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September 2, 2008

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

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[Official Guidance] 403(b) Plans: What Non-Discrimination Rules? Discussion on Universal Availability
Excerpt: "Yes, Virginia, the Internal Revenue Code does have non-discrimination rules for 403(b) plans. And the rules have been expanded in the Treasury Regulations that go into effect at the beginning of 2009 - found in section 403(b)(12)." (; free registration required)

[Guidance Overview] New Proposed Disclosure Requirements for Retirement Plan Fees and Investment Expenses, Part I of II (PDF)
2 pages. Excerpt: "Plan administrative disclosure of the following information would be required upon eligibility and at least annually to each participant: Plan investment procedures, availability of investments, and any investment restrictions; Plan-level expenses by category – legal, accounting, recordkeeping, etc.– and how these expenses are allocated to each participant, namely whether pro rata or per capita, with additional quarterly disclosures of the actual dollar amount charged to each participant's account; and Specific individual-level expenses chargeable for particular individual administrative functions, such as loan processing or review of domestic relations orders (not like the plan-level expenses above), with additional quarterly disclosures of the actual dollar amount charged, if any, to each respective participant." (Holme Roberts & Owen LLP)

[Guidance Overview] Motion for Class Certification Denied in 401(k) Fee Case Against Plan Service Provider
Excerpt: "There are a number of lawsuits currently pending in the federal courts in which sponsors of 401(k) retirement plans are challenging their plans' recordkeepers' receipt of so-called 'revenue sharing' payments from mutual fund companies in which the plans' participants invest. In several of these, the plaintiffs are seeking class certification on behalf of all of the plans to which a specific recordkeeper provided services. On August 27, the United States District Court for the Southern District of Iowa issued the first of several anticipated rulings on these motions, denying the plaintiff's motion for class certification. A summary of the decision, and a copy of the decision itself, are attached [to the target page]." (Groom Law Group)

[Guidance Overview] DOL's Proposed Regulations Regarding Disclosures to Participants of 401(k) Plans
Excerpt: "The regulations are proposed to be effective for plan years beginning on or after January 1, 2009. The regulations do not apply to 'self-directed brokerage accounts' or similar plan arrangements that permit participants to select investments beyond those that are specifically designated by a plan." (The Metropolitan Corporate Counsel, Inc.)

Using Nest Eggs Before Retirement
Excerpt: "Hard economic times are driving some people to take actions that could jeopardize their futures. With home equity lines of credit and other types of loans harder to get, employees are increasingly raiding their retirement plans to take care of immediate needs such as paying down debt and medical bills, staving off foreclosure, or simply covering higher food and fuel prices." (The Washington Post; free registration required)

Proposed Legislation Aims to Limit 401(k) Loans
Excerpt: "Sen. Charles Schumer (D-NY) and Sen. Herb Kohl (D-WI) recently introduced a bill, S. 3278, which would prohibit companies from issuing 401(k) debit cards. The cards allow users to take out loans against their 401(k) accounts to make daily purchases. The bill also prevents consumers who have three or more outstanding 401(k) loans from withdrawing any additional funds from that retirement savings account." (ICMA-RC)

401(k)s Tapped for Loans Less Than in 2007
Excerpt: "Despite reports this year that more people were borrowing from their 401(k) plans to cover daily expenses, the latest data from several plan providers show that the number of loans have fallen in some cases." (Investment News; free registration required)

Report Says ETFs a Potential Threat to Mutual Funds
Excerpt: "They've been slow to catch on in 401(k) plans, but a new report says that exchange-traded funds, or ETFs, are a potential threat to mutual funds in investor portfolios. Distributors and platforms play an important role in vehicle usage, according to a recent Cerulli Report: 'Product Development in an Evolving Portfolio Construction Environment.'" (; free registration required)

New Disclosure Regimen and the Difference Between Planners and Brokers
Excerpt: "Planners are facing considerable competition from brokers in the arena of retirement plans, and the reality that brokers typically don't work as fiduciaries is a thorn in planners' sides. Most clients aren't aware of this distinction; many of those who are don't seem to care. More clients might care if they were aware of differences in the sources of compensation behind the advice they receive. In the coming months, these differences between the two types of advice will probably become crystal clear. Under a proposed Department of Labor regulation pertaining to ERISA Section 408(b)(2), anyone who provides services to qualified pension or profit-sharing plans must provide significantly expanded financial disclosure." (Financial Planning)

Union vs. Private Pension Plans: How Secure Are Union Members' Retirements? (PDF)
44 pages. Excerpt: "[Collectively bargained pension plans] perform quite poorly relative to plans sponsored unilaterally by employers for non-union employees. The disparity raises this question: are union members getting as good a deal in their retirement funding as they might? Or, to put it another way, do collective bargaining contracts lack provisions for the funding necessary to generate the generous retirement income that unions advertise?" (Hudson Institute)

