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October 17, 2008

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

Today's sponsor is International Foundation of Employee Benefit Plans

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E-learning Benefit Courses From the International Foundation

If you need compliance education and are under pressure to cut travel expenses, the International Foundationís e-learning courses are the perfect choice. With the Foundationís commitment to high quality education, you can be certain you are receiving need-to-know employee benefit information. A wide range of benefit topics are available, from the basics to compliance technicalities. Stay within your travel budget and stay on top of benefit complexities with the International Foundationís e-learning courses.

[Official Guidance] Text of EBSA Interpretative Bulletin Relating to Investing in Economically Targeted Investments
Excerpt: "Given the significance of ERISA's requirement that fiduciaries act 'solely in the interest of participants and beneficiaries,' the Department believes that, before selecting an economically targeted investment, fiduciaries must have first concluded that the alternative options are truly equal, taking into account a quantitative and qualitative analysis of the economic impact on the plan. ERISA's fiduciary standards expressed in sections 403 and 404 do not permit fiduciaries to select investments based on factors outside the economic interests of the plan until they have concluded, based on economic factors, that alternative investments are equal." (Employee Benefits Security Administration, U.S. Department of Labor)

[Official Guidance] Text of EBSA Interpretive Bulletin Relating to Exercise of Shareholder Rights by Plan Fiduciaries for Social Investment Purposes
Excerpt: "Plan fiduciaries risk violating the exclusive purpose rule when they exercise their fiduciary authority in an attempt to further legislative, regulatory or public policy issues through the proxy process. In such cases, the Department would expect fiduciaries to be able to demonstrate in enforcement actions their compliance with the requirements of section 404(a)(1)(A) and (B). . . . The use of pension plan assets by plan fiduciaries to further policy or political issues through proxy resolutions that have no connection to enhancing the economic value of the plan's investment in a corporation would, in the view of the Department, violate the prudence and exclusive purpose requirements of section 404(a)(1)(A) and (B)." (Employee Benefits Security Administration, U.S. Department of Labor)

[Official Guidance] Text of IRS-Released Pension Plan Limitations for 2009 (PDF)
3 pages. Excerpt: "Effective January 1, 2009, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $185,000 to $195,000. . . . The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $46,000 to $49,000. . . . The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $15,500 to $16,500. The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $230,000 to $245,000." (Internal Revenue Service)

[Official Guidance] Text of Social Security COLA-Adjusted Limits for 2009: 5.8% Benefit Increase; $106,800 OASDI Comp Cap
Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 5.8 percent COLA for 2009. The maximum taxable earnings for OASDI purposes will be $106,800. (Social Security Administration)

[Official Guidance] PBGC Single-Employer Interest Rates for DB Plans with November 2008 Valuation Date
Excerpt: "The PBGC's regulations prescribe actuarial assumptions -- including interest assumptions -- for valuing and paying plan benefits of terminating single-employer plans covered by title IV of [ERISA]. The interest assumptions are intended to reflect current conditions in the financial and annuity markets." (Pension Benefit Guaranty Corporation)

[Guidance Overview] Automatic Enrollment Ė Time To Plan And Act
Excerpt: "This is an introduction to the basics of automatic contribution arrangements and an overview of how automatic enrollment (with or without employer matching contributions) can maximize retirement savings for all employees, with employee dollars." (Sacramento Area Human Resources Association via Chang, Ruthenberg & Long PC)

[Guidance Overview] Chart of 415, Etc., Limits Updated for News Release IR-2008-118
The chart of maximum limits subject to inflation indexing at Carol V. Calhoun's employee benefits site has now been amended to include the newly announced 2009 limits. Among other things, the chart shows limits under sections 415, 403(b), 401(k), and 457, as well as the Social Security wage base and Social Security and Medicare tax rates, for 1996-2009. (Calhoun Law Group, P.C.)

