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August 18, 2008

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

Today's sponsor is Employee Benefits Institute of America (EBIA)

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[Official Guidance] IRS's Retirement News for Employers, Summer 2008 (PDF)
13 pages. This edition includes articles titled: New Resource Helps Keep Your SEP Plan Compliant; Desk Side Chat with Monika Templeman - Responsibilities to Employees; Form 5307 Has Been Revised; SARSEP Plans Examination Trends; Have a HEART for Our Heroes; Things to Remember - 2007 Forms 5500/5500-EZ; ERPA Contract Awarded - Testing to Begin January 2009; Recent Guidance; Fixing Common Plans Mistakes: Participant Loans in 401(k) Plans. (Internal Revenue Service)

[Guidance Overview] Deadline for Compliance with Final Regulations under Code Section 403(b) for Tax-Deferred Annuity Plans (PDF)
4 pages. Excerpt: "By December 31, 2008, all Code Section 403(b) tax-sheltered annuity plans (also known as 403(b) annuities, or tax-deferred annuities, and referred to in this article as a '403(b) Plan') must be reviewed and will likely need to be amended to ensure compliance with the final Code Section 403(b) regulations. If you have not already started this process, action to review and amend your 403(b) Plans must begin soon in order to meet the December 31, 2008, deadline . . . . This advisory reminds employers eligible to offer a 403(b) Plan (including unwritten non-ERISA 403(b) arrangements) about action items that must be completed in 2008, and also provides some highlights from the final Code Section 403(b) regulations." (Alston & Bird LLP)

[Guidance Overview] IRS Update of Qualified Plan Correction Program
Excerpt: "Rev. Proc. 2008-50 is effective January 1, 2009. However, plan sponsors are permitted to apply the provisions of the revenue procedure on or after September 2, 2008." (McDermott Will & Emery)

[Guidance Overview] Current Initiatives by IRS to Assist Small Employers that Adopt Pre-Approved Qualified Retirement Plan Documents
Excerpt: "The IRS has taken this matter very seriously, and is currently contacting many of the banks and financial institutions that sponsor M&P plans. One of the Employee Plans Compliance Unit's (EPCU) featured projects generates a compliance contact letter that asks the targeted M&P sponsors to provide information on how they are meeting their requirements and responsibilities." (Tax Management Inc.)

Private Pensions: GAO Survey of 401(k) Plan Sponsor Practices, an E-Supplement to Report
Excerpt: "To learn more about how sponsors select plan features and oversee plan operations, [GAO] conducted a Web-based survey of sponsors in coordination with PLANSPONSOR Magazine. This e-supplement presents results from our survey and includes a summary of respondent views on proposed legislative changes to 401(k) requirements." (U.S. Government Accountability Office)

GAO Says Plan Service Providers -- Including Advisers -- Should Better Disclose Fiduciary and Fee Agreements
Excerpt: "In a new report, the Government Accountability Office (GAO) reiterated its previous recommendation that Congress amend the Employee Retirement Income Security Act (ERISA) to require 401(k) service providers disclose compensation arrangements and give the Department of Labor (DOL) authority to recover losses against service providers even if they are not considered fiduciaries." (planadvisor)

PBGC Assets: Implementation of New Investment Policy Will Need Stronger Board Oversight (PDF)
62 pages. Excerpt: "GAO recommends (1) improvements to the way that PBGC's board monitors progress in achieving investment policy goals, and (2) additional analyses on the new investment policy. In response, PBGC's board stated its informal guidance is appropriate oversight. GAO states this type of guidance is not strong enough for investing $68 billion. Further, PBGC is conducting additional analysis on the new policy." (U.S. Government Accountability Office)

Pension Benefit Guaranty Corporation Downplayed Investment Risk - GAO Criticizes Volatile Strategy
Excerpt: "The federal agency charged with backstopping pension benefits for 44 million Americans has understated the risks of its new investment policy, a congressional watchdog said Monday. The Government Accountability Office (GAO) said in a report that the Pension Benefit Guaranty Corp.'s new strategy could significantly boost the PBGC's investment returns, but it 'will likely also carry more risk than acknowledged by PBGC's analysis.'" (The Washington Times)

Atlanta, GA May Form Task Force to Tackle Pension Funding Crisis
Excerpt: "Atlanta's general employees' fund, the city's largest, is only 52 percent funded. The two other funds are better off, but well below 80 percent funded. At least one-fifth of the city's $570 million general fund this year is going to employee pensions, and it still hasn't been enough to make a substantial dent in the unfunded liability." (The Atlanta Journal-Constitution)

