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October 27, 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] New ERISA Interpretive Bulletins Regarding Economically Targeted Investments and Proxy Voting (PDF)
3 pages. Excerpt: "On October 17, 2008, the U.S. Department of Labor ('DOL') published two interpretive bulletins addressing the ability of ERISA plan fiduciaries to consider non-economic factors when making decisions regarding plan investments. In the bulletins, DOL sends a strong message to plan fiduciaries that ERISA requires them to consider as a threshold matter only the plan's economic interests when making decisions regarding the acquisition, management and disposition of plan investments." (Paul, Hastings, Janofsky & Walker LLP)

[Guidance Overview] DOL Updates Guidance on Economically Targeted Investments, Exercise of Shareholder Rights
Excerpt: "The DOL has issued interpretive bulletins that update its guidelines on economically targeted investments and the exercise of shareholder rights. Under the updated guidelines, plan fiduciaries may not consider any factor other than the economic interest of the plan when selecting plan investments, except in specified -- and very limited -- circumstances. Similarly, when exercising shareholder rights, plan fiduciaries may not engage in shareholder activism and socially directed proxy voting unless they reasonably expect that those activities will enhance the economic value of the plan's investment." (Employee Benefits Institute of America)

[Guidance Overview] 401(k) Breach Suit Can Move Forward
Excerpt: "In a federal appellate court ruling, an Illinois psychologist got more time to pursue her legal claims for assets missing from her 401(k) account. The 7th U.S. Circuit Court of Appeals ruled in the suit filed by plaintiff Sandra C. Leister against former employer Dovetail Inc. that the dispute was governed by the 10-year statute of limitations for breach of written contract claims and not the six-year time limit for fiduciary breach actions under the Employee Retirement Income Security Act (ERISA). Circuit Judge Richard A. Posner, writing for the court, noted that Leister's claims for missing benefits in her contract breach claim were more than benefits at stake in her ERISA breach complaint so the longer statute of limitations applies." (planadvisor)

Director Millard Defends PBGC Investment Policy Change
Excerpt: "The head of the nation's private-sector pension insurer appeared before a U.S. House committee in Washington on Friday to respond to continuing controversy over whether the agency's new investment policy/asset allocation is too risky during a time of market turmoil. Charles E.F. Millard, Director of the Pension Benefit Guaranty Corporation (PBGC), explained in testimony before the House Committee on Education and Labor and Chairman, George Miller (D-California), that the PBGC's newly announced investment policy change (See PBGC Makes Big Shift to Stocks, Alternatives) is expected to dramatically increase its chance of closing its deficit, which Millard said is expected to be in the $10 billion to $12 billion range at the end of FY 2008." (; free registration required)

PBGC Director Millard's Post-Committee Hearing Statement
Excerpt: "Following the hearing, PBGC Director Charles E.F. Millard issued the following statement: 'The PBGC in stronger financial condition than it was a year ago. Our deficit is down about $3 billion from last year's $14 billion. Retirees who depend on us should not be concerned --the PBGC has sufficient funds to meet our benefit obligations for years into the future. To ensure our long-term ability to pay benefits, we have adopted a new investment policy that is diversified to mitigate risk." (; free registration required)

Testimony of Director of Pension Benefit Guaranty Corporation before U.S. House Committee on Education and Labor
Excerpt: "Mr. Chairman, Ranking Member McKeon, and Members of the Committee: Good morning. I appreciate the opportunity to appear before the Committee today to discuss the state of the Pension Benefit Guaranty Corporation ('PBGC' or 'Corporation') and the defined benefit pension system. Concern about retirement income security is certainly an important focus in these challenging economic times. I want to emphasize that, despite the current economic slowdown, PBGC will be able to meet its benefit payment obligations for a number of years to come." (Pension Benefit Guaranty Corporation)

A 'Look-Back' at 2010 Target-Date Funds
Excerpt: "As of late 2008, approximately $26 billion was invested in 2010 target-date funds. As a point of reference, roughly $192 billion was invested in all retail target-date funds. Target-date funds linked to the year 2020 have the single largest asset base, with around $42 billion." (Financial Planning)

