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May 16, 2008

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

Today's sponsor is

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Banner ad for now has TWO NEW 403(b) plan documents!

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[Guidance Overview] Arthur Andersen Case Highlights Need for Strict Compliance with Liability Insurance Notice Procedures by Fiduciaries (PDF)
At page 2. Excerpt: "The Seventh Circuit recently provided a stark reminder to ERISA plans and fiduciaries of the consequences resulting from the failure to timely notify the insurer of a potential litigation settlement. In Federal Insurance Co. v. Arthur Andersen LLP . . . the Seventh Circuit held that Federal Insurance Company . . . was not obligated to contribute the [fiduciary breach] policy limit of $25 million towards a settlement of pension claims by retirees who had worked for Arthur Andersen." (Proskauer Rose LLP)

[Guidance Overview] The Supreme Court's Decision In LaRue v. DeWolff, Boberg & Associates: How It Affects You, What You Should Do, and Our Ruminations
Excerpt: "It is premature to predict . . . that LaRue will trigger a significant increase in ERISA litigation. The decision in LaRue removes one of the legal hurdles that, in some circuits (i.e., parts of the country), would have dissuaded would-be plaintiffs' attorneys from taking cases in which an individual participant, or small group of participants, have sustained damage to their plan accounts. While that legal hurdle has been removed, other practical issues will be the deciding factors for plan participants contemplating litigation." (Reish Luftman Reicher & Cohen)

[Guidance Overview] Court Rejects Revival of Company Stock Case Based on LaRue Ruling
Excerpt: "The U.S. District Court for the Middle District of Alabama rejected the attempt by an employee stock ownership plan (ESOP) participant to revive her fiduciary breach case based on the recent U.S. Supreme Court ruling that defined contribution plan participants can seek individual account damages in fiduciary breach suits." (

[Guidance Overview] GFOA Publishes Recommended Practices on Benefit Administration for Public-Sector DB Plans (PDF)
Excerpt: "On February 22, 2008, the Executive Board of the Government Finance Officers Association (GFOA) approved new recommended practices on essential design elements for public-sector defined benefit plans, defined contribution plans, and hybrid plans. The documents can be downloaded from the GFOA website for the following types of retirement plans: . . . " (Gabriel, Roeder, Smith & Company)

[Guidance Overview] Department of Labor Makes Technical Corrections to QDIA Final Regulations (PDF)
3 pages. (Transamerica Center for Retirement Studies)

[Guidance Overview] Public Agencies -- Uncle Sam Wants You (To Amend Your Retirement Plan Document)
Excerpt: "We recommend that governmental employers that wish to comply only with the tax qualification rules applicable to them simply adopt an individually designed plan document expressly intended for a governmental sponsor. Any governmental employer that maintains an individually designed retirement plan must review the status of its plan, update both its operation and plan document compliance, and have the plan submitted to the IRS for a determination letter by January 31, 2009." (Chang Ruthenberg & Long)

[Guidance Overview] ESOPs In Changing Times; C'est LaRue?
Excerpt: "Even though the LaRue case involved a drop in the value of a 401(k) account, the impact of the case can be significant in any context where a plan participant believes that by fiduciary action or inaction, his or her individual benefits were negatively impacted. This means that a participant may directly and immediately bring suit for breach of fiduciary duty without moving through the benefit claim and appeal process. The presumption of correctness for fiduciary defendants and the requirement that plaintiffs prove that a benefit denial was 'arbitrary and capricious,' simply does not apply in a breach of fiduciary duty claim." (Chang Ruthenberg & Long)

IASB Suggests Major Changes to IAS 19; Assessing the Implications for Plans Around the World (PDF)
5 pages. Excerpt: "Accounting for retirement and other post-employment benefits continues to evolve. This evolution reflects a desire by standard setters for immediate recognition of changes in the funded position of retirement plans and increased transparency of their effect on their sponsors' financial position and income. In addition, the increased importance of less traditional retirement plan designs has led some to question the very nature of how retirement program obligations are measured." (Towers Perrin)

