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August 12, 2008

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

Today's sponsor is ASPPA

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ASPPA Annual Conference

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[Guidance Overview] Second Circuit Joins Others in Ruling that Pre-PPA Cash Balance Plans Do Not Violate ERISA Age Discrimination Provisions
Excerpt: "The court ruled that the ERISA provisions -- which prohibit an employee's 'rate of benefit accrual' from being reduced because of age -- refer to the employer's contributions to the plan and not to the employee's accrued benefit (which is expressed as an annuity commencing at normal retirement age). As such, a cash balance plan does not violate ERISA § 204(b)(1)(H)(i) where two similarly situated employees receive the same contribution even though a smaller annuity at normal retirement age will result for the employee who is older." (Deloitte)

[Guidance Overview] Regulators Tell Pensions to Independently Value Alternative Investments
Excerpt: "This admonition is hardly news to this blogger. I've long been advocating (a) the use of an independent third party pricing professional and (b) the need for fiduciary training in this area. . . . Several things come to mind." (Pension Risk Matters)

[Guidance Overview] Ruling Prohibiting the Transfer of a Retirement Plan Outside of the Controlled Group as a Financial Transaction (PDF)
2 pages. Excerpt: "In conjunction with the ruling, the Administration put forth a 'framework of principles.' This framework, it is thought, will serve as a guide in the development of legislation permitting transactions such as the one described in the ruling in which frozen pension plans are transferred to unrelated entities. The Administration set out certain conditions aimed at protecting participants, including providing for advance notice to participants and regulators, requiring a demonstration that the transfer would be in the best interest of participants and limiting transfers in the face of undue risk." (Sutherland)

[Guidance Overview] Timing of Plan Contributions - Safe Harbor Myths and Truths
Excerpt: "Desiring certainty on the timing question and hoping to boost compliance, the DOL recently proposed a new regulation that would give small pension and welfare plans (plans with fewer than 100 participants at the beginning of the plan year) a seven-day safe harbor for depositing participant contributions to a plan. Under the proposed safe harbor, the employer would have seven business days to transmit participant contributions even if the employer could reasonably do so sooner. The seven-day safe harbor period would begin on the first business day after the amounts would have been paid to the employee had they not been withheld from his or her pay." (Poyner Spruill)

[Guidance Overview] A Question of Vesting – Determining If Your Plan Has Suffered A Partial Termination (PDF)
3 pages. Excerpt: "Affected participants become fully vested as a result of a partial termination. Therefore, it is better to recognize a partial termination event when it occurs, rather than to realize that one has occurred in the past and that your plan has not paid out affected participants on a fully vested basis. Although there are technically two types of partial terminations, horizontal partial and vertical partial, this article will focus only on the vertical partial termination – that is, a situation in which an employer-initiated action results in a significant decrease in the employees covered under a retirement plan." (Chang, Ruthenberg & Long PC)

[Guidance Overview] Transfer of Pension Plan and Application of Exclusive Benefit Rule
Excerpt: " In Rev. Rul. 2008-45, the Internal Revenue Service holds that if sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer is not in connection with a transfer of business assets, operations, or employees, then the transfer violates the exclusive benefit rule of IRC Sec. 401(a)(2)." (Wolters Kluwer)

[Guidance Overview] Estoppel -- ERISA Joins the List
Excerpt: "[T]he 3rd Circuit's decision last week in Pell v. DuPont (3rd Cir. 8/8/08) makes the point of how important it is for employers to be accurate in all of their communications to employees, particularly about retirement benefits. Given the number of times estoppel has been applied in other contexts just in the past year, . . . Pell highlights yet another area of exposure for employers that seems to be increasing." (Michael Fox via Jottings By An Employer's Lawyer)

For One San Diego School Chief, An E-mail Asking for Delay in Employment Termination Seemingly Saved a Pension
Excerpt: "When Peter Iverson's job was sliced from the payroll at San Diego Unified, he didn't tote a sign to save his livelihood, as did the hundreds of employees who staged protests and press conferences outside the school board . . . as the school district grappled with budget cuts and its new superintendent reorganized its upper ranks. Instead, Iverson wrote a short e-mail to the school board, the superintendent and top school district officials. He had only one request: to stay employed another six months so that he would qualify for a public pension." (Voice of San Diego)

Report Says Jacksonville FL Police and Fire Pensions Are Too Expensive
Excerpt: "Jacksonville's pension plans need drastic improvements and could better serve city taxpayers by being replaced by other types of retirement benefits, including 'defined contribution' programs similar to 401(k) plans, a nonprofit organization's analysis concludes." (Florida Times-Union)

Retirement Disclosure Presents Challenges, Opportunities for Plan Advisors
Excerpt: "Now that employers are more focused on their role as a fiduciary they are asking questions about whether or not the adviser serves as a fiduciary to their plan. This issue comes partially from rules in the DOL's pending 408(b)(2) regulation. The requirement to explain whether or not a service provider is a fiduciary would apply to broker-consultants as well as investment advisers." (Employee Benefit Advisor; free registration required)

