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October 7, 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] Text of EBSA Amendment to ERISA Prohibited Transaction Exemption for Services Provided in Connection with Termination of Abandoned Individual Account Pension Plans (PDF)
3 pages. Excerpt: "This document amends PTE 2006–06 . . . , a prohibited transaction class exemption issued under [ERISA]. Among other things, PTE 2006–06 permits a 'qualified termination administrator' (QTA) of an individual account plan that has been abandoned by its sponsoring employer to select itself to provide services to the plan in connection with the plan's termination, and to pay itself fees for those services. In response to changes to the Internal Revenue Code of 1986 (the Code) enacted as part of the Pension Protection Act (PPA) of 2006, PTE 2006–06 is amended to require, as a condition of relief under the exemption, that benefits for a missing, designated nonspouse beneficiary be directly rolled over into an inherited individual retirement plan that fully complies with Code requirements." (Employee Benefits Security Administration, U.S. Department of Labor)

[Official Guidance] Text of Amendment to Final EBSA Regs: Safe Harbor for Distributions from Terminated Retirement Plans, Including Orphan Plans (PDF)
9 pages. Excerpt: "The [DOL] is amending these regulations to reflect changes enacted as part of the Pension Protection Act of 2006 to the Internal Revenue Code of 1986 . . . under which a distribution of a deceased plan participant's benefit from an eligible retirement plan may be directly transferred to an individual retirement plan established on behalf of the designated nonspouse beneficiary of such participant. Specifically, the amended regulations require as a condition of relief under the fiduciary safe harbor that benefits for a missing, designated nonspouse beneficiary be directly rolled over to an individual retirement plan that fully complies with Code requirements. . . . This final rule is effective November 6, 2008." (Employee Benefits Security Administration, U.S. Department of Labor)

[Official Guidance] Text of Final EBSA Regs: Statutory Exemption for Cross-Trading of Securities by ERISA Plan Fiduciaries (PDF)
10 pages. Excerpt: "This [regulation] implements the content requirements for the written cross-trading policies and procedures required under section 408(b)(19)(H) of [ERISA]. Section 611(g) of the Pension Protection Act of 2006 . . . amended section 408(b) of ERISA by adding a new subsection (19) that exempts the purchase and sale of a security between a plan and any other account managed by the same investment manager if certain conditions are satisfied. Among other requirements, section 408(b)(19)(H) stipulates that the investment manager must adopt, and effect cross-trades in accordance with, written cross-trading policies and procedures that are fair and equitable to all accounts participating in the crosstrading program. . . . [The DOL] has determined to make the final regulation effective 120 days after [October 7, 2008]." (Employee Benefits Security Administration, U.S. Department of Labor)

[Official Guidance] Text of Final EBSA Regs: Selection of Annuity Providers; Safe Harbor for Individual Account Plans (PDF)
4 pages. Excerpt: "[T]he substance of the final rule is very similar to the Department's proposed rule. The Department, however, has made changes to the proposed rule that clarify and simplify the safe harbor conditions, consistent with the suggestions of the commenters. . . . This final regulation will be effective 60 days after [October 7, 2008]." (Employee Benefits Security Administration, U.S. Department of Labor)

[Guidance Overview] Plan Expenses Attributable to Separated Vested Participants
Excerpt: "[T]he DOL now permits employers to allocate the administrative expenses associated with . . . former employee accounts to such accounts . . . . However, if employers want to take advantage of this rule, their plan documents will have to be amended accordingly. In addition, employers should make sure that the Summary Plan Description and any communication documents sent to participants and former participants are updated to reflect the use of the rule." (Attorney B. Janell Grenier via

[Guidance Overview] Compliance with Notices for Participants (PDF)
4 pages. Excerpt: "Several defined contribution plan designs and provisions require plan sponsors to provide annual notices to participants. As the 2008 plan year is nearing its end, it is important to look ahead at the notices that may need to be provided before the start of the 2009 plan year. This publication provides a summary of those notice requirements, including timing, contents, method of delivery . . . ." (Prudential Retirement)

[Guidance Overview] Disclosure of Service Provider Compensation: Final 408(b)(2) Regulation Will be Issued Soon (PDF)
2 pages. Excerpt: "Whatever form the final regulation takes, we . . . know that every service agreement for every broker-dealer, RIA, recordkeeper, third party administrator and other covered service providers will need to be amended to comply with the regulation before the effective date." (Reish Luftman Reicher & Cohen)

[Guidance Overview] IRS 2008-2009 Priorities for Issuing Regulations and Other Guidance Affecting 401(k) Plans
Excerpt: "EBIA Comment: This Priority Guidance Plan covers the twelve-month period ending June 30, 2009, during which the Treasury Department and the IRS appear to have an ambitious plan for issuing 401(k) guidance. Included in this list are a number of anticipated final regulations and other guidance interpreting PPA provisions (e.g., the regulations on ACAs and employer security diversification rights). We were also pleased to see that the list includes much needed revisions to the model 402(f) notice." (Employee Benefits Institute of America)

