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October 15, 2008

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

Today's sponsor is SunGard

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[Guidance Overview] Reviewing the Issues Market Turmoil Presents for Sponsors of Pension Plans
Excerpt: "During 2008, we have seen what for most of us is unprecedented turmoil in the financial markets both with respect to financial assets in virtually all asset classes and with respect to the underlying interest rates on fixed income investments. This volatility has left nothing untouched, from individuals' retirement accounts to corporate pension plans. In this article, we explore some of the effects of this turmoil in a PPA world. Readers will note that cash management opportunities may yet abound for many of these corporate plans." (JPMorgan Chase & Co.)

[Guidance Overview] Observations on Pension Cash Flow in a Cash-Tight World
Excerpt: "How would you describe your defined benefit plan? Is your company a net contributor or a net spender? If the answer is spender, or if you're not sure, this article may have some much needed answers to the questions that you should be considering. What are the implications of a cash-tight market? And, how important is your role as the project manager of all of your plan's outside providers? This article considers those important questions and more as we consider pension plan cash management in these tumultuous times." (JPMorgan Chase & Co.)

[Guidance Overview] FASB Clarifies 'Fair Value' in Inactive Markets
Excerpt: "Effective immediately, the new FASB staff position affects fair value reporting of financial assets -- including pension assets -- and expands on an earlier SEC-FASB joint statement. The guidance illustrates how a financial statement preparer might conclude that the market for a particular financial asset is not active and instead calculate the asset's fair value using a valuation model that relies on significant unobservable (nonmarket) inputs." (Mercer)

[Guidance Overview] IRS Issues Static Mortality Tables for 2009 Through 2013
Excerpt: "As a follow up to final mortality table regulations the IRS published in July, the IRS has issued Notice 2008-85 to provide the static mortality tables that many pension plans will use to calculate their minimum funding obligations for 2009 through 2013 plan years. The Notice also includes a modified 'unisex' version of the mortality tables to be used for calculating lump sum distributions during that same period." (Deloitte)

[Guidance Overview] IRS Issues Proposed Regulations on Notice of Consequences of Failing to Defer Receipt of Distribution
Excerpt: "Proposed to be effective for plan years beginning after 2009, IRS has outlined the disclosures required under IRC § 411(a)(11) to advise participants of the 'consequences of failing to defer receipt of distribution.' The requirements will expand the information now required under the Notice 2007-7 safe harbor, although inclusion by cross-reference will be allowed if certain requirements are met." (Deloitte)

[Guidance Overview] DOL Issues Final Fiduciary Safe Harbor for Annuity Purchases by Defined Contribution Plans
Excerpt: "Responding to a statutory mandate, the Department of Labor has issued new rules intended to make annuities a more appealing benefit distribution option for 401(k) and other defined contribution plans. An oft-cited obstacle to defined contribution plans offering annuity options is the DOL's 'safest annuity available' rule, which has been applied both to defined benefit and defined contribution plans. However, the Pension Protection Act . . . directed DOL to amend its guidance to clarify the 'safest annuity available' rule does not apply to defined contribution plans." (Deloitte)

[Guidance Overview] Social Security in Mexico: Employer Plans Could Plug Gaps in Future Retirement Security of Workers
Excerpt: "In 1997, Mexico established mandatory individual accounts to (eventually) replace its traditional social security program. Under the new system, private-sector workers choose an investment vehicle from funds offered by approved investment vendors. Contributions are automatically deducted from their paychecks. Meanwhile, the government simultaneously finances the old defined benefit program for current retirees and workers who were covered under the old system before 1997. When these grandfathered workers retire, they choose whether to receive benefits from the old or the new program, but analysts believe most workers will choose the more generous old program." (Watson Wyatt Worldwide)

[Guidance Overview] Roth Retirement Accounts: A Practitioner's Approach
Excerpt: "[The article] describes the factors that must be considered when choosing between a traditional IRA and a Roth IRA." (Journal of Retirement Planning via Social Science Research Network)

