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December 1, 2008

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


Today's sponsor is DATAIR Employee Benefit Systems, Inc.

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[Official Guidance] PBGC Flat-Rate Premiums for 2009: $34/Participant for Single-Employer Plans, $9 for Multiemployer
The flat premium rates apply to premium payment years beginning in 2009. (Pension Benefit Guaranty Corporation)


[Guidance Overview] IRS Extension of Effective Date of Normal Retirement Age Regulations for Governmental Plans (PDF)
1 page. Excerpt: "For governmental plans, the final regulations were scheduled to take effect for plan years beginning on or after January 1,2009. However, the IRS recently published Notice 2008-98, to delay the effective date for governmental plans to plan years beginning on or after January 1, 2011. In the meantime, the IRS may clarify whether a normal retirement age based on years of service is acceptable under a governmental plan." (Prudential Retirement)


[Guidance Overview] Fiduciary Responsibility of Plan Administrators: What Is It and How Does It Affect You? (PDF)
3 pages. Excerpt: "Generally, the members of a defined contribution plan's governing board or committee ('plan board'), particularly when they are determining the plan's investment array, default investment, etc., are plan fiduciaries, /vi/ while 'plan sponsor' activities in establishing, amending and terminating a plan do not involve fiduciary duties." (National Association of Government Defined Contribution Administrators, Inc. via YouTube, LLC)


[Guidance Overview] Another Question is Answered in the 401(k) Plans Q&A Column
What is the distribution code that should be used on the 1099-R for a QDRO distribution where the alternate payee is under 59-1/2 and taking the payout in cash? The entire amount is taxable. (BenefitsLink.com)


[Guidance Overview] PBGC Final Regs Issued on Plan Termination Disclosure Requirements
Excerpt: "The Pension Benefit Guaranty Corporation (PBGC) has issued final regulations, implementing Sec. 506 of the Pension Protection Act of 2006 (PPA; P.L. 109-280), setting forth the disclosure requirements for distress and PBGC-initiated plan terminations." (Wolters Kluwer)


[Guidance Overview] Sixth Circuit Significantly Shortens Limitations Period for ERISA Claims
Excerpt: "Congress did not provide an express statute of limitations for a participant's action 'to recover benefits due to him under the terms of his plan' under ERISA §502(a)(1)(B), 29 U.S.C. §1132(a)(1)(B). The Sixth Circuit, applying the generally-accepted rule that 'in the absence of a federally-mandated statute of limitations, the court should apply the most analogous state law statute of limitations,' has long held that Ohio's 15-year statute of limitations for breach of a written contract applies to a §502(a)(1)(B) claim. Meade v. Pension Appeals & Review Committee, 966 F.2d 190, 195 (6th Cir. 1992), citing Ohio Rev. Code §2305.06. But a recent Sixth Circuit decision augurs ill for the continued viability of the Ohio 15-year statute of limitations in such ERISA claims." (Sixth Circuit Blog)


[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
Does Code section 1563(e)(6)(a) prevent parents who own separate businesses and have a minor child from availing themselves of the exceptions to the constructive ownership rules? (BenefitsLink.com)


Investment Funds Push an Environmental Agenda - Pension Funds Joining the Effort
Excerpt: "Until recently, green investment funds were mostly a niche for individual investors. But now investing with the idea of improving the environmental actions of corporations, not just maximizing profit, is catching on among some big pension funds and foundations, particularly in Europe and even in the United States." (The New York Times; free registration required)


Pension Benefit Guaranty Corporation Concerned About Detroit 3 Buyout Costs
Excerpt: "The federal corporation that insures retirement plans sent letters this week to General Motors Corp., Ford Motor Co. and Chrysler LLC, raising concerns about using pension funds to buy out employees. The Pension Benefit Guaranty Corp. warned that recent buyout and employee-reduction programs were not accounted for when the automakers estimated how much money would be needed to pay future pensions and that they 'may undermine the state of the plans.' In his letters to the automakers Wednesday, PBGC Director Charles E.F. Millard asked for a breakdown of the costs of each employee-reduction program." (Detroit Free Press)


