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October 23, 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] Emergency Economic Stabilization Act of 2008 and Related Developments (PDF)
4 pages. Excerpt: "EESA seems to leave open the possibility that pension plans may be able to take advantage of the TARP to sell troubled assets to the Treasury, but this point is far from clear at this time. In addition to interest in the possibility of participating in TARP, pension plans are major investors and clients of financial institutions. As recipients of trustee, investment management, custody and securities lending services, pension plans are keenly interested in how the measures taken under EESA may affect services provides to plans." (Groom Law Group)

[Guidance Overview] IRS Rules for Notices on Consequences of Not Deferring Receipt of Immediately Distributable Benefits
Excerpt: "The IRS has issued proposed regulations clarifying the content of notices to plan participants of the consequences of failing to defer cash-out distributions. The proposed rules would also expand the time period during which an election to waive or revoke a joint and survivor annuity may be made." (Wolters Kluwer)

[Guidance Overview] Dealing with the New Annual Report and Audit Requirements for ERISA-Covered 403(b) Plans
Excerpt: "This article walks affected employers through the process of dealing with the requirement of filing a Form 5500 and, if the plan is large enough, having an independent audit conducted." (Chang, Ruthenberg & Long PC)

GM Suspends Payments into 401(k) Plans
Excerpt: "General Motors Corp . . . is suspending matching payments to employee 401K plans as of November 1 and continues to assess its staffing needs as part of efforts to conserve cash amid a deep downturn in sales, the automaker said on Thursday. GM spokesman Tom Wilkinson said the company could reinstate matching payments into the 401K program if business conditions improve." (Reuters via The New York Times; free registration required)

Pension Benefit Guaranty Corporation Schedule of Investment Income/(Loss) for Fiscal and Calendar Years 2006 - 2008 (PDF)
1 page. (U.S. House of Representatives Education and Labor Committee)

Social Security Beneficiaries Affected by the Windfall Elimination Provision in 2006 (PDF)
19 pages. Excerpt: "The Windfall Elimination Provision (WEP) is a method of computing benefits for some workers who receive a pension based on non-Social Security covered work. At the end of 2006, about 970,000 beneficiaries, mainly retired workers, were affected by the WEP. This article provides a brief legislative history, describes the WEP computation, and presents statistical data about beneficiaries affected by the WEP." (U.S. Social Security Administration)

Alternate Measures of Replacement Rates for Social Security Benefits and Retirement Income (PDF)
19 pages. Excerpt: "Replacement rates are common and useful tools used by individuals and policy analysts to plan for retirement and assess the sufficiency of Social Security benefits and overall retirement income. Because the calculation and meaning of replacement rates differs depending on the definition of preretirement earnings, this article examines four alternative measures: final preretirement earnings, constant income payable from the present value of lifetime earnings (PV payment), wage-indexed average of lifetime earnings, and inflation-adjusted average of lifetime earnings (CPI average). The article also calculates replacement rates for Social Security beneficiaries aged 64–66 in 2005." (U.S. Social Security Administration) Web Site: A Public Service to Help Individuals Learn About Saving and Investing for Retirement
Excerpt: "This free site includes a simple calculator, easy to read explanations of the various aspects of 401(k), and a section on Frequently Asked Questions." (Profit Sharing/401k Council of America)

PBGC Has Lost $2 Billion This Year
Excerpt: "The federal agency that guarantees pensions has lost $2.1 billion on its investments so far this year, foreshadowing expected losses among corporate pension funds, state retirement systems and others that provide a financial backstop for an aging population. The loss at the agency, the Pension Benefit Guaranty Corporation, was magnified by its decision in February to invest more aggressively to narrow its deficit." (The New York Times; free registration required)

More People Working Longer as Jobs and Retirement Funds Shrink
Excerpt: "Even as workers in their 40s, 50s and 60s accept having to work years longer than anticipated, many companies are laying off employees amid the economic downturn. This often means that older workers are pushed out first, because they are usually the highest-paid employees." (The New York Times; free registration required)