The New 403(b) Plan Documents and ERISA
Excerpt: "A Title I 403(b) program is not only required to file a full Form 5500 in 2009 (complete with expensive audited financials, for the larger plans), but it will also be subject to that whole range of recently promulgated ERISA rules which apply to 401(k) plans: investment advice, the participant fee disclosures rules and the service provider rules, as well as the old standards including ERISA's prohibited transaction and fiduciary rules. Toss in the plan asset 'deposit rules' and the PPA statement rules, along with other ERISA minutia and you begin to get a flavor of what it means to be covered by Title I." (Baker & Daniels)

Pension Freezes Affect Mid-Career Employees While Retirement-Age Workers, Those in Their 20s Remain Relatively Safe
Excerpt: "[When companies freeze the pension plan for all workers, workers] get what they have already accumulated in the plan when they retire or leave the company. They just don't accrue any additional benefit going forward. When that happens, employees of different ages can be affected differently. For workers in their 20s, the change may not matter much. . . . Likewise, employees just a few years from retirement shouldn't be hurt too badly by a pension freeze. . . . It's mid-career workers in their 40s and 50s who suffer the most, financial counselors say. They don't have enough time to build up a sufficient balance in a 401(k), and they didn't accrue enough in the pension plan before it was frozen." (The Greenville News)

[Opinion] ICI Comments on Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies
Excerpt: "Subject to the recommendations set forth in our comment letter, we strongly support the Commission's proposal to permit funds to provide investors with a Summary Prospectus, and make additional information available on the Internet or upon request, and we urge the Commission to move forward as soon as possible. The proposal reflects a strikingly broad consensus that investors would be best served by simplified, streamlined disclosure of essential fund information, and is validated by extensive empirical research conducted by the Commission, the Institute, and others demonstrating both the preferences of fund investors and their widespread use of the Internet to obtain financial information." (Investment Company Institute)

[Opinion] DOL Investment Advisory Proposals
Excerpt: "Overall, the intent of these proposals is to make 'quality' and 'affordable' investment advice more available and more broadly utilized by DC plan participants The proposals were designed to address what the DOL understands to be the primary reasons why plan sponsors have not adopted investment advisory offerings in any meaningful way. Namely, that they have fiduciary concerns about the conflicts of interest associated with many prospective advice providers and that the costs to both sponsor and participants in finding and monitoring purely independent advice could be prohibitive." (Fiduciary Investor)

[Opinion] New Jersey Governor's Delayed Pension Reform Bill Signing
Excerpt: "Gov. Jon S. Corzine's sympathy with public-employee unions has sometimes outweighed his sympathy with beleaguered taxpayers. Here's the latest example in a depressingly long series: The governor has delayed signing a controversial pension and benefit reform bill long enough to give thousands of new teachers, as well as other new public employees, time to be eligible for bigger pensions." (The Press of Atlantic City Media Group)

[Opinion] Illinois Governor Must Sign Pension Bill
Excerpt: "Municipalities throughout the state are facing an impending crisis in meeting their obligations to fund the retirement of . . . public safety employees. Due to a number of factors, including pension benefit increases granted by our state government, almost all public safety pension funds have seen their unfunded pension liabilities dramatically increase over the past eight years. . . . House Bill 5088 was drafted by the Illinois Municipal League to introduce reforms for the downstate and suburban police and firefighter pension funds." (Daily Herald Inc.)

[Opinion] No Solution Should Break Social Security Retirement Fund's Promise
Excerpt: "For more than 70 years, Social Security has kept its promise to American workers and their families. The promise, simply put, is that everyone will have a secure foundation for retirement after a lifetime of work. The promise is not unlimited. Social Security works best as one strong leg of a stool that is also braced by personal savings and pensions. Historically, it's been a winning formula." (

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview] IRS's Retirement News for Employers, Special Edition, August 29, 2008 (PDF)
Excerpt: "The Treasury Department and IRS released Notice 2008-62 in advance of the forthcoming Code §457(f) proposed regulations to provide relief to schools as they begin their 2008/2009 school year. The use of a 12-month pay period that spans two calendar years for employees that actually only work for 9 or 10 months results in compensation earned in one year being deferred to a second year. The notice establishes criteria which, if met, excludes arrangements in which school employees are compensated on a 12-month pay period in lieu of the 9 or 10-month actual work period from being considered as deferred compensation and, therefore, not subject to the rules under Code §§457(f) and 409A." (Internal Revenue Service)

