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September 29, 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] IRS Update and Expansion of Its Employee Plans Compliance Resolution System
Excerpt: "This Update provides only a general summary of the Employee Plans Compliance Resolution System. You can read the full text of Revenue Procedure 2008-50 at" (Perkins Coie LLP)

[Guidance Overview] Hewitt Federal Legislation Quick Guide Updated September 24, 2008, for Retirement Plans (PDF)
5 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding retirement plans. (Hewitt Associates)

[Guidance Overview] IRS FAQs Regarding Governmental Plan Determination Letters (PDF)
Page 1 of 6 pages. Excerpt: "Among other items, the FAQs clarify that the plan documentation submitted with the determination letter request does not have to be in 'restated form.' Generally, the IRS requires a plan be submitted as a single, restated plan document in order to facilitate their review. However, in the FAQs, the IRS recognized governmental plans may not have a single document. Therefore, plan sponsors will be allowed to submit the applicable statutes and other relevant material, provided the information is organized in a way that allows IRS reviewers to determine whether plan provisions meet the qualification requirements." (Gabriel, Roeder, Smith & Company)

[Guidance Overview] DC Plans, Distributed Annuities, Spousal Consent and QJSAs
Excerpt: "One of the most nagging issues related to distributing annuities from defined contribution plans is how and when to apply the spousal consent and qualified joint and survivor annuity ('QJSA') rules to distributions." (Baker & Daniels)

Are Low-Wage Workers Destined for Low Income at Retirement?
Excerpt: "This brief assesses whether boomers with low earnings between ages 22 and 62 are destined for low income at age 67. We find that nearly two-thirds of this group will end up with low income at retirement, but more than one-third will manage to defy the odds and escape being among the lowest-income older Americans." (The Urban Institute)

The New Intersection on the Road to Retirement: Public Pensions, Economics, Perceptions, Politics, and Interest Groups
Excerpt: "State and local pensions have been a cost-effective way to ensure that those retiring from public service will have adequate retirement income after a lifetime of work. Despite their strengths, opposition to public pensions has emerged in recent years. This chapter examines the economics of public pensions and outlines the role of public perceptions, politics, and interest groups in the public pension debate. " (Pension Research Council; registration required to download fulltext of paper)

Pension Fund Activism: The Double-Edged Sword
Excerpt: "Many public pension funds engage in activism by using their pooled ownership of stock to affect changes in the corporations they own. The merits of activism depend on: (1) the conflicts of interest between corporate managers and shareholders, and (2) the conflicts of interest between portfolio managers and investors. These conflicts lead to two types of activism: shareholder activism and social activism. Portfolio managers can use their position to monitor conflicts that might arise between managers and shareholders (shareholder activism), but they can also abuse their position by pursuing actions that advance their own moral values or political interests at the expense of investors (social activism)." (Pension Research Council; registration required to download fulltext of paper)

Redefining Traditional Plans: Variations and Developments in Public Employee Retirement Plan Design
Excerpt: "Retiree benefits for U.S. employees of state and local governments have been traditionally been paid via defined benefit (DB) plans, but this arrangement has been neither monolithic nor static. This article provides examples of variants on the traditional DB model and presents recent developments in retirement benefits for public employees, focusing on the incorporation of DC plan elements into or alongside DB plan structures." (Pension Research Council; registration required to download fulltext of paper)

Reforms to an Individual Account Pension System and their Effects on Work and Contribution Decisions: The Case of Chile
Excerpt: "This study evaluates the effect of Chile's pension system rules and regulations on individuals' contribution and working decisions. In 1980 Chile was the first country to switch from a pay-as-you-go system to a privatized system based on individual investment accounts; then it has since been a model for pension reforms in many other Latin American countries." (Pension Research Council; registration required to download fulltext of paper)

Rescue Plan Draft Expands Retirement References
Excerpt: "In a revision posted Thursday on the Senate Banking Committee site , Sen. Christopher Dodd, D-Conn., chairman of the committee, adds a section stating that 'nothing in this Act prevents the [Treasury] Secretary from protecting the retirement security of Americans by purchasing troubled assets that a financial institution holds or manages on behalf of a cash or deferred arrangement . . . ." (The National Underwriter Company; free registration or paid subscription required)