Are IRAs Safe?
Excerpt: "Given the numbing drumbeat of bad news, even the coolest clients with IRAs at a bank might be concerned about their retirement accounts. The good news: Retirement accounts are federally insured up to $250,000 per bank. Congress raised the limit from $100,000 in 2006. The $250,000 limit for federal deposit protection applies to retirement accounts at banks and savings associations insured by the FDIC, as well as credit unions insured by the National Credit Union Administration (NCUA). (For non-retirement accounts, the FDIC or NCUA limit temporarily increased to $250,000 from $100,000 as part of the 2008 Economic Stabilization Act, effective Oct. 3.)" (Financial Planning)

Present Law and Background Relating to Valuing Assets in Defined Benefit Pension Plans (PDF)
11 pages. Excerpt: "This document, prepared by the staff of the Joint Committee on Taxation, provides a description of present law and background relating to permissible methods of valuing the assets of single-employer defined benefit pension plans for purposes of complying with the minimum funding rules that apply to such plans under the Internal Revenue Code (the 'Code') and the Employee Retirement Income Security Act of 1974 ('ERISA')." (U.S. Congress, Joint Committee on Taxation via American Benefits Council)

Our Wobbly Retirement Reality
Excerpt: "While we're fighting to stave off a depression, the looming Social Security crisis can't be ignored. But any change to shore up the system should also ensure that one leg of the retirement stool is structurally strong and guaranteed to keep people from abject poverty." (The Washington Post; free registration required)

Doctors Eased Path for L.I.R.R. Disability Claims
Excerpt: "In the years before the investigators arrived, the Long Island office of the Railroad Retirement Board had been a beacon to employees of the Long Island Rail Road, offering the prospect of a comfortable retirement, complete with a pension and disability payments -- all at an age when people in other industries were still working. . . . Of particular interest to investigators is a small group of disability consultants and physicians who have helped the L.I.R.R. attain the dubious distinction of having the nation's highest rate of disabled retirees even while it was earning awards for employee safety." (The New York Times; free registration required)

401(k) Plans Could Be Facing a Total Revamp
Excerpt: "House Democrat George Miller is calling for a soup-to-nuts re-examination of 401(k) plans in light of dramatic investment losses this year that could lead to a radical overhaul of the popular defined contribution plans. One proposal under consideration would eliminate the tax-favored treatment of contributions to 401(k) plans and individual retirement accounts; instead, workers would receive a $600 tax credit that would offset contributions to a new mandatory guaranteed plan that would be managed and administered by the federal government. Another proposal would extend 401(k) plans to all workers." (Pensions & Investments)

Improving the Cost Effectiveness of Public Pension Retirement Plans
Excerpt: "Unless defined benefit pension plans are managed much better and more cost-effectively, they will be replaced by defined contribution plans. Benefit and contribution policies need to be carefully evaluated to make sure that a reasonable level of ongoing contributions, together with investment income, are adequate to fund the defined benefit plan without unpleasant surprises. Unless valuation and contribution conventions change to market-valued economically-based quantities, decision makers will lack the right information with which to make informed policy decisions." (Pension Research Council; registration required to download fulltext of paper)

Public Pensions and State and Local Budgets: Can Contribution Rate Cyclicality Be Better Managed?
Excerpt: "Pension fund contribution rate volatility has challenged state and local government defined benefit plan sponsors over time. Methods to contain volatility have been used for years but recent experience has placed greater urgency on the search for better solutions. This chapter examines the historical approach to bring stability to employer rates as well as some of the current thinking on the issues. Because both asset and liability changes can affect volatility, governments are looking at both sides of the balance sheet for relief." (Pension Research Council; registration required to download fulltext of paper)

Engaging New Hires to Invest in Their Financial Security (PDF)
Excerpt: "Engaging new college and university employees to plan and save for retirement is a challenge and concern for many institutions. In September 2008, the TIAA-CREF Institute brought together senior administrators in higher education, leading academic researchers and senior leadership from TIAA-CREF to discuss the nature and causes of the new hire savings challenge and strategies for addressing it. A general consensus emerged that education in the traditional sense of plan communications is inadequate to motivate new hires to begin saving for retirement. While education creates an understanding of the need to save and even an intent to save, it is typically not sufficient to move new employees to actually begin saving." (TIAA-CREF Institute via Pension Research Council)

