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July 28, 2008

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

Today's sponsor is

(Click on company name or banner to learn more.)
Banner ad for now offers a 409A plan document.'s new Section 409A non-qualified deferred compensation plan is now available on its website. The plan includes an Adoption Agreement, Basic Plan Document, Plan Description, election forms, sample Rabbi Trust, inservice distribution form and more.

The document is available for $275/plan or purchase our Non-Qualified Annual Subscription for $775/year and get the 457(b) and 409A.

Contact Holly Roussel for details at 800.596.0714 or via email at

[Guidance Overview] Department of Labor Requirements for Participant-Directed Investments (PDF)
5 pages. Excerpt: "WHO'S AFFECTED These requirements apply to: Qualified defined contribution plans, ERISA 403(b) plans, and Voluntary employee account portions of defined benefit plans that allow participants and beneficiaries to direct the investment of their individual accounts, and that have chosen to take advantage of the fiduciary liability protection afforded by the ERISA section 404(c) regulations." (Prudential Retirement)

[Guidance Overview] ERISA Section 404(c) Required Disclosure Items (PDF)
3 pages. The chart includes Suggested Location of Information, such as the Summary Plan Description, and Suggested Method of Delivery columns. (Prudential Retirement)

[Guidance Overview] DOL's Proposed Additional Fee and Investment-Related Disclosures for Participant-Directed Plans (PDF)
4 pages. Excerpt: "The regulations are proposed to be effective for plan years beginning on or after January 1, 2009. Comments regarding the proposed regulations are due by September 8, 2008." (Sutherland)

[Guidance Overview] DOL's Proposed Regulation on Fiduciary Disclosures for Participant-Directed Individual Account Plans
Excerpt: "The DOL intends that the investment-related disclosures will educate participants and beneficiaries about a plan's investment alternatives without overwhelming them with too much information. The DOL acknowledges that the regulation may trigger increased administrative costs and burdens for plans and plan sponsors, but notes that many of the regulation's required disclosures are similar to those currently required for ERISA Section 404(c) plans." (Employee Benefits Institute of America)

[Guidance Overview] DOL's FAQs on Schedule C Required for 2009 Plan Years
Excerpt: "Among other specialized situations, the guidance also deals with 'open brokerage' windows; compensation received in connection with operating companies; compliance services (e.g., discrimination testing and Form 5500 preparation) provided by recordkeepers to mutual fund agents; 'alliance arrangements' between recordkeepers and other service providers; insurance contract 'wrap fees'; and spreads earned by brokers on principal transactions." (Employee Benefits Institute of America)

[Guidance Overview] IRS's Proposed Regulations on Applying Accrual Rules to 'Greater of' Formulas
Excerpt: "Making good on its earlier promise, the IRS on June 17, 2008 released proposed regulations on applying the IRC § 411(b) accrual requirements (aka, the 'anti-backloading rules') to defined benefit plans that pay benefits based on the 'greater of' two or more separate benefit formulas." (Deloitte via

Details Missing from Obama's Social Security Plan
Excerpt: "Barack Obama's bid to place a new Social Security tax on very high incomes is either a bold or foolhardy plan, depending on who critiques it. But its potential impact is almost impossible to gauge because he is providing few details on basic questions such as what the tax rate might be, what types of income would be taxed and how the taxpayers' benefits would be affected." (AP via The New York Times; free registration required)

House Subcommittee Hearing Considers Changes in IRA Incentives
Excerpt: "The House Ways and Means Subcommittee on Select Revenue Measures held a hearing in June to consider changes to existing Individual Retirement Arrangements (IRAs) that are proposed in two House bills." (ICMA-RC)

Kentucky Lawmakers Who Switch Jobs Get Pension Boost
Excerpt: "Thanks to a provision lawmakers quietly approved in 2005, many former legislators who switch to judicial or executive branch jobs will see their annual retirement benefits double, quadruple or even increase six-fold." (Human Resource Executive Online)

The Case of the 401(k) Plan Loan and Termination of Employment
Excerpt: "There has been a great deal written about why borrowing from your 401(k) plan is a bad idea. If you want to read a good case in point that illustrates how things can go awry when it comes to a 401(k) plan loan, read the recent Tax Court case of Tilley v. Commissioner." (Attorney B. Janell Grenier via

Portability and Its Place in the Design of Retirement Plans
Excerpt: "401(k)s no doubt have a place in the retirement landscape, so long as people understand the real intrinsic differences between defined-contribution plans and defined-benefit plans. Portability is not one of those differences. Plan sponsors are in a position to correct this misconception, and should not be swayed from pursuing an effective defined-benefit strategy in the name of portability." (Workforce Management; free registration required)

