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July 11, 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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[Official Guidance] U.S. Second Circuit Court of Appeals Decision in Hirt v. Equitable, Decided July 9, 2008 (PDF)
15 pages. Excerpt: "Plaintiffs in two separate cases brought claims alleging that 'cash balance' defined benefit plans violated the Employee Retirement Income Security Act's rule against age-based reductions in the rate of benefit accrual, 29 U.S.C. § 1054(b)(1)(H)(i) (2005), as that rule existed prior to the amendment that took effect as of June 29, 2005." (American Benefits Council)

[Guidance Overview] New ERISA Advisory Opinion Issued on Use of Plan Assets to Achieve Collateral Objectives
Excerpt: "In this recent advisory opinion, the DOL responds to a request made on behalf of the U.S. Chamber of Commerce requesting guidance on whether the fiduciary rules of the Employee Retirement Income Security Act of 1974 (ERISA) prohibit the use of plan assets to promote union organizing campaigns and union goals in collective bargaining negotiations." (Health Plan Law blog by Attorney Roy F. Harmon III)

Dell Cleared in ERISA Breach of Fiduciary Case
Excerpt: "The court decision appears correct, but it begs an important question: what role should employers take in providing investment education to their employees? This is a trickier question than it first might appear because although 'investment education' is not fiduciary activity, 'investment advice' is, and the line between the two can be murky." (Workplace Prof Blog)

IRS, Treasury Implementation of PPA Clarification of Required Minimum Distribution Rules for Government Plans (PDF)
1 page. Excerpt: "The proposed regulations would be effective for all years to which section 401(a)(9) applies. Comments on the proposed regulations are due by October 8, 2008." (Sutherland)

Oversight of Fund Proxy Voting (PDF)
18 pages. Excerpt: "This paper: Discusses the responsibilities of fund boards of directors in overseeing proxy voting of fund portfolio securities; Considers various arrangements that funds and their advisers use to vote proxies, as well as other proxy voting issues that can arise for specific categories of funds or particular investment practices; Attempts to identify the major issues that boards are likely to face in establishing and overseeing a fund's proxy voting policy; Offers suggestions for board consideration in evaluating and resolving proxy voting issues." (Independent Directors Council and Investment Company Institute)

TE/GE Advisory Groups recommend changes to EPCRS, government plans
Excerpt: "The IRS's Advisory Committee on Tax Exempt and Government Entities (ACT) met in open session on June 11, 2008 and made suggestions that could affect the administration and correction of pension plans under TE/GE's regulatory umbrella." (Wolters Kluwer)

Investment Advice Arrangements Meet Plaintiffs' Lawyers
Excerpt: "New regulations and a class exemption for the provision of investment advice to participants of individual account plans are currently under review by the Office of Management and Budget, and are expected to be issued in proposed form before the end of the summer." (Baker & Daniels)

Fiscal Watchdog Group Urges End to New York Public Pension Enhancements
Excerpt: "'These bills are quite symptomatic of the fact that the state has to start connecting the dots,' said Elizabeth Lynam of the Citizens Budget Commission, the Manhattan-based watchdog group urging the vetoes. 'They can't say they're concerned about local tax burdens on the one hand, and on the other hand do business as usual by approving these sweeteners.'" (Rochester Democrat & Chronicle)

Governmental Accounting Standards Board Looking at Pensions
Excerpt: "As cities and states struggle with ballooning retirement costs, accounting rule makers started an ambitious project Thursday to force state and local governments to issue better numbers and reveal the true cost of their pension promises." (The New York Times; free registration required)

Is the IRS Becoming Less Kind and Gentle in Audit Resolutions?
Excerpt: "Our office recently handled an IRS audit for a client that has led us to believe that resolving problems discovered on audit is becoming more costly than it has been historically. This makes pre-audit plan reviews and problem resolution even more important than they were before." (Ilene Ferenczy via SunGard)

Experts Tell Congress Pension Funds Are Economic Engines, Provide Critical Investment Capital
Excerpt: "At a hearing [July 10] before the U.S. Joint Economic Committee (JEC), a panel of witnesses testified that pensions are fundamental to ensuring retirement security for American workers. But, less understood is the critical role pension funds play in stimulating the U.S. economy and providing long-term, patient investment capital for businesses, technology, and medical advancements. The hearing entitled, 'Your Money, Your Future: Public Pension Plans and the Need to Strengthen Retirement Security and Economic Growth' was convened by U.S. Senator Robert P. Casey." (Business Wire via iStockAnalyst)

State's Pension Changes Still Leave Uncertain Future for Government Workers
Excerpt: "Public-employee fringe benefits are at the heart of an odd controversy during the Kentucky General Assembly's special session, which began Monday. Despite nearly unanimous floor votes for a reform package of Kentucky's generous health and pension plans this week, wide divisions persist on what needs to come next for the government offerings. The state is languishing under a nearly $30-billion shortfall in its public employee benefit accounts." (Business Lexington)

SPARK Updates 403(b) Info Sharing Practices to Reflect DTCC Project
Excerpt: "The SPARK Institute released a new version of its 'Best Practices for 403(b) Plans Information Sharing -- Minimum and Comprehensive Data Elements' reflecting a project by the Depository Trust & Clearing Corporation (DTCC) to develop an information sharing service." (; free registration required)

