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January 29, 2008

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


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[Guidance Overview] Action Steps for Implementing 401(k) Auto-Enrollment (PDF)
4 pages. Excerpt: "Plan sponsors must build a sound administration process for automatic enrollment and annual increases. There are many considerations: [1] You must track who is automatically enrolled; [2] If you already have automatic increases, you may need to audit existing employees and start tracking who was automatically enrolled; [3] If you want your recordkeeper to track automatic enrollments, you will need to work out the tracking process with them; [4] Once an employee affirmatively elects a contribution amount (even if zero), they must be taken off of the automatically enrolled listing . . . ." (TRI-AD)

Target-Date and Balanced Funds Are Main Default Options for Plans, But Which One Is Better?
Excerpt: "[During] the 48-year period from 1960 to 2007 . . . [t]he annualized return of the 60/40 balanced fund was 9.26% versus 9.59% for the target-date fund. " (Financial Planning)

Many Federal Thrift Savings Plan Participants Selling Off Stocks
Excerpt: "Whether the investors were smart and cut potential losses or shortsighted selling low when they should have been buying 'on sale' stocks remains to be seen." (Washington Times)

Fees on 401(k)s Rocking the Baby Boomers; Flawed Disclosure
Excerpt: "What most of these workers don't know is that fees, rebates and revenue-sharing agreements among employers, 401(k) administrators and mutual funds -- many of them buried in the fine print or not disclosed at all -- are slowing the growth of their nest eggs. The U.S. Department of Labor lists 17 distinct 401(k) fees, including ones for record keeping, legal services and toll-free telephone numbers. Hidden fees of 1 percent can reduce a worker's 401(k) returns by about 15 percent over 30 years . . . ." (Bloomberg)

Workers Should Protect 401(k) in Turbulent Times
Excerpt: "Don't be tempted to stop saving or cash out your retirement accounts. Take these four steps instead." (Kiplinger)

Retirement Distribution Products Confuse Consumers, Study Shows
Excerpt: "Less than 20% of those surveyed said they were 'very familiar' with four approaches for setting up retirement income payments: immediate pay annuities, systematic-withdrawal plans, structured-bond portfolios and laddering certificates of deposit." (Investment News)

The Role of IRAs in U.S. Households' Saving for Retirement (PDF)
4 pages; includes chart showing proportion of investments in mutual funds, bank and thrift deposits, life insurance companies, and securities directly held through brokerage accounts. (Investment Company Institute)

Appendix to Investment Company Institute Study: Additional Data on IRA Ownership in 2007 (PDF)
17 pages. Excerpt: "The January 2008 issue of Fundamentals covers Individual Retirement Account (IRA) ownership in 2007. The report highlights data collected by the Investment Company Institute in a recent survey of households owning IRAs. This Appendix provides supplementary tables with additional detail for the January 2008 Fundamentals." (Investment Company Institute)

Senate Passes Bill on Roth Arrangements in 457 Plans
Excerpt: "Differences between the House and Senate bills will have to be resolved in a conference, which is expected to take place early in 2008. The fact that the Roth 457 provision raises revenue for the Federal Treasury greatly increases its prospects for enactment in this or another bill." (ICMA-RC)

Study Compares Pensions of 85 Public Employer Retirement Plans
Excerpt: "The Retirement Research Committee of the state of Wisconsin has released its most recent biennial study of 85 large public employer retirement systems throughout the country. At least one statewide public retirement system in every state is included in the study. The comparison includes requirements for normal and early retirement, vesting, employee and employer contributions, cost-of-living adjustments and ad hoc postretirement adjustments, and benefit formulas." (CCH Pension)

Study Reveals Gender Gap in Pension Benefits
Excerpt: "The study by the Employee Benefit Research Institute in Washington found that 44.6 percent of men age 65 and older received an employment-based pension during 2006, with a median benefit of $17,200 annually. By contrast, only 28.4 percent of women received a pension, with a median benefit of $11,142 a year." (Workforce Management)

Planning and Financial Literacy -- How Do Women Fare?
Excerpt: "Many older US households have done little or no planning for retirement, and there is a substantial population that seems to undersave for retirement. Of particular concern is the relative position of older women, who are more vulnerable to old-age poverty due to their longer longevity." (National Bureau of Economic Research)

A Framing Explanation of the Under-Annuitization Puzzle
Excerpt: "We posit that consumers evaluate annuity products using a narrow 'investment frame' that focuses on risk and return, rather than a 'consumption frame' that considers the consequences for lifelong consumption. Under an investment frame, annuities are quite unattractive, exhibiting high risk without high returns. Survey evidence supports this hypothesis . . . ." (National Bureau of Economic Research)

Liability Indexes - 'Caveat Emptor' (PDF)
12 pages. Excerpt: "The objective of a pension plan should be to fund the benefits at the lowest cost to the plan and with minimal volatility in contributions and the funded ratio. Indeed, many plans have this stated as investment policy and even written into state constitutions. Such an objective would require over time a shift in asset allocation towards a matching of assets vs. liabilities to reduce such volatility and costs. To match liabilities on a present value basis should require a liability index or benchmark that accurately and frequently calculates the market value of liabilities such that the economic funded ratio can be monitored." (Ryan ALM, Inc.)

