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September 3, 2008

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

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[Guidance Overview] Final 403(b) Regulations—and How They Affect Plan Sponsors
Excerpt: "Sponsors of 403(b) plans -- typically school districts, higher education institutions, health care providers, and charitable organizations -- will soon have increased responsibilities for overseeing investments, transfers, documentation, administration, and participants' disclosures. 'Under these new regulations, a greater level of employer involvement will be necessary . . . .'" (The Vanguard Group)

[Guidance Overview] IRS Update and Expansion of the Qualification Correction Program (PDF)
6 pages. Excerpt: "On August 14, the Internal Revenue Service (IRS) issued Revenue Procedure 2008-50, its latest guidance on methods available to sponsors of tax-qualified retirement plans to correct operational and plan document errors in order to preserve a plan's tax-qualified status. This guidance provides significant expansions and enhancements to the Employee Plans Correction Resolution System (EPCRS) . . . . The EPCRS provides three programs of correction known as (i) Self-Correction Program (SCP), (ii) Voluntary Correction Program (VCP), and (iii) Correction on Audit Program (Audit CAP)." (Morgan, Lewis & Bockius LLP)

[Guidance Overview] Defining the Scope of Discovery in the Administrative Law Setting
Sara Lee Corp. v. Am. Bakers Ass'n. Excerpt: "The magistrate judge in this recent opinion addressed the distinction between supplementation of the administrative record and consideration of evidence outside the administrative record. The two categories may seem similar but the burden of proof is quite different." (Health Plan Law blog by Attorney Roy F. Harmon III)

[Guidance Overview] Insurance Broker Malpractice Claims Avoid ERISA Preemption Defenses
Excerpt: "The district court in Trelease reached the correct conclusion that, notwithstanding specific reference to ERISA in the state law complaint, the gravamen of the plaintiffs' complaint did not invoke ERISA's civil remedies and, therefore, averted preemption. In essence, the case argued by the plaintiffs amounted to no more than a state law malpractice claim against their insurance professionals." (Health Plan Law blog by Attorney Roy F. Harmon III)

[Guidance Overview] Update of the IRS Correction Program
Excerpt: "In Rev. Proc. 2008-50, the IRS has updated and expanded the Employee Plans Compliance Resolution System (EPCRS). The new correction procedure is effective January 1, 2009, but plans may elect to utilize the new procedure as early as September 2, 2008. The new procedure continues the same programs available in the previous procedure: self correction program (SCP), voluntary correction program (VCP) and the closing agreement program for errors discovered on audit (Audit CAP)." (SunGard)

[Guidance Overview] IRS Updates Its Corrections Programs for Retirement Plans (PDF)
2 pages. (Milliman)

[Guidance Overview] Proposed DOL Regulations Would Implement PPA Investment Advice Exemption; Proposed PTE Would Significantly Expand Relief
Excerpt: "EBIA Comment: Although the proposed regulations break little new ground on the level-fee exemption, they do provide more detail regarding how the computer-model exemption is to work. Unfortunately, they leave some significant concepts (for example, the concept of an eligible investment expert) largely unexplained, requiring fiduciaries to make decisions based on general fiduciary principles." (Employee Benefits Institute of America)

Volatility Creates Challenges for Multiemployer Trustees, Survey Says
Excerpt: "Nearly two-thirds (64%) of the trustees said that decreasing volatility in the investment portfolio while maintaining current returns was a higher priority than increasing investment returns while maintaining current volatility. Recent market performance has caused trustees to seek methods to budget for short-term market volatility. An increase in investment diversification is one means of addressing the volatility of the assets and the plan impact that follows." (Wolters Kluwer)

It's Not a Good Idea to Let Company Stock Dominate 401(k)
Excerpt: "'No company, no matter how large, how well thought of or how well-capitalized, is immune from bad things happening,' says Christopher Jones, chief investment officer for Financial Engines, which provides advice to 401(k) plan participants. If your 401(k) is loaded up with company stock and your employer falls on hard times, he says, 'You could easily find yourself not only bereft of retirement savings but also your job.'" (USA TODAY)

Retirement Account Required Minimum Distribution Rules Catch Many by Surprise
Excerpt: "There's some sentiment that a government rule that forces retirees to withdraw money from their IRA and 401(k) accounts when they turn 70 1/2 may need to be changed. That's because people are living longer and need to keep as much of their retirement money for as long as possible, said several financial advisers and a leader of the Senate Finance Committee." (AP via The New York Times; free registration required)