[Guidance Overview] Department of Labor Finalizes Regulations Under ERISA Cross-Trading Exemption (PDF)
3 pages. (Dechert LLP)

[Guidance Overview] IRS Proposed Regulations on Distribution Notices
Excerpt: "While requiring that a distribution consent notice include description of the consequences of failure to defer distribution for years beginning after December 31, 2006, PPA applies a 'reasonable attempt to comply' standard until 90 days after the issuance of regulations." (SunGard)

[Guidance Overview] IRS's Final Regulations on Mortality Tables for Funding (PDF)
2 pages. Excerpt: "To comply with PPA, the IRS has published new mortality tables. The IRS has also provided rules for the use of substitute mortality tables by certain plans. These rules do not apply to actual benefit payment calculations. For example, for lump sum payments with annuity starting dates occurring during plan years beginning on or after January 1, 2008, the 2008 Applicable Mortality Table and the applicable mortality table for each subsequent year must be used." (Prudential Retirement)

Another Bailout? PBGC Could Be Next, Expert Says
Excerpt: "Jeffrey R. Brown says the troubled Pension Benefit Guaranty Corp., which steps in when private-sector employers with under funded defined-benefit plans go bankrupt, was $14 billion short of the cash it will need to cover pensions based on the latest estimates released a year ago. But he predicts the shortfall will soar as a sour economy shutters more businesses and a plunging stock market carves into pension fund assets, with a government fix similar to this month's $700 billion Wall Street bailout as the likely solution." (

PBGC Keeping an Eye on GM
Excerpt: "General Motors Corp. is being monitored by the Pension Benefit Guaranty Corp., 'as financial reports come in,' said Jeffrey Speicher, PBGC public affairs specialist. 'We will be looking with great concern as financial reports come in,' he said. 'We aren't sending out any flares or raising any panic.' GM's pension plan was overfunded, based on its latest filings, he said. 'From our point of view, it is difficult to say what the impact [of the market turmoil] is' on the plan, he said." (Workforce Management; free registration required)

Health, Financial Incentives and Retirement in Spain
Excerpt: "We estimate the impact of health and financial incentives on the retirement transitions of older workers in Spain." (Tinbergen Institute via Social Science Research Network)

Retirement Funds in Jeopardy as Economy Falters (PDF)
Excerpt: "Over the past 30 years alone the number of Americans with an equity stake in the stock market has increased from 15 percent to more than 50 percent, meaning a market failure on the scale of 'Black Friday' has a potential for devastation well beyond anything we've seen before. As a case in point, one need look no further than the millions of workers who are seeing their retirement nest eggs shrink on a daily basis." (The Philadelphia Tribune via Pension Research Council)

Financial Crisis Sparks New Debate on Retirement Benefits
Excerpt: "The U.S. financial crisis has hit participants of defined contribution plans hard -- to the tune of $2 trillion in losses in the months preceding October 2008, according to some estimates. The impact has been so severe that polls show many workers who are 45 and older now believe they will have to delay their retirement plans for several years. The crisis has renewed debate on Capitol Hill on how to ensure U.S. workers are saving enough for retirement, and how to guarantee that they have enough money to retire comfortably. The full House Education and Labor Committee met on Oct. 7, 2008, to examine the security of retirement savings and pension plans following passage of the massive $700 billion mortgage bailout and economic recovery bill. The committee meeting was one in a series of oversight hearings requested by House Speaker Nancy Pelosi, D-Cailf., to investigate the causes and impact of the ongoing financial crisis." (Society for Human Resource Management)

New Notice 2008-94: Trusts May Participate in the Government's Troubled Asset Auction Program?
Excerpt: "There is a slight reference in EESA to pension plans being able to participate in the program . . . . Perhaps the reference to a 'trust' in this Notice might be tied to this possibility?" (Attorney B. Janell Grenier via

