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October 28, 2008

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

Today's sponsor is ASC & The ASC Institute

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The IRS requires that every employer with a 403(b) tax-sheltered annuity plan must have a written plan document in place by December 31, 2008.
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[Guidance Overview] Year-End Deadlines for Certain Tax-Exempt Plan Sponsors (PDF)
4 pages. Excerpt: "[Dec.] 31, 2008, is an important date for many sponsors of Internal Revenue Code (IRC) Section 403(b) programs and sponsors of nonqualified deferred compensation arrangements under IRC Section 457(f). With the year-end fast approaching, now is the time for sponsors of IRC Section 403(b) programs and IRC Section 457(f) plans to ensure that their programs and plans are in compliance." (Drinker Biddle & Reath LLP)

[Guidance Overview] Department of Labor's Final Rule on Securities Cross-Trading for ERISA Accounts (PDF)
3 pages. Excerpt: "This Alert will highlight the differences between the final rule and the interim rule, providing a brief summary and explanation." (Paul, Hastings, Janofsky & Walker LLP)

[Guidance Overview] CRS Report for Congress on Individual Retirement Accounts and 401(k) Plans: Early Withdrawals and Required Distributions (PDF)
19 pages. Excerpt: "This CRS Report summarizes the provisions of law that govern the taxes applicable to pre-retirement distributions from retirement accounts, and the situations in which distributions must be taken from a plan in order to avoid a tax penalty." (Congressional Research Service, U.S. Library of Congress)

[Guidance Overview] Final Regs Allowing for Distributions to Missing Nonspousal Beneficiaries
Excerpt: "The Employee Benefits Security Administration (EBSA) has released final regulations and a related Prohibited Transaction Class Exemption that amend existing distribution requirements for terminated defined contribution plans, including abandoned plans, to allow rollovers into inherited IRAs for missing nonspouse beneficiaries. These final rules clarify the Pension Protection Act of 2006 (PPA; P.L. 109-280) provisions regarding missing participants and are effective on November 6, 2008." (Wolters Kluwer)

[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)

Employers at Risk As Market Takes Toll on Retirement Plans
Excerpt: "Once considered the perfect investment vehicle, 401(k) plans are facing more and more scrutiny as stocks continue to fall. And industry experts warn employers to be very careful about how they sponsor the investment vehicles -- or they could end up in court. 'With the downturn in the market, people who lost money in 401(k) plans are looking for someone to blame,' said Christine Soscia, vice president and plan consultant at Las Vegas-based InVest Financial Solutions for Business." (Las Vegas Business Press)

Investors Stick With 401(k)s and IRAs
Excerpt: "Despite the recent daily thousand-point swings in the Dow Jones Industrial Average and the understandable uncertainty among investors, Individual Retirement Accounts and 401(k) plans still remain American's dominant and trusted retirement vehicles. That trend is expected to continue as retirement plans automatically enroll participants into qualified default investment alternatives like target-date funds, and investors continue to buy into the notion of the rewards of long-term holdings." (Money Management Executive via On Wall Street)

The True Cost of Social Security
Excerpt: "Implicit government obligations represent the lion's share of government liabilities in the U.S. and many other countries. Yet these liabilities are rarely measured, let alone properly adjusted for their risk. This paper shows, by example, how modern asset pricing can be used to value implicit fiscal debts taking into account their risk properties. The example is the U.S. Social Security System's net liability to working-age Americans. Marking this debt to market makes a big difference; its market value is 23 percent larger than the Social Security trustees' valuation method suggests." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)

Americans for Tax Reform's 401(k) Tax Calculator
Excerpt: "The calculator asks a voter to input the current value of his or her 401(k) account. Then, it recalculates what their 401(k) will be worth under four different tax scenarios: The Obama plan to raise the capital gains and dividends rate to 20%; The McCain plan to cut the corporate income tax rate from 35% to 25% and allow for immediate expensing instead of long depreciation; The Hill Democrat/Obama-in-the-Primaries plan to raise the capital gains tax to 28% and the dividends tax to 39.6%; The ATR plan to cut the capital gains and dividends rate to 0%, cut the corporate rate to 25%, and allow for immediate expensing." (Attorney B. Janell Grenier via