DOL Issues Final Rules on Missing Benefits and Other PPA Provisions
Excerpt: "The U.S. Department of Labor (DoL) has announced final rules under the Pension Protection Act of 2006 (PPA) relating to distribution of 401(k) benefits for missing nonspouse beneficiaries in terminated plans, selection of annuity providers, and cross trading of securities by plans governed by the Employee Retirement Income Security Act (ERISA)." (; free registration required)

Committee Hearing: 'The Impact of the Financial Crisis on Workers' Retirement Security'
Excerpt: "This hearing will examine how the current financial crisis is impacting pension funds and workers' directed retirement accounts, such as 401(k) plans. According to a recent poll by the Associated Press, more than half of all Americans are worried that the ongoing financial crisis will force them to postpone retirement. [The hearing is scheduled to begin at 1 p.m. EDT today.]" (U.S. House of Representatives Education and Labor Committee)

What Is This 'Credit Crisis' All About and How Does All of This Affect My 401(k) Investments?
Excerpt: "We feel that it is important to help plan sponsors and their participants sort through all of the information out there so that they can decide if they need to react to, or if they can take advantage of what is happening in the financial markets. We understand how stressful these times can be and we hope that this information is useful to you." (MJM401k)

Rescue Package Includes IRA Charity-Rollover Provision
Excerpt: "The massive financial rescue package signed into law last week, HR 1424, includes a provision to continue allowing tax-free gifts from IRAs to charities. The bill would permit such IRA distributions through the end of 2009 for certain individuals. The tax code provision allowing the contributions expired at the end of 2007." (Investment News; free registration required)

Courts Divide on Fiduciary Status of 401(k) Plan Service Providers
Excerpt: "As the 401(k) fee lawsuits progress, the federal district courts continue to grapple with the issue of whether the defendant service provider qualifies as an ERISA fiduciary. The courts were particularly busy last week, issuing two decisions on this point. In Charters v. John Hancock Life Insurance Company, the court held that John Hancock qualifies [as] an ERISA fiduciary and allowed the case to proceed on the issue of whether John Hancock breached its fiduciary duties. In contrast, in Columbia Air Services, Inc. v. Fidelity Management Trust Company, the court granted Fidelity's motion to dismiss, concluding that the plaintiff failed to allege facts sufficient to demonstrate that Fidelity may qualify as an ERISA fiduciary. Copies of the Charters and Columbia Air decisions, as well as our summary of the decisions, are [linked from the target page]." (Groom Law Group)

New York City's Municipal Labor Unions Warn of a Fight If Pensions Are Trimmed
Excerpt: "[I]f the city's budget situation deteriorates, as many experts predict, and if the mayor starts taking tougher actions -- like laying off workers or pushing for less generous pensions for future employees -- then, labor leaders warn, they will put up a fight." (The New York Times; free registration required)

One in Five Baby Boomers Cuts Retirement Saving
Excerpt: "One in five middle-aged workers stopped contributing to their retirement plans in the last year, and one in three has considered delaying retirement, according to a new survey by AARP, an advocacy group for older Americans. The numbers, from an AARP survey conducted last month, provide the latest evidence that the deteriorating economy and stock market are creating a less-than-golden outlook for the huge tide of baby-boom Americans surging into retirement age. This demographic, born between 1946 and 1964, numbers around 78 million." (The Wall Street Journal)

Plan Now to Fix Your 401(k)
Excerpt: "Save more. You can't control what the stock market will give you, but the single biggest factor in the size of your nest egg is the amount you save. Odds are good that you'll barely notice it if you contribute 1 percentage point more of your salary to your 401(k) plan." (USA TODAY)

Florida Retirement System Sends 'Comfort' Letter to Participants
Excerpt: "As of July 1, 2008, the plan has more assets than currently needed to pay future benefit retirements by about 106%, or $6.9 Billion. Under SBA's stewardship, FRS is one of only a handful of public pension systems to maintain full funding. During these financial times, Ms. South wants members to understand that under Florida law, accrued FRS pension plan benefits are guaranteed, regardless of investment performance. (The foregoing statement is true for virtually every municipal plan in Florida, including all fire and police plans that participate in Chapters 175 and 185.) And what is Ms. South's advice to those unfortunate souls who opted out of the FRS Pension Plan and chose the Investment Plan, which is a defined contribution arrangement? '[M]ake sure you are putting money away for your retirement by investing in a well-diversified portfolio. ... Members should consult their personal financial advisers for guidance.' In other words, you're on your own. Oh, well." (Cypen & Cypen)

Six Ways to Quash Employees' 401(k) Anxieties Over the Financial Crisis
Excerpt: "Lynn Unsworth, regional manager of Capital Associated Industries, offers a few tips to help employers ease workers' concerns about their 401(k) balances in light of the recent mood swings of the stock market." (Employee Benefit News; free registration required)

Congressional Measure Reforms Alaska and Hawaii Federal Worker Retirement
Excerpt: "A bill approved by the U.S. Senate would reform the way retirement benefits for federal employees based in Hawaii, Alaska, and U.S. territories are determined. An Associated Press report said the measure would do away with non-foreign cost of living allowances and phase in locality pay over a three-year period. According to the report, because the cost of living payments are not taxable, they are not considered to be included in a worker's base pay for retirement purposes, while locality pay is taxed and is factored into the retirement benefit determination." (; free registration required)

