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February 20, 2008

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


Today's sponsor is DATAIR Employee Benefit Systems, Inc.

(Click on company name or banner to learn more.)
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[Official Guidance] Text of LaRue Unanimous Supreme Court Opinion Upholding Damages Claim Against ERISA Fiduciaries for Participant's Investment Losses (PDF)
18 pages; decided February 20, 2008. Excerpt (from the opinion's syllabus): 'Held: Although §502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, it does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant's individual account. . . . For defined contribution plans . . . fiduciary misconduct need not threaten the entire plan's solvency to reduce benefits below the amount that participants would otherwise receive. Whether a fiduciary breach diminishes plan assets payable to all participants or only to particular individuals, it creates the kind of harms that concerned §409's draftsmen. Thus, [the references in Massachusetts Mutual Life Ins. Co. v. Russell to] 'entire plan' . . . which accurately reflect §409's operation in the de-fined benefit context, are beside the point in the defined contribution context." (United States Supreme Court)

Unanimous Decision: U.S. Supreme Finds for Plaintiff in ERISA Damages Case Against Plan Fiduciaries
Excerpt: "The Supreme Court says individual participants in the most common type of retirement plan can sue under a pension protection law to recover their losses." (AP via WorldNow and KSWO)

[Official Guidance] Text of Prop. PBGC Regs on PPA Changes to Reporting Requirements for Underfunded Pension Plans (PDF)
12 pages. Excerpt: "This proposed rule would amend part 4010 of PBGC's regulations to implement the change to ERISA section 4010(b)(1). In particular, this proposed rule provides guidance on how to determine whether reporting is required with respect to a plan based on the plan's funding target attainment percentage. The proposed rule would also make conforming changes to address the PPA 2006 changes affecting the section 4010 reporting triggers based on the imposition of certain liens or on the granting of certain minimum funding waivers. In conjunction with these changes, PBGC also is proposing: (1) To waive reporting in certain cases . . . ." (Pension Benefit Guaranty Corporation)

[Guidance Overview] In the Supreme Court: Anti-Alienation Pension Case Involving Divorce
Excerpt: "[A backgrounder on a case granted certiorari:] the ERISA anti-alienation case of Kennedy v. Plan Administrator for Dupont Savings and Investment Plan: William Kennedy's ERISA plan contained a no-alienation provision. William designated his wife Liv as the sole beneficiary. Upon their divorce, Liv agreed to be divested of all her rights. However, there was no Qualified Domestic Relations Order (QDRO). The 5th Circuit held that an ERISA Qualified Domestic Relations Order is the only valid way a divorcing spouse can waive her right to receive her ex-husband's pension benefits under ERISA." (Workplace Prof Blog)

[Guidance Overview] Rulings on Class Certification, Expert Testimony and Summary Judgment in Case Involving Sales of Annuities for Qualified Retirement Plans (PDF)
4 pages. Excerpt: "A federal Magistrate Judge in Texas has issued three rulings in a putative class action alleging that the defendant insurer omitted material information in its disclosures in connection with the sale of variable deferred annuities for use in tax-deferred qualified retirement arrangements such as Individual Retirement Accounts ('IRAs'), 401(k) and 403(b) plans. A.C. Brooks v. The Lincoln Nat'l Life Ins. Co., No. 5:03CV256 (E.D. Tex. Feb. 12, 2008)." (Sutherland Asbill & Brennan LLP)

[Guidance Overview] IRS Delays Effective Date of Certain Funding Regulations (PDF)
1 page. Excerpt: "Despite the delayed effective date of these regulations, the actual Pension Protection Act of 2006 (PPA) funding rules are still effective for plan years beginning on and after 2008. As a result, for plan years beginning during 2008, plan sponsors must comply with the new rules. However, for 2008, they may follow the proposed regulations, or may apply a reasonable interpretation of the PPA rules, subject to the following limitations . . . ." (Prudential Retirement)

[Guidance Overview] Proposed Mandates for Detailed Disclosures from Service Providers to Plan Fiduciaries
Excerpt: "The announcement from the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) said that the disclosures mandated in the latest proposal focus on direct and indirect service provider compensation and a provider's potential conflicts of interest." (PLANSPONSOR.com; free registration required)

[Guidance Overview] PBGC Rule Implements PPA Changes to 4010 Reporting
Excerpt: "The Pension Benefit Guaranty Corporation (PBGC) said in a news release that the proposed rule, which provides guidance on how to determine whether a 4010 filing is required under the PPA changes, would waive reporting in certain cases for controlled groups with aggregate underfunding of $15 million or less." (PLANSPONSOR.com; free registration required)