New York State School Pension Fraud Bill Is Signed
Excerpt: "More than 425 retired educators return to work in New York school districts every year, obtaining waivers from the city and state Education Departments to allow them to collect paychecks and pensions in what critics have called 'double-dipping.' A new state law signed by Gov. David A. Paterson on Friday will tighten government oversight over this longstanding practice, which was intended to help school districts cover hard-to-fill positions with experienced educators but has instead allowed some superintendents and principals to receive six-figure salaries on top of six-figure pensions." (The New York Times; free registration required)

Getting Workers on Track to Invest Early and Often
Excerpt: "As traditional pensions fade from the retirement landscape and workers are forced to take a lot more responsibility for their own financial futures, employers are rolling out a variety of features to help workers prepare for retirement. The key, according to retirement experts: Get workers started automatically and set them on a course of escalating retirement contributions through their working lives." (The Washington Post; free registration required)

Is Now a Good Time to Rebalance a 401(k)?
Excerpt: "With so much economic uncertainty surrounding equities, we asked a panel of Fool analysts: Is now a good time to rebalance a 401(k)? Here's what they had to say." (The Motley Fool)

Replacement of 401(k)s With Government Bonds Proposed
Excerpt: "In a House Education and Labor Committee hearing this week, Professor Teresa Ghilarducci of the New School for Social Research not only proposed elimination of all current tax incentives for defined contribution plans, but also called for the replacement of 401(k)s with a universal government program providing a fixed per-capita government contribution. As part of this, the government would allow all current 401(k) balances to be moved to the government for placement in newly issued bonds to assure the safety of retirement income streams." (HR Policy Association)

Global Equity Sell-Off Severely Reduces Pension Plan Funded Status (PDF)
Excerpt: "The global sell-off of equity shares in early October has had a dramatic impact on the funded status of pension plans around the world. We estimate a funded status decline of over 8 percentage points for our benchmark pension plan in the first 10 days of October. Plan sponsors with significant equity exposures can anticipate similar results." (Towers Perrin)

Candidates Put Forward a Host of New Ideas to Deal with the Economy
Both Barack Obama and John McCain have recently circulated proposals on housing, investing, and retirement plan requirements. (U.S. News & World Report)

Crucial Court Case May Spur 401(k) Lawsuits
Excerpt: "Marcia S. Wagner, president of The Wagner Law Group in Boston, spoke Monday at the Western Springs, Ill.-based Center for Due Diligence's 2008 Advisor Conference in Scottsdale, Ariz. She cited the case Hecker v. Deere, in which employees sued Moline, Ill.-based Deere & Co. over fee disclosures of indirect costs such as revenue sharing. Courts had ruled that a company was not required to disclose revenue sharing. However, Ms. Wagner said that if the court, which is expected to make a decision shortly, rules in favor of participants, this will affect how advisers work with all 401(k) plans." (Investment News; free registration required)

[Opinion] Recent Market Tumult Hurts Main Street's Retirement Pocketbook — Some Fretting About Their '201(k)s'
Excerpt: "You can say all you want that this is a good buying opportunity, but the reality is that our retirement savings accounts have taken a hit, and most people are going to be in mourning, at least for a time. Regardless of the markets (which we can't control), we all know that the most important determinant of retirement security is how much we save -- something we can, within bounds, control. However, when it comes to saving, there are two big questions looming over us, IMHO: Are we saving enough? -- and, more importantly, Can we save enough?" (; free registration required)

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Links to Items on Executive Comp, Benefits in General

[Official Guidance] Text of IRS Notice 2008-94: Executive Comp Provisions of Emergency Economic Stabilization Act (PDF)
29 pages. Excerpt: "New §§ 162(m)(5) and 280G(e) provide additional limitations on the deductibility of compensation paid to certain executives by employers who sell 'troubled assets' in the 'troubled assets relief program' included in EESA. Section 162(m)(5) generally reduces the $1 million deduction limitation to $500,000 for certain taxable years . . . . Section 280G(e) generally expands the definition of a parachute payment to include certain payments made contingent on severance from employment." (Internal Revenue Service)

[Guidance Overview] End of Year Challenges for Benefit Plans As Statutory and Regulatory Mandates Impact Administration and Design of Compensation, Retirement, and Welfare Arrangements
Excerpt: "Although many of the provisions and requirements discussed in this article will not apply to all employers, it is essential that those who are subject to any of those requirements take steps to adopt and implement appropriate measures to ensure their plans' compliance. However modest the requirements may be with respect to a particular plan, the failure to timely implement any required changes could create substantial liability and cost in the event that remedial action is needed at a later date." (Ogletree, Deakins, Nash, Smoak & Stewart, P.C.)

