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January 4, 2008

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

State Street Corp. Is Sued Over Pension Fund Losses
Excerpt: "The State Street Corporation, which manages $2 trillion for pension funds and other institutions, ousted a senior executive . . . and said it would set aside $618 million to cover legal claims stemming from investments tied to mortgage securities." (The New York Times; free registration required)

Law Amended to Shield Tax-Exempt Group Investors
Excerpt: "Pension funds, university endowments and other organizations that are exempt from paying taxes will no longer be ensnared by a law intended to combat two notorious corporate tax shelters. President Bush signed an amendment . . . to the 2004 law, providing relief for investment partnerships whose investors include tax-exempt entities." (The New York Times; free registration required)

(c) Summaries of Guidance; Filed Comments

Overview: DOL Finalizes Qualified Default Investment Alternative Regulation
Excerpt: "The safe harbor generally allows three types of QDIAs: life-cycle or targeted-retirement-date funds, balanced funds and professionally managed accounts. The final regulation took effect December 24, 2007." (Watson Wyatt Worldwide)

Overview: Essentials of Automatic Contribution Arrangements
Excerpt: "The recently-released final regulations on qualified default investment alternatives ('QDIAs') distinguish between an automatic contribution arrangement ('ACA') defined under ERISA §514(e)(2) and a 'non-statutory' ACA, which does not satisfy one or more of the statutory ACA requirements (typically, where the plan does not satisfy the QDIA investment rules) but still is entitled to ERISA's preemption of inconsistent state laws." (SunGard Corbel LLC)

Overview: 403(b) Universal Availability
Excerpt: "Universal availability has always provided 403(b) plans with an advantage over 401(k) plans. Specifically, there is no ADP testing on a 403(b) plan because everyone is universally eligible to defer. Prior to the final regulations, Notice 89-23 had spelled-out a list of those who could be excluded. The final regulations incorporate and change the rules of this notice." (McKay Hochman Co., Inc.)

Overview: PBGC's Flat-Rate Premium Increase, Termination Premium, and Small Employer VRP Cap (PDF)
Excerpt: "PBGC premiums are likely to move higher for all plans in terms of the flat-rate premium and for many plans in terms of the VRP. Understanding the everchanging premium rules will help practitioners properly advise their clients in this area of ever-increasing complexity and importance." (Keightley & Ashner LLP)

Overview: PBGC Update of Regs on Premiums to Reflect DRA and PPA
Excerpt: "The regulations implement changes to the law made by the Deficit Reduction Act of 2005 (DRA; P.L. 109-171) regarding plan years beginning, and terminations occurring, after 2005; and made by the Pension Protection Act of 2006 (PPA; P.L. 109-280) regarding plan years beginning after 2006." (Wolters Kluwer Financial Services)

Overview: Cross-Tested Prototype Plans
Excerpt: "Cross-tested plans will be available as prototype plans for the first time ever in 2008. In order to accommodate this, the IRS has created plan document language and rules for a cross-tested prototype. The IRS LRM limited the plan's HCEs to 25 different allocation rates. While unexpected, we do not see any real problem with this limit." (McKay Hochman Co., Inc.)

Overview: Firms Must Allow Non-Spouse Beneficiaries to Transfer Retirement Plan Funds Directly to Inherited IRA
Excerpt: "The Pension Protection Act of 2006 (PPA 2006) included a provision that would permit the non-spouse beneficiaries of company retirement plans to do direct transfers from the plans to properly titled inherited IRAs. This provision allows these beneficiaries to take stretch distributions over their lifetimes, instead of being subject to the harsh payout rules of most company plans. Originally the IRS said this provision, effective in 2007, was not mandatory for plans, but the agency has changed its position and made the provision mandatory beginning in 2008." (Financial Planning and SourceMedia, Inc.)

Chart: Automatic Contribution Arrangement Characteristics (PDF)
2 pages. Excerpt: "[The chart compares] the differences and similarities between and among these arrangements." (SunGard Corbel LLC)

(d) Trends, Surveys, Research

UBS Says Defined Benefit Plans' Funding Ratio Drops in Q407
Excerpt: "Pension funding ratios fell 8% in the fourth quarter of 2007, according to the latest quarterly US Pension Fund Fitness Tracker from UBS Global Asset Management." (; free registration required)

Educating Advisors on Retirement Consulting in the PPA Era
Excerpt: "This year . . . may prove eventful on the fiduciary front, as industry professionals work to understand and implement the various laws and regulations of recent years. In one such effort, Fiduciary360 and Linsco/Private Ledger have joined together to educate advisors on their responsibilities under the Pension Protection Act (PPA)." (Financial Planning and SourceMedia, Inc.)