DOL's Fee-Disclosure Proposal Scrutinized
Excerpt: "Most observers were pleased with the proposed fee-disclosure regulation issued by the DOL, which could take effect for the 2009 plan year. It requires both quarterly and annual disclosures, as well as information on investment performance. Critics say the proposal does not go far enough." (Human Resource Executive Online)

New York Fire Districts Put Private Lawyers on Public Payrolls
Excerpt: "When Gordon Heights residents mobilized to fight the high taxes they pay for fire service, they were stunned to discover that the fire district's attorney, William Glass, was on the payroll. They complained that taxpayers in Long Island's most expensive fire district should not pay the Social Security and pension costs of a private attorney who had no office, filed no time sheets and had a private practice." (NewsDay)

Senate Bill Would Limit Loans from 401(k) Plan Accounts
Excerpt: "To address concerns of excessive borrowing from 401(k) plans, a bill introduced in the Senate this month would ban debit cards allowing investors to borrow from their retirement accounts and would limit the number of outstanding loans to three." (Investment News; free registration required)

Economically Squeezed Families Are Turning to Their 401(k)s to Make Ends Meet
Excerpt: "Given the significant downsides to 401(k)-type loans, why do people take them? Families take these loans because they are either uninsured or underinsured for the risks they face. Over the past few years, families looked for new ways to bridge the gap between slow income growth and rapidly rising prices, especially for houses, but also for food, energy, and health care. This search more often than not led them to household credit, but as families amassed ever-larger amounts of household debt they sometimes also sought out additional financial resources, such as their retirement plans." (Center for American Progress)

Former Massachusetts State and Local Employees Reap Larger Pensions
Excerpt: "Special pensions granted to 386 public employees in the past five years could cost state and local governments as much as $235 million. The Boston Globe reports that the workers were allowed to invoke an obscure 1945 law to win earlier and larger pensions." (AP via Sunbeam Television Corp.)

Leaving 401(k) at Old Job Could Be Best Way to Go
Excerpt: "Leaving an employer and planning to take retirement savings with you? In some cases, your money doesn't need to move on as badly as you do. A 35-year-old worker who leaves savings with a former employer instead of rolling it into an individual retirement account that charges 30 basis points more in fees resulted in a balance that was roughly 10 percent higher by age 70, according to a statement this month from Hewitt Associates prepared for the Senate Special Committee on Aging." (Chicago Tribune)

Sweetened Pensions Beset Atlanta's Budget Crisis
Excerpt: "As Atlanta politicians address one of the biggest budget deficits in recent history, they frequently say high city employee pension costs are a major part of an economic storm buffeting the city. But unlike the struggling economy or spiking health care costs, those pension increases weren't caused by forces beyond the city's control. The Atlanta City Council, with tacit approval from Mayor Shirley Franklin's administration, made key decisions to sweeten pensions for city workers that have put Atlanta in a budgetary bind that will take years to escape." (The Atlanta Journal-Constitution)

Gender Split on Retirement Worries
Excerpt: "The complexity of preparing financially for retirement can make anyone nervous -- but a new survey finds women are more worried than men about the challenges ahead, particularly inflation, health-care costs and outliving retirement savings." (The Wall Street Journal)

Rate of Return Crucial in Retirement Plans
Excerpt: "Generous return assumptions came under fire recently from Berkshire Hathaway Chairman Warren E. Buffett. In his annual letter to shareholders, Mr. Buffett observed that the average Standard & Poor's 500 member sponsoring a pension plan assumes annual returns of 8 percent. Considering that their average plan allocates 28 percent to bonds and cash, which typically do not earn more than 5 percent, Mr. Buffett calculated the remaining 72 percent invested stock and other asset categories would have to earn 9.2 percent to meet the 8 percent goal." (Pittsburgh Post-Gazette)

Some of the New Features in 401(k) Plans Being Offered Today
Excerpt: "As pension plans decline, more employers are making changes to improve workplace savings plans, such as 401(k) and 403(b) plans. They also are increasing the use of automatic-enrollment and auto-escalation features to 'force' employees to contribute toward their retirement." (

[Opinion] The Road to Fee Disclosure Hell is Paved with Good Intentions
Excerpt: "In the preamble to the regulation, the DOL states that: 'This proposal is intended to ensure that all participants and beneficiaries in participant-directed individual account plans have the information they need to make informed decisions about the management of their individual accounts and the investment of their retirement savings.' While this paragraph may sound good in theory, in practice it is difficult to understand how the specifics of these supposedly new required disclosures will help participants to make better investment allocation decisions." (MJM401k)