FASB Considering Requiring Corporations to Provide More Details About Pension Plan Allocations
Excerpt: "Most interested parties, such as shareholder advocates and associations like Financial Executives International, decided to defer any praise or condemnations until they had more time to study what is being recommended. That should be available in a formal proposal slated to be introduced March 7, with a 45-day comment period to follow. Two months later, in July, FASB expects to issue guidance explaining any changes, which would take effect in fiscal years ending after Dec. 15, 2008." (Treasury & Risk)

Target Date Retirement Funds - Returns & Observations
Excerpt: "The chart . . . illustrates the three-month performance (through January 31, 2008) for many of the target date retirement products available in the marketplace today. The results listed are for the least expensive share class of the '2010' version of the investment manager's target date funds. In addition to the 3-month returns, we have listed the percentage of each fund's portfolio that is invested in equities (stocks), as of the fund's most recent portfolio reporting date." (MJM Financial, LLC)

From the IRS - A 401(k) Fix-It Guide (PDF)
43 pages. The guide provides tips on how to identify, correct, and avoid common errors in 401k plans. (Internal Revenue Service)

In Kentucky, Future State Workers Might Face Higher Pension Costs
Excerpt: "Future state employees would have to contribute more to their retirement than current workers, and work longer before receiving benefits, under proposals Gov. Steve Beshear is considering to shore up the financially troubled pension system." (The Courier-Journal)

More People Tap 401(k) Accounts for Cash
Excerpt: "[D]ipping into 401(k) accounts can carry risks because defaulted loans and hardship withdrawals are taxed as income and are subject to a 10 percent penalty if the worker is under 59 1/2 years old. That means if the trend grows, many Americans will risk coming up short on retirement savings or may have to rely on an overburdened Social Security system." (AP via The New York Times; free registration required)

Judge Rules Cigna Misled Employees on Retirement Benefits Change
Excerpt: "A federal judge has ruled that Cigna misled its employees about a switch to a new pension plan 10 years ago. Attorneys for the employees in the case say they will now try to recoup hundreds of millions of dollars in retirement benefits for thousands of workers." (AP via Hartford Business Journal)

Better Pension Fund Investment Disclosure
Excerpt: "So far, corporate pensions appear to have escaped the credit market storm that has punished commercial and investment banks and insurers. But don't be fooled. Plenty of toxic mortgage-related debt is probably there; it's just buried from investors' view." (AP via The Washington Post; free registration required)

Capital Preservation Funds Conspicuously Absent from Approved List of 'Long-Term' Solutions in Final Qualified Default Investment Alternative Regs
Excerpt: "Because they did not make the cut, stable value is essentially a thing of the past for long-term defaults in automatic-enrollment plans, says Fred Reish, Managing Director and Partner of the Los Angeles-based law firm of Reish Luftman Reicher & Cohen." (PLANSPONSOR.com; free registration required)

DOL's Safe Harbor Protection -- Target-Date Funds, Balanced Funds, and Managed Accounts
Excerpt: "The problem with using target-risk funds as the default is that plan sponsors would have to understand participants' willingness to take on risk, says Matthew Smith, the Managing Director of Russell Retirement Services in Tacoma, Washington." (PLANSPONSOR.com; free registration required)

FASB's Pension Rule Shift May Encourage Stodgier Investing
Excerpt: "The Financial Accounting Standards Board gave a green light last week to its staff to draft a proposal that would increase disclosure requirements for corporate pension plans. The new rules could cause portfolio managers to go looking for more conservative investments, say pension experts." (Financial Week; free registration required)

[Opinion] Proposed Regulations Regarding Section 408(b)(2)
Excerpt: "Section 408(b)(2) allows providers to offer services to a plan without violating ERISA's prohibited transaction provisions. Generally, the proposed rule modifies one of the requirements of section 408(b)(2) -- the 'reasonable arrangement' requirement -- by adding a number of disclosure conditions." (PLANSPONSOR.com; free registration required)


Sponsored by: ASPPA

(Click on company name or banner to learn more.)
Banner ad for ASPPA

The ERISA Outline Book

Stay current with The ERISA Outline Book, 2008 Edition, by Sal Tripodi, J.D., LL.M. only from ASPPA. Available in both print or on CD, this one of a kind resource has become the must have for anyone working in the pension industry today. Fully updated with the latest guidance on a variety of PPA 2006 items, the 2008 Edition also includes automatic enrollment guidance including QACAs, final regulations on QDIA's, guidance on benefit restrictions and much more. Stay current and order your copy today.