Arkansas Attorney General Dustin McDaniel Calls State Retirement Bill Questionable
Excerpt: "Sen. Steve Faris, D-Central, asked for an opinion from the state's attorney general about whether legislation that would curtail the Deferred Option Retirement Plan for some categories of employees who are entitled to select that benefit would be constitutional." (Arkansas Democrat-Gazette)

CPAs Urge Americans to Avoid Borrowing from Their Retirement Accounts to Secure Cash
Excerpt: "The American Institute of Certified Public Accountants and CPAs holding the Personal Financial Specialist (CPA/PFS) credential of the AICPA warn that borrowing from retirement plans can be risky." (MarketWatch)

Testimony: State and Local Government Pension Plans: Current Structure and Funded Status (PDF)
28 pages. Statement of Barbara D. Bovbjerg, director, education, workforce, and income security, before the Joint Economic Committee on July 10, 2008. (U.S. Government Accountability Office)

Cash-Balance Plans Not Discriminatory, Court Says - Fourth Appellate Ruling in Favor of Employers
Excerpt: "In a unanimous decision, the appeals court affirmed two separate lower court rulings finding that cash balance plans sponsored by Verizon Communications Inc. and Equitable Life Assurance Society -- now known as AXA Equitable Life Insurance Co. -- do not discriminate against older workers." (Financial Week; free registration required)

[Opinion] Today's Retirement Education Has No Measures of Individual Success (PDF)
5 pages. Excerpt: "Benchmarking would also be valuable if the key measures were linked to retirees who used voluntary retirement plans to achieve their retirement dreams. Wouldn't it be helpful to compare your plan's progress with benchmarks set by what successful retirees knew and did during their working careers, how and when they learned it, and other factors that helped them achieve their retirement goals?" (Dennis Ackley)

[Opinion] How Public Sector Pension Plans Provide Adequate Retirement Savings in an Efficient and Sustainable Way
Excerpt: "A review of the economic evidence on state and local DB plans tells us that these pension plans have proven themselves as model retirement systems. They have a successful track record of performance in delivering adequate benefits in a sustainable and efficient manner." (Center for American Progress)

[Opinion] The Obama and McCain Economic Plans
Excerpt: "Mr. Obama wants to 'jumpstart economic growth and create jobs' by enacting a $50 billion stimulus package. He also wants to eliminate income taxes on retirement income. In other words, he favors more spending and a tax code that grants an entire class of people an exemption. This is socialistic -- the redistribution of wealth according to the whims of legislators." (The Washington Times)

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview] IRS Provides Guidance on Proper Income Tax Withholding for Nine Common Supplemental Wage Payment Scenarios
Excerpt: "For each of the situations discussed, the IRS assumes that there is no constructive receipt or constructive payment of wages before the actual payment of wages, that no amounts are required to be included in income under section 409A before the actual payment of wages, and that all payments are made on or after January 1, 2007." (Littler Mendelson P.C.)

[Guidance Overview] New Jersey Supreme Court Holds Deferred Compensation Plans with Forfeiture Provisions Lawful
Excerpt: "On June 25, 2008, the New Jersey Supreme Court issued its decision in Melvin Rosen v. Smith Barney, Inc. (A-49-07), holding that deferred compensation plans with vesting periods and forfeiture provisions do not violate New Jersey's wage and hour law or public policy." (Littler Mendelson P.C.)

[Guidance Overview] Deadline for 409A Compliance Fast Approaching
Excerpt: "The cost for non-compliance with Section 409A can be very high. NQDC plans that do not comply with Section 409A are subject to the immediate taxation of all vested amounts deferred, including earnings, for all years in all similar plans plus interest plus a 20% penalty tax. Additionally, Section 409A does not provide any exceptions to this penalty calculation for de minimus violations." (Aiken and Aiken)

Non-Qualified plan Participants Demand Communication Account Tools
Excerpt: "A survey co-sponsored by executive benefits consulting firm MullinTBG and PLANSPONSOR found that 69% of NQDC sponsors ask third-party recordkeepers to furnish account services such as online information tools, an on-demand benefit statement, online enrollment, and access to call centers." (; free registration required)

Newly Posted Events
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403(b) Myth Busting and the Latest IRS Guidance on the Coming Regulations Webcast
Nationwide on August 27, 2008
presented by National Institute of Pension Administrators

Newly Posted Press Releases
(Post Yours!)

Survey Suggests Incentives That Might Persuade Older Workers to Delay Their Decision to Retire
Employee Benefit Research Institute (EBRI)

Survey: Employee Retirement Brings New Challenges
American Benefits Council

SEI Launches Suite of Target-Date Portfolios for Defined Contribution Plans

Experts Tell Congress Pension Funds Are Economic Engines, Provide Critical Investment Capital
National Institute on Retirement Security

Paychex Named Preferred Retirement Services Provider for Members of the AICPA

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Actuary - White Plains
for Retirement System Group Inc.
in NY

Senior Defined Benefit Change Work Analyst
for Constantin Control Associates
in NJ

Manager – Conversions & Implementations
for The Standard

Employee Benefits Consultant
for Benefit Consulting Group, Inc.
in NY

401(k) Administration Assistant/Takeover Coordinator
for Florida Pension Consultants
in FL

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