Public Entities Generally Keep Traditional Pension Plans
Excerpt: "While public entities may continue to fine-tune elements of their defined benefit pension plans to make them less costly, it is unlikely that they will soon adopt the defined contribution approach as the private sector did when its defined benefit plans became too expensive, experts say. In fact, no state has created a broad-based defined contribution plan since Alaska did so in 2005 . . . . Michigan is the only other state to offer a defined contribution plan as its primary retirement vehicle, which has been in place since 1999." (Business Insurance)

Handing Over Your Underfunded Pension Plan to a Financial Institution May Cripple the Plan's Tax Benefit
Excerpt: "It has been reported that financial institutions have been eyeing underfunded or 'frozen' corporate pension plans as a new line of business. The transaction being contemplated is a sort of rescue operation that involves a transfer of the stock of a 'shell' subsidiary to the financial institution, after the plan sponsor does two things: transfers sponsorship of the plan to the shell subsidiary, and injects sufficient assets into the plan to cure the underfunding." (

Employer Views on the Value of 401(k) Plans (PDF)
17 pages. Excerpt: "Finance executives feel strongly about the value of a 401(k) plan for their company and its employees. Survey results show that, rather than considering 401(k) plans as a financial or an administrative burden, finance executives largely view them as an important tool for strengthening both their workforce and their company." (CFO Research Services in collaboration with Charles Schwab)

401(k) Enrollment Not 'Automatic' for Most Employers
Excerpt: "Less than half of employers that offer 401(k) plans use automatic enrollment, according to the results of a recent poll. When asked, 'Do you use automatic enrollment for your 401(k) plan?,' 56 percent responded 'No,' while 38 percent responded 'Yes.' Only 6 percent responded 'We don't offer a 401(k).'" (Business & Legal Reports, Inc.)

Boeing Presses Unions to Drop Traditional Pensions
Excerpt: "Boeing, like many other companies, wants to phase out traditional pensions and instead put new workers into a 401(k)-like plan. As Boeing's contract talks with its two main unions gather steam in August, the issue is taking on heat. The move, company spokesman Timothy Healy says, would free up money for research and development or other purposes that Boeing (BA) now must set aside for pension plans whenever an investment, in the stock market or elsewhere, comes up short." (BusinessWeek)

Tax Secrets of the Wealthy: Supreme Court Deals Blow to Most 401(k) Plans
Excerpt: "Do you own all or part of a business that sponsors a 401(k) plan for your employees? If so, this column is a must. You won't like the liability position the Supreme Court has hung over your head. But, as it is often the case, adverse circumstances bring opportunity. On Feb. 20, 2008 our top court decided LaRue versus DeWolff." (The E.W. Scripps Co.)

Credit Crisis Brings Pension Fund Attention to Liquidity
Excerpt: "During the worst of the global credit crisis in 2007, a significant proportion of U.S institutions experienced either an unexpected interruption in liquidity or unanticipated risks and credit exposures in securities lending pools and short-term investment funds, a new survey from Greenwich Associates reveals." (; free registration required)

Replacement Ratio Study Shows the Impact on Workers Who Are Not Saving Enough for Retirement
Excerpt: "The 2008 Replacement Ratio Study, conducted by Aon Consulting and Georgia State University, details the percentage of one's final annual salary that needs to be replaced for a person to keep the same standard of living after retirement. This allows workers to determine what they should be saving now and in the future, based on age, current salary and other factors. For example, the study shows that a worker earning $50,000 at retirement will need to replace 81 percent of that amount annually to continue the same standard of living." (PRNewswire-FirstCall via COMTEX via MarketWatch)

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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] IRS Proposes Updated Regulations for Stock Purchase Plans
Excerpt: "The regulations are proposed to apply as of January 1, 2010, and will apply to any option issued under an employee stock purchase plan that is granted on or after that date. However, taxpayers may rely on the proposed regulations for the treatment of any option issued under a plan that is granted after July 29, 2008." (Deloitte)

[Guidance Overview] Reporting and Disclosure Issues With Small Employer Employee Benefit Plans
Excerpt: "Small employers that sponsor ERISA plans generally rely entirely on outside attorneys and consultants to draft the SPDs and other employee disclosures, or sometime use model notices published by the IRS or DOL. However, the employers still have the responsibility to understand the meaning and purpose of each and every communication, and if in their judgment the document is not written in a manner calculated to be understood by its particular workforce, then it should append the boiler-plate communication with at least a tailored cover letter." (Tax Management Inc.)