Underfunded Pension Plans Eat Away at Earnings
Excerpt: "It's beginning to look as if large companies may end the year with their pension plans more underfunded than ever -- and a handful of corporations are already acknowledging that these deficits are likely to have a significant impact on earnings." (Workforce Management; free registration required)

GM Won't Be Alone in Freezing Its 401(k) Match, Experts Predict
Excerpt: "'A number of companies did this during the bear market in 2001,' said Ted Benna, who is known as the founder of the first 401(k) plan and is COO of Malvern Benefits Corp., a 401(k) plan administrator. 'We are in a very nasty situation that isn't going to get better for some time and a lot of employers are going to be anxiously looking at how to reduce costs.'" (Workforce Management; free registration required)

Changes in Consumption at Retirement
Excerpt: "Previous empirical literature has found a sharp decline in consumption during the first years of retirement implying that individuals do not save enough for their retirement. This phenomenon has been called the retirement consumption puzzle. In contrast to some of the previous studies, the authors find no evidence of the retirement consumption puzzle during the first years of retirement." (Social Science Research Network)

Fidelity Investments Reports Nearly Half of 61 Year-Olds Plan to Start Taking Social Security as Soon as Eligible
Excerpt: "While more than three quarters (77%) of 61 year-olds report knowing when they will start taking Social Security, many show a very limited awareness of basic Social Security knowledge needed to make an informed decision. When quizzed about issues such as filing requirements and taxation, a vast majority (85%) correctly identify age 62 as the earliest possible age that people may become eligible for Social Security, but 56 percent do not know when they will be eligible for full Social Security benefits (age 66 for those born 1943-54)." (Business Wire via MarketWatch)

[Opinion] The Pension Fund Problem to Come
Excerpt: "Many Americans still rely on pension funds for their retirement. Those pension funds count on their investments doing well to help fund the growing population of retirees. With the Dow down more than 40% this year and bonds also taking a hit, look for underfunded pension plans to become the next big story in this already weak economy." (FOX News Network)

[Opinion] Amara v. Cigna Pension Plan Class Action Lawsuit About Cash Balance Pension Conversions (PDF)
Excerpt: "On October 14, 2008, AARP and the National Employment Lawyers Association filed an amici curiae . . . brief on behalf of the Plaintiffs, asking the Court to provide full relief to the Plaintiffs." (Stephen R. Bruce via ERISA Pension Claims)

[Opinion] Baltimore's Public Pension Plan Helps Contain City's Costs
Excerpt: "The Baltimore Sun's editorial on retired city police and firefighter benefits is wrong and incredibly mean-spirited ('A costly pension benefit,' editorial, Oct. 23). Let's start with some basics. All city employees, except police and firefighters, earn for their years with the city both a city pension benefit and Social Security. Police and firefighters do not get Social Security benefits. The only pension benefits they get for their years with the city come from the Fire and Police Retirement System, which is funded in part by their own contributions." (The Baltimore Sun)

[Opinion] They Say That Desperate Times Call for Desperate Measures - Looking at 401(k) Plans
Excerpt: "[H]aving spent some part of the last several years worrying about the establishment of a 'you're on your ownership' society (see IMHO: Legs to Stand On, IMHO: Dead 'Beat'), I have been distressed to see a growing voice given to those who would treat the ills of the employer-based leg of the three-legged stool by amputation." (; free registration required)

[Opinion] American Fiduciaries Must Not Vote Plan Proxies
Excerpt: "On October 17, 2008, the U.S. Department of Labor issued and Interpretive Bulletin Relating to Exercise of Shareholder Rights for pension funds regulated by ERISA, the federal pension law. The crux of the ruling was that U.S. pension funds subject to ERISA may no longer vote their proxies if they want to avoid the risk of investigation and possible prosecution by the federal government." (Global Investment Watch)

[Opinion] LaRue and the Coming Avalanche of ERISA Fiduciary Litigation - Not
Excerpt: "You may recall that after the Supreme Court in LaRue v. DeWolff, Boberg, and Associates found that individuals could bring breach of fiduciary claims against their plans for mismanagement of their 401(k) accounts, there were many who predicted that such 401(k) suits would overwhelm the courts and generally spell disaster for the judiciary of this country (I didn't predict that, but I thought the principle of the holding was an important one)." (Paul M. Secunda via Marquette University Law School)

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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] New Transit Benefit for Bicyclists
Excerpt: "Congress recently passed and President Bush signed the Emergency Economic Stabilization Act (EESA).1 Section 211 of the EESA amends Section 132 of the Internal Revenue Code (IRC) to create a new tax-preferred transit benefit for bicyclists. Effective January 1, 2009, private and public sector employers may provide tax-free subsidies to employees who regularly bike to work." (The Segal Group, Inc.)