Maybe Those Who Practice Socially Responsible Investing Should Settle for Lower Returns - and More Satisfaction
Excerpt: "For some conscientious investors who deploy capital in part to tackle thorny social and environmental problems, the time may have come to adopt a new goal: lowering expectations for financial returns. That idea represents heresy at mutual fund companies committed to socially responsible investing (SRI). For decades, they have insisted that investors can 'do well by doing good' - that is, address moral issues and still grow wealth at competitive rates." (The Christian Science Monitor)

[Opinion] Text of ASPPA Testimony to IRS about Proposed Regulations on Benefit Restrictions for Underfunded Pension Plans (PDF)
5 pages. On January 28, 2008, Judy A. Miller, ASPPA Chief of Actuarial Issues and Director of Retirement Policy, testified before the IRS and Treasury on proposed benefit restriction regulations for underfunded pension plans. (American Society of Pension Professionals and Actuaries (ASPPA))

[Opinion] Is Your 401(k) Taking a Hit? No Time to Sit on the Sidelines
Espousing a view contrary to almost all other advice being described in the media regarding the stocks downturn, the article cites a money manager who 'suggested that investors take a look at their portfolios, see where the most damage has occurred, and pull money from those areas.' The money manager is quoted as saying 'The market will tell you where to cut back, and what you sell first is your weakest positions -- the ones that are losing the most,' and that 'human nature . . . urges investors to hold on to a losing stock until it bounces back. That's absolutely the wrong thing to do." (SmartMoney via FOXBusiness)


Links to Items on Executive Comp, Benefits in General

[Guidance Overview] DOL Takes Action on Disclosure of Compensation
Excerpt: "The U.S. Department of Labor ('DOL') recently took two actions that will significantly expand the types of information that must be disclosed by persons who provide services to ERISA-covered employee benefit plans. This Alert describes the DOL actions and offers some preliminary thoughts on the practical implications." (K&L Gates)

SEC Unhappy With Answers on Executive Pay
Excerpt: "The increasing SEC scrutiny could spur changes in how companies calculate compensation, including moving away from individual performance as a measure of success -- one of the areas the SEC focused on as particularly weak -- in favor of company-wide financial targets, such as earnings or stock prices." (Wall Street Journal)

KLA to Pay $65M in Stock Option Case
Excerpt: "[T]he settlement will be the second largest paid to shareholders of one of the dozens of companies entangled in a stock option scandal that swept across corporate America during the past two years, with Silicon Valley at the epicenter." (AP via Washington Post)

Ex-SafeNet CFO Gets Prison Term in Options Case
Excerpt: "A former chief financial officer of information security company SafeNet Inc was sentenced on Monday to six months in prison for manipulating employee stock option grants. Carole Argo also was fined $1 million." (Reuters via Washington Post)

Countrywide CEO Forfeits $37.5 Million in Severance Pay
Excerpt: "[The CEO,] however, will retain retirement benefits and deferred compensation that he has already earned, Countrywide said . . . . In addition to cash severance payments, Mozilo also walked away from $400,000 per year he was to be paid under an agreement to serve as a consultant to the company following his retirement, and perks including the use of a private airplane . . . ." (AP via Washington Post)

Hewitt Global Report - Fourth Quarter 2007 (PDF)
6 pages. Excerpt: "In many countries, legislative activity ended in 2007 as it began -- with moderate initiatives designed to create flexibility for employers and encourage employees to stay in the workforce. Working time -- length of the workweek, flexible work time, and family leave -- dominated discussions in Europe and Asia. With regard to retirement and social security and the taxation of compensation and benefits, governments focused on adjustments to employment costs, deferred retirement, the extension and expansion of occupational pension plans, and the tax treatment of contributions. Governments also worked to facilitate the recruitment of expatriate employees for hard-to-fill jobs through the simplification of visa requirements." (Hewitt Associates)

Seven Things Employees Want Most to Be Happy at Work
Excerpt: "Ask bosses what makes employees happy at work, and many are likely to think in terms of tangible rewards: a good salary, a pleasant office, generous benefits. Those play a role in job satisfaction, of course. But increasingly, workplace specialists are discovering that for many workers, the 'happiness factor' depends heavily on intangibles, such as respect, trust, and fairness." (The Christian Science Monitor)

[Opinion] Lawyer Argues ERISA Preemption Statute Must Be Curtailed; Plan Participants Are Being Deprived of Constitutional Right to Due Process of Law
11 pages. Excerpt: "Congress should amend ERISA immediately to only provide for a 'contingent' or 'conditional' form of preemption as illustrated above, since an absolute statutory preemption by a forgetful Congress deprives We The People of one of our most sacred inalienable rights -- the due process of law." (Brooks Hamilton)


Newly Posted Events
(Post Yours!)

Healthcare State of the Union
in Georgia on February 19, 2008
presented by Worldwide Employee Benefits Network (WEB) - Atlanta Chapter

Proposed Funding Regulations Under Section 430 - Webcast
Nationwide on February 15, 2008
presented by ASPPA (American Society of Pension Professionals & Actuaries)


Newly Posted Press Releases
(Post Yours!)

ASPPA Testifies about Proposed Pension Benefit Regulations
ASPPA (American Society of Pension Professionals & Actuaries)

Milliman Survey Confirms Continued Dominance of Guarantees in Variable Annuity Retirement Income Products
Milliman USA

Transamerica Launches Revolutionary Retirement Plan Product With Unique Online TPA Solution Technology
Transamerica Retirement Services

RNs Praise Courageous Vote by Senate Committee on Badly Flawed California Healthcare Bill
California Nurses Association


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