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September 5, 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.

(Click on company name or banner to learn more.)
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  • FAS 132/158: Audit Letter, Worksheets, Schedules
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[Guidance Overview] Fiduciary Focus: The 'Anti-Participant Rule' (PDF)
4 pages. Excerpt: "Any discussion about the regulatory effort (i.e., proposed rule 2550.404a-5 set forth by the Department of Labor) or the legislative effort (i.e., HR 3185) to disclose fees associated with qualified retirement plans such as 401(k) plans must begin with citation to the relevant portion of section 404(a)(1)(A) of the Employee Retirement Income Security Act (ERISA): '[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.'" (W. Scott Simon via Morningstar)


[Guidance Overview] Proposed Regs, Class PTE, Liberalize Exemption for Provision of Investment Advice to Self-Directed Plan Participants
Excerpt: "These proposals are intended to implement changes made to ERISA 408(b)(14) and ERISA 408(g) by the PPA. ERISA 408(b)(14) provides an exemption from certain prohibited transaction provisions in ERISA with respect to the provision of investment advice, and the direct or indirect receipt of fees or other compensation by the fiduciary adviser or an affiliate. ERISA 408(g) describes the conditions under which the investment advice-related transactions are exempt." (Wolters Kluwer)


[Guidance Overview] DOL Proposed Rules on Investment Advice Exemptions for 401(k) Plans and IRAs
Excerpt: "The proposed class exemption would provide relief for individualized investment advice to individuals following the furnishing of recommendations generated by a computer model (or, in the case of an IRA with respect to which modeling is not feasible, the furnishing of certain investment educational material)." (Deloitte via BenefitsLink.com)


[Guidance Overview] HEART Act Changes Retirement Plan Rules for Military Reservists
Excerpt: "In June, the Heroes Earnings Assistance and Relief Tax ('HEART') Act became law. The Act makes a number of significant changes to the treatment of military reservists under employee benefit plans. This article summarizes those changes as they apply to qualified defined benefit and defined contribution plans, Section 403(b) plans, and Section 457(b) plans." (Spencer Fane Britt & Browne LLP)


[Guidance Overview] Retirement Provisions in the HEART Act May Affect Multiemployer Plans (PDF)
2 pages. (The Segal Group, Inc.)


Insights on Roth 401(k)s and Excessive Plan Fees
Excerpt: "Regardless of whether Roth features are offered or not, excessive fees can drain retirement savings considerably. A recent lawsuit illustrates the need for employers to ensure that all 401(k) plan fees are reasonable. Ronald C. Tussey, a participant in his employer's 401(k) plan, filed suit in U.S. District Court for the Western District of Missouri in 2006. This is one case in a series of lawsuits brought by the St. Louis-based law firm of Schlichter, Bogard & Denton on behalf of retirement plan participants." (Employee Benefit News; free registration required)


Welcome to the 401(k) Day 2008 Homepage
Excerpt: "401(k) Day is an annual celebration spotlighting the importance of employer-sponsored profit sharing and 401(k) plans. As retirement follows work, 401(k) Day follows Labor Day. In 2008, 401(k) Day is officially September 5, 2008, the Friday after Labor Day." (Profit Sharing / 401k Council of America)


Worker Finances Stretched Too Thin to Save, According to Survey
Excerpt: "The current economy has workers stretching their paychecks more than ever, according to a nationwide survey of over 7,192 workers by CareerBuilder.com. . . . Stretching their income leaves little room to save. A quarter of workers say they do not put any money aside for savings each month, and of those who do save, 34% set aside less than $100 a month and 18% save $50 or less. In addition, a third of workers say they do not participate in a 401k, IRA, or other retirement plan." (PLANSPONSOR.com; free registration required)


Pension Accounting Change Needed, But Not As Suggested Say Employers
Excerpt: "Employers believe changes to current pension accounting standards are necessary, but most are not in favor of the changes proposed in the International Accounting Standards Board's (IASB's) preliminary views paper, according to a recent survey by Watson Wyatt Worldwide." (PLANSPONSOR.com; free registration required)


Managing Contribution and Capital Market Risk in a Funded Public Defined Benefit Plan: Impact of CVaR Cost Constraints
Excerpt: "Using a Monte Carlo framework, we analyze the risks and rewards of moving from an unfunded defined benefit pension system to a funded plan for German civil servants, allowing for alternative strategic contribution and investment patterns. In the process we integrate a Conditional Value at Risk (CVaR) restriction on overall plan costs into the pension manager's objective of controlling contribution rate volatility." (Pension Research Council; registration required to download fulltext of paper)


