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| January 14, 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
Hikes in Pension Contributions Loom
Excerpt: "Corporations may be faced with making larger contributions to their defined-benefit pension plans this year, or possibly freezing their plans altogether, if 2008 picks up where a turbulent fourth quarter left off." (Financial Week; free registration required)
Democrats Line Up Behind Retirement Benefits Match Plans
Excerpt: "If any of the leading Democratic contenders wins the presidential election this November, some sort of a federal match proposal stands a strong chance of getting passed into law. Meanwhile, other leading Democratic legislators are jumping on the bandwagon." (Workforce Management; free registration required)
Chicago's Mayor Daley Wants Panel to Solve Pension Crisis
Excerpt: "The comprehensive solution Daley is seeking within 18 months could include everything from benefit reductions and increased employee contributions to a shift away from 'defined benefit' pension plans and toward the 'defined contributions' or 401(k) plans favored by private industry." (Chicago Sun-Times)
It Might Take 10 to 12 Times Salary for Retirement, According to Foundation
Excerpt: "One group, the Retirement Solutions Foundation, says you have to put away 10 to 12 times your salary at retirement to have financial security after your working days are over. But I don't know that there is a single right answer to the question. It depends on how much you spend, how long you live and how much you have." (The Washington Post; free registration required)
West Virginia Retirement Board Loses Appeal for Teacher Plans Merger
Excerpt: "The West Virginia Supreme Court declined to review a lower court ruling over the merger of the state's two retirement systems covering teachers, the Associated Press reported." (PLANSPONSOR.com; free registration required)
State of Maryland Defines 'Domestic Partners'
Excerpt: "Maryland state lawmakers are still debating the overall same-sex marriage issue, but the state now has at least formally defined domestic partners." (PLANSPONSOR.com; free registration required)
(c) Summaries of Guidance; Filed Comments
Overview: IRS Proposed Diversification Rules for Defined Contribution Plans Using Employer Securities
Excerpt: "The regulations are proposed to be effective for plan years beginning on or after January 1, 2009, although plans can rely on the proposed regulations before final regulations go into effect." (Wolters Kluwer Financial Services)
Overview: 401(k) Plans and the New Qualified Default Investment Alternative Regulations
Excerpt: "The Pension Protection Act added new fiduciary protections to ERISA. Under section 404(c)(5), when participants fail to direct investments, fiduciaries have safe harbor protection if investments are defaulted into a QDIA . . . . The most immediate concern is grandfathering capital preservation -- i.e., stable value -- funds as QDIAs." (PLANSPONSOR.com; free registration required)
Overview: New Rules for Minimum and Maximum Funding (PDF)
Page 6 of 8 pages. Excerpt: "As a result of the Pension Protection Act of 2006 (PPA), all of the rules for minimum required contributions and maximum deductible contributions have changed. Beginning in 2008, say goodbye to the Section 412 funding standard account, additional funding charges, and full funding limits. Under Section 430, we meet funding targets, funding shortfalls, target normal costs, and shortfall amortization bases, installments, and charges." (American Academy of Actuaries)
Measuring Assets and Liabilities Under PPA (PDF)
Pages 1, 4-5 of 8 pages. Excerpt: "Although the rules appear to be fairly clear on how to calculate plan liabilities and assets, this isn't the case. . . . There are numerous exceptions to the general statements provided that will be triggered by the size of a plan's population, its funded status, and any applicable transition rule." (American Academy of Actuaries)
2008 Compliance Calendar Checklist for DB/DC/403(b) Plans
Excerpt: "Certain provisions of the Pension Protection Act of 2006 will require plan amendments. Plan amendments should be effective retroactively and will not violate anti-cutback rules if made on or before the last day of the plan year -- beginning on or after January 1, 2009 (or 2011 for governmental plans)." (PLANSPONSOR.com; free registration required)
IRS Provides Updates of Procedures for Issuing Various Plan Guidance
