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August 1, 2008

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

Today's sponsor is DATAIR Employee Benefit Systems, Inc.

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[Official Guidance] Final IRS Regs: Mortality Tables for Determining Present Value and Certain Pension Funding Computations (PDF)
17 pages. Excerpt: "Section 1.430(h)(3)–1, which provides generally applicable mortality tables, applies to plan years beginning on or after January 1, 2008. Section 1.430(h)(3)–2, which provides rules regarding the approval and use of substitute mortality tables, applies to plan years beginning on or after January 1, 2009. Taxpayers may rely on the provisions of § 1.430(h)(3)–2 for plan years beginning during 2008. For example, taxpayers can use the exceptions contained in § 1.430(h)(3)–2(d)(1) from the general rule that all controlled group members must use substitute mortality tables in order for any controlled group member to use substitute mortality tables . . . if those mortality tables were approved by the IRS under the procedures set forth in Rev. Proc. 2007–37." (Internal Revenue Service)

[Guidance Overview] Proposed Rule on Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans (PDF)
5 pages. Excerpt: "Congressional outlook – It's a good bet that this will not be the final word on participant fee disclosure. There are significant differences between the rule and HR 3185, the leading bill on fee disclosure. It's likely that fee legislation will be enacted next year." (Profit Sharing/401k Council of America)

[Guidance Overview] Dividends Versus Distributions in ESOP Planning
Excerpt: "This article is an overview of the differences in the utility of C corporation dividends and S corporation distributions in ESOP transactions. It assumes the reader has some familiarity with the basics of ESOPs and the fact that ESOPs may now be sponsored by S corporations." (Chang, Ruthenberg & Long PC)

[Guidance Overview] Second Circuit Rules That Cash Balance Plans Are Not Inherently Age Discriminatory (PDF)
Pages 2-3 of 6 pages. Excerpt: "The Second Circuit ruling makes it quite likely that the age discrimination issue has been put to bed for cash balance plans. Although there is at least one appeal pending in the Ninth Circuit on this same issue, most anticipate that it too will follow the holdings and reasoning of the four Circuit Courts that have unanimously rejected these claims. Should the Ninth Circuit (or any other Circuit) rule to the contrary, however, there might still be a need for Supreme Court resolution." (Proskauer Rose LLP)

[Guidance Overview] Another Question is Answered in the 401(k) Plans Q&A Column
I have been trying to find support for handling a 401(k) plan matter. I think I found what I need in an "IRS Publication."; Can I rely upon it? (

Who Needs More Steady Income in Retirement--And What Could Be Done About It? (PDF)
3 pages. June 10, 2008, presentation by Olivia S. Mitchell. (University of Michigan Retirement Research Center)

Thrift Savings Plan Changes Included in Tobacco Legislation
Excerpt: "The purpose of the legislation is to protect public health by providing the Food and Drug Administration with authority to regulate tobacco products. Most readers would not have inferred from the name of the bill that the legislation would also increase annuity payments for some federal employees who are in the FERS retirement program . . . ." (FedSmith Inc.)

House Approves Thrift Savings Plan Automatic Enrollment Measure
Excerpt: "The bill was rolled into a larger piece of legislation, the Family Smoking Prevention and Tobacco Control Act (H.R. 1108), which also advances a measure that grants federal employees who were hired after 1984 credit for unused sick time in their pension calculations." (

Managing Pension Surplus: A New Playbook for a New Era (PDF)
12 pages. Excerpt: "Higher funding targets under the U.S. Pension Protection Act of 2006 (PPA) and the reduction or elimination of future pension accruals are increasing the likelihood of significant surplus in defined benefit pension plans. Now is the time to develop a strategy for effectively managing emerging pension surpluses." (Towers Perrin)

Before You Make Retirement Decisions, Make Sure You Understand the Lingo
Excerpt: "Understanding these terms can be crucial to your future. In the worst case, making a financial decision based on misunderstanding some of the jargon could detract from both your retirement income and the lifestyle you've dreamed about. A competent financial adviser will explain retirement planning terms to a client." (BusinessWeek)

Target-Date Funds Investing in Wider Array of Products
Excerpt: "Target-date mutual funds were supposed to lead a revolution in retirement savings. These funds, which automatically adjust their asset mix as an investor's retirement date approaches, were seen as a way for individual investors to achieve the discipline, diversity, and typically higher returns of pension funds. Now, 15 years after the first target-date fund launched, they are finally positioned to live up to their initial promise." (BusinessWeek)

Interim Amendments for Tax Qualified Plans
Excerpt: "Beginning in the late 1990s, the IRS Employee Plans group spent a great deal of time studying various options for avoiding the enormous workload spikes that arose during the determination letter process in the past and developing the settled upon option -- the staggered remedial amendment period (RAP). As part of this process, IRS EP personnel made a real effort to 'partner' with the various stakeholders in the benefits community (ranging from benefits practitioners to prototype sponsors and vendors) to develop a workable, manageable program for all." (Pension & Benefits Blog)

Some 401(k) Advice That Can Pay Off for Employees
Excerpt: "Offering advice as part of a 401(k) plan can be pivotal in creating employees that are happy, engaged, and more knowledgeable about the plan itself, the investment choices you have made available to them and what it takes for them to reach their goal of retiring securely. Employers who boast the most successful advice programs have found that people prefer to receive 401(k) guidance through a personal, one-on-one interaction, typically over the phone or in an in-person meeting." (Human Resource Executive Online)