House Democrats Contemplate Abolishing 401(k) Tax Breaks
Excerpt: "Powerful House Democrats are eyeing proposals to overhaul the nation's $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive. House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute." (Workforce Management; free registration required)

Pension Reform in Mexico: The Evolution of Pension Fund Management Fees and their Effect on Pension Balances
Excerpt: "In 1997 Mexico introduced Personal Retirement Accounts (PRAs) which, after a transition phase, will completely replace the pay-as-you-go (PAYG) system. We give a detailed overview of the relevant institutional framework, the market of PRA providers and how it has evolved since the 1997 reform. We use administrative data obtained from CONSAR, the regulatory agency of the PRA system to assess how pension fund management fees affect pension accumulations. We find that fees can drain up to a quarter of individuals' pension savings." (University of Michigan Retirement Research Center)

401(k) 'Do-Overs'
Excerpt: "Back in 1991, the State of West Virginia barred new teachers from participating in the state's traditional defined-benefit pension plan, the kind that gives you a guaranteed annual income in retirement. The plan had become the worst funded of its kind in the nation, requiring large injections from the state. To stem the bleeding, West Virginia forced new teachers into a 401(k)-style savings plan. . . . For the majority of West Virginia teachers, this new plan has been a disaster. . . . So the teachers asked for a do-over. Under their proposal, their paltry account balances would be replaced by the more generous pensions they would have racked up had they been in the traditional plan all along. Essentially, the past 17 years would be treated as if they'd never happened. The legislature agreed, and on July 1 four out of five teachers made the switch." (

Prosecutors Tack on New Fraud Charges in San Diego Pension Funding/Benefits Case
Excerpt: "Federal prosecutors have added new wire fraud and conspiracy charges to the long-running prosecution of five former city of San Diego retirement officials. A San Diego Union-Tribune news report said prosecutors now allege the five defendants took a wider variety of actions and received a wider variety of benefits when they decided in 2002 to put less money into the pension system than was required. The pension underfunding ultimately produced a $1.4 billion deficit -- since reduced -- and also caused a variety of financial and budgetary woes." (; free registration required)

The Impact of Inflation on Social Security Benefits (PDF)
Excerpt: "This brief explores the interaction of inflation and Social Security benefits. The first section describes the nature of the cost-of-living adjustment. The second section looks at the interaction of Medicare premiums and the cost-of-living adjustment. The third section explores how inflation affects the taxation of benefits." (Center for Retirement Research at Boston College)

Consider the Source of 401(k) Advice
Excerpt: "A government proposal to allow employees of companies that sell mutual funds and other investments to offer direct advice to investors remains a subject of controversy. The Pension Protection Act of 2006 slightly opened the door for such firms to offer investment advice, but proposed Department of Labor rules published in the federal register on Aug. 22 pushed it wide open. It's created a debate over whether the proposal is good for investors or the potential for conflicts of interest is too great." (AP via

Four Pillars of U.S. Retirement: A Framework to Discuss How Americans Will Prepare for and Live in Retirement (PDF)
20 pages. Excerpt: "The Four Pillars have their origin in the traditional 'three-legged stool' of retirement security: Social Security, Employment-Based Plans, and Personal Savings. To this, Prudential has added a fourth Pillar, Retirement Choices, to capture lifestyle and financial choices that are taking on greater significance given the changing nature of retirement in America." (Prudential Retirement via Investment News; free registration required)

DOL Says Plan Assets for Retirements, Not Politics
Excerpt: "Pension plan assets must be invested and used solely to provide for the retirements of plan participants, not to advance political, corporate or other goals, according to new bulletins from the Department of Labor." (Pensions & Investments)

EBSA Gives Thumbs Down to SRI Investment Criteria
Excerpt: "Federal regulators reaffirmed their position that the goal of ERISA plans must be to generate maximum returns to meet pension liabilities and not for socially responsive investing purposes. The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) said in a news release that its guidance asserts that plan fiduciaries may never increase expenses, sacrifice investment returns, or reduce the security of plan benefits to promote legislative, regulatory, or public policy goals with no connection to the payment of benefits or plan administrative expenses." (planadvisor)

[Opinion] Revenue Sharing: What Is It?
Excerpt: "The 401(k) industry calls it revenue sharing. The mutual fund industry calls it 12b-1 fees, subtransfer agency fees, shareholder servicing fees, and profit-sharing payments. The Department of Labor (DoL) calls it indirect payments. Plaintiffs' attorneys call it 'hidden and excessive' fees. By now, everyone in the 401(k) community must have some understanding that almost all plan providers and many advisers receive indirect payments from the investments in 401(k) plans." (; free registration required)

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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

[Official Guidance] Text of IRS Announcement of Hearing on Proposed Section 6039 Regs for Reporting of Incentive Stock Options, Employee Stock Purchase Plans
Excerpt: "This document provides notice of public hearing on [October 30 on] a notice of proposed rulemaking relating to the return and information statement requirements under section 6039 of the Internal Revenue Code. These regulations reflect changes to section 6039 made by section 403 of the Tax Relief and Health Care Act of 2006. These proposed regulations affect corporations that issue statutory stock options and provide guidance to assist corporations in complying with the return and information statement requirements under section 6039. . . . The IRS must receive outlines of the topics to be discussed at the hearing by October 23, 2008." (Internal Revenue Service)

