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October 21, 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] DOL Finalizes DC Annuity Purchase Safe Harbor
Excerpt: "On October 6, the Department of Labor amended the 'safest available annuity' rule to specify that it applies to defined benefit plans only. PPA provides, however, that DC plan annuity purchases are 'subject to all otherwise applicable fiduciary standards.' This guidance provides a safe harbor for DC plans to comply, but assures that the safe harbor is not the exclusive means of satisfying the safest available annuity rule. This article examines the guidance with particular emphasis on the safe harbor." (JPMorgan Chase & Co.)

[Guidance Overview] ERISA Section 107 Does Not Require Retention of Old Pension Plan Documents
Excerpt: "EBIA Comment: ERISA Section 107 requires that records sufficient to document information required by the Form 5500 be retained for six years after the Form 5500 is filed. Although the plan in this case prevailed, it will not always be possible to produce a witness with personal knowledge of the provisions of plan documents from long ago. As a result, retention of old plan documents may be necessary to protect a plan in litigation. Therefore, we advise keeping any documents that may be relevant to benefit disputes for the six-year period under ERISA Section 107 or the applicable statute of limitations period, whichever is longer." (Employee Benefits Institute of America)

[Guidance Overview] District Court Finds that Plan Administrator Abused Its Discretion in Reforming Plan To Correct for Multi-Billion Dollar Drafting Error, But Leaves Open the Possibility of Reformation (PDF)
10 pages. Article appears at page 6. (Proskauer Rose LLP)

[Guidance Overview] IRS Gives Governmental Plans More Time to Comply With Regulations on Normal Retirement Age (PDF)
2 pages. Excerpt: "The IRS has issued Notice 2008-98 extending by two years (i.e., to 2011) the deadline for governmental plans to comply with its final regulations on the definition of normal retirement age. This relief will provide sponsors of non-conforming governmental plans with much needed additional time to address the challenges posed by the regulations." (Buck Consultants)

[Guidance Overview] Ninth Circuit Ruling that Cash Balance Plans Do Not Discriminate Against Older Workers (PDF)
3 pages. Excerpt: "BUCK COMMENT. Because the Pension Protection Act of 2006 (PPA) has insulated cash balance plans from such challenges going forward, the discrimination issue only applies retroactively. This ruling by the Ninth Circuit, not usually considered a pro-business court, should largely end the litigation over whether cash balance plans are age discriminatory." (Buck Consultants)

[Guidance Overview] DOL's Addition of Online Payment Option to DFVC Program Penalty Calculator
Excerpt: "To make its online penalty calculator more convenient, the DOL has announced a new feature that allows employers and plan administrators the option to pay DFVC Program penalties electronically with a credit or debit card. Payments are processed using the Treasury Department's financial management system. Users of the online penalty calculator are automatically offered the electronic payment opportunity after their penalty is calculated. Instructions for the new electronic payment feature appear on the same web page as the instructions for the penalty calculator." (Employee Benefits Institute of America)

Pension Woes Loom for Large Midwest Firms
Excerpt: "Rising pension costs threaten to eat into the profits of many of the Chicago area's largest companies as they divert billions of dollars to shore up funds depleted by the stock market swoon. Aon Corp., Exelon Corp., Abbott Laboratories, Caterpillar Inc., Motorola Inc. and Sara Lee Corp. are among the region's companies that started the year without enough in their pension funds to cover projected payments to retirees. Those shortfalls almost certainly have deepened, observers say." (Workforce Management; free registration required)

Retirement Risk: How Employers Can Help (PDF)
Pages 2-7 of 7 pages. The piece, by Anna Rappaport and Steve Siegel, coveres retirement concerns and strategies. (International Foundation of Employee Benefit Plans via Society of Actuaries)

Asset Mix of the Nation's State Retirement Plans, 2006
Excerpt: "The October 2008 Question of the Month relates to an inquiry that sought to determine the asset mix of the nation's state retirement plans. Four of the top 10 plans in the nation are under SLC states, while at the other end of the spectrum, three of the bottom ten belong to SLC states." (Southern Legislative Conference)

