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February 25, 2008

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

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Gearing up for the Form 5500 filing season?

Join our Form 5500 webinar with speaker Janice Wegesin.

On Tuesday, March 4th, Janice will review what's new with the DOL and IRS, how to avoid common errors, new simplified filing, changes to Form 5500EZ and more.

Also learn about's new InfoLink feature which gives you access to the content in the Form 5500 Preparers' Manual through our context sensitive help buttons.
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[Guidance Overview] Supreme Court Allows Individual 401(k) Plan Participants to Sue (PDF)
2 pages. Excerpt: "In a decision that has significant implications for employers that sponsor 401(k) and other defined contribution plans, the U.S. Supreme Court unanimously ruled that an individual participant may bring suit for fiduciary breaches under the Employee Retirement Income Security Act (ERISA) to recover losses in an individual account (LaRue v. DeWolff, Boberg & Associates, Inc. (No. 06-856, Feb. 20, 2008)). In so ruling, the Court rejected an appellate court's holding that suits alleging fiduciary misconduct must be brought to recover benefits for a plan as a whole rather than for an individual participant." (Milliman)

[Guidance Overview] The 403(b) Plan Document
Excerpt: "We have compiled the top ten questions we have received with respect to 403(b) and the new regulations. [The target page provides] the first in this series of ten FAQs." (McKay Hochman Co., Inc.)

[Guidance Overview] The 'Otherwise Excludable Employees' Rules
Excerpt: "The rules affecting otherwise excludable employees are a special area of opportunity. Otherwise excludable employees are employees who are eligible to participate by plan terms, but whose age and/or service are less than the maximum eligibility requirements that are allowed by law. Accordingly, these are employees who are not yet age 21 or who have not yet completed a year of service." (McKay Hochman Co., Inc.)

[Guidance Overview] U.S. Supreme Court Allows 401(k) Plan Participant to Sue Plan Employer over Loss to Participant's Account
Excerpt: "There were two concurring opinions. Chief Justice Roberts, joined by Justice Kennedy, agreed with the majority's holding, but wrote separately to identify the question as to whether LaRue's claim was more properly construed as a claim for benefits under ERISA 502(a)(1)(B) as opposed to breach of fiduciary duty." (Goodwin Proctor LLP)

[Guidance Overview] A Primer on Indirect Mutual Fund Payments by 401(k) Participants (PDF)
3 pages. Excerpt: "[W]hen it comes to the fees paid to service providers -- like the recordkeeper and the adviser -- participants almost always bear the brunt of the cost. In the 401(k) community, these payments are called 'revenue sharing.' In the mutual fund world, they have other names . . . shareholder servicing fees, transfer agent fees, and 12b-1 fees. By any name, they come from the money in the participants' 401(k) accounts." (Reish Luftman Reicher & Cohen)

[Guidance Overview] May a Safe Harbor 401(k) Make a Discretionary Match and Avoid ACP Testing?
Excerpt: "Within limits, a safe-harbor plan may make additional non-safe harbor matching contributions without triggering the actual contribution percentage (ACP) test . . . ." (McKay Hochman Co., Inc.)

[Guidance Overview] May Plan Select Vesting Schedule That Is Shorter Than the Top-Heavy Six-Year Graded Vesting Schedule?
Excerpt: "Employers may choose a vesting schedule that is shorter than the top heavy vesting schedule, however, any shorter schedule must still be able to satisfy at least the minimum vesting percentage for each year of the top heavy schedule." (McKay Hochman Co., Inc.)

[Guidance Overview] Supreme Court Expands Liability for 401(k) Plan Fiduciaries
Excerpt: "As with all ERISA pension and welfare plans, LaRue points out that it is critically important for ERISA plans to contain a broad grant of discretionary authority to their administrators and fiduciaries. To the extent courts in the future will apply Bruch discretionary review to LaRue-type claims, heightened review will only be available if the plan contains a grant of discretion which encompasses such claims." (Briggs and Morgan)

[Guidance Overview] ERISA Lawyers Say Don't Expect Lawsuit Tsunami After LaRue Ruling
Excerpt: "It's not likely that this week's long-awaited U.S. Supreme Court ruling blessing individual participant-filed fiduciary breach suits in defined contribution plan cases will unleash a tsunami of participant lawsuits. That was a key assertion from two prominent Employee Retirement Income Security Act (ERISA) lawyers in the wake of the unanimous ruling in LaRue v. DeWolff Boberg & Associates, Inc." (; free registration required)