Written Testimony on Spend-Down of Defined Contribution Assets at Retirement Before the 2008 ERISA Advisory Council, (PDF)
11 pages. Excerpt: "Over the next 18 years, about 78 million baby boomers will be retiring, many with large lump sums. Plan sponsors are beginning to raise concerns about the impact of this wave of retirees and Congress is also looking closely at the issue. To help address these concerns, Ann Combs, head of Vanguard Institutional Strategic Consulting, was among those invited to testify before the ERISA Advisory Council in Washington, D.C. In her testimony, Ms. Combs discusses several new options to help retirees generate income over their lifetimes and avoid premature depletion of their savings." (The Vanguard Group)

Unsound Business Practices by Bank Leads to Company Stock Suit
Excerpt: "Former employees of the now-closed ANB Financial are suing members of the bank's retirement plan committee over the loss of an estimated $56.37 million in their retirement plan." (; free registration required)

An Investment Officer's Guide to Investment Management Agreements (PDF)
12 pages. The guide is a series of lists reflecting investment management representations and duties. (The Committee on Investment of Employee Benefit Assets via Association for Financial Professionals, Inc.)

Rate of 401(k) Hardship Withdrawals Jumps
Excerpt: "Amid a weakening economy and rising layoffs, the percentage of 401(k) plan participants who have made hardship withdrawals from their accounts jumped 21 percent during the first six months of 2008 compared with the same period last year, according to Mercer. During the same period of time, the number of new loans taken out by plan participants increased 4.5 percent." (Workforce Management; free registration required)

CRS Report for Congress: H.R. 6500, The Thrift Savings Plan Enhancement Act of 2008 (PDF)
6 pages. Excerpt: "On July 16, 2008, the House Committee on Oversight and Government Reform approved H.R. 6500, the Thrift Savings Plan Enhancement Act of 2008, by voice vote . . . [which] would provide for newly hired federal employees to be enrolled automatically in the Thrift Savings Plan (TSP) at a default contribution rate of 3%; require the Federal Retirement Thrift Investment Board to establish within the Thrift Savings Plan a qualified Roth contribution program that provides for after-tax contributions and tax-free distributions; give the Federal Retirement Thrift Investment Board authority to include self-directed investment options in the TSP . . . ." (Congressional Research Service, U.S. Library of Congress)

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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] Proposed Regulations for Employee Stock Purchase Plans
Excerpt: "As stated in the notice that sets forth the new rule, which was published in the Federal Register on July 29, the IRS's objective in issuing the proposed regulations was to provide a comprehensive set of rules governing section 423 options. Toward that end, the proposed regulations amend the existing section 423 regulations in three main respects. They update the regulations for statutory changes and conform them, where appropriate, to the section 422 regulations governing ISOs. They also clarify the requirements for employee stock purchase plans, and they remove obsolete rules." (Faegre & Benson LLP)

[Guidance Overview] Post LaRue 11th Circuit Published Case
Excerpt: "Here is an important decision just issued by the Eleventh Circuit Court of Appeals. The case is Lanfear, et. al. v. Home Depot, Inc., et. al. The case involves the issue decided by LaRue although, strangely, the case does not cite LaRue." (

Options Losing Luster as Long-Term Incentive Tool
Excerpt: "A new survey by an Alpharetta, Georgia research firm finds that stock options are gradually losing their status as the most common form of equity-based compensation." (; free registration required)

Work Schedules in the National Compensation Survey
Excerpt: "The work schedule is intended to reflect the hours of work performed in a particular job. In most cases, the actual schedule can be collected. There are times, however, when actual data are not available for a job. In those cases, the NCS attempts to collect the employer's best estimate of the work schedule. If the employer is unable or unwilling to make an estimate, the work schedule used is that of other similarly situated employees in the establishment, if available; if such a work schedule is not available, the job is not included in the calculation of NCS estimates." (U.S. Bureau of Labor Statistics)

Should You Take That Buyout?
Excerpt: "Buyouts can vary. 'Two weeks for every year is as bad as [it's] going to get,' says Bennett. 'That's what someone at the lowest level of [the] company will get. A fair severance for someone on the director or vice-president level is anywhere from six months' to a year's salary.' Absent a lucrative, pre-existing 'golden parachute' agreement, one month's pay for each year of service is about what an executive should be paid, says Avery E. Neumark, a certified public accountant at Rosen, Seymour, Shapss, Martin and Co." (

Employee Ownership Update for July 31, 2008
NCEO Executive Director Corey Rosen discusses a PLR allowing floor price agreements for S corporation ESOPs; proposed ESPP and incentive stock option regulations; a new FASB staff position on dividends or dividend equivalents in share plans; an NCEO partnership with the Initiative for a Competitive Inner City; and the Ownership Thinking Conference. (National Center for Employee Ownership)

Newly Posted Events
(Post Yours!)

Cash Balance 101 Podcast
Nationwide on August 4, 2008
presented by Kravitz

ERISA Audits: What We All Knew But Forgot
Nationwide on August 13, 2008
presented by

Personal Health Records: Implications for Employers and Employees Webcast
Nationwide on August 7, 2008
presented by International Foundation of Employee Benefit Plans

Newly Posted Press Releases
(Post Yours!)

Retiring Boomers Prompt Increased Employer Interest in Phased Retirement Programs, According to Hewitt Survey
Hewitt Associates LLC

U.S. Labor Department Seeks To Recover Employee Contributions For Participants Of Austin, Texas 401(k) Plans
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

The Online 401k Adds 16 New Financial Advisor Partners
The Online 401(k)

Ohio Roundtable's Statement on Governor Strickland's Mandatory Sick Leave 'Compromise'
Ohio Roundtable

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