(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

Commission Report Cites Flaws in New Jersey Civil Union Law
Excerpt: "New Jersey's civil union law 'creates a second-class status' for same-sex couples and is particularly vexing for people in the military, transgender people, the poor and minorities, according to a report issued on Tuesday by a commission set up to review the law." (The New York Times; free registration required)

Report Says New Jersey Civil Union Law Fails to Protect Same-Sex Couples
Excerpt: "A new state civil unions law has failed to ensure that same-sex couples in New Jersey enjoy the same rights as married heterose.xuals, an official report said on Tuesday. On the first anniversary of the law's implementation, the Civil Union Review Commission said some employers in New Jersey have refused to provide benefits to the partner of employees in a civil union." (Reuters Limited via Yahoo! News)

Small Businesses - Dealing with Employees Called into Military Service
Excerpt: "Nearly all employers are bound by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) to provide reemployment, as well as additional benefits to employees who perform military service as a member of the Army, Navy, Marine Corps, Air Force, Coast Guard, National Guard, and Public Health Service commissioned corps (including the reserve components of each of these services)." (AllBusiness.com Inc. via The New York Times; free registration required)

What is America Saves Week? - February 25 - March 2, 2008
Excerpt: "Compared with the 2007 Week, America Saves Week 2008 will address a broader range of savings needs and involve a broader range of organizations. At present, hundreds of organizations are planning activities focused on savings needs ranging from debt repayment to emergency savings to homeownership to education to retirement." (America Saves)

Audio and Text from AP on Age Discrimination Cases before the Supreme Court
Excerpt: "The Supreme Court [heard arguments yesterday] on whether the Age Discrimination in Employment Act prohibits federal employers from retaliating against workers who complain of age discrimination. Madeleine Brand talks to Slate.com legal analyst Dahlia Lithwick about the case." (National Public Radio)

Differing Treatment of Dividends in ESOP Stock Did Not Affect Status As Employer Securities
Excerpt: "In a private letter ruling, the IRS has ruled that company securities held in an employee stock ownership plan (ESOP) were 'employer securities' despite differences in their treatment of special dividends." (Wolters Kluwer Financial Services)

Expanded Benefits May Prevent Labor Shortage for Employers in Puerto Rico
Excerpt: "In order to remain competitive, employers in Puerto Rico must address the aging work force and consider expanding benefits as key approaches to preventing a labor shortage in their firms in terms of employee retention and recruitment, according to the report Workforce Trends: An AARP Study of Employers and Workers in Puerto Rico." (Wolters Kluwer Financial Services)

Fact Sheet on Tax Expenditures and Employee Benefits - Estimates from the FY 2009 Budget (PDF)
2 pages. Excerpt: "The federal government supports the provision of employee benefits through preferential tax treatment in the Internal Revenue Code. For the next fiscal year (2009), all employee benefits-related tax expenditures ($347.9 billion) will account for 36.7 percent of the $948.157 billion tax expenditures in the budget." (Employee Benefit Research Institute)


Newly Posted Events
(Post Yours!)

162(m) - Have the Rules Changed for Termination Payments and Performance-Based Compensation
Nationwide on March 18, 2008
presented by ABA Joint Committee on Employee Benefits

Advanced COBRA Compliance: Thorny Issues for Employers, COBRA Administrators, and Advisors
Nationwide on March 20, 2008
presented by Employee Benefits Institute of America (EBIA)/Thomson Tax & Accounting


Newly Posted Press Releases
(Post Yours!)

CEOs at Best-Performing Companies Receive Long-Term Incentive Payouts Substantially Above Target, Watson Wyatt Analysis Finds
Watson Wyatt

Council Applauds New PBGC Investment Strategy
American Benefits Council

Non-Traditional Families Face Retirement Planning Hurdles, According To MetLife Study
MetLife

Buck Consultants Survey Finds Cost Containment Is Top Corporate Concern for Pensions in Canada
Buck Consultants, an ACS Company

Coty & Bruce Benefits, Inc. to Change Name to Atéssa Benefits, Inc.
Atéssa Benefits, Inc.

Experts to Discuss Key Concerns in the Rapidly Changing 401k Marketplace
Interlake Capital Management, LLC


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Pension Administrator
for Geller Group, LLC
in NY

Supervisor, Benefits Administration (JP31369-CW)
for Southern California Edison
in CA

401(K) Plan Conversion Specialist
for BenefitStreet, Inc.
in CA

401(k) Senior Plan Administrator
for Matthews Benefit Group, Inc
in FL

Manager, Benefits
for Daiichi Sankyo, Inc.
in NJ

Defined Benefit Administrator
for Pension Strategies, LLC
in AZ




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