[Guidance Overview] Arbitrability of USERRA Claims: Battle on the Home Front
Excerpt: "With the continuation of major troop deployments overseas, increasing numbers of employers and employees are finding themselves affected by the protections of the Uniformed Services Employment and Reemployment Rights Act of 1994 ('USERRA'), which provides comprehensive re-employment and anti-discrimination rights to employees who serve in America's military. . . . Employees who seek to vindicate their rights under USERRA, however, are finding themselves at the center of a conflict among federal courts concerning whether USERRA claims may be subject to their employers' mandatory arbitration clauses." (

[Guidance Overview] ERISA Does Not Prohibit Proposed Transfer of Assets from Terminated MEWA to Tax-Exempt Foundation
Excerpt: "EBIA Comment: We found this advisory opinion noteworthy because it addresses issues relating to the distribution of welfare plan assets on plan termination. But given how little guidance exists on this topic, it is unfortunate that the DOL did not explain its reasoning more clearly. The opinion appears to conclude that the proposed transfer was permissible because the trust had been properly terminated and all liabilities satisfied." (Employee Benefits Institute of America)

[Guidance Overview] The ERISA and Non-ERISA Employee Benefit Implications of the Emergency Economic Stabilization Act of 2008
Excerpt: "Employers should consult with benefits counsel to decide whether any of the benefit-related provisions contained in EESA are applicable to their benefits programs." (Aiken & Aiken)

[Guidance Overview] Compliance with Final Regulations under Code Section 409A Required by December 31, 2008
Excerpt: "If not yet started or completed, the following should be undertaken immediately: (1) identify and inventory all agreements, methods, programs, or arrangements that could include a 'nonqualified deferred compensation plan' and (2) work with counsel to take such action as may be warranted to comply with the written document and other requirements of Section 409A prior to January 1, 2009." (Blank Rome LLP)

IRS to Waive Code Y 2008 Reporting Mandate
Excerpt: "Treasury Deputy Benefits Tax Counsel Helen H. Morrison told attendees at a recent Webinar that the Internal Revenue Service (IRS) will waive the requirements for Code Y reporting in 2008 of amounts deferred under 409A for nonqualified deferred compensation plans (NQDC)." (; free registration required)

Lessons from the Orth Case
Excerpt: "There are some really great lessons for all from the District Court and the Circuit Court opinions in the Orth v. Wisconsin State Employees Union Council 24, et al. case discussed in this previous post here (in case you missed it): (1) Statements in collective bargaining agreements can give rise to unintended ERISA plans. The district court opinion includes a discussion of this issue . . . ." (Attorney B. Janell Grenier via

Expatriate Benefits Improve as Assignments Double
Excerpt: "Mercer's 2008/2009 Benefits Survey for Expatriates and Globally Mobile Employees indicates 86% of companies consider benefit provision for expatriate employees a medium or high business priority." (; free registration required)

Newly Posted Events
(Post Yours!)

Administrative Problems in Section 125 Plans (60-Minute Power Series Webcast)
Nationwide on November 11, 2008
presented by International Foundation of Employee Benefit Plans

Aon Consulting’s 2008 Replacement Ratio Study™
in Colorado on November 11, 2008
presented by Western Pension and Benefits Conference-Denver Chapter

Year-End Compliance Checklist (60-Minute Power Series Webcast)
Nationwide on November 18, 2008
presented by International Foundation of Employee Benefit Plans

Newly Posted Press Releases
(Post Yours!)

Basic Competencies for Health Information Management and Informatics Workforce Development
American Medical Informatics Association

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Plan Document Specialist
for American National Insurance Company
in TX

DC / 401(k) Compliance Consultant
for The Savitz Organization
in DE, NJ, PA

Senior Associate - Actuarial
for Fidelity Investments
in MA

Retirement Plan Services Administrator
for Stock Yards Bank and Trust
in KY

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