The Saver's Credit - What Does It Do for Saving? (PDF)
8 pages. Excerpt: "This AARP Public Policy Institute paper by Lisa Southworth and John Gist uses detailed examples to show that the saver's credit has great potential to effectively target a retirement savings tax incentive to low- and middle-income taxpayers, including a substantial number of filers over age 50. It concludes that Congress could improve the credit by making it refundable, expanding eligibility, smoothing the credit rate drops, and supporting public education efforts in order to maximize the use of this incentive to save." (AARP)

Veterans Try Again on Pension Taxation in Maryland
Excerpt: "Maryland's military retirees appealed to lawmakers . . . to stop taxing their pensions, warning that otherwise many of the defense workers whose jobs are transferring to military bases in the state over the next few years will not move here. But with legislative analysts warning that such a tax break could cost the state $60 million in revenue next year, the retirees' plea faces an uphill battle." (The Baltimore Sun)

PBGC Adopts Diversified Investment Policy Which Gives It 57% Likelihood of Achieving Full Funding Within Ten Years
Excerpt: "Charles Millard, director of the PBGC, said while the new investment policy should generate higher returns, it also offered lower risk through broader diversification." (Global Pensions)

Dana Corp. Latest Revived Company to Retain Pension Plans
Excerpt: "Dana Corp. emerged from bankrup.tcy court protection Feb. 1 with a promise that pleased the Pension Benefit Guaranty Corporation: The auto parts supplier retained its retirement plans, a move PBGC called 'a victory for the private defined benefit pension system.'" (1105 Media Inc.)

Massachusetts May Tax Owners and Partners on 401(k) Deferrals and Matching Amounts, According to Draft Directive
Excerpt: "For taxable years beginning on or after January 1, 2008, this Directive clarifies and prescribes the Massachusetts personal income tax treatment of contributions made on behalf of partners and other self-employed individuals under a so-called 401(k) plan. As explained in this Directive, under G.L. c. 62 2(d)(1)(D), partners and other self-employed individuals are denied any deduction for contributions to their 401(k) plans, irrespective of whether the contributions are elective contributions or matching contributions made on their behalf." (

Have People Delayed Claiming Retirement Benefits? Responses to Changes in Social Security Rules (PDF)
23 pages. Excerpt: "This article examines changes in the age at which people claim Social Security retirement benefits in response to two recent changes in the Social Security rules: the removal of the retirement earnings test at ages 65 to 69 in 2000 and the gradual increase in the full retirement age (FRA) for those born in 1938 or later." (U.S. Social Security Administration)

IRS Addresses Application of Wash Sale Rules to Sales of Securities from Traditional or Roth IRAs
Excerpt: "The ruling addresses the situation where a taxpayer sells stock or securities at a loss, then purchases substantially the same stock or securities within 30 days of the sale through his traditional or Roth IRA. The loss on the sale of stock would be disallowed for tax purposes under the wash sales rules of Code Sec. 1091, the IRS ruled, and the taxpayer's basis in the IRA would not be increased." (Wolters Kluwer Financial Services)

PBGC Returns to a Diversified Portfolio
Excerpt: "Over 75 percent of PBGC's assets were in the trust funds at the end of its last fiscal year and thus able to be invested in stocks and other asset classes. This means the PBGC has much the same flexibility that private plan fiduciaries have to build a diversified portfolio, since any diversified pension portfolio is likely to have more than 25% in fixed income securities. Under the new policy, stocks and fixed income securities will each represent 45 percent of PBGC's portfolio, with the remaining 10 percent invested in alternative investments." (Pension & Benefits Blog)

Fees Push Managed Accounts Off 401(k) Default Lists
Excerpt: "Managed accounts aren't popular default options in 401(k) plans, because fees are too high for plan executives to justify, leaving them concerned about fulfilling their fiduciary responsibility, experts say." (Investment News; free registration required)

High-Court Ruling on 401(k) May Open Floodgates of Litigation
Excerpt: "Last week's U.S. Supreme Court decision to allow individual participants to sue 401(k) plan administrators will put further pressure on financial advisers to ensure that they are adhering to their fiduciary status, industry observers say." (Investment News; free registration required)

