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| October 8, 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 Proposed IRS Regs: Notice to Participant of Consequences of Failure to Elect to Defer Receipt of Retirement Plan Benefit; Expansion of Periods for Other Notices and Elections (PDF)
18 pages. Excerpt: "These proposed regulations would provide that the notice required by section 411(a)(11) advising a participant of the right, if any, to defer receipt of a distribution must also inform the participant of the consequences of failing to defer such receipt. The proposed regulations would also provide guidance on the relevant information that must be provided to a participant in order to satisfy the requirement that the participant be notified of the consequences of failing to defer. . . . These regulations are proposed to become effective for notices provided (and election periods beginning) on or after the first day of the first plan year beginning on or after January 1, 2010. However, in no event will the regulations become effective for notices provided (and election periods beginning) earlier than the first day of the first plan year beginning 90 days after publication of final regulations in the Federal Register." (Internal Revenue Service)
[Official Guidance] Text of IRS Notice 2008-93: Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)
4 pages. Excerpt: "This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007." (Internal Revenue Service)
[Guidance Overview] Analysis of Oral Argument Transcript in ERISA DuPont Case
Excerpt: "The Supreme Court heard oral argument in the case of Kennedy v. Plan Administrator for DuPont Savings and Investment Plan this afternoon. The case concerns whether a divorcing spouse may waive her rights to spousal pensions benefits without going through the qualified domestic relations order (QDRO) process set out in the exceptions to ERISA's anti-alienation rule. What follows is analysis of that oral argument transcript based on my reading of the oral argument transcript in DuPont . . . ." (Workplace Prof Blog)
[Guidance Overview] Proposed Regulations Regarding 401(k) Plan Disclosures (PDF)
2 pages. Excerpt: "By beginning the review process now, employers and plan administrators will be able to react quickly when final DOL disclosure regulations are issued. We recommend the following steps: Review the time periods for distributing currently required notices. Carefully review the proposed DOL regulations regarding plan fee disclosures. Create forms and procedures for complying with the new disclosure requirements. Discuss the foregoing points with third-party administrators to address their compliance with the proposed disclosure requirements." (Porter Wright Morris & Arthur LLP)
Congressional Hearing Considers Market Drop's Impact on Retirement Security
Excerpt: "Aptly titled 'The Impact of the Financial Crisis on Workers' Retirement Security', the hearing, convened by the U.S. House Committee on Education and Labor, included testimony from a number of experts." (PLANSPONSOR.com)
Congressional Budget Office Estimates Retirement Plan Losses of $1 Trillion, or 10 Percent of Assets, Over Four Quarters
Excerpt: "It notes that Federal Reserve data suggest the decline in the value of financial assets cost pension funds roughly $1 trillion -- almost 10 percent of their assets -- from the second quarter of 2007 to the second quarter of 2008, the latest period for which data are available. Given the significant further drop in asset prices since the end of the second quarter, 'it is plausible that the cumulative decline in pension assets over the past year and a half amounts to about $2 trillion,' says CBO director Peter Orszag in a blog detailing his Tuesday testimony before the House Committee on Education and Labor." (CFO.com)
Retirement Security or Insecurity? The Experience of Workers Aged 45 and Older (PDF)
22 pages. Excerpt: "There are several implications of this study: (1) Employer-provided pension coverage needs to be greatly increased; (2) There is considerable distress among vulnerable elements of the population suggesting that the most at-risk individuals may be the hardest hit; (3) Middle-aged workers (45-49) need to make saving for their retirement a priority; and (4) Most workers are relying on working longer to compensate for retirement nest-egg shortfalls." (AARP)
Advisers Set to Benefit from the Transformation of 403(b) Plans
Excerpt: "Prior to the new regulations this employer segment did not really need an adviser, but as 403(b) plans are being made to look more like 401(k)s a new market is developing for retirement plan experts. Why are the regulations making the products more 401(k)-like? Simply put, 403(b)s haven't performed as well as their counterparts." (Employee Benefit Adviser; free registration required)
The Coverage of Employer-Provided Pensions
Excerpt: "The coverage of employer-provided pension plans has never been much above 50 percent, however, and there are remarkable disparities of coverage, with coverage rates for better paid, older, better educated, and white Americans much higher than those of other groups. Coverage rates are also low for part-time workers and employees of small firms." (AARP)