Stylized Facts and Incentive Effects Related to Claiming of Retirement Benefits Based on Social Security Administration Data
Excerpt: "We rely on the Master Beneficiary File to document a number of facts regarding claiming of Social Security benefits and quality of date of birth data in administrative files. We then assess the impact of changes in retirement incentives that have taken place since 2000 on claiming." (University of Michigan Retirement Research Center)

Social Security Retirement Benefits - How You Can 'Do-Over'
Excerpt: "[Y]ou can start collecting at 62, saving and investing that money, and then at age 70 file a withdrawal application and still get the maximum benefits accorded to those who wait to start collecting. All you have to do is repay what you've collected so far (plus any money withheld for Medicare premiums). You can even deduct the repayment or take an income tax credit for taxes you paid on benefits." (The New York Times; free registration required)

S&P Warns of Severe Pension Funding Shortfalls
Excerpt: "Company pensions that went into 2008 in good shape may go into 2009 with what could be their largest underfunding ever from recent steep market losses, S&P warned on Wednesday. Reuters reported that in a research note, S&P senior index analyst Howard Silverblatt said funds could suffer an underfunding greater than the $219 billion shortfall seen six years ago." (; free registration required)

10-Point Plan to Help Employees and Retirees and to Strengthen the Economy and the Retirement System (PDF)
5 pages. Excerpt: "The American Benefits Council divides its proposals into three parts. First, we must help individuals get back on their feet economically. In developing these ideas, we built upon prior Council recommendations and also drew on key proposals offered by the presidential candidates and members of Congress. Second, we must prevent pension funding obligations from triggering a massive freeze of new benefits and widespread job loss. Third, recognizing that full economic recovery may take a while, we must begin now to lessen the impact of the downturn and better prepare for future economic uncertainties." (American Benefits Council)

American Benefits Council Unveils 10-Point Reform Plan
Excerpt: "A retirement services trade group has released a 10-point plan for Congress to reform plans to help participants be better able to weather the current economic turmoil. A news release from the American Benefits Council (ABC) said elements of its plan help to prevent unexpected and unintended pension funding mandates that would cost jobs and trigger massive benefit freezes, while encouraging future retirement saving." (; free registration required)

PBGC's Stock Investment Losses Exceed $3 Billion
Excerpt: "The U.S. Pension Benefit Guaranty Corp. (PBGC), a government agency that insures private-sector pension plans and pays out benefits if the a plan fails, lost at least $3 billion in investments during its fiscal year, which ended in August, U.S. Rep. George Miller announced at a hearing today in San Francisco. Miller, a California Democrat, heads the congressional committee that oversees PBGC. According to a document containing preliminary, unaudited figures, the losses were caused by the agency's stock holdings. Miller says PBGC invested a significant portion of its funds in mortgage-backed securities." (U.S. News & World Report)

Elements of the Argentine Bill to Nationalize Pensions
Excerpt: "Argentina's President Cristina Fernandez sent a bill to Congress on Tuesday to nationalize the 14-year-old, $30 billion private pension system. Here are key elements of the bill." (Reuters)

Meltdown Retirement Blow Is Softer for Lawmakers
Excerpt: "Along with the rest of America, Rep. George Miller has watched the value of his retirement investments plummet in recent weeks. 'I've lost 30 percent like everybody else. This hits home with the Miller family, too,' the California Democrat said in a recent interview. But the blow is softer for members of Congress than for most. Although lawmakers have lost value in their thrift savings plans -- the government's version of a 401(k) -- they are also offered a defined-benefit pension plan backed by the U.S. Treasury and largely insulated from Wall Street fluctuations. That puts Miller and the other lawmakers into an increasingly privileged category -- workers with guaranteed retirement benefits that aren't subject to the vicissitudes of the financial markets." (AP)

[Opinion] Text of Letter to IRS Requesting Extension of January 1, 2009 Deadline for 403(b) Plan Document Requirement and Final 403(b) Regulations Compliance (PDF)
3 pages; sent to IRS on October 21, 2008 from 33 tax law firms, consultants and other organizations including the American Benefits Council, the Investment Company Institute and the SPARK Institute. Excerpt: "[I]t is our view that the current deadline of January 1, 2009 is not sufficient to ensure compliance with the final 403(b) regulations . . . . This is particularly true due to the lack of guidance explaining the regulations in a number of critical areas where decisions must be made . . . . [N]umerous issues remain, such as: . . . . (Various 403(b) Practitioners and Interested Organizations)