Reducing Retirement Investment and Income Risk
Excerpt: "[T]he proper asset allocation depends on a number of factors, including the investor's tolerance for risk, spending and bequest goals, life expectancy, etc. However, when longevity risk becomes the primary concern, it may be that a more conservative portfolio is in order during the early retirement years, in order to get through the riskiest period. Later, it may be safe to move to a more aggressive portfolio." (Financial Planning)

Wall Street Lays Egg With Its Nest Eggs: Retirement Lessons of Dumb Moves by 'Smart Money'
Excerpt: "In the past week, Merrill Lynch's Web site still displayed an article, 'Understanding Your Entire Portfolio,' full of sensible advice. If shares in your employer's stock are 'a significant portion of your investments,' it said, 'you'll want to consider the potential impact of a falling stock price on your portfolio.' Physician, heal thyself. At the end of 2006, Merrill employees had 27% of all their retirement money in Merrill shares. In 2007, Merrill employees lost $669.8 million on their holdings of Merrill, and so far this year, probably at least $400 million." (The Wall Street Journal)

Comparison of Original Paulson Bailout to Compromise Proposal
Excerpt: "House Republican Whip Roy Blunt's office provides this side-by-side comparison of Treasury Secretary Henry Paulson's original Wall Street bailout proposal with the final compromise agreed to over the weekend by congressional and Treasury negotiators . . . ." (The Examiner)

Market Turbulence Has Implications for ERISA Fiduciaries
Excerpt: "The recent turmoil in the financial markets, while troubling for individual investors, also has potentially significant implications for ERISA fiduciaries. Individuals and committees who have investment authority over plan assets should reevaluate their portfolios in light of these developments. This is true not only for fiduciaries of qualified retirement plans, but also welfare plan fiduciaries." (Spencer Fane)

Bailout Bill Gives Treasury Wide Leeway in Buying Bad Assets
Excerpt: "[S]ection 103 of the bill (page 12) says the Treasury, in exercising its authority, can consider 'the need to ensure stability for U.S. public instrumentalities, such as counties and cities, that may have suffered significant increased costs or losses in the current market turmoil.' The Treasury also is permitted to protect 'the retirement security of Americans by purchasing troubled assets held by or on behalf of an eligible retirement plan,' obviously including pension funds." (Los Angeles Times)

ICI Answers Questions on Money Market Funds
Excerpt: "Following the U.S. Department of the Treasury's announcement on September 19 of an emergency, temporary guaranty program to protect shareholders of money market mutual funds from losses if their funds are unable to maintain a $1.00 net asset value, the Investment Company Institute (ICI) is addressing frequently asked questions about money market funds. See]" (; free registration required)

Lifestyle/Lifecycle Funds Best Strategy for Capturing Rollovers
Excerpt: "A new Cerulli report suggests that between 2008 and 2013, rollovers from 401(k), 403(b), and 457 plans will account for nearly $1.9 trillion of asset flows into traditional IRAs, which will increase to $6.1 trillion by 2013. According to the report, 'IRA Rollover and Retention: Strategies and Positioning,' real success in capturing these assets will hinge on the right mix of advice." (; free registration required)

Cashed-Out Participant Gets Go-Ahead in Company Stock Drop Case
Excerpt: "A federal judge in Massachusetts cleared the way for a participant invested in a company stock fund to pursue a fiduciary breach suit. The judge gave the OK, despite the fact that the plaintiff had cashed out of the fund more than two years before the employer disclosed its stock option backdating practices. U.S. District Judge Nancy Gertner of the U.S. District Court for the District of Massachusetts ruled that Soufiane Bendaoud had legal standing to sue over the Analog Devices Inc. (ADI) company stock fund under the Employee Retirement Income Security Act (ERISA)." (planadvisor)

Shareholder Suits Face Uncertainty, Higher Hurdles
Excerpt: "[T]he FBI is conducting preliminary investigations of AIG, Lehman, Fannie Mae and Freddie Mac, according to news reports last week. In addition to dozens of shareholder lawsuits -- both derivative actions and class actions -- all four companies face related suits filed on behalf of their employees who had retirement plans tied up in company stock. Those suits are filed under the Employee Retirement Income Security Act of 1974 (ERISA)." (

Automatic Enrollment in 401(k) Doesn't Take Care of Everything
Excerpt: "Don't confuse your employer's default contribution rate with a magic number guaranteed to provide you with enough money to live on in retirement. In fact, [experts] worry that for all the good automatic enrollment does, it also may create a false sense of security and discourage workers from putting more away. Financial planners often encourage people in their 20s to save at least 10 percent of gross income for retirement, including employer match money, and 15 percent or more if they got a later start." (Chicago Tribune)

