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June 13, 2008

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


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[Guidance Overview] Navigating the QDIA Notice Requirements (PDF)
5 pages. Excerpt: "This bulletin discusses the notice and information requirements and the practical application of those rules." (Reish Luftman Reicher & Cohen)


[Guidance Overview] Section 404(c) Compliance Audit Checklist
9 pages. (Snell & Willmer, L.L.P.)


[Guidance Overview] DOL's Final Rules and Supplemental Guidance for Qualified Default Investment Alternatives
6 pages. Excerpt: "Following the issuance of the QDIA regulations, a number of issues arose. To address those issues and provide guidance with respect to the application of the final regulations, the Department of Labor recently issued Field Assistance Bulletin 2008-03 . . . . At the same time, the Department of Labor made some minor clarifications to the final regulations. The Bulletin is written in question and answer format and is intended to address the most frequently asked questions about the final QDIA regulations. After a brief outline of the final regulations' QDIA requirements, this newsletter highlights the helpful and practical guidance provided by the Department of Labor in the Bulletin." (Utz, Miller, Kuhn & Eickman, LLC)


[Guidance Overview] IRS Changes Reporting Requirements for Section 404(k) Dividends from ESOPs (PDF)
3 pages. Excerpt: "This change applies only to an ESOP's distribution of cash dividends. Dividends on ESOP employer securities that the corporation pays directly to ESOP participants or their beneficiaries will continue to be reported on Form 1099-DIV. The change in reporting will apply to ESOP dividend distributions made on or after January 1, 2009." (Pillsbury Winthrop Shaw Pittman LLP)


[Guidance Overview] PPA Testing Changes for 2008
Excerpt: "[There are three basic changes:] 1. GAP Period Income Eliminated on ADP and ACP Test Failure Refunds. 2. Eligible Automatic Contribution Arrangement plans will have 6-months after the plan year-end to make a refund for a failed ADP/ACP test without a 10% penalty to the employer versus 2 months for 401(k) plans without automatic enrollment. 3. Corrective distributions for ADP/ACP will be taxable in the year distributed." (McKay Hochman Co., Inc.)


[Guidance Overview] Off-Calendar-Year Plans
Excerpt: "Most of the compensation limitations are based on the limit in effect in the calendar year in which the plan year begins with a notable exception of the annual additions limit . . . ." (McKay Hochman Co., Inc.)


[Guidance Overview] Getting Plan Terminations Right
Excerpt: "If a sponsor is no longer committed to the defined benefit (DB) system, if a decision has already been made to freeze or terminate the DB plan, what is the best way to wind things up? That issue of DB 'exit strategy' is more complicated than it sounds. In this article we review the exit strategy process and considerations plan sponsors should be aware of." (JPMorgan Chase & Co.)


[Guidance Overview] PBGC Premiums After PPA
Excerpt: "PPA not only overhauled the funding rules for DB plans, but also changed the way premiums are assessed for the mandatory benefit guaranty insurance coverage provided by the PBGC. In this article, we discuss the changes to the premium calculations and touch on funding strategies to minimize these premiums." (JPMorgan Chase & Co.)


[Guidance Overview] Hewitt Federal Legislation Quick Guide Updated June 11, 2008, for Retirement Plans (PDF)
10 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] Understanding Employee Contributions to 403(b) Plans
Excerpt: "Most 403(b) plans provide employees with salary reduction agreements with which the employees can choose to have funds withheld from compensation and contributed to the 403(b) plan. They closely resemble 401(k) elective deferrals. In fact, the final regulations require that 403(b) elective deferrals follow many of the requirements of the 401(k) regulations." (SunGard Corbel LLC)


Why Not a 'Super Simple' Saving Plan for the United States?
Excerpt: "The Super Simple plan would (1) create solid minimum levels of employer contributions for low- and moderate-income workers; (2) include automatic contribution features for employees who do not formally opt out; (3) remove many of the complex discrimination rules surrounding retirement plans; (4) create a significant government match for savers to replace the largely symbolic match now in existence for only a few taxpayers; and (5) streamline today's multiple 401(k)-type plans through a simple plan design attractive to employers and employees alike." (Social Science Research Network)


As 401k Audit Season Starts, Sponsors Face Tougher Standards
Excerpt: "Auditors will be asking more questions and requesting more documentation because new, stricter audit standards, known as the 'risk assessment standards,' now are effective for employee benefit plan audits for periods beginning on or after Dec. 15, 2006. This year, auditors are required to look at the plan sponsor as well as the plan, and the audit process will last longer and demand more management time." (Business Wire via Human Resource Executive Online)