Revisions Considered for Valuations of Public Pension Fund Payouts
Excerpt: "The leading U.S. association of actuaries is considering a change to the way state and local officials value the cost of their pension promises, which could force governments to dramatically raise their contributions to their retirement plans. The American Academy of Actuaries heard testimony yesterday on whether to revise accounting methods used by public pension funds that determine how much money they must invest now to meet their payments to workers in the future." (The Washington Post; free registration required)


Harvard's Endowment Offers an Education in Asset Allocation (PDF)
2 pages. Excerpt: "From yesterday's WSJ, how individual investors can benefit from the wisdom behind the successful returns of Harvard University's endowment." (The Wall Street Journal via MJM401k, LLC)


Overhauling 40(k) Plans to Net Employees More Money for Retirement
Excerpt: "Rare is the corporation that won't at least consider changes in DC plans that will net participants more money for retirement and, eventually, guaranteed lifetime income. Call the new and improved plans, DC Version 2.0 . . . . The transformation began quietly a few years ago with automatic enrollment, which got a big boost when the Pension Protection Act of 2006 identified allowable default investments. Since then, pioneers have been overhauling their 401(k) offerings. Consultants label it the DBization of DC plans. What started with auto-enrollment designed to mimic the automated enlistment of pension offerings, has turned into innovative companies adding automatic yearly escalation of employer contributions and managed, institutional fund choices." (Treasury & Risk)


Summary of 401(k) Fee Cases Pending as of September 2, 2008 (PDF)
The 3-page table presents the complaints filed against major companies and service providers. (Spencer Fane Britt & Browne LLP)


[Opinion] PSCA Comments on Proposed Rule for Fee Disclosure in Participant-Directed Individual Account Plans (PDF)
6 pages. Excerpt: "We recommend that the final rule require initial disclosures to participants under paragraphs (c) and (d) on or before the date of participation in the plan, not the date of plan eligibility. Requiring initial disclosure on or before participation in the plan, prior to the actual selection of a designated investment alternative, provides many advantages. It will result in incorporating the disclosures required under the proposed rule into the plan enrollment process, when the employee's attention is focused on the plan features and the investment selection process." (Profit Sharing / 401k Council of America)


[Opinion] American Benefits Council Letter to Treasury Requesting Guidance on HEART Act Benefit Provisions (PDF)
6 pages. Excerpt: "The Council's members have raised a number of questions about sections 104, 105 and 107 of the HEART Act, which generally provide relief from certain retirement plan rules for distributions, contributions and accruals made on behalf of participants engaged in qualified military service." (American Benefits Council)



Sponsored by: BLAZE SSI Corp.

(Click on company name or banner to learn more.)
Banner ad for BLAZE SSI Corp.

GTS - the George Taylor System for combined DB /DC Plan Proposals

GTS is a fast, easy-to-use MS Excel-based interactive system designed by George Taylor. It creates plan proposals, including combined DB Cash Balance and DC New Comparability plan designs. GTS performs combined plan IRC401(a) non-discrimination testing and prepares client-ready reports. A GTS subscription includes system updates for government regulations and HelpLine Support. GTS is available exclusively from BLAZE SSI Corp.

(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] Welfare Plan Violated ERISA 204(g); Amendment Adopted with Intent To Penalize the Exercise of Accrued Rights under a Pension Plan (PDF)
At page 3 of 5. Excerpt: "After several unsuccessful attempts to amend the merged pension plan to limit lump sum payments, the trustees amended the welfare plan to preclude payment of retiree welfare benefits for participants who elected a lump sum payment from the pension plan." (Proskauer Rose)


[Guidance Overview] Year-End Bonuses and the All-Events Test: Time to Review (PDF)
3 pages. Excerpt: "Due in large measure to FIN48, a number of taxpayers have begun reexamining their methods of accounting for executive and employee performance and incentive bonuses (generically 'year-end bonuses'). These reviews focus upon determining whether the taxpayer may accrue a federal tax deduction for year-end bonuses for the tax year in which the employee performs the related services." (Miller & Chevalier Chartered)


[Guidance Overview] Section 409A Compliance Deadline
Excerpt: "This client alert is intended to bring to your attention certain decisions and actions that must be taken by December 31, 2008 with regard to all plans of nonqualified deferred compensation subject to Internal Revenue Code Section 409A." (Baker & McKenzie LLP)