To Fund $14 Billion Deficit, PBGC Dives Deeper Into Equities Rather Than Charge Higher Premiums
Excerpt: "The federal agency -- which has a mere $68.4 billion in assets to cover the $82.5 billion in pension liabilities from the terminated corporate defined-benefit plans the agency has assumed -- elected to invest a much larger share of its $55 billion in investable assets in equities and alternative assets last week, a move the PBGC said should give it a better chance to eventually become fully funded. If the new strategy does indeed result in higher investment returns and can close the PBGC's funding gap, corporations may not be faced with the prospect of eventually paying higher premiums to have their pension plans insured by the agency, industry observers noted." (Financial Week; free registration required)

In Policy Shift, PBGC Turns to Stock Market Shrinking the Portion of Bonds in Its Portfolio
Excerpt: "After five years of strictly matching its assets to its liabilities, the nation's defined-benefit pension insurer will stock its investment portfolio with a larger percentage of equities and a new host of 'alternative investments,' including real-estate and private-equity partnerships." (

Non-Traditional Families Face Retirement Planning Hurdles, According to MetLife Study
Excerpt: "Planning for retirement is tougher and more complicated for middle-aged Americans who are single or married with children from previous relationships than it is for those with 'traditional' families. According to the MetLife Mature Market Institute' s Family Matters study, 40 to 65-year-olds with non-traditional families face more challenges with regard to saving and investing and are less likely than others to have a distinct retirement vision." (

MassMutual's Center for Behavioral Research
Excerpt: "MassMutual is dedicated to understanding the dynamics of financial decisions and behavior in order to provide innovative retirement solutions to improve the retirement outcomes of our customers. It is a center for experimentation and collaboration, which serves as a creative laboratory for emerging education and communication techniques. [Registration required to access Research Library.]" (Massachusetts Mutual Life Insurance Company)

401(k) Plans Put on Notice As Investor's Suit Advances
Excerpt: "The Supreme Court's ruling on the mismanagement of a 401(k) plan last week isn't likely to have broad ramifications for investors saving for retirement. But it does highlight ongoing efforts to expand protections for investors managing their own retirement accounts." (The Washington Post; free registration required)

Oklahoma Bill Moves Forward; Would Cap Pension at 100% of Pay for Elected Officials
Excerpt: "Legislation to close a loophole in state law that allows some elected officials to retire with pensions bigger than the salaries they earned on the job has survived two committee hearings. But it is still questionable that a bill to abolish the loophole will become law this session, since numerous attempts in previous years have failed." (Tulsa World)

West Virginia House Passes Pension Transfer Bill
Excerpt: "The West Virginia House of Delegates has approved a $78-million pension reform measure allowing teachers and other school employees to move from a 401(k)-style plan to the state's defined benefit pension plan for education employees." (; free registration required)

Turning Age 62 - Have Your Retirement Cake and Eat It, Too
Excerpt: "Under the Social Security Act, individuals who receive early-retirement benefits from Social Security can withdraw their application, repay the benefits they've received and refile for higher benefits at a later date, says Mary Jane Yarrington, senior policy analyst for the National Committee to Preserve Social Security and Medicare." (USA TODAY)

[Opinion] Supreme Court Opens New Front In 401(k) Suits
Excerpt: "The company's lawyer told the Washington Post that 'Ultimately, employers aren't going to sponsor plans if they're going to be sued every time they make an innocent mistake.' Right -- and if you believe that, I have a front-loaded mutual fund to sell you. When they're being candid, 401(k) consultants will tell you that employers set up such defined contribution plans for their benefit as much as their employees'." (

[Opinion] Looks Like James Larue Will Get His Day in Court, After All
Excerpt: "Whatever the rationale, the law of the land now affirms that participants can bring suits based on injuries to their individual accounts. Frankly, the court's previous sense that an injury to a participant in a plan was not a plan injury smacked of the kind of legal hair-splitting that only lawyers (and I have a JD) and politicians relish. Now, in the wake of the LaRue decision, I can understand and appreciate the concerns expressed on behalf of employers that this case will simply set off a wave of new and expensive litigation." (Nevin Adams via planadvisor)

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Signs of the Times: The Future of Plan Management

Auto enrollment, QDIAs, plan fees, liability driven investing...The times are changing for employer-sponsored retirement plans. Makes plan now to attend the Mid-Sized Retirement & Pension Plan Management Conference in San Francisco, March 11-14, 2008, to learn how these changes will affect your plan and participants.