[Opinion] Will the 401(k) Allow for Retirement?
Excerpt: "The trend away from defined-benefit plans toward defined-contribution plans makes it harder for workers to have adequate retirement income. And even with default enrollment and other provisions in the pension-reform act, it's likely that many workers will not be able to stop working." (Dallas Salisbury via Human Resource Executive Online)

[Opinion] On Backdating, ERISA, and the Possibly Unintended Consequences of the Diamond Hypothetical
Excerpt: "If you have an interest in both ERISA and in well written, logical judicial opinions, I can't recommend highly enough this opinion, by Judge Gertner of the United States District Court for Massachusetts, in Bendaoud v. Hodgson, deciding a number of issues at the motion to dismiss stage." (Stephen Rosenberg of The McCormack Firm, LLC)

[Opinion] Save our retirement funds now and create a more secure system of investments for retirement accounts
Excerpt: "The Treasury-Federal Reserve proposal should give not only investment banks but also retirees and those close to retirement the option to clear the junk -- bad mortgage-based securities and their derivatives -- out of their 401(k) accounts and invest in government-guaranteed bonds." (Teresa Ghilarducci via The New York Times; free registration required)

[Opinion] In Financial Food Chains, Little Guys Can't Win
Excerpt: "The people whose conduct got us into this catastrophe have not only taken our money, hopes and peace of mind, but they apparently also want a trillion or so more dollars to put into their Wall Street Buddy System Fund. This may be the most dangerous attack on the law in my lifetime. What anarchists even dared consider this plan? Thank heaven that minds more devoted to the Constitution on Capitol Hill are questioning this shocking request." (Ben Stein via The New York Times; free registration required)

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Register Now for the 2008 SPARK Forum, Nov. 2-4 at The Breakers

The 2008 SPARK Forum is the retirement plan industry’s premier event for executives, managers, and professionals to increase their knowledge, network with peers and enjoy golf, fishing and other events at the beautiful Breakers Resort in Palm Beach, Florida. In more than a dozen sessions, you’ll gain insights into the latest business, marketing and sales strategies, market trends, and legal issues. Special sessions have been planned for TPAs and financial advisors. You’ll also hear from TV finance commentator and author Terry Savage, and learn valuable selling techniques from author Paul Karasik.

(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

[Official Guidance] Text of Rev. Proc. 2008-61: Areas as to which IRS Will Not Issue Rulings or Determination Letters Pertaining to Section 409A (PDF)
4 pages. Excerpt: "This revenue procedure modifies and amplifies Rev. Proc. 2008-3, 2008-1 I.R.B. 110, with respect to areas in which rulings and determination letters will not be issued as to the tax consequences of arrangements described in § 409A of the Internal Revenue Code. As described below, this revenue procedure does not provide for the Service to issue rulings on the application of § 409A to nonqualified deferred compensation plans, but does provide for the issuance of rulings in other areas with respect to compensation plans that may covered by § 409A." (Internal Revenue Service)

[Guidance Overview] Hewitt Federal Legislation Quick Guide Updated September 24, 2008, on Human Resources & Employment Law (PDF)
5 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding human resources and employment law. (Hewitt Associates)

[Guidance Overview] Section 409A—All Employers Must Act By December 31
Excerpt: "This alert briefly outlines steps employers should consider to come into full compliance with Section 409A, and briefly outlines a final opportunity to take advantage of a transition rule under Section 409A. Even though the deadline for full compliance is the end of 2008, good-faith compliance with Section 409A has been required since 2005, and continues to be required." (O'Melveny & Myers LLP)

Rescue Plan May Shut Out Non-Qualified Plans
Excerpt: "The new version states that 'nothing in this act prevents the Secretary from protecting the retirement security of Americans by purchasing troubled assets held by or on behalf of an eligible retirement plan other than a plan described in section 409A of the Internal Revenue Code of 1986.'" (The National Underwriter Company; free registration or paid subscription required)

Emergency Economic Stabilization Act of 2008: Executive Compensation Provisions
Excerpt: "The House Financial Services Committee has released a draft of the proposed rescue legislation. The bill is now entitled the 'Emergency Economic Stabilization Act of 2008' and contains much more lengthy executive compensation provisions than previously contemplated versions." (Attorney B. Janell Grenier via