Retirement Accounts Have Lost $2 Trillion - So Far
Excerpt: "Americans' retirement plans have lost as much as $2 trillion in the past 15 months -- about 20 percent of their value -- Congress' top budget analyst estimated Tuesday as lawmakers began investigating how turmoil in the financial industry is whittling away workers' nest eggs." (AP via The New York Times; free registration required)
U.S. Supreme Court Denies Cash Balance Challenge Review
Excerpt: "U.S. Supreme Court justices have turned aside a request to rule whether cash balance plans are age biased as the high court refused to review a 6th U.S. Circuit Court of Appeals decision. The lower court ruling in Drutis v. Quebecor World (USA) Inc. held that any difference in benefits that employees of different ages received under the cash balance plan was 'merely the result of the time value of money.'" (PLANSPONSOR.com; free registration required)
U.S. Supreme Court Denies Hearing Promised Benefits Suit by Former Quaker Oats Co. Employees
Excerpt: "The U.S. Supreme Court has denied a request to hear the case of two former Quaker Oats Co. employees fighting to receive additional pension benefits they say were promised by Quaker. In making its October 6 decision, the high court let stand a ruling by the 7th U.S. Circuit Court of Appeals that representations made to the employees were innocent mistakes and that anything told to them orally did not carry the same weight as what the court said were clear plan documents . . . ." (PLANSPONSOR.com; free registration required)
Accounting Rules Help Pension Plans, But Losses Continue, According to Mercer
Excerpt: "The upheaval on Wall Street that began a few weeks ago is the latest chapter in the financial market turmoil that began in the middle of last year. Since the end of 2007, the funded status of pension plans sponsored by large US companies has fallen by almost $100 billion. However, during the third quarter, despite the falls in global equity markets, the financial position improved, due to the increase in 'high-quality' corporate bond yields, according to analysis conducted by Mercer." (Business Wire via MarketWatch)
[Opinion] EBRI Testimony: The Impact of the Financial Crisis on Workers' Retirement Security (PDF)
6 pages. Excerpt: "The impact of the current financial crisis on defined benefit (pension) plans is impossible to quantify, but it is obvious that a marked reduction in funding ratios and/or increase in volatility may make continued sponsorship of these plans less attractive under some forms of pension accounting modifications. Moreover, the Pension Protection Act of 2006 (PPA) has established specific restrictions with respect to freezing of accruals, plan amendments and lump-sum distributions as a function of funding ratios." (Employee Benefit Research Institute)
[Opinion] CBO Testimony: The Effects of Recent Turmoil in Financial Markets on Retirement Security (PDF)
10 pages. Excerpt: "The turmoil in financial markets has affected many aspects of the economy, including pensions. The most direct effect on pensions is through the prices of financial assets such as corporate equities and bonds." (U.S. Congressional Budget Office)
[Opinion] American Benefits Council Statement for Hearing on Impact of Financial Crisis on Workers' Retirement Security (PDF)
4 pages. Excerpt: "Regardless of the type of plan (or plans) an employer offers to its workforce, there is a dimension of employer plan sponsorship that deserves particular mention as it brings tremendous value to plan participants in financial circumstances like those we are experiencing. That is the simple fact of employer plan sponsorship and the fiduciary oversight that accompanies this employer role. Retirement plan participants have a fiduciary whose legal obligation it is to act solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits." (American Benefits Council)
[Opinion] Breach of Fiduciary Duty Claims: Tagging a Party as 'Fiduciary' Is Harder Than It Looks
Excerpt: "I talked about a case last week that addressed the damages aspect of making out a breach of fiduciary duty claim related to stock drop type issues, and pointed out the broad, ambiguous and easy to manipulate nature of a damages claim in that scenario. Another case last week, also out of the United States District Court for the District of Massachusetts, points out that other aspects of making out a breach of fiduciary duty case on a class action basis based on the administration of 401(k) plans provide a real check on such cases. The issue in that case? Namely that not everyone involved in operating a 401(k) plan is a fiduciary, and that while deep pockets involved in allegedly inappropriate behavior with regard to such a plan may make tempting targets, they cannot be sued successfully for breach of fiduciary duty if the prerequisite of having acted as a fiduciary is not satisfied." (Stephen Rosenberg of The McCormack Firm, LLC)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview] Do Employers Need to Provide Time off to Vote?
