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| October 22, 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 IRS Notice 2008-102: Pension Plan Limitations for 2009 (Same as October 16 IRS News Release) (PDF)
Appears to be word-for-word identical to the IRS News Release IR-2008-18 of October 16, 2008, which sets for various cost-of-living-adjusted pension plan limitations for 2009. Scheduled for publication in Internal Revenue Bulletin 2008-45, to be dated November 10, 2008. (Internal Revenue Service)
[Guidance Overview] DOL's Final Regulations Under ERISA Cross Trade Exemption (PDF)
5 pages. Excerpt: "On October 7, 2008, the U.S. Department of Labor ('DOL') published final regulations, mandated by the Pension Protection Act of 2006 ('PPA'), to implement the new statutory exemption for cross trades of securities involving large ERISA-governed employee benefit plans. The final regulations largely adopt the provisions of the interim rule published in February 2007." (Sutherland)
[Guidance Overview] Final 403(b) Regulations Require Action by January 1, 2009 (PDF)
2 pages. Excerpt: "[This] discussion summarizes the new regulatory requirements and lists what an employer needs to do in the coming months to prepare for the January 1, 2009 effective date." (Porter Wright Morris & Arthur LLP)
[Guidance Overview] Fiduciary 'Safe Harbor' for Terminated Plans Requires Direct Rollover to IRA for Missing Non-Spouse Beneficiaries
Excerpt: "EBSA adopted its 2007 interim rule as final – requiring the fiduciary of a terminated individual account plan with benefits payable to a missing non-spouse beneficiary to transfer those benefits to an IRA in order to meet the fiduciary safe harbor. The original safe harbor required transfer to a non-IRA account. Fiduciaries who comply with the 'missing participant and beneficiary' safe harbor receive a significant advantage, in that they are deemed to satisfy their duties under ERISA § 404(a) with respect to the distribution of benefits, the selection of a transferee entity, and the investment of the funds in connection with the transfer. 73 FR 58459 (October 7, 2008)." (Deloitte via BenefitsLink.com)
Impact of Recent Investment Market Downturn on Employer Rates (PDF)
4 pages. Excerpt: "The agenda item is being presented to this committee to discuss the impact of the recent investment market volatility. As you are well aware, investment markets have declined substantially since the beginning of this fiscal year. As of October 10, 2008, the CalPERS fund had lost more than 20% of its value since July 1, 2008. Such decline will no doubt have an impact on the funded status of plans at CalPERS and on the contribution rates that employers will have to pay in the future." (CalPERS)
Puerto Rico Increases Limits on Contributions to Saving Plans
Excerpt: "1165 (e) Saving Plans are the Puerto Rican equivalent of U.S. 401(k)s or Cash or Deferred Arrangement (CODA) plans. In these plans, individuals choose the percentage of contributions they prefer within limits established by the government." (Watson Wyatt Worldwide)
Survey Indicates DB Freeze Wave is Over
Excerpt: "A new survey of large corporate and public defined benefit (DB) plans found that plan sponsors have, for the most part, concluded their formal assessments of the merits of freezing or closing their DB plans and are now focused on a long-term view." (PLANSPONSOR.com; free registration required)
Defined Contribution Plan Distribution Choices at Retirement: A Survey of Employees Retiring Between 2002 and 2007 (PDF)
92 pages. Excerpt: "Retirees' selection of a distribution option involves a variety of considerations, including the availability of other sources of income; preservation of assets for future use; an immediate need for cash to pay bills, debts, or for large purchases; the security provided by regular income payments; estate planning; taxation of benefit payments; and management of invested assets." (Investment Company Institute)
Argentina Nationalizes $30 Billion in Private Pensions