Obama Appears to Be Altering His Proposals for Extending Social Security Payroll Taxes
Excerpt: "Mr. Obama, the presumptive Democratic nominee for president, has not abandoned either his support for a higher tax rate on capital gains or his proposal to subject individual wages above $250,000 to the Social Security payroll tax. But recent statements by campaign aides suggested that the latest iterations of the plans are more modest." (The New York Times; free registration required)

Retire Now, and Risk Falling Short on Your Nest Egg
Excerpt: "If you have just retired or are about to retire, your timing could not be worse. Leaving the work force just as markets stumble can do real damage to retirement savings. Your nest egg has shrunk just as you need to start withdrawing money from it; you are essentially locking in your losses. (And at the moment, sinking home values make matters even worse.)" (The New York Times; free registration required)

What Small Business Owners Need to Know About 401(k)s
Excerpt: "An October survey by ING DIRECT's ShareBuilder401k, which designs 401(k) plans for small businesses, found that 'not enough employees' was the top reason cited by small-business owners as to why they do not have a 401(k) plan. That's despite the fact that even sole proprietorships with no other employees can have 401(k)s." (U.S. News & World Report)

Aon Study Shows True Cost of Pre-Retirement Lifestyle in the Golden Years
Excerpt: "The 2008 Replacement Ratio Study, conducted by Aon Consulting and Georgia State University, shows the percentage of a worker's final annual salary that he needs to replace in order to keep the same standard of living in retirement. Financial planners can use this information to show their clients what they should be saving now and in the future based on their age, current salary, and other factors." (U.S. Insurance News)

401(k) Plan Participants Continue Move to Fixed Income Investments
Excerpt: "401(k) participants moved assets out of equity into fixed income investments again in July, according to the results of the Hewitt 401(k) Index. Net transfers were fixed income oriented on 91% of the days during the month." (; free registration required)

ERISA vs. the Hedge Fund Industry
Excerpt: "According to Pensions and Investment, the Boston office of the US Department of Labor . . . recently issued a letter to an (unidentified) US Pension Plan subject to ERISA (the Employee Retirement Income Security Act) stating that the plan was in violation of ERISA regulations. . . . The problem? When valuing hedge funds and other alternative assets for purposes of the Plan's annual filing, the pension investor had apparently relied upon valuations provided by the underlying funds' general partners and, in some cases, on audited financial statements for those funds." (Castle Hall Alternatives)

Career Status Bonus/Redux a Bad Deal for Military Servicemembers
Excerpt: "While the bonus has been frozen at $30,000 since it was introduced in 2001, individuals who take it today forfeit, on average, nearly $100,000 more in lifetime retired pay than bonus takers did seven years ago . . . ." (Stars and Stripes)

Why Staggered Retirements Pay Off for Couples
Excerpt: "Here's a quick review of some factors that might make it worthwhile for couples to consider two separate retirement dates . . . ." (

Private Pensions: Fulfilling Fiduciary Obligations Can Present Challenges for 401(k) Plan Sponsors (PDF)
45 pages. Excerpt: "GAO examined: (1) common 401(k) plan features, which typically have important fiduciary implications, and factors affecting these decisions; (2) challenges sponsors face in fulfilling their fiduciary obligations when overseeing plan operations; and (3) actions Labor takes to ensure that sponsors fulfill their fiduciary obligations, and the progress Labor has made on its regulatory initiatives." (U.S. Government Accountability Office)

Court Dismisses Nationwide Countersuit
Excerpt: "In a Nationwide case, a judge rules that fiduciaries can bring contribution and indemnification claims against co-fiduciaries under ERISA. A federal judge in Connecticut ruled that while Nationwide Financial Services can legally countersue trustees of five 401(k) plans in a revenue sharing dispute, such counterclaims would be unsuccessful in this case." (planadvisor)

[Opinion] What Will Participants Do with Additional Fee Disclosure Information?
Excerpt: "The 'debate' over participant fee disclosure has generally focused on one of two concerns - the physical impossibility (or at least impracticality) of doing it -- and concerns about what participants would do once they had that information. Those concerns have similarly run the gamut, everything from 'we'd spend all this money for no reason' to worries that participants would be so shell-shocked by the size of those fees (or the realization that there WERE fees) that they would opt out of retirement plan savings altogether." (; free registration required)