Increasing Life Expectancies Are Disrupting Traditional Retirement Distribution Strategies
Excerpt: "[W]hen retirement income is primarily based on annual investment earnings, so that the depletion of principal is spread out over a very long life expectancy, annual retirement income will never fall below annual investment income, even if the retiree lives to age 1,000! . . . . Perhaps . . . learning to live on just investment income (plus Social Security) is an idea whose time has come!" (Brooks Hamilton)


Rep. Meek Introduces Legislation to Address Public Safety Retiree Tax Issue
Excerpt: "Section 828 of the Pension Protection Act of 2006 amended the tax code to allow retired public safety employees beginning at age 50 to take distributions from their defined benefit pension plans without paying the 10 percent early distribution tax. Section 828 was enacted recognizing that, due to nature of the profession and in many cases mandatory retirement ages, public safety employees typically retire earlier than the general population. Of course, 26 U.S.C. 72(t)(2)(A)(v) permits all other retirees to take distributions without the 10 percent tax, beginning at age 55. Unfortunately, since implementation of PPA Section 828, two issues have arisen that need to be fixed." (Cypen & Cypen)


Workers Are Sleepwalking Towards an Impoverished Old Age with DC Plans
Excerpt: "In their Pensions Institute paper, David Blake, Andrew Cairns and Keith Dowd point out that DC plans are poorly designed. Instead of asking how much employees want to get out of the plan, the focus is on how much they are willing to contribute. 'A well-designed plan will look very much like a defined-benefit plan, offering a promised retirement pension, but without the guarantees implicit in the DB promise,' they argue. One way of achieving this would be for the default fund to target a pension level that is a proportion of final salary." (The Economist)


Small-Business Owners Turning to Tax-Saving Investment Tool - the 401(k)
Excerpt: "The [target page lists] five tax-specific benefits that make the 401(k) a smart choice for any small business . . . ." (Forbes.com)


Are Lifecycle Funds the QDIA of Choice?
Excerpt: "Nearly eight-in-ten (78%) employers surveyed by Fidelity Investments already offer a qualified default investment alternative (QDIA), with most (63%) holding lifecycle funds as the QDIA." (PLANSPONSOR.com; free registration required)


Gannett Pension Freeze Draws Angry / Concerned Employee Reaction
Excerpt: "As word of spread of Gannett's plan to freeze its employee pension and increase 401(k) contributions, rank and file workers reacted with a mix of anger and uncertainty Thursday. Gannett revealed that the move would save the company about $30 million in 2009." (Nielsen Business Media, Inc.)


Why ETFs And 401(k)s Will Never Match
Excerpt: "Similar to ETFs, index mutual funds are less expensive than actively managed mutual funds. Therefore, the real debate regarding the potential benefits of ETFs in 401(k)s is not whether ETFs create cost savings versus actively managed mutual funds, but whether ETFs create additional cost savings when compared with traditional index mutual funds." (IndexUniverse.com)


Newspaper Publisher Gannett's Turn Away from Pension in Favor of Enhanced 401(k) Seen As Possibly Renewing the Trend
Excerpt: "USA Today publisher Gannett Co.'s freezing of its pension plan -- boosting its 401(k) program instead -- could spur renewed activity in the push for companies to replace traditional plans with improved defined-contribution systems." (CFO.com)



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(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] Hewitt Federal Legislation Quick Guide Updated June 11, 2008, on Human Resources & Employment Law (PDF)
10 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] Rule 10b5-1 Plan Creating Litigation - In Re Countrywide Financial Corp. Derivative Litigation
Excerpt: "A Rule 10b5-1 plan, when correctly designed and adopted, gives executives a safe and effective way of buying or selling their companies' securities free of insider trading concerns. However, the Countrywide case underscores the importance of proceeding with caution when adopting, modifying, or terminating a Rule 10b5-1 plan." (Michael S. Melbinger via Winston & Strawn LLP)


Law Firms Offering College 'Coaching' as a Benefit
Excerpt: "Law firms credit family-friendly benefits like day care with drawing the best and the brightest to their firms, and now they're offering college-admissions consulting to help lawyers and staff navigate their children's college placement process." (The National Law Journal via LawJobs.com)




Newly Posted Events
(Post Yours!)

409A Compliance and Deferred Compensation
in New Jersey on June 18, 2008
presented by New Jersey Institute for Continuing Legal Education



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