Excerpt: "Argentina's government said Tuesday that it would seek to nationalize nearly $30 billion in private pension funds to protect retirees from falling stock and bond prices as the global financial crisis continues. The measure, confirmed in a speech in Buenos Aires late Tuesday by Cristina Fernández de Kirchner, Argentina's president, was criticized by political opponents and analysts as a move to shore up government coffers to try to head off a fiscal crisis in 2009, when Argentina might be struggling to make billions of dollars in debt payments." (The New York Times; free registration required)
Argentina's Leftist President Cristina Kirchner Has Signed a Proposal Nationalizing the Country's Private Pension Funds
Excerpt: "The proposal, which must be approved by the country's legislature, was signed by Ms. Kirchner, along with Labor Minister Carlos Tomada and Amando Boudou, the head of the national social security system, ANSES, according to the Wall Street Journal. The New York Times says that under the plan all the assets in individual accounts would be transferred to the state's 'pay as you go' system, and affiliation to the state system would be mandatory, effectively putting an end to the current dual system." (PLANSPONSOR.com; free registration required)
Innovative Strategies to Help Maximize Social Security Benefits (PDF)
20 pages. Excerpt: "In this paper, we will strive to outline why Social Security deserves to be considered a valuable resource worthy of careful stewardship -- and how today's seniors can best maximize its benefits while helping minimize the taxes on their retirement income in general." (Prudential Retirement)
Unusual Element in Pension Benefit of Baltimore Police, Fire Payments Is Too Costly, Officials Say
Excerpt: "The police and fire pension fund is causing an extra drag on Baltimore's budget because of an unusual benefit. In addition to the regular fixed annuity that guarantees retired officers a percentage of their final salary for life, it provides increases in years when the stock market exceeds expectations. Those increases become part of the retirees' baseline pensions, compounding their benefits over time. But the higher payments mean the pension fund has less of a cushion when the market drops." (The Baltimore Sun)
Are Retirement Savings Too Exposed to Market Risk?
Excerpt: "The stock market, as measured by the broad-based Wilshire 5000, declined by 42 percent between its peak in October 9, 2007 and October 9, 2008. Over that one-year period, the value of equities in pension plans and household portfolios fell by $7.4 trillion. Of that $7.4 trillion decline, $2.0 trillion occurred in 401(k)s and Individual Retirement Accounts (IRAs), $1.9 trillion in public and private defined benefit plans, and $3.6 trillion in household non-pension assets. This brief documents where the declines occurred. This information is interesting and important in its own right. But the declines also highlight the fragility of our emerging pension arrangements." (Center for Retirement Research at Boston College)
Pension Fund Returns May Trim Defense Contractors' Earnings
Excerpt: "Declining stock values are playing havoc with employee pension plans in the aerospace and military-supply industries, prompting lowered profit estimates for next year in anticipation of greater funding requirements and expenses." (MarketWatch)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview] 2009 Limits for Benefit Plans
4 pages. Excerpt: "Each year, the U.S. government adjusts the limits for pension plans, Social Security, Medicare, and other benefit programs to reflect price and wage inflation, and changes in the law. As a result, employee benefit specialists must annually adapt their benefit plans to accommodate the new limits." (Aon Consulting)
[Guidance Overview] Economic Stabilization Act Creates Bicycle Commuter Benefit
Excerpt: "The Emergency Economic Stabilization Act (EESA) of 2008 (Pub. L. 110-343), enacted Oct. 3, 2008, creates a new qualified transportation fringe benefit. The EESA amends Code Section 132(f) to authorize employers to reimburse their employees for certain bicycle commuting expenses beginning Jan. 1, 2009. The new law permits a $20 monthly reimbursement for each month in which an employee 'regularly uses' a bicycle to commute to work, but not during any month in which that employee gets any other type of transportation reimbursement under Section 132(f)." (Thompson Publishing Group Inc.)
