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June 3, 2008

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

Today's sponsor is ASC & The ASC Institute

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ASCi EGTRRA Documents Available Now!

ASCi launches its IRS-approved Volume Submitter 401(k) document! Additional EGTRRA documents will be rolling out throughout this spring and summer. Join the many practitioners who have already used ASCi’s highly acclaimed DGEM system to prepare thousands of new and restated documents and remain far ahead in restating their clients’ plans to comply with EGTRRA.

Click here to see a DGEM video or contact us at

[Guidance Overview] Government Contractor ESOP Cost Accounting Rules Finalized
Excerpt: "[W]hen the company is a government contractor with cost-plus contracts, certain ESOP costs are reimbursable to the extent there is room in the overhead of a contract. As a result, the costs associated with the ESOP can be reimbursed by the government to the company. The issue of which costs are reimbursable however, was both controversial and ambiguous prior to final rules adopted on May 1." (Morgan, Lewis & Bockius LLP)

[Guidance Overview] An ESOP Fable with a Drafting Tip
Excerpt: "An interesting case was recently decided by the federal court in the Northern District of Alabama: Pension and Employee Stock Ownership Plan Administrative Committee of Community Bancshares, Inc. v. Patterson . . . . Community Bancshares, Inc. (Bancshares) sponsored an ESOP that purchased Bancshares stock in 1993 and 1998." (Morgan, Lewis & Bockius LLP)

[Guidance Overview] Practitioner Highlights Changes to Form 5500 for 2007
Excerpt: "Completing a Form 5500 requires more thought and care due to recent changes, according to Janice Wegesin, President of JMW Consulting, Inc. in Petosky, MI." (Wolters Kluwer)

[Guidance Overview] Fiduciary Focus: The Night of the Living Dead Retirement Plan Participants (PDF)
5 pages. Excerpt: "A highly disturbing fact is that many plan sponsors fail to discharge their ERISA section 404(a)(1)(A) duties because they don't know about--much less understand--the total economic impact that the hodgepodge of both 'visible' costs (e.g., the annual expense ratio of mutual funds) and 'invisible' costs (e.g., the bid-ask spreads of mutual funds) can have on the account balances of the participants in the plans provided to them by the sponsors." (W. Scott Simon via Morningstar)

West Virginia Educators OK Pension Plan Transfer
Excerpt: "More than 14,870 West Virginia teachers will get the chance to abandon the state's poorly performing 401(k)-style retirement program in favor of a traditional pension plan, officials announced today. These fed-up members of the Teachers' Defined Contribution plan can also count on an estimated $24.5 million in state funds to help them. More than 78 percent of the teachers enrolled in the TDC plan voted to transfer, according to the state's Consolidated Public Retirement Board." (AP via The Charleston Gazette)

KiwiSaver: New Zealand's New Subsidized Retirement Savings Plans (PDF)
8 pages. Excerpt: "On July 1, 2007, New Zealand introduced KiwiSaver, a new subsidized retirement savings plan. All new entrants to the labor force and anyone starting a new job are automatically enrolled in a plan and may opt out if they wish. Anyone younger than age 65, including the self-employed and anyone not in the labor force, may choose to set up a KiwiSaver account. The government provides tax credits for both employer and account holder contributions, a one-time tax-free payment to each account, and an annual fee subsidy to defray administrative costs." (U.S. Social Security Administration)

Women, Marriage, and Social Security Benefits Revisited (PDF)
Excerpt: "Introduced into the Social Security program in 1939, spouse and survivor benefits have important implications for the retirement experience of women. At the end of 2005, 12.9 million women Social Security beneficiaries aged 62 or older (59 percent) received at least part of their benefit as wives or widows of entitled workers." (U.S. Social Security Administration)

Why Pricing of 403(b) Plan Services Can be Complex
Excerpt: "If one is looking for reasons why pricing of services for 403(b) plans is so complex and confusing, a starting point might be the reality that service platforms for these defined contribution plans are actually comprised of two separate and distinct businesses that service providers attempt to combine into a single business model. This may work well for branding, but is problematic when services are bundled together for pricing purposes." (; free registration required)

Forecasting Labor Force Participation and Economic Resources of the Early Baby Boomers
Excerpt: "This paper forecasts the retirement patterns and resources of the Early Baby Boomers by estimating forward-looking dynamic models of labor force participation, wealth accumulation and pension and Social Security benefit claiming for older workers using seven waves of HRSdata. The two most important innovations of our proposed approach are the use of alternative measures of pension entitlements and the associated incentives, and accounting for subjective expectations about future work. Our main findings are that the Early Baby Boomers will work longer and claim Social Security later." (Michigan Retirement Research Center)