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview] India's Fringe Benefit Tax: Common Issues
Excerpt: "In April 2007, the Indian government imposed a fringe benefit tax (FBT) on the allotment or transfer of shares by a company to its employees under an employee stock option plan. In October 2007, the Central Board of Direct Taxes (CBDT) issued rules prescribing the method of valuing stock options subject to the tax. This Client Alert is a reminder about the previously approved tax law changes and the fact that employers in India generally must accrue and remit the taxes once the options begin vesting (even though they may not be exercised until some later date)." (O’Melveny & Myers LLP)

[Guidance Overview] When The Going Gets Tough, Executive Deferred Compensation Issues Get Tougher
Excerpt: "This article discusses some issues that may arise under section 409A and other laws during an economic squeeze and what they can mean to nonqualified deferred compensation plans such as a SERPs, synthetic equity, or severance agreements." (Chang, Ruthenberg & Long PC)

An Overview of the Railroad Retirement Program (PDF)
11 pages. Excerpt: "The Railroad Retirement program was established in the 1930s. It provides retirement, survivor, unemployment, and sickness benefits to individuals who have spent a substantial portion of their career in railroad employment, as well as to these workers' families. This article describes the history, benefit structure, and funding of the Railroad Retirement program." (U.S. Social Security Administration)

Labor Supply Effects of the Interaction between the Social Security Disability and Retirement Programs at Full Retirement Age
Excerpt: "The Social Security Disability Insurance (DI) program imposes strong work restrictions on beneficiaries; however, the causal effect of the work disincentives on labor supply has been difficult to estimate. We take a new look at this question by exploiting the fact that DI benefits are payable only until full retirement age (FRA), at which point they are converted to retired worker benefits, and the program's implicit high marginal tax rate on earnings is abruptly relaxed." (University of Michigan Retirement Research Center)

Bailout Bill Hones Ax Over Executive Pay
Excerpt: "The big bank bailout doesn't just take aim only at excessive severance packages for top executives of financial companies, as has been widely reported. The limitations Congress has mandated apply to other elements of bailed-out financial institutions' pay packages, and they could potentially apply to those of other publicly traded companies in the not-too-distant future. The provision that may have the greatest impact on financial firms is a new $500,000 deductibility limit that will apply to all forms of compensation for top officers." (Workforce Management; free registration required)

How TARP May Impact All Executive Compensation Disclosures
Excerpt: "'At our '3rd Annual Proxy Disclosure Conference' yesterday, Corp Fin Director John White delivered an important speech - entitled 'Executive Compensation Disclosure: Observations on Year Two and a Look Forward to the Changing Landscape for 2009' - during which John talked briefly about how the TARP's executive compensation provisions could potentially spill-over and impact the many companies not directly subject to TARP." (From the Blog via Attorney B. Janell Grenier via

Newly Posted Events
(Post Yours!)

Is the San Francisco Health Care Security Ordinance a Roadmap for States to Avoid ERISA Preemption?
Nationwide on November 18, 2008
presented by ABA Joint Committee on Employee Benefits

Section 403(b) Compliance Countdown
Nationwide on November 13, 2008
presented by ABA Joint Committee on Employee Benefits

Newly Posted Press Releases
(Post Yours!)

PSCA Announces New Web Site
Profit Sharing/401(k) Council of America (PSCA)

PBGC Assumes Pope & Talbot Inc. Pension Plan
Pension Benefit Guaranty Corporation (PBGC)

U.S. Labor Department Recovers $8.6 Million For Workers In Settlement Involving Agway 401(k) Plan In New York
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Mutual of Omaha Offers 401k Toolbox® to Help Protect Investors
Mutual of Omaha

Morningstar Investment Services Announces Morningstar(R) Managed Portfolios Retirement Income Series
Morningstar, Inc.

Study Confirms the Business Case for Employer-Sponsored Child Care
Bright Horizons Family Solutions

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