[Guidance Overview] Milliman's Monthly Benefit News and Developments, October/November 2008 (PDF)
4 pages. The newsletter provides a summary of the previous month's legislative, regulatory, and judicial information on employee benefits. (Milliman)

[Guidance Overview] Human Resources and the 2008 'Bailout Bill'
Excerpt: "On October 3, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (EESA), better known as the 'Bailout Bill'. While the provisions intended to save certain troubled financial institutions got all the press, EESA had provisions in it that affect human resource programs especially those related to compensation and mental health. In this article, we focus on those human resource programs and the changes that EESA brings to them." (JPMorgan Chase & Co.)

[Guidance Overview] San Francisco Requires Employers to Provide Transportation Benefits
Excerpt: "It is anticipated that regulations will be issued to provide guidance on the new requirements (e.g., on calculating the average number of employees, the average number of hours worked, etc.). Clarification will also be needed on how the 'look back' determination is administered in connection with the initial implementation of the law. For example, will January 19 be the date counting hours must commence in order to determine which persons are 'covered employees' entitled to benefits on February 1 – or, will December be the 'look back' month for counting hours in order to determine which persons are 'covered employees' entitled to benefits no later than January 19?" (Deloitte via

[Guidance Overview] New IRC Section 457A: Nonqualified Deferred Compensation from 'Tax Indifferent' Entities to Be Subject to more Immediate Income Inclusion
Excerpt: "Attached as a revenue raiser to the Emergency Economic Stabilization Act (H.R. 1424), new IRC § 457A will impose more restrictive income timing rules on nonqualified deferred compensation from 'tax indifferent' entities. Aimed at offshore hedge and private equity funds and at other service recipients that are not subject to U.S. income tax, IRC § 457A requires income inclusion when there is no substantial risk of forfeiture -- which exists only if the right to the compensation is 'conditioned upon the future performance of substantial services.'" (Deloitte)

[Guidance Overview] Executive Compensation Issues in the Current Economic Crisis (PDF)
6 pages. Excerpt: "An immediate impact will be felt by financial services companies that accept relief under the Emergency Economic Stabilization Act that was signed into law October 3. These organizations will have to come to terms with the effects of new pay restrictions for their senior executives (defined as CEO, CFO and three other highest paid proxy-named executives or equivalent for private companies). The restrictions are likely to create significant internal equity issues among senior leaders in companies participating in the bailout and may make it more difficult for these organizations to attract and retain senior executive talent, although the full magnitude of the impact won't be known for several months when more guidance is issued." (Towers Perrin)

[Guidance Overview] Nonqualified Deferred Compensation Plans: IRS Breaks No-Ruling Policy -- Somewhat
Excerpt: "Carving out an exception to IRS's general prohibition against issuing rulings regarding nonqualified deferred compensation plans subject to IRC § 409A, the IRS issued a Revenue Procedure which will allow it to rule on the application of certain other tax laws – such as FICA and estate and gift taxes – to such plans. Revenue Procedure 2008-61." (Deloitte via

Executive Pay Limits May Prove Minimal: Lawmakers Hail Plan, but Analysts Question Its Impact
Excerpt: "With the nation's largest banks set to receive an unprecedented infusion of public funds, lawmakers boasted yesterday that the top executives will for the first time face federal limits on their multimillion-dollar pay packages. But outside analysts and the banks themselves said the new limits are unlikely to significantly reduce anyone's paycheck." (The Washington Post; free registration required)