ESOP Member Firms Give Program Big Thumbs Up
Excerpt: "Executives at companies with an employee stock ownership plan (ESOP) are nearly all jumping for joy that their employer made the move to create such a program. A 2008 survey by the Employee Ownership Foundation found that 92.4% of respondents reported that kicking off an ESOP was 'a good business decision that has helped the company' - the highest percentage ever reported in the 17 years the survey has been conducted." (; free registration required)

Czech Republic Retirement Age to Gradually Increase
Excerpt: "A new law recently passed by parliament will progressively increase the retirement age. It will also increase the number of years employees must contribute to a pension before they are eligible to make withdrawals." (Watson Wyatt Worldwide)

Lifetime Income for Women: A Financial Economist's Perspective (PDF)
17 pages. Excerpt: "Five forces are converging upon Americans today in what some have called the Perfect Storm and it is about to engulf us from all sides. The situation is particularly precarious for women, as I will demonstrate shortly, and there isn't anything we can do to stop these converging forces. The best we can do is to organize our own finances in such a way that we can provide for ourselves and our families." (Wharton Financial Institutions Center)

Plan Sponsors Quick to Make QDIA Selection
Excerpt: "New research from Chatham Partners indicates two-thirds of plan sponsors have selected a qualified default investment alternative (QDIA) despite limited understanding of QDIA regulations and alternatives." (; free registration required)

Changing Demographics and Cruddier Retirement Plans Mean More Workers Will Delay Job Exit
Excerpt: "'The American work force is aging -- it is a very dramatic demographic transformation for the country,' said G.ayle Gamauf McCoy, vice president of senior programming for the National Able Network, which helps train older workers. Indeed, with pensions rare and investments losing value, more Americans will be delaying retirement -- or trying to. But in a tough economy, cutbacks commonly include early retirement buyouts, even for workers in mid-career." (Financial Week; free registration required)

Plans Sue to Recover Subprime Investment Losses
Excerpt: "After the scope of the subprime mortgage crisis became clear in 2007, a number of pension and 401(k) plans with assets invested in subprime mortgage obligations filed lawsuits in federal district court to recover their losses. They cite a provision of ERISA that holds fiduciaries liable for losses resulting from a breach of fiduciary responsibilities." (Employee Benefit News; free registration required)

Do ETFs Have a Place In 401(k)s? Here's the Pro and Con
Excerpt: "Editor's Note: David Blanchett and Gregory Kasten's article, 'Why ETFs And 401(k)s Will Never Match,' . . . elicited a lot of discussion in the exchange-traded fund industry. Blanchett and Kasten argued that the extra costs associated with incorporating ETFs inside a 401(k) program far outweighed any cost savings from the funds' lower expense ratios. Darwin Abrahamson took exception to that argument. Abrahamson is the CEO of Invest n Retire, the leading provider of software that allows ETFs to function in an ETF platform. His position is not just that ETFs can work inside 401(k)s, but that they represent a dramatically better solution for the 401(k) market. Abrahamson submitted a letter to the editor disputing Blanchett and Kasten's article . . . . Because it is such an important discussion, we invited Blanchett and Kasten to respond." (

Don't Fear the 401(k) Loan
Excerpt: "When you must find cash for a serious short-term liquidity need, a loan from your 401(k) plan probably is one of the first places you should look. When you loan yourself appropriate amounts of money for the right short-term reasons, these transactions can be the simplest, most convenient and lowest-cost source of cash available." ( LLC)

Women Should Lighten Equity Load, According to Study
Excerpt: "Due to their longer life expectancies, woman should allocate much less to equities than advisers normally recommend, according to an academic paper. Women should put 40% to 80% of retirement assets into lifetime income annuities, according to 'Lifetime Income for Women: A Financial Economist's Perspective,' a paper by David F. Babbel, professor of insurance and finance at the Wharton School of the University of Pennsylvania in Philadelphia." (Investment News; free registration required)

Verizon Hit for Cash Balance Conversion Error
Excerpt: "A federal judge said a Verizon benefits committee improperly handled an error in the plan document by ignoring it." (planadvisor)

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Links to Items on Executive Comp, Benefits in General

[Official Guidance] Text of OMB Advance Notice of Proposed Regs on Harmonization of PPA Funding Rules with Federal Cost Accounting Standards for Contractor Reimbursement
Excerpt: "SUMMARY: The Office of Federal Procurement Policy, Cost Accounting Standards Board, invites public comments concerning an Advance Notice of Proposed Rulemaking on the harmonization of Cost Accounting Standards 412 and 413 with the Pension Protection Act of 2006. DATES: Comments must be in writing and must be received by November 3, 2008." (U.S. Office of Federal Procurement Policy, Office of Management and Budget)

