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September 9, 2008

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

Today's sponsor is ASC & The ASC Institute

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[Guidance Overview] IRS Guidance on Finding, Correcting and Preventing 401(k) Loan Errors
Excerpt: "In the latest issue of Retirement News for Employers, the IRS has provided guidance on the corrective steps which can be taken when mistakes are made in a 401(k) loan repayment which could result in the entire loan amount being considered a taxable distribution to the participant." (Wolters Kluwer)

[Guidance Overview] Final 403(b) Regulation Date Tricky for Church Plans
Excerpt: "As the general deadline of January 1, 2009 creeps closer and closer for most 403(b) plans to comply with the Final 403(b) Regulations, the applicability dates in the Final 403(b) Regulations deserves a little scrutiny. For church 403(b) plans, the deadline for complying with the Final 403(b) Regulations depends on whether the authority to amend or establish the plan is with the church convention. The reason for this is contained within the 'Applicability Date' section of the Final 403(b) Regs . . . ." (Pension Protection Act Blog)

[Guidance Overview] IRS Rules on Frozen Plan Buyouts
Excerpt: "On August 6, 2008, the IRS published Revenue Ruling (RR) 2008-45, holding that, under current rules, frozen pension plan 'buyouts' would generally violate the Internal Revenue Code's 'exclusive benefit' rule. In connection with the ruling, the Administration also published a press release subtitled 'Agencies Offer Framework for Possible Legislative Change,' which outlines rules the Administration believes should be part of any legislation that would allow for the transfer of frozen pension plans. In this article, we review the ruling and the 'Framework' and then discuss some of the policy issues at stake." (JPMorgan Chase & Co.)

[Guidance Overview] SEC Warns Investors About Pitfalls of Using 401(k) Debit Cards
Excerpt: "EBIA Comment: While SEC guidance generally is outside the scope of the EBIA Weekly, we are covering this alert because of the important information it provides for plan sponsors and advisors that might be considering 401(k) debit cards for plan participants. We note that these debit cards could dramatically increase both the demand for and the actual number of plan loans. We are not aware of any recent IRS or DOL actions or guidance on debit cards . . . ." (Employee Benefits Institute of America)

[Guidance Overview] 'Two' Vendors Works for 403(b) Plans
Excerpt: "At long last, a DOL official has spoken publicly about what constitutes a 'reasonable choice' under its 403(b) 'safe harbor,' 2510.3-2(f)(3)(vii). At stake here is the answer to the question of when and whether any particular 403(b) plan is subject to ERISA, a topic upon which we have recently blogged. One of the requirements of the regs' safe harbor is that the employer must make a reasonable choice of vendors available to its employees in order to avoid the 501(c)(3)organization's 403(b) plan from being considered subject to ERISA." (Baker & Daniels)

DOL Opens Advice Window for Investment Firms
Excerpt: "The Labor Department has proposed to dramatically open the door for mutual funds and other investment companies to offer investment advice directly to participants in defined-contribution plans. Fund companies long have been effectively barred from offering direct advice to participants because of fears that the advisors might steer participants to the companies' own investment options." (Workforce Management; free registration required)

Nevada's Public Employees Retirement System Billions in Debt, According to Study
Excerpt: "The pension plan, which the study said is 'among the nation's most favorable public employee retirement systems,' provides a $37,380 annual pension to general government workers earning annual salaries of $50,000 who retire today after 30 years on the job. Those hired since 2001 would receive the same benefit if they retire after working 28 years." (Las Vegas Review-Journal)

Comparison of 401(k) Participants' Understanding of Model Fee Disclosure Forms Developed by DOL and AARP
Excerpt: "AARP developed an alternative disclosure form through consultations with experts and revised it through extensive interviews with 401(k) participants." (AARP)

401k Retirees, Take An Annuity for a Test-Drive
Excerpt: "[T]here will always be two kinds of people: those who hire a professional, and those who prefer to do things themselves. It's as true in retirement planning as it is in other areas of life. The common goal is funding a secure retirement, but there are two vastly different approaches to getting there. On one end of the spectrum is the 'hire it done' mentality of a defined benefit plan. . . . Way at the other end of the spectrum is the 'do-it-yourself' mentality of a 401k plan." (

Jacksonville, FL's Police and Fire Pension Fund Facing Huge Deficit
Excerpt: "Mayor John Peyton said growing pension costs for the city, which paid $56.3 million into the fund this year, need to be reduced. He isn't sure how to do it, but he hopes a three-year review of the city's finances will provide help. The results will come about the time Peyton is leaving office. A recent Florida TaxWatch study said the city should change the pension to a plan that doesn't guarantee a payout, taking financial pressure off the city. But union officials, both of whom are negotiating contract renewals, say they would never agree to such a change." (The Florida Times-Union)