[Guidance Overview] Employee Stock Purchase Plans: IRS Update to Rules and Reporting Requirements (PDF)
4 pages. Excerpt: "In July, the Internal Revenue Service proposed regulations that would provide a comprehensive set of rules governing stock options issued under employee stock purchase plans. Earlier in the month, IRS issued proposed regulations relating to ESPP and incentive stock option (ISO) information reporting requirements. In the [target] article, the authors summarize key changes in both regulatory proposals. [Reproduced with permission from Pension & Benefits Reporter.]" (The Bureau of National Affairs, Inc. via Groom Law Group)


Low-Cost, High-Value Benefits Can Aid Retention in a Difficult Economic Climate
Excerpt: "With each blow to the economy, workers grow even more concerned that their jobs are at stake. But by using a little ingenuity, employers can beef up their benefits offerings with low-to-no-cost perks that can improve morale. . . . Karen J. Johnson, DVM, of Banfield Pet Hospital in Portland, Ore., says that her 400-person office allows around 40 pets each day to come into the office. 'It's a huge morale booster for the team member who brings their pet ... [and] it's a good social interaction for the team members.' Johnson cites studies crediting pet interaction with lower stress, increased productivity and improved staff relations." (Employee Benefit News; free registration required)


SEC Proposes to Adopt International Accounting Standards
Excerpt: "On Aug. 27, the Securities and Exchange Commission (SEC) voted unanimously to propose a road map for shifting U.S. companies from U.S. Generally Accepted Accounting Principles (U.S. GAAP) to International Financial Reporting Standards (IFRS). The move to a global accounting language is intended to improve the comparability and transparency of financial reporting worldwide. It will also have important implications for U.S. employers in how they account for employee benefit and stock plans." (Watson Wyatt Worldwide)


IRS's Notice Delaying Effective Date of Smartcard Guidance for Transportation Benefits
Excerpt: "The Internal Revenue Service (IRS) has released Notice 2008-74, delaying the effective date of Revenue Ruling 2006-57 which provides guidance to employers on the use of smartcards, debit, or credit cards, or other electronic media to provide qualified transportation fringes under sections 132(a)(5) and (f) of the Code." (International Foundation of Employee Benefit Plans)


[Opinion] Two Interesting But Different Cases - Both Related to Broad Impact ERISA Has Across the Workplace
Excerpt: "[I]n this first one, you find the story of the Third Circuit concluding that certain death benefits were not pension, but instead welfare, benefits, which did not vest and could be revoked, despite long time practice and the reliance of employees on the benefit as part of retirement planning. . . . In the second story, you see the potential reach of ERISA in an attempt, ultimately rejected by the court, to have it reach and protect what was otherwise allegedly illegal conduct in providing fringe benefits . . . ." (Stephen Rosenberg of The McCormack Firm, LLC)




Newly Posted Events
(Post Yours!)

Multistate Taxation Reporting And Compliance
Nationwide on September 24, 2008
presented by HRTrainingCenter.com

The Open Enrollment Challenge: Strategies For Success
Nationwide on October 1, 2008
presented by HRTrainingCenter.com

Understanding Your Fiduciary Responsibilities Under ERISA/Voluntary Fiduciary Correction Program Workshop
in Tennessee on September 25, 2008
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)



Newly Posted Press Releases
(Post Yours!)

Employers Oppose Proposed New Pension Accounting Rules Despite Desire for Change, Watson Wyatt Survey Finds
Watson Wyatt

Profit Sharing/401k Council of America Announces National 401(k) Day 2008
Profit Sharing/401(k) Council of America (PSCA)

Aon Consulting, FEI Canada and CFERF Release Pensions Study Results
Aon Consulting



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Defined Contribution Administrator
for Merit Benefits Group, Inc.
in IL

Enrolled Actuary
for Creative Plan Designs, Ltd.
in NY

Education Specialist Field Presenter
for Charles Schwab & Co.
in ANY STATE

Retirement Services Senior Relationship Manager
for Charles Schwab & Co.
in AZ

Retirement Plans Recordkeeper/Tester
for The Standard
in TX

RVP/External Wholesaler - Massachusetts/Rhode Island
for Transamerica Retirement Services
in MA, RI

Compliance Director
for MassMutual Financial Group
in CT

Senior Compliance Analyst
for Administaff
in TX




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