Sponsored by: University Conference Services

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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] Deadline for Code Section 409A Compliance (PDF)
Excerpt: "By December 31, 2008, all plans and arrangements subject to Code Section 409A must be in writing and the written terms of those arrangements must comply with Code Section 409A." (Alston & Bird LLP)

Employers Ignoring Workers' Pain at the Pump, According to Survey
Excerpt: "Employers are doing little, if anything, to help employees cope with the budget-busting fill-ups at the pump. Eighty percent of the employees surveyed say they get no financial or other benefits from their employers to ease the burden of high fuel prices." (Workforce Management; free registration required)

Shared Capitalism in the U.S. Economy? Prevalence, Characteristics, and Employee Views of Financial Participation in Enterprises
Excerpt: "Between one-third and one-half of employees participate directly in company performance through profit sharing, gainsharing, employee ownership, or stock options. This flies in the face of concerns about the free rider problem and worker risk aversion in group incentives, and raises many questions about the effects on firms and workers. This paper lays out the major reasons we may see such 'shared capitalism' plans, and reviews recent nationally representative surveys on the prevalence of these plans." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)

Creating a Bigger Pie? The Effects of Employee Ownership, Profit Sharing, and Stock Options on Workplace Performance
Excerpt: "This paper uses data from NBER surveys of over 40,000 employees in hundreds of facilities in 14 firms and from employees on the 2002 and 2006 General Social Surveys to explore how shared compensation affects turnover, absenteeism, loyalty, worker effort, and other outcomes affecting workplace performance." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)

Do Workers Gain by Sharing? Employee Outcomes under Employee Ownership, Profit Sharing, and Broad-based Stock Options
Excerpt: "We find that greater involvement in the programs is generally linked to greater participation in decisions, higher quality supervision and treatment of employees, more training, higher pay and benefits, greater job security, and higher job satisfaction. We also find positive interactions of shared capitalism with high-performance policies in predicting participation in decisions and overall job satisfaction, and negative interactions of shared capitalism with close supervision in affecting almost all of the outcomes. Overall the results support the idea that workers can gain by sharing, but whether this happens is contingent on other workplace policies." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)

Companies Taking Specific Steps to Keep Older Workers
Excerpt: "According to Gray Matters: Engaging the Older Workforce, a 2007 white paper by Milwaukee-based Manpower Inc., employees ages 55 and older are projected to comprise more than 20 percent of America's workforce by 2016, creating a pool of 27 million workers to help meet employment needs. Yet fewer than 18 percent of employers surveyed by Manpower have developed strategies to recruit older workers, and only 28 percent are planning retention programs for this population." (Human Resource Executive Online)

Online Avatars Enhance Benefits Communication
Excerpt: "No longer just for video games, avatars -- computer-generated characters -- now can be integrated into employers' benefits communications programs to ensure consistent, user-friendly messaging 24/7. Sound like an alternate reality? It is -- virtual reality." (Employee Benefit News; free registration required)

Tuition Payment Programs Widespread
Excerpt: "Nearly all executives in a recent poll said their employer helps pay employees' continuing education expenses. An Accountemps news release said 94% of respondents reimburse employees for university tuition while 95% pay employees' expenses for other kinds of professional development." (; free registration required)

Newly Posted Events
(Post Yours!)

The Basics of Retirement Plans
in California on September 18, 2008
presented by International Society of Certified Employee Benefit Specialists, Northern California Chapter

What 401(k) Plan Fiduciaries Must Tell Participants About Their Investment Options: the New DOL Guidance
Nationwide on September 17, 2008
presented by ABA Joint Committee on Employee Benefits

Newly Posted Press Releases
(Post Yours!)

Convergent Retirement Plan Solutions, LLC Announces the Addition of SEI and The Calvert Group to its Growing List of IRA Clients
Convergent Retirement Plan Solutions, LLC

Corporate Benefit Plans included in WELCOA National Panel of Advisors
Corporate Benefit Plans

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Institutional Services Employee Benefit Operations Administration Analyst II
for BB&T
in NC

Plan Administrator
for Pension Resources Corporation
in TX

TRS - Document Production Coordinator
for Transamerica Retirement Services
in CA

Product Consultant / Internal Wholesaler
for AXA Equitable
in NJ

401(k) Plan Administrator
for Retirement Planners

Retirement Planning Consultant
for Tessada & Associates Inc
in MS

Pension Compliance Manager
for RSM McGladrey
in IL

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