[Opinion] DOL's Proposal Regarding Participant Fee Disclosures
Excerpt: "[T]he proposal itself seems relatively straightforward: It purports to require disclosure of certain plan- and investment-related information (including fees and expenses, of course) to participant-directed account participants. It identifies three categories of annual disclosures (to be furnished on or before their eligibility date, and at least annually thereafter), and further requires a quarterly disclosure of specific dollar amounts charged to the participant's account for specified administrative expenses." (planadvisor)

[Opinion] SEC Issues Compliance Alert About Sloppy Valuation Process
Excerpt: "According to the SEC website, a ComplianceAlert letter highlights results of examiners' audits in an attempt to 'encourage' institutions to better their current compliance and supervisory efforts. In its July 2008 letter that starts 'Dear Chief Compliance Officer,' the SEC staff provides a laundry list of concerns . . . ." (Pension Risk Matters)

[Opinion] Class Action Certification and 401(k) Fees
Excerpt: "According to Class Action Litigation Report ('Court Certifies Class Action Alleging Fiduciary Breach in Charging Excessive Fees, July 25, 2008), a U.S. federal court has granted class action status to a claim by 401(k) plan participants that they were forced to pay 'unreasonable' fees to service providers. Alleging that Kraft Foods Global Inc. plan fiduciaries failed to keep a lid on costs related to recordkeeping and asset management, this case may raise the stakes for Corporate America, with at least a dozen other 'excess fee' cases awaiting adjudication." (Pension Risk Matters)

[Opinion] Letter to the Editor: 'Freezing' a Pension Plan Won't Jeopardize Benefits
Excerpt: "The main news section item, 'Many retirement plans are at risk' (July 23), indicated that employees' retirement pensions were at risk because employers were freezing their defined-benefit pension benefits. This is misleading. Freezing the plan simply means em­ployees will not earn any further benefits." (St. Louis Post-Dispatch)

Sponsored by:

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Are you a 401(k) plan sponsor who is looking for a cost-effective way to get your employees to appreciate their plan and save more? "It’s Your Money" information sheets are now available as e-mailable newsletters sent to your employees at the same time that they receive their quarterly 401(k) statements. They can now be customized with your company logo, a valuable retention tool!

(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

Teleworkers Say It's A Gas-Saver
Excerpt: "Although the spike in gas prices might be driving the increase, advocates for telecommuting say it's a matter of time before the trend catches fire. For a generation that came of age texting and instant-messaging, driving two hours to sit at a cubicle outside the boss's office doesn't make sense if there's an office down the street. And as that generation replaces an older set of supervisors, businesses will become more open to the idea of remote offices, teleworkers say." (The Washington Post; free registration required)

Working Long Hours, and Paying the Price
Excerpt: "[L]ong days at work take a serious toll. For starters, it is very hard for employees to maintain a healthy lifestyle when work and commuting consume 60 or more hours a week. It is probably not a coincidence that obesity has become more prevalent as work hours have expanded for some. Too many hours at the office can also wind up being counterproductive. Employees who are overtired or preoccupied with neglected personal issues are unlikely to perform at their peak. They fall behind, spend more unproductive time at work to catch up, and so on." (The New York Times; free registration required)

GM to Offer an Extra Employee Discount Through July
Excerpt: "The discount offers a substantial savings. A Buick Lucerne with a sticker price of $34,200 would carry an employee price of $29,758.03 after cash incentives, says a GM spokesman." (Workforce Management; free registration required)

Newly Posted Events
(Post Yours!)

The DOL's New Proposed Fee Disclosure Regulations
Nationwide on August 13, 2008
presented by Qualified Pension Consulting, Inc.

Newly Posted Press Releases
(Post Yours!)

CFDD Launches Unique Training Program For Retirement Plan Wholesalers
Center for Due Diligence

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Plan Administrator
for Beneco, Inc.
in AZ

DC/401(k) Administrator
for Gelman Pension Consulting, Inc.
in NY

Benefits Manager, Savings Plans
for Sodexo USA
in MD

Client Service Consultant
for The Standard
in CA

DC Client Mgmt Spec
for Prudential Financial
in IA

Associate Actuary
for Prudential Financial
in CT

Retirement Plan Services Administrator
for Associated Bank
in IL

Director of Retirement Product Marketing
for Commonwealth Financial Network
in MA

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