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February 29, 2008

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


Today's sponsor is International Foundation of Employee Benefit Plans

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Banner ad for International Foundation of Employee Benefit Plans

Be Smart by Association with the International Foundation

Smart is not a permanent state of being. What’s your maintenance plan? Take advantage of the education and information available through the International Foundation of Employee Benefit Plans, a nonprofit educational association, and find out why over 35,000 industry professionals like Larry Beebe rely on the Foundation to stay informed and educated. Make sure you have the most comprehensive information on health, pension and compensation issues. Be smart by association. www.ifebp.org/memberkit

[Guidance Overview] In France, Higher Social Security Charges Introduced for Involuntary Retirements
Excerpt: "Employers may need to review assumptions in their retirement programs in light of a law that will considerably increase the social security charges employers must pay when employee contracts are terminated involuntarily. The law also will outlaw involuntary retirement before age 65 as of January 1, 2010." (Watson Wyatt Worldwide)

[Guidance Overview] Pension Protection Act of 2006 - Implementation and Aftermath (PDF)
27 pages. Excerpt: "In this five-section special report, we provide the insights of benefit experts on retirement plan administration in this post-PPA world as well as a look at how the PPA affects critical aspects of this important topic as the dust continues to settle." (Thompson Publishing Group Inc.)

[Guidance Overview] Hewitt Federal Legislation Quick Guide Updated February 27, 2008, for Retirement Plans (PDF)
11 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding retirement plans. (Hewitt Associates)

[Guidance Overview] Ruling May Impact Tax Treatment of Transactions Inside 401(k)s, IRAs
Excerpt: "Individuals who actively invest their retirement accounts should consider the impact of the ruling on their individual investment decisions and would be advised to avoid transactions where a purchase and sale of similar securities will occur within the 60-day period beginning 30 days before a sale and ending 30 days after a sale." (Employee Benefit News; free registration required)

Canadian Federal Budget introduces Tax-Free Savings Accounts
Excerpt: "The federal budget, which was tabled on February 26, 2008, proposes creating Tax-Free Savings Accounts (TFSA) beginning in 2009. Individuals could contribute up to CAD 5,000 in after-tax dollars to these accounts annually. Investment income and withdrawals would be tax-free, and account holders could use the funds however they wish." (Watson Wyatt Worldwide)

Resources on Mandatory Divestment Issues
The association has published a list of publications, with links to fulltext, on the issue of divestment. (National Association of State Retirement Administrators)

What Do We Know About the Universe of State and Local Retirement Plans? (PDF)
12 pages. Excerpt: "The brief's key findings from U.S. Census data are: State-administered retirement plans account for only 8 percent of total plans, but 88 percent of the active members and 82 percent of the assets. Local plans have more assets per worker, probably because they often cover police and firefighters. Returns in public plans are higher than private plans because they are larger and invest more of their assets in equities." (Center for State and Local Government Excellence)

ASPPA Suggests Clarification of DOL Proposed Plan Fee Regulations
Excerpt: "The American Society of Pension Professionals and Actuaries (ASPPA) and the Council of Independent 401(k) Recordkeepers (CIKR) have submitted critical comments and recommendations concerning proposed regulations issued by the U.S. Department of Labor (DOL) under ERISA §408(b)(2) . . . . Among their recommendations, ASPPA and CIKR encouraged the DOL to separate disclosure of compensation for all service providers into three general categories: investment-related fees and expenses; transaction-related fees and expenses; and recordkeeping and administrative fees and expenses." (Wolters Kluwer Financial Services)

The Retirement Plans Industry Outlook - A Preview
A summary of the outlook for plan providers and vendors in 2008. (Center for Due Diligence)

EBSA Proposes Seven-Day Employee Contribution Deposit Safe Harbor
Excerpt: "According to EBSA, the proposal would set up a safe harbor period under which participant contributions to a small plan will be deemed to be legally compliant if put into the plan within seven business days from when they are received." (PLANSPONSOR.com; free registration required)

Kentucky Pension Reform Plan Sails Through House
Excerpt: "The bill seeks to begin chipping away at a $26.6 billion shortfall facing the public employee and teacher retirement systems. Under HB 600, all future state workers -- including legislators and judges -- would have to pay more toward their retirement. Future state and local government employees would have to work longer to get benefits." (The Courier-Journal)

Teaching Employees About the Need to Diversify Retirement Nest Eggs
Excerpt: "Among the employers that are focusing on diversification, Pepsi Bottling Group emphasizes the topic in targeted mailings, onsite workshops and articles in the company's quarterly benefits newsletter. It sends targeted communications at key times: when the employee reaches one, three, five or 10 years of service, hits their mid-40s or has two years until retirement eligibility. A few years ago, the company lifted restrictions on eliminating investments in company stock." (Employee Benefit News; free registration required)

Annuities' Guaranteed Rate of Return May Prove Alluring, But Critics Question Their Suitability for 401(k)s
Excerpt: "Financial Research Corp., based in Boston, reports that record keepers are 'expressing significant interest in income-guaranteed products and are actively conducting due diligence on the various products to determine whether or not they will be added to their platforms.' o gain ground within DC plans, annuities should be delivered in a manner that participants can easily understand, according to the FRC report." (Financial Week; free registration required)

Plan Sponsors Paying a Lot More in Fees, Study Finds
Excerpt: "Average fees paid by pension plans worldwide have jumped 50% over the past five years, with active managers making up the bulk of the increase, according to a new report by Watson Wyatt Worldwide." (Financial Week; free registration required)


Sponsored by: University Conference Services

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Banner ad for University Conference Services

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

[Official Guidance] Text of Proposed Labor Regs: 7-Day Safe Harbor for Participant Contributions for Plans Having Fewer Than 100 Participants (PDF)
Excerpt: "[T]he Department believes that adoption of a '7-business day' safe harbor rule would present little, if any, additional risk to plan participants and beneficiaries. In this regard, the Department believes that most employers with small plans that are taking longer than 7 business days to deposit participant contributions will expedite the depositing of those contributions to take advantage of the safe harbor. The Department also believes that where participant contributions are being made by employers with small plans within a period shorter than 7 business days, few employers with small plans will incur the costs attendant to modifying their payroll system in order to hold such contributions for a few additional days." (Employee Benefits Security Administration, U.S. Department of Labor)

[Guidance Overview] Employee Benefits Update, February 2008 (PDF)
7 pages. The newsletter covers select compliance deadlines, retirement plan developments, and health and welfare plan developments. (Reinhart Boerner Van Deuren s.c.)