Excerpt: "Internal Revenue Bulletin 2008-1 provides updates and restatements of eight IRS revenue procedures that govern letter rulings, information letters, determination letters, and other guidance regarding employee plans." (PLANSPONSOR.com; free registration required)
The Effect of State-Legalized Same-Sex Marriage on Social Security Benefits and Pensions, Updated Jan. 3, 2008 (PDF)
5 pages. Excerpt: "[U]nder current law, same-sex spouses are not eligible for Social Security benefits because they are unable to meet the gender-based definitions of 'wife' and 'husband' in the Social Security Act and the gender-based definition of 'marriage' established by the Defense of Marriage Act. Federal employee pensions and private-sector pensions regulated by the Employee Retirement Income Security Act (ERISA) are required to provide certain benefits to the spouse of a participant in the event of the participant's death." (U.S. Congressional Research Service)
(d) Trends, Surveys, Research
Now Is the Time to Conduct a DC Plan Assessment
Excerpt: "To stay in control, DC plan sponsors should adopt an ongoing due diligence process that starts by conducting a fiduciary and operational assessment of the DC plan to determine and document its current state. By focusing on the plan's investments, administration, compliance and communications, the sponsors will be able to determine where any weaknesses lie and take steps to correct them." (The Segal Group, Inc.)
Preaching Retirement Realities Helps Workers Appreciate Defined Benefit Plans
Excerpt: "If you have it, flaunt it, especially if 'it' is a defined benefit plan. Dennis Ackley, a guru of employee benefits communication, believes employers with traditional pension plans have to make DB plan communication sound like a valuable reward." (Employee Benefit News; free registration required)
Legal Briefing on LaRue
Excerpt: "Not everyone agrees that a finding for LaRue means the sky is falling. 'As for the impact on employers, I think it will be minimum despite the dire predictions of doom. I don't see this case as opening up any floodgates of litigation. Instead, it should clarify an important part of the ERISA remedial scheme - which is something that is sorely needed,' Alden Bianchi, an attorney for Boston's Mintz Levin, says." (Employee Benefit News; free registration required)
SSGA's Intermediate Bond Fund and Government Credit Bond Funds' Summer 2007 Results for Funds' Owners
Excerpt: "When a conservative investment fund suffers a big loss, who's at fault and who's responsible? That is at the heart of a controversy involving two institutional commingled trust funds offered by State Street Global Advisors (SSgA), a manager of $2 trillion in passive, enhanced, and active strategies in markets all around the world." (PLANSPONSOR.com; free registration required)
Experts Cite Cash Balance Growth As Reason to Adopt Defined Benefit Model
Excerpt: "An increasing interest by employers in cash balance plans has service providers and consultants offering new tools to the sponsor market. John Hancock, a long-time provider of 401(k) plans, announced recently it was wading into the defined benefit space primarily because of increasing interest in cash balance plans from professional-dominated firms and small companies." (Employee Benefit News; free registration required)
Haven't Saved For Retirement? Don't Wait Another Day
Excerpt: "If you're a fiftysomething who hasn't saved a lot, you probably need to 'get your head out of the sand' and figure out what life after 65 is going to look like, says Book of Lenox Advisors. You might need to work longer so you don't spend down your savings. That means not retiring at 62, when you first qualify for Social Security, but rather waiting until 65. Or keeping a part-time job for years into the future, he says." (USA TODAY)
(e) Policy, Opinion, Advocacy
Opinion: Thorough Knowledge of 401(k)'s But a Dream for Participants
Excerpt: "Millions of U.S. workers who under new Labor Department rules are automatically enrolled in their companies' 401(k) plans and invested in 'default' diversified portfolios of stocks and bonds will actually take the time to read over plan documents and understand their investments." (Humberto Cruz via Chicago Tribune)
NBER Working Paper: Footnotes Aren't Enough: The Impact of Pension Accounting on Stock Values
Excerpt: "Some research has suggested that companies with defined benefit (DB) pensions are sometimes significantly misvalued by the market. This is because the measures of pension cost and pension net liabilities embedded in financial statements, taken at face value, can provide very misleading picture of pension finances. The more pertinent information on pension finances is relegated to footnotes, but might not receive much attention from portfolio managers." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