[Guidance Overview] The Supreme Court Strikes Twice (but Misses the Mark) (PDF)
4 pages. Excerpt: "In its recently completed term, the Supreme Court issued two ERISA-related opinions that address questions left unanswered by earlier Supreme Court decisions and that are of critical importance for plan administration (and litigation that may result from fiduciary missteps). . . . If the Court's intention was to entertain us with a series of interesting (but not that interesting) and thought-provoking essays . . ., then it hit the target both times. If, on the other hand, the Court's goal was to supply clear and sensible guidance in an area that is generating more (not less) litigation, its aim was not true." (Adams and Reese LLP)

[Guidance Overview] 3rd Circuit Appeals Court Rules Death Benefits Not Protected Under ERISA
Excerpt: "Former employees of AT&T Corp. and Lucent Technologies who claimed they were cheated out of death benefits have lost their bid to revive an ERISA suit now that the 3rd U.S. Circuit Court of Appeals has ruled that the benefits were unvested and therefore could be terminated by Lucent." (South Florida Personal Injury Lawyers)

Cut Commuting Costs by Using Employer Benefits
Excerpt: "High cost of gasoline getting you down? Your employer may be willing to help. 'Companies are embracing techniques to reduce commuting time and expense,' said Mitch Barnes, principal at Mercer, a New York-based benefits consulting firm. 'It used to be that they did this to balance work-life issues. Now it's becoming more of an employee-driven economic issue.'" (Los Angeles Times)

Employers to Offer Benefits to Offset Higher Fuel Prices, New Study Shows
Excerpt: "Some employers plan to offer various benefits to employees to alleviate the impact of higher gasoline prices, including a compressed workweek and increased use of telecommuting, a new study has revealed. Within the next six months, 22 percent of employers plan to offer at least some of their employees the option of a four-day workweek, and 24 percent plan to allow more employees to telecommute, according to Mercer's 2008 Gas Price Impact SnapShot Survey." (Workforce Management; free registration required)

Social Security and Medicare and Americans' Confidence in Their Retirement Future
Excerpt: "Academics, policymakers and the media have been sounding alarms about shortfalls ahead for Social Security and Medicare for some time now. And many Americans have taken their warnings to heart, according to Watson Wyatt's 2007 U.S. Survey of Older Employees' Attitudes Toward Lump Sum and Annuity Distributions From Retirement Plans. Roughly 61 percent of older workers -- those 50 to 64 years old -- are not confident of receiving unreduced Medicare benefits, and 52 percent are not confident of receiving unreduced Social Security benefits, according to the survey." (Watson Wyatt Worldwide)

GM Offers More Buyouts - Extends Deal to 9,000 Salaried Workers
Excerpt: "About 9,000 workers have been offered the deal, according to a source familiar with the plan. If they all accepted, it would trim about 28 percent of GM's salaried work force and shave about 20 percent of its white-collar costs. The voluntary offers, which GM started making in recent weeks, come a month after GM said it wanted to trim its salaried work force expenses by more than 20 percent in the U.S. and Can.ada. That includes ending its salaried retirement health coverage for employees over 65 starting Jan. 1 and eliminating salaried raises through the end of 2009." (AP via The Detroit News)

Employee Ownership Update for August 29, 2008
NCEO Executive Director Corey Rosen discusses a study of 328 majority ESOP-owned companies finding that they have sales per employee that are 8.8% greater than comparable non-ESOP companies; a new NCEO issue brief on the state of broad-based employee equity plans; a new IRS analysis finding that the top 47,000 families in the U.S. own $1.196 trillion in public and private corporate equity; and a correction to a prior story on Appleton, Inc. (National Center for Employee Ownership)

NCEO Issues Issue Brief on the Future of Broad-Based Equity Plans
The NCEO presents excerpts from its revised Issue Brief on the Future of Broad-Based Equity Plans, written by NCEO Executive Director Corey Rosen. The issue brief looks at how the markets will react to stock option expensing, how expensing and greater concern about dilution are affecting broad-based equity plans, and the impact of broad-based plans on corporate performance. (National Center for Employee Ownership)

[Opinion] Renewing America's 'Contract with the Middle Class'
Excerpt: "[O]ver the last 25 years -- especially over the last decade -- what is good for America and what is good for much of corporate America have gotten way out of sync. Our current business culture too often emphasizes only short-term corporate profits and shareholder returns -- however and wherever they are generated -- and in the process, what is good for America is being pushed aside." (Los Angeles Times)

Newly Posted Events
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401(k) Plan Fees: What a Plan Sponsor Must Know
Nationwide on September 4, 2008
presented by AFS Financial Group

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TPA Channel Manager - Retirement Services- East Coast
for MassMutual Financial Group
in AL, AR, CT, FL, GA, LA, MA, ME, MS, NC, NH, NY, RI, SC, TN, VA, VT

Pension Specialist
for The Seattle Times Company
in WA

401(k) Pension Administrator
for IPA Northeast, LLC
in NJ

DC / 401(k) Administrator
for TPA Company
in OK

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