Plan Assets for Retirements, Not Politics, Department of Labor Says
Excerpt: "One DOL bulletin, on economically targeted investments, clarifies that 'fiduciary consideration of non-economic factors should be rare and, when considered, must comply with ERISA's rigorous fiduciary standards,' according to a DOL news release issued Thursday, October 16. The second bulletin, on shareholder rights issues, clarifies that plan fiduciaries 'may never increase expenses, sacrifice investment returns or reduce the security of plan benefits in order to promote legislative, regulatory or public policy goals that have no connection to the payment of benefits or plan administrative expenses.'" (Workforce Management; free registration required)

Presidential Candidates Weigh in on 401(k)s
Excerpt: "The financial crisis that has walloped many employees' and retirees' 401(k) and other retirement plan account balances has also spurred both presidential candidates to unveil proposals to ease the tax bite of plan withdrawals. The two candidates take different approaches in improving employee access to 401(k) plan balances and in lowering the taxes retirees pay when they receive a 401(k) plan distribution." (Workforce Management; free registration required)

Experts Say HR Should Educate Employees on Just What It Means to Invest in Stocks
Excerpt: "Dallas Salisbury, president and CEO of Employee Benefit Research Institute in Washington, says HR needs to educate employees up-front to make sure they know that retirement accounts are linked to stock prices, and that there are no sure things when investing." (Human Resource Executive Online)

The Outlook for Can.ada's Public Sector Employee Pensions
Excerpt: "This chapter examines the context and features of occupational pension plans in the Canadian public sector and compares these with their private sector counterparts. Relative to the declining importance of registered pension plans in the private sector, pension coverage rates of public sector employees remain high and their pension plans retain traditional characteristics. Yet funding considerations have brought considerable change to public sector employee pensions. These and other challenges are discussed." (Pension Research Council; registration required to download fulltext of paper)

401(k) Plans Add Exchange-Traded Funds
Excerpt: "The growing interest in ETF-based 401(k)s comes as regulators demand better disclosure of plan fees. Mutual funds, currently the mainstay of 401(k) plan investment menus, often have complex 'revenue sharing' agreements, which can involve the fund company making payments to the plan provider to help cover the cost of certain services such as account maintenance. Those revenue-sharing costs are often passed along to plan participants as part of the funds' expenses. Since ETFs don't have revenue-sharing arrangements, they can simplify 401(k) plan fee disclosure." (The Wall Street Journal)

Rediscovering Defined Contribution Plans
Excerpt: "As little as ten years ago, most large employers still used the defined benefit plan as the primary means of providing retirement benefits for their employees. For many of those companies, that mantra has changed, and in a large number of those cases, new employees are left with defined contribution plans only. Most all of those companies sponsor 401(k) plans, but many are coming to the realization that those plans alone may not be enough. Even if companies are not going to sponsor defined benefit plans, additional retirement benefits, probably in the form of old-fashioned defined contribution plans, are going to be necessary. In the first of a series, we re-introduce our readers to defined contribution plans that don't require employee contributions." (JPMorgan Chase & Co.)

Unifying Pension Schemes in Japan: Toward a Single Scheme for Both Civil Servants and Private Employees
Excerpt: "A topic of long-standing discussion in Japan has been how to equitably merge the retirement plans for civil servants and private employees, which in the past have been managed separately. Recent legislation sought to unify social security pension schemes for all employees, by extending the coverage of the Japanese Employees' Pension Insurance Scheme which covers private employees to include civil servants as well. We describe how Japanese social security pension schemes have evolved, the forces driving the merger of these plans, and what future prospects may be." (Pension Research Council; registration required to download fulltext of paper)

Coordinating 403(b) Compliance with State Dictates
Excerpt: "Like any other plan sponsor, 501(c)(3) educational institutions will have to comply with new IRS 403(b) rules requiring more plan oversight, but these plan sponsors are faced with the additional task of making sure compliance measures fall in line with state laws. For plans governed by the Employee Retirement Income Security Act (ERISA), state laws are preempted, but non-ERISA plans must pay attention to state dictates." (; free registration required)

Half of Employers Offering Retirement Investment Training
Excerpt: "Nearly half of those in a recent survey offer employees training on investing for retirement, and nearly eight in 10 of those offering such training say it is effective. A news release about the survey by Hay Group, WorldatWork, and Loyola University Chicago said the key problem is that only 29% of employees participate in such retirement saving training." (; free registration required)