Valuing Public Pension Plans: Comparing Financial Economics with Conventional Approaches (PDF)
Excerpt: "Financial economics (FE) is a branch of economics that studies the valuation of corporations and investments. Over the past decade, adherents to these theories have successfully advocated applying FE principles to corporate pension plans. Over the past year, they have begun advocating applying FE to public pension plans. This article examines the FE approach and compares it with conventional actuarial approaches for valuing public plans." (Gabriel, Roeder, Smith & Company)

Prepare for a Gruesome Retirement, According to 2008 Retirement Confidence Survey
Excerpt: "According to the table above, if you are a typical 40-year-old working American, there's a nearly 50% chance that your savings and investments total less than $25,000. Let's be generous and assume that you have $20,000 socked away and that you have about 25 to 30 years until you retire. How will that money grow for you? Well, here's what happens . . . ." (Motley Fool)

The Incredible Shrinking Nest Egg
Excerpt: "For years, stock investors have been led to expect average annual returns of 8% to 10%. Similarly, many people have assumed that their homes would appreciate by roughly 10% a year. Both assumptions, though, rest on two decades of outsize returns -- returns that were inflated by low interest rates that fueled bubbles in the values of stocks and real estate." (USA TODAY)

Retirement Plan Assets Continue To Grow Through Third Quarter Of 2007, Including Life Cycle Funds
Excerpt: "Total retirement plan assets in the United States continued to grow from $16.5 trillion at the end of 2006 to $17.8 trillion at the end of the third quarter of 2007, according to statistics reported by the Investment Company Institute (ICI) . . . ." (Wolters Kluwer)

Spring 2008 Regulatory Agendas Released by PBGC, IRS and EBSA
Excerpt: "Among the items in the PBGC's proposed rule stage are: . . . . Among the items in the IRS proposed rule stage are: . . . . The prerule and final rule EBSA agenda items are: . . . ." (Wolters Kluwer)

Unions Bankrolled Analyst Vetting Pension Bill Proposing Higher Benefits for New York City Workers
Excerpt: "A bill offering thousands of additional city workers early retirement has been gaining support in the Legislature in recent weeks. New York City officials have protested, saying it would cost the city $200 million annually." (New York Times)

Business Groups Bash Pivotal 401(k) Suit Filed Against Deere
Excerpt: "Trade groups decry lawsuit charging Deere, Fidelity with excessive fees; call suit a 'fishing expedition.' Several industry groups have filed a joint brief stating that the lawsuit should be dismissed." (

Overview of Segal's Survey of Calendar-Year Plans' Actual Zone Status (PDF)
2 pages. Excerpt: "This [report describes] the percentage of multiemployer pension plans that fell into the yellow zone and red zone in the first round of certifications, as well as the percentage whose funding status was classified as neither endangered nor critical (known as the green zone), based on The Segal Company's actual certifications of more than 230 calendar-year plans." (The Segal Company)

Why Liability-Driven Investing? A Strategy for Balancing Asset and Liability Risk for Defined Benefit Pension Plans
Excerpt: "While the primary reason for creating a defined benefit (DB) pension plan is to help employees prepare for retirement, financial stewardship issues have recently eroded their importance as part of the employer's total rewards package to attract and retain talent. Study after study of DB plans has shown that the volatility -- rather than the absolute level -- of costs has spurred employers to act." (Sibson Consulting)

Employee Ownership Update for May 15, 2008
NCEO Executive Director Corey Rosen discusses a program in Indiana to encourage banks to loan to ESOPs; a pro-ESOP resolution in Congress; an inaccurate claim by many compensation professionals that broad-based equity plans don't work; an NCEO survey of equity compensation practices in closely held companies; and a Winning Workplaces Webinar on employee ownership. (National Center for Employee Ownership)