How Pension Rules Affect Work and Contribution Patterns: A Behavioral Model of the Chilean Privatized Pension System
Excerpt: "Chile has been at the forefront of pension reform, having switched in 1980 from a pay-as-you-go system to a fully funded privatized accounts system. The Chilean system served as a model for reform in many other Latin American countries and has also been considered by U.S. policy makers as a possible prototype for social security reform. Some of the criticisms of the Chilean system are low coverage rates and contributions rates among certain segments of the population.' (University of Michigan Retirement Research Center)

Errors in Retirement Planning
Excerpt: "The challenges of saving enough for retirement are enormous -- and today's financial meltdown makes everything harder. Learn some of the common mistakes workers make -- errors that HR leaders could help eliminate by better educating their employees." (Dallas Salisbury via Human Resource Executive Online)

Will Your Retirement Money Last?
Excerpt: "Standard & Poor's suggests you consider these five risks to your retirement income, including outliving your assets and higher health-care costs." (BusinessWeek)

More on Argentina's Private Pension Seizure Plan
The target page provides links to news articles on the issue. (Attorney B. Janell Grenier via

Full Committee Field Hearing: 'The Impact of the Financial Crisis on Workers' Retirement Security'
Excerpt: "This hearing, held [Wednesday, October 22, 2008] in San Francisco, CA, further examined how the current financial crisis is impacting pension funds and workers' directed retirement accounts, such as 401(k) plans. [Links to witness testimony are on the target page.]" (U.S. House of Representatives Education and Labor Committee)

From Oct. 23 WSJ Opinion: Are 401(k)s Safe from Congressional Democrats?
Excerpt: "If you have a 401(k) or equivalent retirement plan, you've probably been watching nervously the past few weeks as your nest egg has shrunken owing to the current turmoil in the markets. Well, it could be worse. But don't take heart, for what we mean is it could get worse. The market turmoil has some politicians on Capitol Hill eyeing the end of the 401(k) as we know it. . ." (Attorney B. Janell Grenier via

Age-Based Retirement Investing: A Better Solution for Participants and Plan Sponsors in the Age of Transparency (PDF)
24 pages. Excerpt: "Knowing how to invest for retirement is often difficult for the average person. In recent years, lifestyle funds have made it easier for most participants. The distinguishing feature of the popular 'target date' lifestyle funds is that the overall asset allocation automatically becomes more conservative as a participant's retirement date approaches. Another approach – age-based investing – automatically adjusts asset allocation to become more conservative based on a person's age, rather than an expected retirement date." (Securian Retirement)

DOL Sues California Registered Investment Adviser for Undisclosed Incentive Receipt
Excerpt: "The U.S. Department of Labor (DoL) has sued Zenith Capital LLC of Santa Rosa, California, and its executives for investing the assets of 13 retirement plan clients in the hedge fund Global Money Management LP and receiving undisclosed incentive fees from the hedge fund's sponsor and manager. According to a news release, the DoL lawsuit alleges that Zenith Capital and executives Rick Lane Tasker, Michael Gregory Smith, and Martel Jed Cooper violated their fiduciary obligations under the Employee Retirement Income Security Act (ERISA). The defendants allegedly made investment decisions for their ERISA plan clients." (; free registration required)

Lawsuits Over Diminished 401(k) Accounts
Excerpt: "After my recent conversation with two employment lawyers, Mark Risk and Zachary Hummel, about the kinds of lawsuits they expect to see coming out of the current crisis on Wall Street, I received this question from a reader: After reading your column, I was wondering if any of these companies would be sued by former employees in class-action suits to try to reclaim any amounts of pensions they may have lost. Individuals lost hundreds of thousands of dollars because they got paid in stock they unable to sell. I had been wondering the same thing myself, so I went back to the lawyers to hear what they had to say." (Marci Alboher via The New York Times; free registration required)