PBGC's September Premium E-Filing Webcasts & Online Demos
Excerpt: "To assist plan administrators and other practitioners to electronically file the new 2008 Comprehensive Filing via PBGC's e-filing application called My Plan Administration Account (My PAA), we will conduct two Webcasts. During each Webcast, we will briefly describe the three premium e-filing methods . . . and then will focus on using My PAA's data entry and editing screens to prepare, e-sign, pay, and submit a single-employer Comprehensive Filing to PBGC. To participate in the Webcast of your choice, [choose one of the following dates and register prior to the Webcast: Tuesday, September 23, 2008 (2:00 to 3:15 pm Eastern time) or Thursday, September 25, 2008 (2:00 to 3:15 pm Eastern time)" (Pension Benefit Guaranty Corporation)

Senator Obama's Pension Proposals
Excerpt: "Senator Barack Obama (D-IL) has made a number of (relatively) concrete pension reform proposals. In this article we evaluate them. Our focus in this article is on Senator Obama's proposals that will affect private pension plans. Thus, we will not be addressing, for example, Senator Obama's Social Security proposals. With respect to private pension policy, we identify three major Obama-supported initiatives." (JPMorgan Chase & Co.)

What Pension Policy Issues Are at Stake This November?
Excerpt: "As the 2008 Presidential election draws near, in this article we discuss the major pension policy issues that will confront Congress and the next President, observing, where the issues may become polarizing, how Democrats and Republicans may line up." (JPMorgan Chase & Co.)

Guaranteed Income Top Priority for Managing Retirement Savings
Excerpt: "The latest Principal Financial Well-Being Index reveals that the vast majority of American workers (71%, up from 67% a year ago) are concerned about their long-term financial security, and significantly more Americans this year compared to last year are losing sleep over it. The biggest financial worry respondents say keeps them awake at night is the ability to pay for basic necessities during retirement (up to 48% from 38% a year ago), according to a Principal news release." (; free registration required)

Shortage of Retirement Savings Services for Those Who Fall in Middle of Wage Scale or Lower
Excerpt: "[F]ew middle- or lower-income workers are getting the advice they need not only for retirement savings but also for all their other finances. Now, a wave of innovation is aimed at meeting these needs. Public-policy experts are pushing state and federal laws that would vastly widen the availability of low-cost, tax-advantaged retirement-savings programs. And some financial-services firms are looking for ways to better serve the less well-heeled -- instead of shunting them to online investment tools and call centers for advice -- and still turn a profit. Here is a look at three approaches in different stages of development . . . ." (The Wall Street Journal)

[Opinion] SPARK Institute Comments on Participant Fee Disclosure Proposed Regulation (PDF)
11 pages. Excerpt: "Some of the specific provisions that The SPARK Institute supports include, but are not limited to: (1) the flexible concept based approach that allows plan fiduciaries, service providers and investment providers flexibility in making participant disclosures, (2) the absence of a mandated one-size fits all disclosure form or format, (3) the targeted approach that focuses on providing clear, concise and meaningful disclosure, including investment option comparisons . . . ." (The SPARK Institute)

[Opinion] Investment Company Institute Comment Letter on Participant Fee Disclosure Proposal
Excerpt: "The Department should enhance the ability of plans to use electronic delivery and web-based disclosure. Although the proposal contemplates the use of a website for layered disclosure, it otherwise simply incorporates the Department's current electronic disclosure rules. Benefits of the layered approach to disclosure in the proposal can best be realized if the Department updates its electronic disclosure rules." (Investment Company Institute)

[Opinion] ERIC Comments on Proposed Regulation on Disclosure Requirements for Participant-Directed Individual Account Plans (PDF)
29 pages. Excerpt: "The Department has proposed to make the regulation effective for plan years beginning on or after January 1, 2009. This proposed effective date is not realistic. As explained . . ., fiduciaries will need substantially more time to comply with the new disclosure requirements. ERIC recommends that the requirements become effective no earlier than the first plan year beginning at least 12 months after the final regulation is published in the Federal Register." (The ERISA Industry Committee)

[Opinion] American Society of Pension Professionals & Actuaries and Council of Independent 401(k) Recordkeepers Comments on Participant Fee Disclosure Proposed Regulation (PDF)
26 pages. Excerpt: "ASPPA and CIKR have serious concerns regarding the timing, cost and burden of the proposed disclosures, and we strongly urge the Department to delay adoption of a final regulation to enable the service provider community to create the systems that will assist fiduciaries in complying with the new requirements." (American Society of Pension Professionals & Actuaries/Council of Independent 401(k) Recordkeepers)

[Opinion] Systemic Losses and Fiduciary Liability
Excerpt: "We have all taken note of the run up in filings of very large breach of fiduciary duty cases against plan fiduciaries that are based on the tremendous losses incurred in investments held by plans as a result of the subprime lending mess. The filings themselves are noteworthy, and the numbers, losses and alleged misconduct depicted in them are eye-grabbing . . . . Most lawyers, myself included, and other observers have immediately delved into the ERISA defense lawyers playbook in thinking through these cases, looking towards the procedural, and if they fail, substantive defenses that the fiduciaries can present." (Stephen Rosenberg of The McCormack Firm, LLC)

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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] HEART Act Affords Greater Protections to Those Serving on Active Military Duty
Excerpt: "Under the Act, retirement plans must provide certain survivor benefits to participants who die while serving in active military duty and make plan contributions for 'differential pay.' The Act also modifies the tax treatment of certain deferred compensation items." (Littler Mendelson P.C.)