National Save for Retirement Week: October 19-25, 2008
Excerpt: "In follow up to the successful passage of the Resolution in 2006 and 2007, Senator Smith (R-OR), Ranking Member Senate Special Committee on Aging and Member Senate Committee on Finance, and Senator Conrad (D-ND), Chairman of the Senate Committee on the Budget and Member, Senate Committee on Finance, has joined him in introducing S. Res. 601 before adjourning for the July 4 recess. The Resolution establishes the week of October 19, 2008 as National Save for Retirement Week. Both Smith and Conrad are members of the Senate Committee on Finance and are active members on retirement and pension related matters. The House of Representatives has also recently passed a companion resolution, H. Res. 1294, sponsored by Representatives Schwarz (D-PA) and Johnson (R-TX) that had been drafted by the Committee on Ways and Means. On September 18, 2008, the Senate passed S. Res. 601 declaring National Save for Retirement Week for 2008." (National Association of Government Defined Contribution Administrators, Inc.)

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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

[Guidance Overview] Treasury's Executive Compensation Rules Under the Emergency Economic Stabilization Act (PDF)
13 pages. Excerpt: "As widely publicized, EESA contains limits on executive compensation for financial institutions that participate in the Troubled Asset Relief Program (TARP). Depending on the type and level of participation by the financial institution, these limitations include prohibition of incentives that encourage 'unnecessary and excessive risks'; substantial new limits on tax deductibility; prohibition of certain severance payments; new excise taxes and loss of deduction on 'golden parachute' payments; and 'clawback' provisions to recoup incentive compensation paid based on inaccurate financial criteria." (Alston & Bird LLP)

A Legislative and Political History of ERISA Preemption, Part 3
Excerpt: "The preemption language in section 514(a) of the Employee Retirement Income Security Act of 1974 (ERISA) is exceedingly broad. The preemption language in the law ERISA replaced - the Welfare and Pension Plans Disclosure Act of 1958 (WPPDA) - was exceedingly narrow. There were four stages in Congress's journey from the narrowly circumscribed preemption of state law under the WPPDA to the sweeping suppression of state law under ERISA. This article covers the first three stages, tracing the evolution of ERISA's preemption language from the enactment of the WPPDA to the end of the Ninety-Second Congress." (Journal of Pension Benefits via Social Science Research Network)

Optimal Taxation and Social Insurance with Endogenous Private Insurance
Excerpt: "This paper characterizes the welfare gains from redistributive taxation and social insurance in an environment where the private sector provides partial insurance. We analyze stylized models in which adverse selection, pre-existing information, or imperfect optimization in private insurance markets create a role for government intervention. We derive simple formulas that map reduced-form empirical estimates into quantitative predictions for optimal tax and social insurance policy. Applications to unemployment and health insurance show that taking private market insurance into account matters significantly for optimal benefit levels given existing empirical estimates of the key parameters." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)

Newly Posted Events
(Post Yours!)

Executive Compensation Strategy and Disclosure After the Credit Crisis Webcast
Nationwide on November 23, 2008
presented by Katten Muchin Rosenman LLP

Key Issues Facing Not-for-Profit Boards
in New York on October 29, 2008
presented by Directors Roundtable

Mining Your Health Plan Data for Jewels
in Virginia on October 29, 2008
presented by WEB (Worldwide Employee Benefits Network) Washington Chapter

Newly Posted Press Releases
(Post Yours!)

Step-by-Step Guide Explains How to Collect Delinquent Employer Contributions
International Foundation of Employee Benefit Plans

ASPPA Honors Jordan and Shultz
American Society of Pension Professionals & Actuaries (ASPPA)

White Paper Issued on Changing Focus of IRS and DOL Audits
David K. Young Consulting, LLC

403(b) Compliance Pledge From Security Benefit
Security Benefit

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Pension Administrator
for Pension Administration Firm located in Westchester, NY
in NY

Institutional Services Employee Benefit Operations Administration Analyst II
for BB&T
in NC

Client Services Associate
for Milliman, Inc.
in CO, TX

401k Administrator
for Vanguard
in PA

Senior Claim Audit Manager
for Towers Perrin
in CA

Total Absence and Disability Management Associate
for Towers Perrin
in IL

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