[Guidance Overview] IRS Issue Paper Concludes That Employee Tool and Equipment Plans Generally Fail Accountable Plan Rules
Excerpt: "EBIA Comment: According to the IRS, tool plans, as described in the issue paper, don't work -- the conditions for income exclusion under the accountable plan rules are routinely failed. Furthermore, the IRS views the practice of temporarily recharacterizing wages as reimbursements until the employee's tool inventory is zeroed out (only to reinstate the original wage amount at that point) as a 'pattern of abuse' that bars accountable plan treatment. Of course, each tool plan should be reviewed to determine whether it differs from those described in the issue paper. But if it seems too good to be true, it probably is." (Employee Benefits Institute of America)

Golf Club Dues and Other Executive Fringe Benefits Trimmed Way Back
Excerpt: "A growing number of companies are finding that there's a pretty simple way to avoid taking heat over lucrative fringe benefits that are dished out to top executives: Just pull the plug on perks. Now that the Securities and Exchange Commission requires companies to disclose executive benefits valued at more than $10,000, large corporations are shedding some of the smaller -- yet most frequently offered -- fringe benefits provided to their top officers." (Financial Week; free registration required)

New Intel Benefit Offers Free Homework Help
Excerpt: "Through a connection with, Intel offers free online homework help to the roughly 20,000 children and grandchildren of the company's U.S. employees.'s service allows students to access a virtual classroom where they can instant message with a tutor and utilize a virtual whiteboard to solve homework problems. The service is available on demand and operates 24/7." (Employee Benefit News; free registration required)

Segal Examines What Motivates Employees of Different Ages
Excerpt: "The incentives that motivate 30-year-old employees are not going to have the same effect on their 60-year-old colleagues. Individuals from different age groups have diverse interests and needs. What exactly is it that motivates people in their 20s, 30s, 40s and older? The data from Sibson Consulting's 'Rewards of Work' study, based on 1,059 respondents, reveal the elements that employers can use to drive employee performance over the course of their careers." (Employee Benefit News; free registration required)

[Opinion] Funding Executive Plans: Good Planning or Pension Manipulation?
Excerpt: "A front page article in the August 4th edition of the Wall Street Journal outlines a method by which companies are transferring portions of their non-qualified deferred compensation obligations of senior executives into their qualified plans. . . . The program outlined in the Journal article may very well be reasonable. The IRS should examine this practice to determine whether it violates the anti-discrimination rules. If it does, the IRS should eliminate it administratively or request Congress to pass clarifying legislation." (Pension & Benefits Blog)

[Opinion] Happy (Belated) Birthday, ERISA!
Excerpt: "Today marks the 34th anniversary of the date that the Employee Retirement Income Security Act of 1974, known to those in the field of pensions as ERISA, was signed into law. In a tribute to the workers who would be helped by the new law, that day, September 2, 1974, fell on Labor Day." (Pension Rights Center)

Newly Posted Press Releases
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And They’re Off! – The Race to Gather QDIA Assets - An Assessment of Selection and Evaluation Criteria of QDIA Options by Plan Sponsors and Their Intermediaries
Chatham Partners

Employee Understanding and Adequacy Of Benefits Are Top Concerns for SERP Sponsors in Canada, Finds Buck Consultants Survey
Buck Consultants, an ACS Company

Fiduciary360 Introduces Enhanced Web-Based Training Program for Accredited Investment Fiduciary (AIF) Designation
Fiduciary360 (fi360)

American Workers Overwhelmingly Support Paid Sick Days, Labor Day Survey Finds
University of Chicago

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Pension Administrator
for Primark Benefits
in CA

Pension Administrator
for Pension Administration Firm located in Westchester, NY
in NY

Plan Administrator/ Account Manager
for Pension Specialists, Inc.
in CA

Daily 401k Plan Administrator
for The Newport Group
in NC

Conversions Specialist
for The Newport Group
in NC

Pension Analyst
for T. Rowe Price Associates, Inc.
in MD

DC or DB Plan Administrator
for Derby and Company, Inc.
in MA

Defined Contribution Analyst I
for The Standard
in OH

Chairman of Administration Services for TPA Firm
for Dana Consulting Group, Ltd.
in IL

Sr. Defined Benefit Client Consultant
for Prudential Financial
in CT

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