Excerpt: "There is no federal law that requires an employer to give an employee time off, paid or unpaid, to vote. However, most states DO have laws that require employers to provide their employees with time off to vote on Election Day." (Snell & Wilmer LLP)
[Guidance Overview] Financial Rescue Legislation - Employee Benefits and Executive Compensation Provisions (PDF)
4 pages. Excerpt: "As enacted, the legislation contains: Employee benefit and executive compensation provisions of general applicability, as well as Constraints on executive compensation and corporate governance limited to financial institutions that participate in the Treasury program for troubled assets." (Sutherland)
Three Perks That Work in Lieu of Raises
Excerpt: "[W]hile pinching pennies is good for the wallet, it's not always good for employee morale. That's why many entrepreneurs are choosing to offer perks and benefits, in lieu of raises, that may not cost a lot of money but are worth more to employees than the standard 3.8% pay raise." (Entrepreneur.com via TheStreet.com)
Corporate America's Employment Law Concerns
Excerpt: "The Association of Corporate Counsel and the Jackson Lewis law firm have released the results of their annual In-House Counsel Workplace survey. According to the press release, employment issues are a major concern to companies. And among those issues are the changes employers see coming in the next few years. A majority of respondents believed that who becomes our next president will affect the labor and employment laws, but a sizeable minority did not expect that to have an impact." (Workplace Prof Blog)
Leaving Employment by the Federal Government Before Retirement? What Happens To Your Benefits?
Excerpt: "What happens to Your Benefits if you leave before you retire? As many of us periodically think of leaving federal service for various reasons (the grass is greener or the boss from Hell are common reasons) this information is important and can help us make the right decision when or if the time comes." (FedSmith Inc.)
Survey Finds Organizations Are Realizing the Benefits of a Telecommuting Workforce
Excerpt: "The CompTIA study of 212 IT and other professionals in a range of industries shows that the benefits of telecommuting to organizations include improved employee productivity (67%), cost savings (59%), access to more qualified staff (39%), employee retention (37%), and improved employee health (25%)." (PLANSPONSOR.com; free registration required)
IRS Expands Areas Collateral to 409A Arrangements in Which Rulings May Be Issued
Excerpt: "Although the IRS will continue not to issue rulings or determination letters on the income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan, as described in Code Sec. 409A , the IRS will generally issue rulings on the application of certain other tax provisions to taxpayers who participate in those plans." (Wolters Kluwer)
Newly Posted Events
Automatic Enrollment Issues: What You Need to Know
Nationwide on November 6, 2008
presented by ASPPA (American Society of Pension Professionals & Actuaries)
Benefits Conference of the South
in Georgia on January 15, 2009
presented by ASPPA & IRS
Newly Posted Press Releases
Employer-Sponsored Retirement System Designed To Weather Economic Challenges, Council Says
American Benefits Council
U.S. Chamber Study Finds Medical Benefits Consume Largest Share of Employer Costs
U.S. Chamber of Commerce
Trust Builders Introduces New Retirement Distribution Model
Trust Builders, Inc.
Newly Posted or Renewed Job Openings
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TPA Relationship Manager - Central Region
for Transamerica Retirement Services
in IL
Benefits Specialist
for Chugach Alaska Corporation
in VA
Retirement Plan Sales
for BOK Financial
in AZ
Handy Links:
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- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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