate with the long-term corporate bond rate, subject to a five year phase-in period. The Revenue Ruling makes clear that the timing for determining the rate has not changed." (Seyfarth Shaw LLP)
Overview: Section 204(h) Notice Not Required in 2007 for Certain Pension Protection Act Amendments (PDF)
3 pages. Excerpt: "On Nov. 6, 2007, the Internal Revenue Service announced that proposed regulations to be issued under Section 4980F of the Internal Revenue Code of 1986 (the Code), and Section 204(h) of the Employee Retirement Income Security Act of 1974 (ERISA), will address the advance notice requirements for certain required amendments under the Pension Protection Act of 2006 (the PPA)." (Pillsbury Winthrop Shaw Pittman LLP)
Final QDIA Regs Create Implementation Questions
Excerpt: "In a recent PLANSPONSOR Plugged In Web cast, Lisa Alexander, Chief, Division of Coverage, Reporting & Disclosure in the Office of Regulations and Interpretations at the Employee Benefit Security Administration of the Department of Labor, said her office is working on a Q&A document to assist in implementing the regulations." (PLANSPONSOR.com; free registration required)
Preparing for 2008 -- DB Funding under PPA
Excerpt: "In this article, we review generally the challenges PPA compliance presents for plan sponsors, discuss what guidance has been published and, critically, what guidance has not been published, and then briefly review some strategic considerations." (JPMorgan)
Defined Benefit Plan Liabilities: Picking the Yield Curve
Excerpt: "The IRS recently provided guidance on the calculation of the yield curve, together with numbers for August - October, 2007. In this article, we analyze the advantages and disadvantages of various yield curve 'versions.'" (JPMorgan)
Hewitt Federal Legislation Quick Guide Updated as of November 7, 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)
Pensions and Retirement Plan Enactments in 2007 State Legislatures
Excerpt: "This report summarizes selected pensions and retirement legislation that state legislatures enacted in 2007, some 2006 legislation not reported last year, and a few items of particular interest that failed to pass or were vetoed. Bills summarized . . . have been enacted into law unless there is a specific indication to the contrary. Not all legislation had been chaptered at the time this report was compiled. Some legislatures remain in session at the time of publication, October 2007." (National Conference of State Legislatures)
(d) Trends, Surveys, Research
Using 401(k) for Mortgage Payment Can Worsen Plight
Excerpt: "Some companies that manage 401(k)s for employers report an increase in loans or hardship withdrawals from plans this year. Principal Financial, for instance, says hardship withdrawals to stave off eviction or foreclosure doubled in August from July." (The Baltimore Sun; free registration required)
Emap in Pensions Buy-Out Ahead of Break-Up
Excerpt: "Emap said its two largest defined benefit pension plans were being bought by insurance company Paternoster UK Ltd. This will lead to Emap making a final cash contribution of £40 million ($82.76 million) into its schemes in November." (Business Insurance)
European Employers Cite Cost Savings in Shift Away from DB Pension Plans
Excerpt: "Over half of the companies in the European survey group reported launching a new type of retirement plan in the last five years, nearly always a DC plan. Across Europe, fewer than one in seven employers now offer new recruits a traditional DB plan. However, primarily due to labor relation considerations and legal constraints, two-thirds of U.K. employers and over one-third of German employers still have DB plans for their existing employees." (Towers Perrin)
Pensions Issues in European Mergers and Acquisitions
Excerpt: "[Disclosure of pension liabilities is] of growing concern across Europe, which is experiencing both increased longevity and enhanced disclosure requirements. However, the particular issues are very much country-specific, and it is important to be aware of what particular issues may arise in any specified jurisdiction on an international M&A transaction. The purpose of this Commentary is to give a brief overview of the pension provision in a number of European jurisdictions and the issues to be alert to in a transaction involving pension plans in one or more of these jurisdictions." (Jones Day)
Hartford Finds a World of Retirement Savings Confusion
Excerpt: "Consumers around the world are having a hard time saving for retirement and figuring out where to go for information. Lizabeth Zlatkus, co-chief operating officer of Hartford Life, Simsbury, Conn., an arm of Hartford Financial Services Group Inc., Hartford, presented that finding Monday in New York, at an international insurance meeting . . . ." (The National Underwriter Company; free registration or paid subscription required)
Research Report: Preparation for Retirement -- The Haves and Have-Nots
Excerpt: "AARP conducted a survey to gage the level of retirement preparedness of those households that participate in an employer-sponsored defined contribution plan versus those that do not have access to a plan. This survey, which compares the 'Haves' (working households that participate in a 401(k) or 403(b) plan) with the 'Have-Nots' (working households that lack access to a retirement savings plan at work) finds that . . . ." (AARP)
The Benefits of a Pension, for Now and Beyond
Excerpt: "One tool that well-off business people can use is a defined-benefit pension plan authorized by Section 415 of the tax code. Karen Shapiro, chief executive of Dedicated DB, a San Francisco firm that specializes in setting up and administering such plans, said that the effort and expense of doing so was daunting, but that for a surprising number of small-business owners, the tax benefits make it worthwhile." (The New York Times; free registration required)
'Consumption Smoothing' Your Retirement Plan
Excerpt: "Mr. Kotlikoff and his colleagues have developed and market a tool called ESPlanner (www.ESPlanner.com) based on economists' theory of 'consumption smoothing' -- the idea of maintaining a relatively level living standard over your lifetime. A consumption-smoothing model focuses on your likely spending and saving needs over time, accounting for temporary big outlays and a changing household structure (for instance, once the kids leave home, your expenses change). It aims to make sure your living standard remains steady, rather than suffering jolts as you try to sock away, say, 20% of your income every year no matter what comes up." (The Wall Street Journal Online)