[Guidance Overview] IRS Updates Business Travel Expenses Deemed Substantiated / Per Diem Rates
Excerpt: "Revenue Procedure 2008-59 updates the rules under which an employee's expenses for lodging, meals and incidental expenses while traveling away from home are deemed to be substantiated under Treasury Regulation § 1.274-5 when an employer provides a per diem allowance. The Procedure also provides, for those employees and self-employed individuals who are not reimbursed, an optional method for use in computing the amounts paid or incurred for business meals and incidental expenses while traveling away from home." (Deloitte via BenefitsLink.com)
[Guidance Overview] Financial Rescue Bill Raises Thorny Issues in Setting New Restrictions on Executive Pay
Excerpt: "Sweeping new restrictions on executive pay programs are suddenly a reality as a result of the financial rescue legislation signed by President Bush on Oct. 3. While the rules are aimed at banks and other financial institutions, they raise a lot of unanswered questions -- and some tough issues. How, exactly, will they work for participating institutions? And could this be the beginning of a broad new push by lawmakers in Washington to extend additional restrictions on executive compensation to other companies outside the financial sector?" (Towers Perrin)
[Guidance Overview] Offshore Deferred Compensation to be Taxable at Time of Vesting (PDF)
4 pages. Excerpt: "On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (the 'EESA') was enacted with the hope of restoring the viability of the nation's credit markets. The EESA contains a revenue-raiser requiring the current income inclusion upon vesting of nonqualified deferred compensation paid by certain 'tax indifferent' entities, effective for services performed beginning January 1, 2009." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview] U.S. Treasury Provides Interim Guidance on Executive Compensation Provisions in Emergency Economic Stabilization Act
Excerpt: "The interim guidance provides important details about permitted executive compensation practices for financial institutions participating in the Troubled Asset Relief Program; other companies should also consider this guidance when working with their compensation committees regarding potential further executive compensation and corporate governance reform." (McDermott Will & Emery)
[Guidance Overview] Highlights of Treasury Department Guidance on Executive Compensation Restrictions in the Emergency Economic Stabilization Act of 2008
Excerpt: "On October 15, 2008, the Treasury Department . . . issued four pieces of guidance implementing the executive compensation restrictions contained in the Emergency Economic Stabilization Act of 2008 (EESA). In general these restrictions apply only to senior executive officers of financial institutions which sell troubled assets through auction or direct purchase to the Department under the Department's 'Troubled Asset Relief Program' (TARP). The Department's authority to purchase troubled assets under TARP became effective October 3, 2008 and will expire on December 31, 2009, unless extended until a date no later than October 3, 2010 (the 'TARP Effective Period')." (McGuireWoods)
[Guidance Overview] Executive Compensation under the Emergency Economic Stabilization Act of 2008 (PDF)
Excerpt: "On October 3, President Bush signed into law a $700 billion economic rescue package that imposes limits on the compensation for certain executives of financial firms whose troubled assets may be purchased by the government. Although these limits are aimed at companies that are expected to benefit from the bailout, the stage may be set for market forces to demand similar restraints on other companies' executive compensation practices going forward. This For Your Information discusses the rules affecting executive compensation, including guidance released on October 14 and 15." (Buck Consultants)
[Guidance Overview] New 457A Rules on Offshore Deferred Compensation Pose Tough Issues
Excerpt: "The bailout law calls for harsh tax treatment of offshore deferred compensation, effective in 2009. Offshore hedge and similar funds may have been the intended target, but new Section 457A tax rules could apply to other companies, depending on treaty terms and foreign income tax laws. If 457A applies, employees pay tax when compensation vests, regardless of the payment date. If the amount is not known at the vesting date, taxes -- and hefty penalties -- are due once the amount is determinable. Determining whether 457A applies could be very challenging for employers with foreign operations." (Mercer LLC)
Economic Crisis Hits Incentive Plans Hard
Excerpt: "A new survey from Deloitte reveals that decreased earnings and falling stock prices have decimated the value of some companies' annual incentive and long-term incentive plans, leaving companies searching for ways to help their employees feel valued and motivated in this economy. The survey of 151 U.S. companies found that 59% expect their annual incentive plans to pay out below target, while 11% believe there will be no payout at all." (Employee Benefit News; free registration required)
Newly Posted Events
Are You Ready for Mental Health Parity? Webcast
Nationwide on October 30, 2008
presented by International Foundation of Employee Benefit Plans
Connecting With Employees During Economic Turbulence Webcast
Nationwide on November 7, 2008
presented by International Foundation of Employee Benefit Plans
Newly Posted Press Releases
Council Outlines 10-Point Plan To Address Challenges Threatening Employer-Sponsored Retirement Plans
American Benefits Council
Recordkeeper Is Certified To Industry Best Practices
Centre for Fiduciary Excellence (CEFEX)
Investment Advisor Is Certified For Fiduciary Excellence
Centre for Fiduciary Excellence (CEFEX)
Recordkeeper Is Certified To Industry Best Practices
Centre for Fiduciary Excellence (CEFEX)
Americans for Tax Reform and Rutledge Capital Release Version 2.0 of Obama-McCain 401(k) Tax Calculator
Americans for Tax Reform (ATR)
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