Adequacy of Economic Resources in Retirement and Returns-to-Scale in Consumption
Excerpt: "Most assessments of the adequacy of retirement resources are expressed as a comparison of preretirement income to immediate post-retirement income. Yet, among couples a substantial fraction of retirement years is eventually spent by the surviving spouse living alone. To the extent that singles need less than couples to maintain the same standard of living, assessments of the adequacy of economic resources that make no adjustment for widowing will systematically misstate economic preparation." (Michigan Retirement Research Center)

New York Teachers Guaranteed 8.25 Percent Return on Savings Plan
Excerpt: "The teachers' 403b savings plan is a voluntary contribution plan, similar to the 401(k)s in which millions of Americans invest. But while most investors risk a loss or a meager return, this teachers account doesn't carry such risk, because the public, in this case New York City taxpayers, guarantees a minimum return. The benefit is over and above the teachers' pension plan." (Times Union)

Pension Costs Off by $500 Million, New York City Finds
Excerpt: "An actuary paid by public employee unions and yet relied upon by the State Legislature to determine the cost of proposals affecting New York City's pension system underestimated their ultimate cost by at least $500 million, city documents and other records show." (The New York Times; free registration required)

New Hampshire Lawmakers Bogged Down Over Pension Reform Snag
Excerpt: "[T]alks eventually ground to a standstill over a provision capping pension benefits for new hires after July 1, 2009. According to the news account, the controversial provision would limit pension benefits to 100% of the highest year of pay. Firefighters and police objected it would hurt recruitment and retention efforts since they work overtime to boost their pensions." (; free registration required)

California City Files for Bankrup.tcy to Get Out of Generous Obligations to Public Employees
Excerpt: "Back at the turn of this century, when the stock market was still booming, public pension plans across the country were suddenly overflowing with surplus money. Politicians responded by handing out heavily sweetened pensions. Then, even though the stock market collapsed, politicians couldn't stop the trend. In 2001 alone, pension benefits were increased in at least 17 state plans, as well as some major cities." (

Humana Named in Purported Class Action Lawsuits Claiming ERISA Violations, Rate Fixing
Excerpt: "Humana Inc. said Monday it has been named as a defendant in a purported class action lawsuit claiming the health insurer provided certain retirement plan participants with misleading information, among other things. The complaint was filed May 1 in U.S. District Court in Kentucky by participants in and beneficiaries of the Humana Retirement and Savings Plan and the Humana Puerto Rico Retirement Plan, according to a filing with the Securities and Exchange Commission." (

[Opinion] American Benefits Council Amicus Brief with 2nd Circuit U.S. Appeals Court in re Citigroup Pension Plan ERISA Litigation (PDF)
30 pages. Excerpt: "The Council bases its decision to seek to file an amicus brief upon criteria that limit participation to significant cases in which the Council believes its discussion of the issues will advance arguments that will not be fully developed from the same broad perspective by the parties or by other amici. Issues in the Citigroup Pension Plan ERISA Litigation are of critical importance to the Council because affirmance of the District Court's decision would have a serious adverse impact on America's defined benefit pension system and those members of the Council that sponsor such plans." (American Benefits Council)

[Opinion] Automatic Enrollment or Managed Account? (PDF)
7 pages. Excerpt: "[W]e need to ask one question: does automatic enrollment (and its associated qualified default investment alternatives) represent the most realistic solution for sponsors looking to truly address the long-term retirement income needs of their plan participants? This position paper posits that the answer to that question is: 'no.'" (StanCorp Financial Group, Inc.)

[Opinion] Follow the Numbers: the Evolution in ERISA Law
Excerpt: "I have noted two things - well, many things, only two of which are relevant to this post - in the past, one the line that Marx was wrong about a lot of things, but he was right that everything is economics, and the second that we are beginning to see an incremental evolution in the law of ERISA to account for the reality that pensions - predominant at the time of many of the earlier, key court rulings on ERISA - have been supplanted by defined contribution plans." (Stephen Rosenberg of The McCormack Firm, LLC)

Sponsored by: ASPPA

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The Western Benefits Conference, July 13-16, 2008, Seattle, Washington

It's the best of both worlds, and should not be missed. Join the Western Pension & Benefits Conference and ASPPA for this unique conference designed with all retirement, health, welfare and benefits professionals in mind. The Western Benefits Conference offers attendees seven separate professional learning tracks with over 50 individual sessions all led by nationally renowned speakers and both national and local government representatives. Network with your peers, private sector experts, and government officials at planned events throughout the conference. Be in Seattle with over 900 of your colleagues July 13-16, 2008 and experience this conference first hand. Register NOW and don't miss out.

(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] FICA Treatment of Severance Pay Clarified (PDF)
2 pages. Excerpt: "A recent federal appeals court decision affirmed the IRS' position on the FICA treatment of severance payments, overturning a controversial lower court decision. Employers now have a clear roadmap as to how to structure severance arrangements that are exempt from FICA taxation." (Buck Consultants)

[Guidance Overview] Employee Benefits Review, May 2008 (PDF)
8 pages. The newsletter covers select compliance deadlines and developments in retirement and health and welfare plans. (Reinhart Boerner Van Deuren s.c.)