401(k) Balances and Changes Due to Market Volatility: Data to November 26, 2008
Excerpt: "The Employee Benefit Research Institute is giving regular updates of 401(k) balance estimates as the markets change, based on data from the EBRI/ICI 401(k) database, the most comprehensive database on 401(k) plan participants yet assembled." (Employee Benefit Research Institute)


Target-Date Funds: Still the Right Rationale for Investors
Excerpt: "Recent market volatility reinforces how critical it is for plan sponsors to help ensure their participants have well-diversified portfolios and adhere to investing fundamentals, such as proper asset allocation, rebalancing, and long-term focus. These fundamentals are among the attributes of target-date funds . . . ." (The Vanguard Group, Inc.)


Legal Requirement for Pension Contributions Kicks in This Year Under the Pension Protection Act of 2006
Excerpt: "U.S. companies could face a pension contribution tab of $40 billion thanks to this year's financial crisis. Plus, the falling markets have corporations looking at an expected combined pension deficit of well over $200 billion, their worst ever. But for many companies the situation, while dire, isn't desperate; they have a war chest of cash giving them the ability to pay increased contributions, and they might even be able to put off paying them for a year or more under pension funding rules." (Workforce Management; free registration required)


State Street Refuses Sale of Company Stock to GM 401(k) Plan Participants
Excerpt: "General Motors Corp., Detroit, was blocked by State Street Bank & Trust from allowing participants in the automaker's two 401(k) plans to purchase GM common stock shares because of GM's financial difficulty, said Julie Gibson, GM spokeswoman. State Street, administrator and fiduciary for the $11.7 billion salaried employees 401(k) plan and $8.6 billion GM hourly employees 401(k) plan, refused to approve registration by GM of shares for sale to participants, Ms. Gibson said." (Pensions & Investments)


Cracks in the Pension Safety Net System?
Excerpt: "According to two separate news accounts, cracks may be appearing in the pension back-up systems for the United States and UK, respectively. Already jittery taxpayers may look at these warnings with heightened alarm. In 'Pension Agency Sounds Alarm on Big Three,' Wall Street Journal reporter John D. Stoll (November 28, 2008) writes that the Pension Benefit Guaranty Corporation ('PBGC') is worried that large automakers may offer early retirement or buyout deals to some plan participants, at the expense of those who remain. . . . In 'Pension lifeboat may be sunk by wave of firms being liquidated' (November 28, 2008), Phillip Inman and Simon Bowers - reporters for The Guardian - write that 'The Pension Protection Fund (PPF), which has already rescued more than 66 retirement schemes, may be forced to increase its levy on profitable companies to boost its finances or risk a government bail-out if more companies go bust.'" (Pension Risk Matters)


Officials at Colorado's Largest Public Pension Plan Examine Options Amid Declining Assets
Excerpt: "Pension officials face steep legal, political and financial hurdles in climbing out of the $12 billion funding hole that chaotic markets dug for the state's largest public pension plan. The board of the Colorado Public Employees' Retirement Association wants actuaries to calculate remedies for a funding drop that sent PERA's assets tumbling at least 29 percent this year. But some solutions may be unconstitutional, others won't produce enough money, and nearly all will stir political opposition." (The Denver Post)


Senate Bill Would Modify Pension Distribution Requirements
Excerpt: "The Senate Finance Committee has proposed the 'Worker, Retiree, and Employer Recovery Act of 2008,' bipartisan legislation that would modify pension distribution requirements and plan asset determinations." (Wolters Kluwer)