[Opinion] The Time is Now to Remedy the Inequity Applied to American Small Businesses Respecting the Late Filing of IRS Form 5500-EZ (PDF)
9 page letter to the Internal Revenue Service by attorney Alex M. Brucker. Excerpt: "The potential $15,000 penalty is more burdensome for small than large employers, especially when more than one plan and more than one plan year are involved. . . . For a one-participant plan which has been exempt from Form 5500-EZ filings because plan assets are below the $250,000 threshold, it is easy to inadvertently miss a filing when plan assets increase above the $250,000 threshold. . . . There is no justification for denying the DFVC Program to a plan covering an owner and spouse while allowing the program to be used by a plan covering an owner and a non-spouse employee." (Brucker Morra)

Sponsored by: Investment Company Institute

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Banner ad for Investment Company Institute

June 3rd ICI Conference on DC Plans in the PPA Era

Register today for the Investment Company Institute's June 3rd conference on legal and business issues for 401(k) plans, 403(b) plans, and IRAs. Speakers include senior representatives from the Departments of Labor and Treasury and the mutual fund industry. Topics include:
  • DOL's 401(k) plan fee disclosure agenda and fee-related developments
  • PPA implementation update
  • Participant notices and statements
  • The future of 403(b) plans

(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] Golden State Court Allows G.ay Marriages
Excerpt: "With the 172-page ruling, including a majority opinion penned by Chief Justice Ronald M. George, California becomes the second U.S. state behind Massachusetts to allow g.ay marriage, according to news reports . . . . The decision was a product of a deeply divided court that narrowly approved the final holding 4 to 3." (

[Guidance Overview] IRS Redesignates Backdated Stock Options as a Tier II Issue (PDF)
At page 2. Excerpt: "Late last month, the IRS issued a directive announcing that the issue of backdated stock options was being redesignated from Tier I status to Tier II status. Tier II issues are those where the IRS' Large and Mid- Sized Business (LMSB) division believes there is a significant risk of noncompliance." (Miller Chavalier)

[Guidance Overview] Regulatory Dissonance on Personal Use of Company Aircraft -- IRS vs. SEC vs. FAA (PDF)
Excerpt: "It is probably too much to ask of federal regulators to coordinate their rules, but the IRS, SEC and FAA rules affecting personal use of company aircraft by executives are frustratingly out of synch. Companies need to be careful that they use the correct valuation method . . . ." (Miller Chavalier)

California Court Strikes Down G.ay Marriage Ban
Excerpt: "The California Supreme Court has overturned a ban on g.ay marriage, paving the way for California to become the second state where g.ay and les.bian residents can marry. The ruling reverses a voter-approved law that defined marriage as a union between a man and a woman." (National Public Radio)

Newly Posted Events
(Post Yours!)

Are You Ready For EGTRRA Restatements?
Nationwide on May 28, 2008
presented by

Newly Released Proposed PPA Regulations on Quarterly Contribution Requirements
Nationwide on May 22, 2008
presented by Conference of Consulting Actuaries

Smoking Discrimination in the Workplace: On and Off the Clock
Nationwide on July 9, 2008
presented by Lorman Education Services

WEB Phoenix Chapter Monthly Breakfast Meeting- June Panel Discussion, "HR Challenges"
in Arizona on June 12, 2008
presented by Worldwide Employee Benefits Network

Why Is This Guy Still on My Health Plan?
Nationwide on July 17, 2008
presented by Lorman Education Services

Newly Posted Press Releases
(Post Yours!)

NIPA Celebrates Successful NAFE
National Institute of Pension Administrators

Newport Appoints Mid-Atlantic Regional Director
Newport Group, The Announces the Release of Their EGTRRA Plan Document Software

Financial Professionals From Across The U.S. Attend fI360 National Conference On Fiduciary Responsibility
Fiduciary360 (fi360)

Benefit Plans Plus LLC Is Certified To Industry Best Practices
Centre for Fiduciary Excellence (CEFEX)

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Employee Benefits Administration
for Primary Consulting, Inc.

Retirement Services Manager
for Fiserv Investment Support Services
in CO

CEO - Pension Consultant
for M.L. Kerns & Associates, LLC
in TX

TRS - Retirement Plan Operations Specialist
for Transamerica Retirement Services
in CA

Relationship Manager
for Vanguard
in AZ

Benefit Service Representative
for Leggette Actuaries, Inc.
in TX

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