Providing Value to Sponsors of Retirement Plans
Excerpt: "The Pension Protection Act, signed into law by President Bush in August 2006, provides safe harbors for the sponsor of a qualified retirement plan if the sponsor follows the necessary procedures to implement the limited protections of section 404(c) of the Employee Retirement Income Security Act of 1974 and a qualified default investment alternative. These safe harbors protect a plan sponsor against certain risks at the participant level of decision-making. While that's nice, it does nothing to reduce or mitigate the inherent risks at the plan level of decision-making." (Morningstar)

U.K. Companies Cutting Pension Benefits, According to Study
Excerpt: "Over a third of British companies with defined-benefit pension schemes plan to either close them to new members or limit their benefits over the next five years, an industry body said . . . ." (Reuters via Business Insurance)

(e) Policy, Opinion, Advocacy

The 401(k) Fee Flimflam
Excerpt: "Members of Congress, the Department of Labor, and financial experts say some companies that manage 401(k) plans are siphoning off billions in excessive fees. Because the fees are extracted before investment returns are reported, buried in 'bundled services,' or not disclosed at all, employers may not even be aware of the true costs of their plans, experts say." (Yahoo! Finance)

Opinion: Decision in Cash Balance Conversion Case May Have Missed the Boat
Excerpt: "The 1st Circuit Court of Appeals has delivered a very interesting opinion involving a grab bag of cash balance conversion issues. In Gillis v. SPX Corp. Individual Acct Retirement Plan, No. 07-1777 (Dec. 19, 2007), the 1st Circuit affirmed the district court's granting of summary judgment in favor of the plan sponsor, stating that they found neither of the participant's arguments persuasive." (Pension Protection Act Blog)

Sponsored by: University Conference Services

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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

Cost of Production Not Reason for TPA Firm to Not Produce Documents
Excerpt: "Even though the Court found no rational basis for the TPA firm's storage system, and it found that retrieving records from that system was burdensome, the Court still ordered the TPA firm to produce the electronically stored records. With the TPA firm now retrieving those records pursuant to a Court order, it probably wishes that their electronic storage system was more rational and less burdensome." (Pension Protection Act Blog)

Reminder: January 31 Deadline for Information Statements for Incentive Stock Options and ESPPs (PDF)
3 pages. Excerpt: "Section 6039 of the Internal Revenue Code requires that corporations provide a written statement to each current and former employee who receives stock pursuant to the exercise of an incentive stock option or who transfers for the first time stock received under an employee stock purchase plan (ESPP). The statement must be provided by January 31 of the year following the calendar year in which the stock transfer was made. The Tax Relief and Health Care Act of 2006 amended section 6039 to further require corporations to file an expanded information return with the Internal Revenue Service." (Pillsbury Winthrop Shaw Pittman LLP)

Survey Finds Firms Will Retain Their Executive Defined Contribution and Defined Benefit Plans
Excerpt: "A majority of employers have no intention of terminating their non-qualified executive retirement plans due to final Internal Revenue Code rules governing these arrangements, according to a survey released by Buck Consultants." (; free registration required)

Newly Posted Press Releases
(Post Yours!)

Consumer Advocates to CA Legislative Analyst: Consider Massachusetts Financial Meltdown in Review of Health Care Legislation
Foundation for Taxpayer and Consumer Rights

The LoneStart Wellness Initiative Pioneers a Powerful New Trend in Employee Wellness: It's Called Personal Responsibility

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Pension Administrator
for Preferred Pension Planning Corporation
in NJ

Director of ERISA
for July Business Services
in TX

Supervisor of Benefit Plan Administration
for The Guardian Insurance Company
in NY

Plan Architect-50018765
for MassMutual Financial Group
in MA

Pension Administrator
for Pension Professionals, Inc.
in AZ

Associate Plan Administrator
for Alliance Benefit Group
in MO

CRTNJ - Manager Implementation Services
for CitiStreet
in NJ

CRTMA - Senior Business Analyst -Implementation Services
for Citi
in MA

401(k) & Pension Customer Service Representative
for Financial Services Firm
in NY

Pension Consultant
for Standard Insurance Company
in KS

Pension Consultant
for Standard Insurance Company
in TX

Enrolled Actuary
for Schloss & Co., a BenefitStreet company
in NY

Defined Contribution Consultant
for Schloss & Co., a BenefitStreet company
in NY

Vocational Case Manager
for Standard Insurance Company
in OR

Employee Benefits Counsel
for Air Products and Chemicals, Inc.
in CT, DC, DE, MA, MD, ME, NH, NJ, NY, PA, RI, VT

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