[Guidance Overview] HEART Act Affects Qualified Plans, Health FSAs, and Military Differential Pay (PDF)
4 pages. Excerpt: "In June, the President signed the Heroes Earnings Assistance and Relief Tax Act ('HEART Act') into law. The HEART Act amends certain provisions that were added by the Uniformed Services Employment and Reemployment Rights Act of 1994 ('USERRA'). The HEART Act requires certain changes for retirement plans and permits other changes, changes the treatment of military differential pay for purposes of retirement plans and income tax withholding, permits certain changes to health FSAs, and adds special withholding provisions for certain expatriate employees." (Powell Goldstein LLP)

[Guidance Overview] 1st Circuit Says Intent Required in ERISA Retaliatory Discharge Case
Excerpt: "Kouvchinov sued the employer for violation of ERISA alleging retaliatory discharge, and for tortiously interfering with an advantageous business relationship. The trial court granted the employer's motion for summary judgment. The 1st Circuit affirmed. Kouvchinov argued that proof of the employer's specific intent to interfere with his ERISA benefits was not required in retaliatory discharge cases as compared to preemptive discrimination cases. The court rejected Kouvchinov's argument because, without the specific intent requirement, every discharged employee who had exercised his right to benefits would have a potential claim against the employer." (Workplace Prof Blog)

[Guidance Overview] Proposed Regs Provide Guidance on Options Granted Under Employee Stock Purchase Plans
Excerpt: "The IRS has issued proposed regulations, amending existing regulations under Code Sec. 423, which affect those who participate in the transfer of stock pursuant to the exercise of options granted under an employee stock purchase plan. Such options, under Code Sec. 423, and incentive stock options, under Code Sec. 422, are collectively called statutory options." (Wolters Kluwer)

Government Workers Have Greater Access to Benefits, DOL Data Show
Excerpt: "According to the [Bureau of Labor Statistics] release, access to and participation in retirement and medical care benefits were greater in government employment than in private industry." (

Telework for Federal Workers Becomes More Attractive As Quality-of-Life Concerns Spike
Excerpt: "In the face of all [the] challenges, the federal government is turning to the little workforce policy that could. Telework might not solve all the federal government's workforce ills, but it's providing relatively cheap and easy relief for agencies struggling to make themselves more resilient and performance-oriented. And telework is a major weapon in the fight to make the federal government an ahead-of-the-curve employer." (

[Opinion] Follow-up to the 'Beware of Beneficiary Provisions' Blog
Excerpt: "In [Ed Burmeister's blog, he] channels Andy Rooney, pointing out all that is wrong and risky about beneficiary designation provisions in stock incentive plans and ESPPs. Speaking as only someone who has been through these headaches a few times can, Ed's article points out [a] few of the pitfalls in allowing employees too much latitude in the designation of beneficiaries, given the variety of state and foreign laws, and argues compellingly for simplicity." (Michael S. Melbinger via Winston & Strawn LLP)

Newly Posted Events
(Post Yours!)

2008 Web/Telephone Seminar: 72(t) Payments
Nationwide on September 25, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Conversions and Recharacterizations
Nationwide on September 18, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Direct Rollover and Other Portability Issues
Nationwide on September 9, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Handling IRA Legal Issues
Nationwide on September 11, 2008
presented by Ascensus

2008 Web/Telephone Seminar: Introduction to QRPs
Nationwide on September 4, 2008
presented by Ascensus

2008 Web/Telephone Seminar: IRA Contributions
Nationwide on September 30, 2008
presented by Ascensus

2008 Web/Telephone Seminar: SIMPLE Plans
Nationwide on September 23, 2008
presented by Ascensus

Cash Balance Plans Workshop
in Texas on August 22, 2008
presented by SunGard Relius

Cash Balance Plans Workshop
in Kansas on August 28, 2008
presented by SunGard Relius

Code Section 409A Workshop
in Washington on September 12, 2008
presented by SunGard Relius

Code Section 409A Workshop
in Missouri on September 18, 2008
presented by SunGard Relius

Code Section 409A Workshop
in Texas on September 19, 2008
presented by SunGard Relius

Code Section 409A Workshop
in Massachusetts on September 19, 2008
presented by SunGard Relius

Code Section 409A Workshop
in Illinois on September 24, 2008
presented by SunGard Relius

Code Section 409A Workshop
in Minnesota on September 25, 2008
presented by SunGard Relius

Code Section 409A Workshop
in Georgia on September 26, 2008
presented by SunGard Relius

Cross-Tested Plans Workshop
in Texas on August 21, 2008
presented by SunGard Relius

Cross-Tested Plans Workshop
in Kansas on August 27, 2008
presented by SunGard Relius

Newly Posted Press Releases
(Post Yours!)

Aon Consulting's Replacement Ratio Study Shows the Impact on Workers Who are not Saving Enough for Retirement
Aon Consulting

MetLife’s Benefits Benchmarking Tool Provides Employers And Brokers Trend Insights To Help Optimize Workplace Plans

Employee Involvement Is Key to Long-Term Pharmacy Cost Control, Finds Buck Consultants Survey
Buck Consultants, an ACS Company

OppenheimerFunds, Inc. Retirement Services Introduces New Value-Added Tools And Services
OppenheimerFunds, Inc.

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Retirement Plan Consultant
for The Retirement Advantage
in WI

Retirement Plan Specialist
for The Rehmann Group
in MI

Manager, Retirement Services Consulting
for Administaff
in TX

Qualified Plan Specialist
for Pen-Cal
in CA

EBS Associate Actuary
for EBS Benefit Solutions (an Excellus Company)
in NY

Sr. Consultant (Plan Documentation)
for Transamerica Retirement Services
in CA

Pension Administrators
for Polycomp Administrative Services
in CA

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