Senator Collins Asks Paulson to Cancel 2008 RMD Penalty
Excerpt: "A Republican U.S. Senator has added her voice to the chorus of those calling for changes in the rules governing required minimum distributions (RMD) from retirement savings plans. Senator Susan Collins (R-Maine) issued her call in a letter to U.S. Treasury Secretary Henry Paulson in which she urged Paulson to use his authority to suspend the RMD regulations 'to mitigate the impact on retirees over age 70 ½ who are required to withdraw funds from their 401(k) accounts or face stiff penalties,' and waive any penalties at least for the 2008 tax year." (PLANSPONSOR.com; free registration required)


Pomeroy Criticizes PBGC for Silence on Pension Funding Rule Adjustments
Excerpt: "Congressman Earl Pomeroy (D-North Dakota) again questioned the Pension Benefit Guaranty Corporation's stance on easing the funding requirements for pension plans in a letter to PBGC director Charles E.F. Millard." (PLANSPONSOR.com; free registration required)


Plan Sponsors Rank Service to Participants As Most Important Criteria in Selecting Plan Provider
Excerpt: "This year, as in every year we have asked plan sponsors to do so in PLANSPONSOR's Defined Contribution Services Survey, they ranked service to participants as the most important criteria, garnering a ranking of 6.65 on a 7.0 scale. Once again, service to plan sponsors was the second most important (6.50). Not surprisingly (particularly these days), investment performance was deemed the third most significant, while the financial strength of the provider was ranked fourth. However, the importance of all of these declined slightly from a year ago -- though perhaps 'not as much as you might think' . . . ." (PLANSPONSOR.com; free registration required)


Retirement Plan Advice: Stay the Course
Excerpt: "Veteran financial adviser Ed Slott has a stern warning for solo and small-firm lawyers who are panicking about their retirement investments: Stop watching CNBC. 'I tell the attorneys, 'You can't watch the Dow every day. Instead of watching that and getting [agitated] spend the time helping clients and making money doing it.'' As the owner of a small business himself in Rockville Centre, N.Y., Slott feels his small-business clients' pain. 'My own retirement plan has got hit plenty,' he says. 'But I'm not going to stop putting money in.'" (Dolan Media Newswires via Wisconsin Law Journal)


Pension Benefit Guaranty Corporation Asks Carmakers for Buyout Details
Excerpt: "Federal pension regulators expressed concern the big three U.S. automakers' cost-cutting efforts may harm their retirement programs and come back to haunt taxpayers should the companies default on the plans. The director of the Pension Benefit Guaranty Corp. sent letters this week to General Motors Corp., Ford Motor Co. and Chrysler LLC asking for information about their buyout and other employee-attrition programs. Such programs could drain money from pension plans by accelerating retirement-related costs that otherwise wouldn't come due for years." (Bloomberg L.P.)


Organisation for Economic Co-operation and Development Wants Employers' Help in Pension Investment
Excerpt: "Companies should help staff make the right investment decisions as employees play an ever larger role in managing their pensions, the Organisation for Economic Co-operation and Development (OECD) said. In a review of its pension fund governance guidelines expected next month, it will recommend employers and financial supervisors fill a 'governance vacuum' in pension schemes known as defined contribution (DC) schemes." (Reuters)


Latest Chrysler Buyout Offer Lures Quarter of Salaried Staff
Excerpt: "The historic downsizing of the Detroit automakers has already eliminated more than 100,000 factory jobs over the last three years. But at Chrysler, the day before Thanksgiving was the moment of reckoning for endangered members of its white-collar work force. Like General Motors and the Ford Motor Company, Chrysler is cutting deep into its white-collar ranks by offering buyouts or early retirement deals to managers, engineers, financial analysts and secretaries. The company is committed to reducing its salaried staff by 25 percent, or about 5,000 employees, by the end of the year." (The New York Times; free registration required)


Financially Themed Gift May Be a Hit this Season
Excerpt: "It won't have the wow factor of an iPhone, but a Roth IRA or other money-minded gift may have more sizzle than you think this holiday season. There are nevertheless some rules to keep in mind when bestowing such presents - like making sure they don't come off as judgmental or a homework assignment in disguise. 'Don't make it boring - or worse, a chore,' said Sheryl Garrett, president of the Garrett Planning Network of certified financial planners, based in Shawnee Mission, Kan." (AP via San Francisco Chronicle)