Banks' Bailout Unlikely to Crimp Executive Pay
Excerpt: "The Treasury's plan seeks to take aim at the eight-figure pay packages given to Wall Street executives that have enraged so many Americans in the wake of the country's financial collapse. Banks that get an equity infusion from the government will have to follow some general rules on paying their top five executives. They will be restricted from offering golden parachutes, as rich severance packages are called, and they will have to pay more taxes if an individual's compensation exceeds $500,000." (The New York Times; free registration required)

Treasury Details Executive Comp Standards
Excerpt: "Federal officials on Tuesday released executive compensation standards for companies involved in any of several phases of the economic recovery bill recently signed into law. A Treasury Department news release said the standards issued under the Emergency Economic Stabilization Act, 'generally apply' to the chief executive officer, chief financial officer, and the next three most highly compensated executive officers." (; free registration required)

'Perverse' Bonuses, Not Exuberance, Led to Crisis, Study Claims
Excerpt: "Perverse bonuses for managers at some less-than-prudent banks and financial intermediaries, not irrational exuberance, fuelled the debt securitization boom that led to the financial crisis, a study said on Tuesday. 'A large number of financial intermediaries retained a prudent policy over the last years. But others, including some large players, did not,' said the study by the Center for Financial Studies (CFS) at Frankfurt's Goethe-University." (Reuters via Financial Week; free registration required)

DOL Adds to Enforcement Policy for Gifts, Entertainment and Educational Expense Reimbursement
Excerpt: "The U.S. Department of Labor (DOL) recently added a new section to its enforcement manual concerning gifts and entertainment provided to plan fiduciaries. The section directs DOL investigators to determine whether gifts, meals and entertainment (including expenses associated with educational conferences) violate ERISA's fiduciary standards." (Watson Wyatt Worldwide)

Newly Posted Events
(Post Yours!)

EBSA's Proposed Guidance on Investment Advice for 401(k): Be Prepared Webcast
Nationwide on October 28, 2008
presented by International Foundation of Employee Benefit Plans

ERISA Benefits Litigation: From Pilot Life and Firestone to Glenn -- Where Are We Now?
Nationwide on December 2, 2008
presented by ALI-ABA (American Law Institute-American Bar Association)

Providing Domestic Partner Health Benefits: Practical Advice for Employers and Service Providers
Nationwide on November 13, 2008
presented by EBIA / Thomson Reuters

Qualified Transportation Fringe Benefits: The 132(f) Basics
Nationwide on November 5, 2008
presented by Qualified Pension Consulting, Inc.

Writing Effective SPDs (60-Minute Power Series Webcast)
Nationwide on November 4, 2008
presented by International Foundation of Employee Benefit Plans

Newly Posted Press Releases
(Post Yours!)

Employees Want to Improve their Health and Want Employer Help, National Business Group on Health Survey Finds
National Business Group on Health

Beyond Translation: Unum Bridges Cultural and Language Gaps in Employee Benefits

We're one of the top 350 employment sites on the web!Newly Posted or Renewed Job Openings
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Plan Administrator/Trust Accountant
for Thomas F. Barrett, Inc.
in DC, MD, VA

Sr. Human Resources Representative (#682)
for Entergy
in MS

Compliance Consultant
for Texas Company
in TX

Sr. Human Resource Representative (#688)
for Entergy
in MS

Sr. Human Resource Representative (Defined Benefits Administrator #698)
for Entergy
in MS

Sr. Human Resource Representative (#686)
for Entergy
in MS

ERISA Attorney
for Employee Benefits Boutique
in DC

Litigation Attorney
for Employee Benefits Boutique
in DC

Pension Plan Administrator
for The Allocation Company, Inc.
in TX

Project Manager/Sr. Business Analyst
for NY City Software Development firm, DC Industry
in NY

Quality Assurance Analyst
for NY City Software Development firm, DC Industry
in NY

Retirement Plans Operations Division Manager
for Nationwide
in OH

Retirement Plans Operations Director
for Nationwide
in OH

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