UBS Finds Pension Funding Ratios Take a Dive
Excerpt: "UBS Global Asset Management announced that its US Pension Fund Fitness Tracker, a quarterly estimate of the overall health of a typical U.S. defined benefit pension plan, shows pension funding ratios fell seven percentage points in the third quarter of 2008." (; free registration required)

Congressional Leaders Urge Treasury to Adopt Small Plan Funding Relief
Excerpt: "The leaders of the House and Senate tax writing committees urged Treasury Secretary Henry M. Paulson, Jr., in a September 23, 2008 letter, to provide guidance on the application of the funding restrictions under Code Sec. 436 to small, single-employer defined benefit plans that use an 'end of year' valuation date." (Wolters Kluwer)

[Opinion] American Benefits Council Comment Letter to DOL/EBSA on Investment Advice Proposed Regulations (PDF)
7 pages. Excerpt: "The proposed regulations and their companion proposed class exemption represent very significant steps towards enhancing and expanding access to professional, high-quality investment advice for IRA owners and participants in individual account plans that permit participant investment direction . . . . The Council believes that, if finalized, these proposals have the potential to greatly improve retirement savings for millions of working Americans, and we urge EBSA to move expeditiously in finalizing the proposed rules. We provide . . . a number of suggestions for improving and clarifying the proposals." (American Benefits Council)

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview] Final Form 990 for Tax-Exempt Organizations Requires Extensive Reporting of Executive Compensation (PDF)
6 pages. Excerpt: "The major changes to the Form 990 include a new summary page, a new governance section, increased details on executive compensation and the organization's relationships with insiders and other organizations, along with new reporting for hospitals, tax-exempt bonds, noncash contributions, and foreign activities. This For Your Information will focus on the executive compensation reporting requirements." (Buck Consultants)

[Guidance Overview] Employee Benefits and Executive Compensation Issues Connected to Emergency Economic Stabilization Act of 2008
Excerpt: "This alert focuses on the limits imposed on executive compensation for troubled financial institutions that participate in the TARP." (Ballard Spahr Andrews & Ingersoll, LLP)

[Guidance Overview] Q&A on 409A: Compliance Deadline for Deferred Compensation Plans and Agreements
Excerpt: "Time is running out on employers who have yet to ascertain whether the written terms of their plans and agreements providing for deferred compensation are in compliance with the requirements of 409A. A lengthy (396 pages to be exact) and complex set of 409A final regulations, issued in April 2007, will be enforced as of January 1, 2009." (Janich Law Group)

[Guidance Overview] Congress Curbs Compensation of Executives Under Financial Rescue Plan (PDF)
6 pages. Excerpt: "As part of the Emergency Economic Stabilization Act of 2008 (commonly referred to as the 'Financial Rescue Plan' or 'Bailout Bill' . . . signed into law on October 3, various limitations have been imposed on executive compensation including: New limits on tax deductibility, Prohibition of certain golden parachute payments, Enhanced 'clawback' provisions to recoup compensation, and Prohibition of incentives that involve 'unnecessary and excessive risks.'" (Frederic W. Cook & Co., Inc.)

Benefits Pricing a Leading Concern with Credit Harder to Come By
Excerpt: "With credit harder to come by and credit costs increasing, senior executives surveyed by Grant Thornton LLP ranked employee benefits as their number one pricing pressure concern. According to a press release, 55% of CFOs and senior comptrollers chose employee benefits as the pricing pressure about which they are most concerned . . . ." (; free registration required)

International Executive Pay: Current Practices and Future Trends
Excerpt: "This article compares executive pay practices in the U.S. with those employed elsewhere in the world. [It provides an overview of current practices and analyzes] whether there is likely to be a convergence of these practices. It first examines the influence of market based factors, such as evolving share ownership patterns, cross-border hiring, transnational mergers and acquisitions, and the growth of multinational enterprises, on the likelihood of convergence occurring. It concludes that these factors point in the direction of increasing convergence in executive pay." (Social Science Research Network)

Newly Posted Events
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2008 Legislative Update
in California on October 30, 2008
presented by International Society of Certified Employee Benefit Specialists, Northern California Chapter

Newly Posted Press Releases
(Post Yours!)

U.S. Department Of Labor Issues Final Rules Under Pension Protection Act On Missing Pension Beneficiaries, Annuities And Cross Trading
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Accounting Rules Help Pension Plans, But Losses Continue, According To Mercer

Fiduciary Prudence Is Key In Times Of Market Extremes
OneFiduciary Group, LLC

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401(k) Administrator
for Redwood Administrators, Inc.
in NJ

Retirement Benefits Specialist
for HR Placement Group
in MA

Benefits and Accounting Manager
for PricewaterhouseCoopers LLP
in IL, NY

Plan Document Specialist
for Redwood Administrators, Inc.
in NJ

Retirement Plan Benefits Professional
for Huntington National Bank
in IN, OH, PA

Retirement Plans Analyst
for Saks Fifth Avenue
in NY

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