(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

[Guidance Overview] IRS Issues More Section 162(m) Guidance
Excerpt: "Public companies subject to the $1 million deduction limit of Internal Revenue Code Section 162(m) should continue to monitor the fallout from IRS Revenue Ruling 2008-13 for further developments, and should give themselves plenty of lead time to implement changes to employment agreements and plan documents." (McDermott Will & Emery)

IRS Wants to Tax Golden Parachutes - Its Proposal Would Mean Rewriting Most Pay Contracts
Excerpt: "This is not the IRS's first revisiting of Section 162(m), which was created in 1993 with the intention of reining in executive pay but has arguably had the reverse effect, ballooning compensation for top officers through dramatically expanded use of stock options, stock grants, non-cash compensation and other tools of the exec-comp trade over the past 15 years." (Financial Week; free registration required)

New edition of The Stock Options Book
The NCEO presents excerpts from the new edition of The Stock Options Book, a comprehensive guide to employee stock options. The book also covers employee stock purchase plans (ESPPs). It is a required text in the Certified Equity Professional (CEP) program. (National Center for Employee Ownership)

New edition of Selected Issues in Equity Compensation
The NCEO presents excerpts from the new edition of Selected Issues in Equity Compensation, which provides in-depth coverage of topics like administrative issues, securities laws, etc., as they relate to equity compensation plans such as employee stock options and employee stock purchase plans (ESPPs). It is a required text in the Certified Equity Professional (CEP) program. (National Center for Employee Ownership)

New edition of Beyond Stock Options
The NCEO presents excerpts from the new edition of Beyond Stock Options, which covers restricted stock, phantom stock, stock appreciation rights, and other alternatives to employee stock options. It is a required text in the Certified Equity Professional (CEP) program. The book includes a CD with model plan documents. (National Center for Employee Ownership)

New edition of Accounting for Equity Compensation
The NCEO presents excerpts from the new edition of Accounting for Equity Compensation, which provides detailed coverage of how to account for stock options, ESPPs, and other equity instruments under SFAS 123(R). It is a required text in the Certified Equity Professional (CEP) program. (National Center for Employee Ownership)

Highlights from IFEBP Employee Benefits Survey - U.S. and Can.ada, 2007 (PDF)
Pages 3, 12 of 24 pages. Excerpt: "[An online survey conducted in 2007 resulted] in 1,233 responses from corporations, professional service firms, public employers and multiemployer benefit plans. The survey looked at all types of benefits: pensions; health, dental and prescription drug plans; life insurance; disability benefits; adoption assistance; holidays; voluntary benefits; and paid leave. [There is limited public access to this Web-based highlight summary.]" (International Society of Certified Employee Benefit Specialists)

Benefits Plan Design & Strategies - 2008's Top Topics
Excerpt: "The three top themes for benefits managers this year are OPEB, fees and sustainability." (Congressional Quarterly, Inc.)

Yahoo Sued for Spurning Microsoft
Excerpt: "Two Detroit pension funds have sued Yahoo Inc. and its board of directors, saying they breached their duties to shareholders in trying to thwart a takeover by Microsoft Corp." (AP via Yahoo! News)

Newly Posted Events
(Post Yours!)

Creating a Healthier Bottom Line: Controlling Benefit Costs through Healthier Employees and Better Care Management
in California on March 5, 2008
presented by International Society of Certified Employee Benefit Specialists - Orange County Chapter

DOL's Proposed FMLA Regs: New Obligations and Opportunities for HR Professionals
Nationwide on March 18, 2008
presented by Thompson Interactive, A Division of Thompson Publishing Group

How to Comply with New FMLA Rules Affecting Military Family Members
Nationwide on February 26, 2008
presented by Thompson Interactive, A Division of Thompson Publishing Group

Wellness Programs That Maximize ROI: What Works & What Doesn't
Nationwide on March 26, 2008
presented by Thompson Interactive, A Division of Thompson Publishing Group

Newly Posted Press Releases
(Post Yours!)

Wachovia Securities Launches FundSource 401k Plan
Wachovia Corporation

Dow Jones Launches Real Return Target Date Index Series
Dow Jones Indexes

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Pension Administrator
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for Scholz, Klein & Friends Enlightened Retirement Group, Inc.
in TX

Health Care Consultant (Actuarial)
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in NJ

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in FL

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for R.J.L. Pension Services, Inc.
in FL

Senior Counsel, Benefits & Employment Law
for Philips Electronics North America
in MA

Regional Retirement Plan Consultant
for RBC Dain Rauscher
in NC

DC Plan Administrator
for CMC Retirement and Employee Benefits Specialists
in CA

Defined Benefit Plan Administrator
for CMC Retirement and Employee Benefits Specialists, Inc.
in CA

CRTMA - Participant Accountant - ABA
for Citi
in ME

Reconciliation Specialist
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