Special Laws Skirt Pension System as Massachusetts Legislature Boosts Benefits for Some Police, Firefighters
Excerpt: "It was about 3 a.m. in the Theatre District when Boston police Officer William I. Griffiths wrenched his back during a struggle with a gun-wielding drug suspect who fired a bullet that zipped past the officer's head. The injuries he said he suffered during the July 2001 arrest, a herniated disc and traumatic stress, were so disabling that Griffiths decided he could not return to the force. But rather than applying for a disability pension, Griffiths went another route. He went to City Hall and Beacon Hill and persuaded local and state elected leaders to back a special state law granting him a much larger pension - 100 percent of his salary, tax free - than most disabled retirees receive." (The Boston Globe)

The Latest Bad News for Your 401(k) - Employers Suspending or Reducing 401(k) Contributions
Excerpt: "Though it can be hard to resist the urge to pull out your money and cut your losses, financial planners say sticking to your guns should pay off in the long run. The benefits of the tax advantages of contributing to your 401(k) along with compounding, Keady said, will most likely outweigh the temporary blip of a year or so of missing or smaller matching payments." (The Washington Post; free registration required)

Financial Chaos Undermines Security of 401(k) Plans
Excerpt: "The global financial crisis that revealed the flaws of Wall Street has also exposed the vulnerability of America's retirement system. Employers have increasingly abandoned traditional pensions, forcing workers to rely on 401(k)s and similar plans that have a lot more exposure to the stock market. The assumption was that even if the market suffered short-term losses, over time it would rise, allowing workers to recoup their savings." (The Washington Post via The Austin American-Statesman)

[Opinion] American Benefits Council Summary of 10-Point Plan to Help Employees and Retirees and to Strengthen the Economy and the Retirement System (PDF)
Excerpt: "Among the areas most adversely affected by recent economic turmoil has been retirement security – we need to act now to restore retirement security. Expand the Saver's Credit. . . . Protect retirees from excessive untimely distributions. . . . Allow penalty-free hardship distributions. [And, seven more proposals.]" (American Benefits Council)

[Opinion] Investment Company Institute Testimony at Hearing on Impact of Financial Crisis on Workers' Retirement Security
Excerpt: "The Investment Company Institute appreciates the opportunity to provide its research and expertise in connection with the Education and Labor Committee's October 7 hearing on the impact of the financial crisis on Americans' retirement security." (Investment Company Institute)

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview] New Bicycle Commuter Benefit in Bailout Bill (PDF)
2 pages. Excerpt: "One provision of the financial bailout legislation enacted earlier this month creates a new tax-favored bicycle commuter benefit for employees. This new benefit may be offered by employers beginning in 2009." (Buck Consultants)

Employers Cut Perks, But Some May Go Too Far
Excerpt: "In a recent survey, the Chicago-based consulting firm Challenger, Gray and Christmas Inc. found that 20 percent of businesses already have cut employee perks, and another 10 percent are considering doing so. John Challenger, CEO of the firm, says that companies should consider some low-cost perks, such as allowing casual attire, early Friday dismissals or making the office pet-friendly." (The Hartford Courant)

Obama vs. McCain: It's About Your Money
Excerpt: "As the financial crisis has worsened and the economy has deteriorated, basic pocketbook issues -- taxes, jobs, retirement -- have taken center stage in the presidential race between Democrat Barack Obama and Republican John McCain. When the new president 'comes to town in January, he'll have to work on the short-term stimulus to the economy, and the longer-term plans may get deferred,' says Clint Stretch, managing principal of tax policy at Deloitte Tax. 'But the issue isn't the economic-recovery package and what the budget looks like in 2009, but what it will look like come 2012.'" (The Wall Street Journal)

Newly Posted Events
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18th Annual National Health Benefits Conference & Expo (HBCE)
in Florida on February 3, 2009
presented by Health Benefits Conference & Expo

ASPPA C-4 Preparation Series
Nationwide on October 28, 2008
presented by Amy L. Cavanaugh, CPC

Seminar -- Save the Date!
in Connecticut on December 3, 2008
presented by National Institute of Pension Administrators-CT Chapter

Newly Posted Press Releases
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The Flowers Group Announces the Launch of The Perks Company
Flowers Group

"Bender's Federal Income Taxation of Retirement Plans” Released by LexisNexis® Matthew Bender®
LexisNexis Matthew Bender

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