[Guidance Overview] Employment Law Risks in the Current Financial Crisis
Excerpt: "There are several, critical employment law issues that must be taken into account in any organization's plan to address the new economic realities especially if reductions in force are a part of the organization's strategy. . . . Employers that are considering reductions in force and providing severance payments to laid-off employees may wish to consider establishing a severance plan governed by the Employee Retirement Income Security Act (ERISA). . . . As the economic noose tightens, employers are bound to consider cutbacks in benefits and impose greater cost sharing with employees. In the health plan arena, employers have, for years, been passing along a greater share of the costs to employees." (Mondaq; free registration required)

[Guidance Overview] Time Off to Vote on Election Day
Excerpt: "While some states have no applicable requirements, the majority of states obligate employers to provide employees time off to vote in certain situations and impose civil and/or criminal penalties for non-compliance. Some of these jurisdictions even require such time to be paid for non-exempt employees. Finally, some jurisdictions also obligate employers to provide employees time off to act as election officials." (Jackson Lewis LLP)

[Guidance Overview] How Bailout Will Affect Executive Compensation
Excerpt: "Boards of financial institutions that participate in the bailout program will have to limit executive compensation in a manner that prevents the top five executives from receiving incentives to take 'unnecessary and excessive risks that threaten the value of the financial institution during the period that the Secretary [of the Treasury] holds an equity or debt position.' Furthermore, these boards must reserve clawback rights against these executives for bonus and incentive compensation arising from financial results that are later proven to be materially inaccurate." (American Banker via Paul, Hastings, Janofsky & Walker LLP)

[Guidance Overview] Emergency Economic Stabilization Act of 2008 Limits Executive Compensation and Offshore Deferrals
Excerpt: "Financial institutions that sell assets to the Treasury Department (Participating Financial Institutions) under the TARP are subject to new limitations with respect to the compensation of their executives. Note that the new restrictions on executive compensation summarized in this Section do not apply to (i) financial institutions that only insure assets through the TARP or (ii) entities that do not participate in the TARP." (Morgan, Lewis & Bockius LLP)

[Guidance Overview] Section 409A Compliance Deadline (PDF)
2 pages. Excerpt: "[Listed] are examples of compensation arrangements that should be examined for Section 409A compliance: Traditional deferred compensation agreements; Employment and consulting agreements; Severance agreements and plans; Bonus and performance incentive plans; Equity and equity-based plans including, stock option plans; Supplemental retirement plans; Post-retirement benefits; Change-in-control agreements; Indemnification agreements; Split-dollar insurance agreements." (Drinker Biddle & Reath LLP)

[Opinion] Avoiding the Tough Issues: The Candidates on Health Care and Entitlements
Excerpt: "Wharton faculty say the candidates have done a better job of clarifying their positions on these difficult issues than their predecessors in prior elections. Still, they add, Senators Barack Obama of Illinois and John McCain of Arizona fall short of laying out richly detailed plans to solve the deep, structural problems with these programs, mainly because there are no easy solutions and speaking hard truths is likely to alienate voters." (Wharton School of the University of Pennsylvania)

Newly Posted Events
(Post Yours!)

401(k) Webinar: The Current Economy & Your Company's 401(k) Plan
Nationwide on October 30, 2008
presented by AFS Financial Group

ERISA Advisory Council November Meeting
in District of Columbia on November 6, 2008
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

ERISA Advisory Council Working Groups November Meetings
in District of Columbia on November 5, 2008
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Voluntary Insurance Products in the Workplace: Avoiding Pitfalls and Limiting Employer Obligations
Nationwide on October 2, 2008
presented by EBIA / Thomson Reuters

Newly Posted Press Releases
(Post Yours!)

Introducing NIPA's Distribution Administrator Certificate Program
National Institute of Pension Administrators

Federal Agencies Finalize Rules On Newbornsí and Mothersí Health Protection Act
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

IRS Announces Pension Plan Limitations for 2009
Internal Revenue Service (IRS)

Boomers Want Careers with Meaning and Impact Later in Life, But Will Nonprofits Hire Them?

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Retirement Plan Consultant
for The Retirement Advantage
in WI

Sales Associate for Midwest Region
for Milliman, Inc.
in IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI

Retirement Plan Administrator
for Noble-Davis Consulting, Inc.
in OH

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