IRS Extends Delay of 409A Rulings
Excerpt: "The Internal Revenue Service has decided to extend its temporary halt on rulings and determination letters regarding the tax consequences of nonqualified deferred compensation arrangements described in § 409A of the Internal Revenue Code." (; free registration required)

The Age Discrimination in Employment Act: A Legal Overview (PDF)
19 pages. Excerpt: "This report provides an overview of the Age Discrimination in Employment Act (ADEA) and discusses current legal and legislative developments. . . . In addition, the Supreme Court recently handed down a series of decisions involving the ADEA during its 2007-2008 term, including Sprint/United Management Co. v. Mendelsohn; Federal Express Corp. v. Holowecki; Gomez-Perez v. Potter; Kentucky Retirement Systems v. Equal Employment Opportunity Commission; and Meacham v. Knolls Atomic Power Laboratory." (U.S. Congressional Research Service)

Partner Benefits for G.ay Federal Workers Make Sense
Excerpt: "When U.S. Sen. Susan Collins, a Maine Republican, pointed out that providing benefits to the partners of g.ay employees would be a smart way for Uncle Sam to attract and keep talented workers, she explained why she's sure: The strategy is a success in her home state. 'The state of Maine has already worked through (possible stumbling blocks). And has a lot of safeguards built in,' Collins said at the first congressional hearing on legislation to give g.ay partnered federal workers the same benefits as married heterose.xuals. These include health care, retirement benefits, relocation expenses and coverage under the Family and Medical Leave Act." (The Detroit News)

Few Employees Are Benefits Experts Despite Importance of Worker Buy-In
Excerpt: "A new survey of human resources officials and benefits managers finds, while there is widespread agreement that it is important employees think their workplace benefits package is a good deal, comparatively few workers actually hold that view. The Colonial Life & Accident Insurance Company poll of 650 HR/benefits executives found 90% knew employee buy-in was important. However, a Colonial news release said, 21% thought workers at their companies had a good understanding of their benefits package while nearly 5% of respondents thought their employees knew nothing at all about their benefits." (; free registration required)

Newly Posted Events
(Post Yours!)

A Practical Approach to Developing a Wellness Program
Nationwide on December 10, 2008
presented by Lorman Education Services

Automatic Enrollment for 401(k) and 403(b) Plans under the Pension Protection Act of 2006—Pros & Cons
in Illinois on October 23, 2008
presented by WEB - Chicago West

Creating and Maintaining a Domestic Partner Benefits Policy: New Laws and Recent Trends
Nationwide on December 2, 2008
presented by Lorman Education Services

Determination Letter Applications: A Practical Approach
Nationwide on October 8, 2008
presented by Qualified Pension Consulting, Inc.

Obama, McCain Health Plans Debated By Leading Economists
Nationwide on September 30, 2008
presented by Health Affairs

Workplace Wellbeing: The Path to Enhanced Productivity
Nationwide on December 3, 2008
presented by Lorman Education Services

Newly Posted Press Releases
(Post Yours!)

Credit Crisis May Dampen Pension Funds' Use of Derivatives to Hedge Risk, Watson Wyatt Says
Watson Wyatt

Presidential Candidates on Key Health Care Issues: New Side-by-Side Comparison and Video Clips
Kaiser Family Foundation

PSCA's 51st Annual Survey
Profit Sharing/401(k) Council of America (PSCA)

PBGC Director Praises Pension Transfer From Delphi To GM
Pension Benefit Guaranty Corporation (PBGC)

ERIC Testifies in Opposition to Tierney Retiree Health Legislation
ERIC (ERISA Industry Committee)

Council Recommends New, Tax-Favored Approaches To Address Decline In Retiree Health Coverage
American Benefits Council

Scott Macey of Aon Consulting Testifies at House Committee Hearing on Retiree Health Benefits Protection
Aon Consulting

ICI, SIFMA Launch IRA Research Project
Investment Company Institute

COPA Merges with ASPPA
American Society of Pension Professionals & Actuaries (ASPPA)

Presidential Debate Over Health Care Costs Highlights Need for Preventive Health Care
U.S. Preventive Medicine

Nurses, Healthcare Workers Launch Massive Drive to Inform One Million Caregivers in Key States on Obama and McCain Healthcare Plans
SEIU Healthcare

T. Rowe Price Introduces Enhanced Online Retirement Income Calculator For Those in Any Stage of Retirement Planning
T. Rowe Price

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General Counsel
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“Virtual” Defined Contribution Pension Plan Administrator
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in VA

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