Improving Corporate Governance at CalPERS
Excerpt: "CalPERS proposed 33 resolutions last year -- more than twice the number filed in 2006. A record six came to a vote, snaring an average of nearly 63% of votes cast, according to ISS Governance Services, the proxy-advisory unit of RiskMetrics Group Inc. CalPERS expects to file as many resolutions this year as it did in 2007. Mr. Johnson broke another record by hanging 11 companies out to dry on CalPERS' 2007 'Focus List,' a tally of underperforming companies that the fund has put out annually since 1992." (The Wall Street Journal)
Opinion: Truth Is a Risk Management Tool in Retirement Planning
Excerpt: "While the law does not require most of the services and information discussed in this article (at least not yet; remember, the prudent man rule is based on prevailing circumstances -- that is, it evolves), my experience as a lawyer is that, where situations are well-managed and the results are positive, there is little to fear. Fiduciaries will do well while doing good." (PLANSPONSOR.com; free registration required)
Opinion: Pensions for Everyone
Excerpt: "At the very least, we need to make sure that every worker has an easy way to save for retirement. We might, for example, let state government entities create 'State-K' pension plans for employers that do not already have pension plans. Or we could require that those employers offer payroll-deduction IRAs to their workers. Even with universal access, however, many workers simply will not save for retirement. In the end, we will need a mandatory universal pension system." (Jon Forman via Los Angeles Newspaper group)
Opinion: Focus on Retirement's 'Duration'
Excerpt: "[O]ne of the most important aspects of planning for a financially secure retirement is making some attempt to predict just how long that retirement is going to be. There are simple ways to deal with this complex and sensitive issue, not least of which the cogitations of actuarial science imbedded in those ubiquitous retirement projection calculators." (PLANSPONSOR.com; free registration required)
Job Market Paper: Corporate Governance Objectives of Labor Union Shareholders (PDF)
44 pages. Excerpt: "I examine the proxy votes of AFL-CIO pension funds in director elections of 503 companies from 2003 to 2006. Using the 2005 AFL-CIO breakup as a source of exogenous variation in the union affiliations of workers across firms, I find that AFL-CIO affiliated shareholders become significantly more supportive of director nominees once the AFL-CIO no longer represents workers at a given firm." (Ashwini K. Agrawal, University of Chicago, via HR Policy Association)
Links to Items on Executive Comp, Benefits in General
Modeling Equity Compensation (PDF)
Pages 4-5 of 8 pages. Excerpt: "Since Financial Accounting Standard 123R came on the scene over a year ago, the need for companies to accurately value the share-based incentives they award their employees has exploded. The standard, which requires expensing the grant date fair value of awards, sets the groundwork for valuations, but its complexity often presents companies with complicated choices." (American Academy of Actuaries)
Overview: OPEB Liabilities Under GASB (PDF)
Pages 2-3 of 8 pages. Excerpt: "[A chart in the target article] compares Financial Accounting Standards Board (FASB) Statement of Accounting Standard (SFAS) 106 and GASB 45." (American Academy of Actuaries)
FASB Reform: Smooth Sailing or Rough Waters? (PDF)
Page 8 of 8 pages. Excerpt: "There has been widespread dissatisfaction with current financial accounting and disclosure standards in Financial Accounting Standard (FAS) 87 and FAS 106, particularly from investors and other users of financial statements. The Financial Accounting Standards Board (FASB) is in the middle of a two-phase project to reform pension accounting." (American Academy of Actuaries)
Investments and Markets: 2008's Top Benefits Topics
Excerpt: "Public pension funds and retirement plan investors face a challenging year. Here are some key issues for the coming months, including investment return targets, sovereign funds, recession vs. correction, oil, interest rates, the Fed, muni bonds, alternative investments, China, the presidential election cycle and housing . . . ." (Congressional Quarterly, Inc.)