(e) Policy, Opinion, Advocacy
Compilation of Current News and Articles on Fee Disclosure
Excerpt: "In the past year or so, Congress and government regulators have increasingly taken an interest in assessing fee disclosure issues, such as what fee information is required and how the information is disbursed. A primary concern amongst lawmakers is that plan participants have enough information about the fees and expenses they are being charged, so that they are able to make the best investment choices for themselves." (ICMA-RC)
Opinion: Levin's Stock-Options Tax Bill Careens Off-Track
Excerpt: "Under Levin's proposal, we are seemingly going to get justice at last, with federal tax revenue going up because corporate tax deductions will go down. But that's unlikely because a company now gets a tax deduction only if the option goes into the money and is exercised by the optionee. Under Levin's approach, any company granting an option would get a tax deduction, even though the option later expired underwater." (Bloomberg News)
Opinion: Clear Participant 401k Fee Communication is Inevitable and Necessary
Excerpt: "Most participants think 401ks are free. That's probably because employees are accustomed to seeing price tags on things they buy - 401ks don't have price tags. A recent AARP survey found that 65 percent of 401k participants believed they pay no fees for their investments. Another 18 percent don't know if they pay. None of this comes as a surprise to industry leaders." (Investment News via 401khelpcenter.com)
American Benefits Council Comment on Proposed Regulation on Selection of Annuity Providers (PDF)
Excerpt: "In response to your proposed regulations, the Council informally surveyed a portion of our plan sponsor members; the responses received indicated that Plan sponsors are examining various ways of helping participants address concerns about longevity though not many appeared to be committed to adding annuity options at this time. However, some expressed an interest in incorporating more defined benefit plan type features into their defined contribution plans in the future." (American Benefits Council)
Opinion: The Preservation of (Excess) Benefits
Excerpt: "I have been working since April 2007, to bring to light a little known pension problem that is brewing and will soon reach a boiling point. The problem is the Preservation of Benefits Plan, but most San Diego taxpayers have no idea that the city of San Diego and the San Diego City Employees' Retirement System (SDCERS) Board are attempting to fund a second retirement plan to pay current and future retirees excess retirement benefits." (voiceofsandiego.org)
Links to Items on Executive Comp, Benefits in General
Expensing Executive Stock Options: The Agency Problem and Structure of Management Compensation
Excerpt: "This research examines the valuation effect and the factors associated with firms' decisions to expense executive stock options, as well as determinants of market reaction to expensing announcements. The likelihood of expensing is found to be higher for firms subject to fewer agency problems and having a 'share-holder friendly' corporate governance structure. These results suggest that the decision to expense is heavily influenced by the extent of discipline, monitoring, and how closely the interests of management and stockholders are aligned." (Social Science Research Network)
Hewitt Federal Legislation Quick Guide for November 7, 2007, on Human Resources & Employment Law (PDF)
13 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)
Newly Posted Events
18th Annual Employee Benefits Conference
in Florida on November 29, 2007
presented by Greenberg Traurig, PA
2008 Chicago Advanced Pension Conference
in Illinois on September 3, 2008
presented by SunGard Relius
2008 Orlando Advanced Pension Conference
in Florida on February 6, 2008
presented by SunGard Relius
Are You Doing Enough To Protect Your Employees' Privacy?
Nationwide on December 11, 2007
presented by Thompson Interactive, A Division of Thompson Publishing Group
ASPPA Annual Conference Highlights
in Massachusetts on November 29, 2007
presented by ASPPA Benefits Council (ABC) of New England
Cafeteria Plan Regulations and Nondiscrimination Testing- Learn How the New Rules Will Affect You
Nationwide on December 12, 2007
presented by Thompson Interactive, A Division of Thompson Publishing Group
Forming a Successful Partnership With Your RIA and TPA
Nationwide on November 29, 2007
presented by TRI-AD
HIPAA Privacy and Security Training for Rookies: Basic Training for Individuals Handling Group Health Plan PHI
Nationwide on December 6, 2007
presented by Employee Benefits Institute of America (EBIA)/Thomson Tax & Accounting
Recognizing and Preventing FMLA Abuse- What You Need to Know
Nationwide on December 6, 2007
presented by Thompson Interactive, A Division of Thompson Publishing Group
Shifting Retiree Health Benefits from Employers to VEBAs
Nationwide on December 6, 2007
presented by ABA Joint Committee on Employee Benefits
Newly Posted Press Releases
Awards for Leadership in Health System Reform Presented by the National Business Coalition on Health
National Business Coalition on Health
National Business Coalition on Health Recognizes Health Plans for Efforts to Improve Community Health
National Business Coalition on Health
MassMutual Study: Including Fixed Income Annuity in a Retirement Income Portfolio May Increase Long-Term Wealth as Well as Retirement Income Security
MassMutual
Legal Advantage, LLC Announces California Expansion to Further Solidify Position as Premier Provider of Legal Support and Document Review Services
Legal Advantage, LLC
'Traditional Retirement' at Age 65 Has Been Retired According to New Poll of U.S. Voters Age 50 and Over
Experience Wave
Health Alliance Medical Plan Joins Value-Based movement
Center for Health Value Innovation
Newly Posted or Renewed Job Openings
(Post a Job | View All Jobs |
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In-House Counsel, Senior Benefits / Erisa Attorney
for Bristol-Myers Squibb Company
in NJ
Pension Administration Services Supervisor
for Milliman, Inc.
in TX
Benefits Analyst
for Scripps Health
in CA
Attorney -- In-house Non-Profit; Tax-exempt Funds
for 1199SEIU Benefit and Pension Funds
in NY
Plan Administrator
for The Kagan Company
in CA
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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