[Guidance Overview] IRS Delay of Effective Date of Electronic Payment Card Guidance for Transit Expenses
Excerpt: "EBIA Comment: This delayed effective date will be welcome news for the transit systems that are still struggling to comply with the technological requirements for vouchers (presumably, such as the need for single-purpose cards or cards with separate 'purses' for transit versus parking expenses). But in the absence of clear guidance from the IRS on the effect of using noncompliant cards before January 1, 2010, cautious employers with noncompliant cards should change to a compliant alternative, if one is available." (Employee Benefits Institute of America)

[Guidance Overview] No Severance Pay for Constructive Termination
Excerpt: "A federal appeals court has concluded that executives were not entitled to severance pay because they were not involuntarily terminated, but were instead, at least arguably, constructively discharged. The case is Mallon v. Trust Co. of New Jersey Severance Pay Plan, 2008 WL 2553027 (3d Cir. 2008)." (National Association of Stock Plan Professionals via Utz, Miller, Kuhn & Eickman, LLC)

[Guidance Overview] Corporate Jets: How to Deal With the Tangle of FAA and IRS Rules (PDF)
3 pages. Excerpt: "Private jet travel's strengthened appeal is all the more reason to be aware of the pitfalls that go with flying on the 'company' aircraft, for business or for pleasure. Problems include the ownership and operational structure of the aircraft because the manner in which the aircraft is owned, operated, and funded can determine what regulations apply and many owners unknowingly fly under the wrong set of regulations." (Thompson Publishing Group via McDermott Will & Emery)

International Accounting Rules Could Affect Way American Companies Compensate Employees
Excerpt: "Companies that adopt international financial reporting standards will need to reexamine their compensation and employee benefit plans. The switchover from U.S. generally accepted accounting principles to IFRS will not only translate into tweaks regarding how companies account for such programs -- but could also change plan design because of the way international rules affect corporate financial statements, according to Deloitte." (

Summary Plan Descriptions Under Scrutiny
Excerpt: "Most Summary Plan Descriptions ('SPDs') contain disclaimer language stating that in case of conflict between the SPD and the Plan documents, the Plan documents will always govern. In fact, sometimes SPDs are given less attention than we benefits lawyers recommend, usually due to cost or other factors and because people often believe that the disclaimer language will protect them. However, whatever the reason, it appears that the courts are not always willing to enforce provisions of a Plan document that are not disclosed in the SPD, despite the disclaimer language." (Attorney B. Janell Grenier via

Opportunities Exist in Linking Equity Awards and NQDC Programs
Excerpt: "Recent regulatory changes are creating some new synergies between equity awards and non-qualified deferred compensation programs. Those opportunities - and the shifts that have created them were addressed in a the latest of PLANSPONSOR's Nonqualified Deferred Compensation Plan Web cast series by John N. Smith, III Vice President and Corporate Benefit and Institutional Specialist for Merrill Lynch Retirement Group." (; free registration required)

Newly Posted Events
(Post Yours!)

ERISA Basics (60-Minute Power Series)
Nationwide on September 16, 2008
presented by International Foundation of Employee Benefit Plans

The Savvy Self-Funding Healthcare Conference & Expo
in Missouri on June 1, 2009
presented by Savvy Self-Funding Healthcare Conference & Expo

Newly Posted Press Releases
(Post Yours!)

MassMutual Launches TPA Registered Product
MassMutual Retirement Services

ERIC Urges DOL to Delay Effective Date of Proposed Participant Fee Disclosure Regulations, Among Other Recommendations
ERIC (ERISA Industry Committee)

CDM Retirement Consultants, Inc. Provides New Service Package for 403(b) Plans
CDM Retirement Consultants, Inc.

Wachovia Offers Live Retirement Consultation to Plan Participants
Wachovia Retirement Services

401k Producer Services Rebrands as Retirement Plan Advisory Group
401k Producer Services

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Employee Benefits Administration
for Primary Consulting, Inc.

DC/401(k) Plan Administrator
for Escondido California (North Inland San Diego County)
in CA

Benefit Funds Administrator
for Northern Illinois Taft Hartley Benefit Funds
in IL

401(k) Senior Plan Administrator
for Matthews Benefit Group, Inc
in FL

Employee Benefits & HRIS Platform Manager
for CBIZ
in KS, VA

Benefits Manager 2
for Sun Microsystems Inc
in CA

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