IBM Agrees to $20M Settlement of Options-Related Lawsuit
Excerpt: "IBM Corp. has agreed to pay $20 million to settle a lawsuit by shareholders who claimed the technology company misled the public about employee stock-option expenses in 2005." (AP via The Washington Post; free registration required)

New Documents Illuminate Yahoo-Microsoft Takeover Saga
Excerpt: "Yahoo Inc. Chief Executive Jerry Yang pushed for an employee severance program that made it more expensive for Microsoft Corp. to engineer a takeover even after an outside consultant questioned the plan's generous benefits, according to previously sealed documents in a shareholder lawsuit against Yahoo." (AP via Chicago Sun-Times)

Holding Your Third Party Administrator Accountable
Excerpt: "A good place to start is asking a TPA for their SAS 70 audit, which should highlight significant and relevant characteristics of their internal controls for ensuring an acceptable ERISA compliance plan is in place." (Employee Benefit News; free registration required)

Despite Veto Threat, House Passes Extenders Bill with Pension Provisions
Excerpt: "The House on May 21, 2008 passed H.R. 6049 (the Renewable Energy and Job Creation Bill of 2008), tax extenders legislation that includes a handful of provisions affecting pensions and employee benefits." (Wolters Kluwer)

New York Governor Paterson's G.ay Marriage Edict Sparks Debate
Excerpt: "Gov. David A. Paterson's edict to state agencies to recognize same-sex marriages is still confusing to many people throughout the state two weeks after he quietly issued it. It is uncertain, for example, whether the governor's decree on state agencies will matter to private companies or nonprofit agencies that provide an array of services to the state or whether he even has the legal authority to enforce his edict." (The Buffalo News)

Employee Ownership Update for June 2, 2008
NCEO Executive Director Corey Rosen discusses a district court ruling that a previously decided ESOP case could not be reopened in light of the new legal standard set out in the Supreme Court's LaRue v. DeWolff decision; final ESOP reimbursement rules from the U.S. Cost Accounting Standards Board; controversy over a New York Times article on the U.S. Sugar ESOP; and an upcoming conference. (National Center for Employee Ownership)

Newly Posted Events
(Post Yours!)

2008 Web/Telephone Seminar: Advanced HSAs
Nationwide on July 10, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Basic IRAs
Nationwide on July 10, 2008
presented by Ascensus

2008 Web/Telephone Seminar: HSA Basics
Nationwide on July 17, 2008
presented by Ascensus

2008 Web/Telephone Seminar: HSA Market Entry
Nationwide on July 31, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Introduction to QRP Distributions
Nationwide on July 24, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Retirement Distribution and Income Planning
Nationwide on July 22, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Understanding & Processing Transfers & Rollovers
Nationwide on July 8, 2008
presented by Ascensus

Compliance Assistance Seminar For Retirement Plan Fiduciaries
in California on July 1, 2008
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Newly Posted Press Releases
(Post Yours!)

Accurate Revenue Estimates Needed for Retirement Policy
ASPPA (American Society of Pension Professionals & Actuaries)

National Institute of Pension Administrators (NIPA) Launches New Business Management Education (BME) Series
National Institute of Pension Administrators

EBRI Estimates Precise Retiree Health Savings Needs
Employee Benefit Research Institute (EBRI)

Great-West Retirement Services® Announces Managed Account Program Surpasses $2 Billion
Great-West Retirement Services

Nationwide Retirement Plans Unveils Plan Sponsor Fiduciary Bill of Rights
Nationwide Financial

New NCQA Program to Evaluate Health Promotion
National Committee for Quality Assurance (NCQA)

MassMutual Completes Acquisition of First Mercantile Trust Company

The Massachusetts Reforms: A One-Year Progress Report
Health Affairs

PlanSource Expands Product Set with Acquisition of Enwisens Broker Communication Suite

Paychex Partner Program With AICPA Reaches Milestone

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DB Implementation Specialist
for Milliman
in TX

Pension Consultant
for Randall & Hurley, Inc.
in WA

Compliance Account Manager
for First Niagara Benefits Consulting Group
in NY

Retirement Plans Relationship Manager
for Boston Financial Data Services
in MA

Compliance Manager – Retirement Plans
for The National Rural Electric Cooperative Association (NRECA)
in VA

Business Analyst/Retirement Pension Analyst-SPGA Installation
for Transamerica
in CA

CRTMA - Plan Consultants - Government Market
for Citi
in AR

Lansing MI Home Based Customer Service Representative
for Citi
in MI

Defined Contribution Document Specialist
for Nationwide Financial
in OH

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