NBER Working Paper: Stock-Based Compensation and CEO (Dis)Incentives
Excerpt: "We find that a firm-specific compensation package based on both stock and earnings performance instead induces a combination of high effort, truth revelation and optimal investments. The model produces numerous predictions that are consistent with the empirical evidence." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
GM / UAW Negotiating More Buyouts
Excerpt: "General Motors Corp. is close to an agreement with the United Auto Workers on another round of buyout and early retirement offers to cut the number of workers in jobs banks and clear openings for workers hired at lower-tier wages, a top company official said . . . ." (AP via The New York Times; free registration required)
Notes on the 2008 Annual Meeting Season (PDF)
12 pages. Excerpt: "In this issue, we are including discussions concerning the SEC's 2006 executive compensation disclosure rules, the new e-proxy rules as well as other updates and reminders that will help you prepare for your 2008 annual meeting and keep you abreast of the latest developments from the SEC, New York Stock Exchange, NASDAQ, and Institutional Shareholder Services." (Snell & Wilmer L.L.P.)
Newly Posted Events
February Web Seminar: Section 1235 Plans Legislative Update
Nationwide on February 28, 2008
presented by TRI-AD
Governmental Benefits Seminar
in Pennsylvania on February 5, 2008
presented by Rhoades & Wodarczyk Law Firm
January Web Seminar: Open Enrollment- Ten Tops to Make it Better
Nationwide on January 31, 2008
presented by TRI-AD
Newly Posted Press Releases
ExpertPlan Expands Payroll Foothold with 5 New Payroll Companies
ExpertPlan
Elaine Sarsynski to Head Retirement Services at MassMutual
MassMutual
Wachovia Introduces New Product That Makes Savings Easy And Automatic For Consumers
Wachovia Corporation
SEI Selects Ascensus to Provide Retirement Plan Recordkeeping
Ascensus
Newly Posted or Renewed Job Openings
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Employee Benefits Associate Washington Office
for Morgan, Lewis and Bockius LLP
in DC
Employee Benefits Administration
for Primary Consulting, Inc.
in ANY STATE
Customer Service Representatives I
for Great-West Corporate
in KS
Operations Specialist
for The CIP Group
in MA
Defined Contribution Retirement Plan Administrator
for Medium-Sized Company
in NC
Retirement Compliance Testing Manager
for Vanguard
in PA
Senior Compliance Testing Consultant
for Vanguard
in PA
Relationship Manager - Defined Contribution Plans
for Vanguard
in AZ
ERISA Consultant
for Vanguard
in AZ
Compliance Account Manager
for First Niagara Benefits and Consulting Group
in NY
Plan Sponsor Relationship Manager
for T Rowe Price
in MD
Benefits Consultant
for Carilion Clinic
in VA
Pension Administrator
for R-Tech Consultants, Inc.
in CA
Primary Administrator for Qualified Retirement Plans
for Kidder Benefits Consultants, Inc.
in IA
Pension Consultant
for Mercer Advisors
in CA
Pension and 401(k) Plan Consultant
for Pacific Coastal Pension Services
in CA
Senior Advisor Disease Mgmt & Wellness Prevention
for NRECA
in VA
TPA Regional Manager - Western Region
for Transamerica Retirement Services
in CA
401(k)/Pension Administrator
for Abar Pension Services, Inc.
in NJ
Legal / Compliance Specialist
for Beneco, Inc.
in AZ
ERISA Benefits Attorney
for DATAIR Employee Benefit Systems, Inc.
in IL
Paralegal/Retirement Document Support
for DATAIR Employee Benefit Systems, Inc.
in IL
Client Services Associate
for Pinnacle Financial Group
in MA
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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