[Guidance Overview] Hewitt Federal Legislation Quick Guide Updated February 27, 2008, on Human Resources & Employment Law (PDF)
14 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding human resources and employment law. (Hewitt Associates)

[Guidance Overview] State Regulation Barring Grants of Discretion to ERISA Plan Administrators Sustained
Excerpt: "Note: This holding affects the fundamental operation of ERISA plans and, as such, is a remarkable outcome. If state insurance departments can by fiat remove the advantage conferred by grants of discretion to the plan administrator, the standard of review in an enormous number of ERISA cases could be altered in short order." (Health Plan Law blog by Attorney Roy F. Harmon III)

[Guidance Overview] Possible Fixes for New 162(m) Problems
Excerpt: "Every corporation with plans and agreements potentially affected by the new rule will need to consider whether to revise its plans and agreements, and if the answer is affirmative, how to revise its plans and agreements to best achieve the original purposes of the acceleration. Remember, the new ruling would deny deductibility to plans and agreements with the offending language even if the acceleration event never occurs. The . . . examples show how a corporation could accelerate vesting provisions to preserve deductibility, with the possibility of a reduced payout to a participant who retires." (Michael S. Melbinger via Winston & Strawn LLP)

[Guidance Overview] New IRS Position on Section 162(m) Performance-Based Compensation Deduction
Excerpt: "In a surprisingly swift and unexpected turn of events, the Internal Revenue Service (IRS) has reversed its long-standing position with respect to a public company's right to deduct certain 'performance-based compensation' under Section 162(m) of the Internal Revenue Code. Revenue Ruling 2008-13, issued by the IRS on February 21, 2008, provides that the performance-based compensation requirements of Section 162(m) are not met if compensation could be payable on a termination without cause or for good reason, or on a voluntary retirement, even if the applicable performance goals are met. This Ruling is directly counter to the IRS's position in prior private letter rulings issued as recently as 2006." (Kirkpatrick & Lockhart Preston Gates Ellis LLP)

[Guidance Overview] IRS Affirms Position That Right to Performance-Based Compensation on Termination of Employment Results in Loss of Deduction
Excerpt: "Companies should consider whether the IRS' new position on Section 162(m) also impacts bonuses intended to qualify as 'performance bonuses' for purposes of the special deferral rules of Section 409A (which permit deferral elections to be made up to six months before the end of the performance period). Additionally, as companies amend their compensation arrangements for Section 409A, they will need to consider whether such amendments will result in the employment contracts no longer qualifying for the Section 162(m) transition relief described above on the basis the employment contracts have been renewed or extended." (Troutman Sanders LLP)

[Guidance Overview] Corporate Communicator, March 2008, Recent Developments Concerning Small Public Companies (PDF)
6 pages. Excerpt: "In this issue we highlight recent significant developments in the reporting requirements for small public companies. We are also including a discussion about recent rulings from the Internal Revenue Service that reverse the IRS's position on the tax deductibility of certain severance payments under IRS Code Section 162(m)." (Snell & Wilmer L.L.P.)

[Guidance Overview] New IRS Ruling Affecting 162(m) Performance-Based Compensation
Excerpt: "The IRS just recently issued a revenue ruling (Rev Rul 2008-13) that may affect how some bonus arrangements and employment contracts are structured for 'covered employees' of public companies. As of 2007, the IRS is interpreting the term 'covered employee' to mean the CEO and the other three most highly compensated officers other than the CFO." (Gray, Plant, Mooty, Mooty & Bennett, P.A.)

Compensation Model Breeds Excessive Executive Pay, Study Says
Excerpt: "Corporate boards of directors and institutional investors disagree over whether the executive pay model has helped improve corporate performance, but they agree it has led to excessive levels of compensation, according to a Watson Wyatt Worldwide study released today." (Pensions & Investments)

GAO Report Says Many States Are Lax in Funding Their Pension Plans
Excerpt: "The Government Accountability Office looked at a sample of about 70 public retirement systems at the request of Senators Max Baucus, Democrat of Montana, and Charles E. Grassley, Republican of Iowa, the chairman and ranking Republican member of the Finance Committee, respectively. The request was somewhat unusual, because Congress has little authority over the way states handle their pension funds." (The New York Times; free registration required)

State and Local Government Retiree Benefits: Current Funded Status of Pension and Health Benefits (PDF)
32 pages. Excerpt: "[T]he GAO was asked to examine: 1) the key measures of the funded status of retiree benefits and 2) the current funded status of retiree benefits. GAO analyzed data on public pensions, reviewed current literature, and interviewed a range of experts on public retiree benefits, actuarial science, and accounting." (U.S. Government Accountability Office)


Newly Posted Press Releases
(Post Yours!)

Roth 401k Analyzer Version 3.0 Released by ERISA Expertise
ERISA Expertise LLC

MassMutual to Acquire First Mercantile Trust Company from SunTrust Banks
MassMutual


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