As Economy Slides, More Employees Give Up on Retirement Plans
Excerpt: "401(k) participants' reactions to what happened in 2008 could have a big effect on how much money people have when they're ready to retire decades from now, experts said. Already this year, with the Dow Jones industrial average down about 40 percent from its October 2007 high, some 4 percent of 401(k) participants have stopped putting money in their plan, according to consulting firm Hewitt Associates. Once investors start seeing year-end numbers, that figure likely will go higher, experts said." (New Jersey On-Line LLC)


Know the Law Before Taking Distributions from Retirement Accounts
Excerpt: "The shaky economy and plunging stock market are leading many Americans to cut back on their spending. If you're retired, you might also be inclined to pull less money out of your retirement account. But efforts to preserve as much of your depleted nest egg as possible could be thwarted by the Internal Revenue Service. If you're older than 70 1/2, Internal Revenue Service rules require you each year to take a minimum amount of assets out of your traditional individual retirement account or 401(k) plan. (The rules don't apply to Roth IRAs.)" (Newsday)


Plan Sponsors Said to Be Struggling to Evaluate Target Date Funds
Excerpt: "Many plan sponsors aren't focused on the investment strategies behind target date funds, creating an opportunity for financial advisers to play a greater role in the retirement-planning process, according to a survey by JPMorgan Asset Management Inc. of New York." (Investment News; free registration required)


Fewer Troops Choosing Redux Plan - and Lower Retirement Benefits
Excerpt: "The good news: The percentage of eligible service members choosing the $30,000 Redux bonus -- and the diminished lifetime retirement annuities that come with it -- [is] a lot lower than in 2001, the first year that anyone could actually get the bonus. The bad news: Even those lower figures, particularly for enlisted troops, are still robust enough to be worrisome. Last fiscal year, 28 percent of eligible enlisted Marines chose the fast cash over the security of a healthier retirement. In the Navy, the figure was 24 percent." (Army Times Publishing Company)


[Opinion] A Strategic Argument for Phased Retirement
Excerpt: "Commentary: Why should employers care about the social good of phased retirement -- especially in today's downturned economy, when getting expensive workers off the books is a matter of some urgency for many organizations? It's simple: Phased retirement is good for business." (Workforce Management; free registration required)


[Opinion] A Capitalist's Social Security, 401(k), and Retirement Plan Reform Program
Excerpt: "What if there was an easy way to implement a whole new approach to retirement funding, pension planning, and Social Security? Would the politicians be interested? Let's find out. What if the new plan actually reduced payroll taxes, cut prices, created jobs, increased salaries, raised shareholder dividends, partially funded decreased healthcare costs, and was available to everyone? Sound too good to be true, but it's actually doable." (NewsBlaze)


[Opinion] Don't Give Up on 401(k) Plans
Excerpt: "These voluntary retirement accounts have succeeded for most people where conventional retirement plans generated next to nothing for the average worker. Has the government somehow lost out? Not really. It gets to eventually tax retirement money as regular income versus what otherwise might have been capital gains on a much smaller amount. Any effort to dismantle one of the most solid underpinnings of today's shaken economy would be hopelessly misguided." (Steve Butler via ANG Newspapers)


[Opinion] Pension Agency Sounds Alarm on Big Three - Comments on Article at WSJ.com
Excerpt: "The agency that protects pension plans raised new concerns about Detroit's three auto makers, saying their use of pension funds to pay for restructuring threatens to drain the funds and leave the agency footing the bill." (Tom Vanderwell via Straight Talk About Mortgages and Real Estate)



Sponsored by: ASPPA

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Banner ad for ASPPA

The ASPPA 401(k) SUMMIT, March 22- 24, 2009

Register now and be a part of this unique forum for retirement sales and investment professionals in the 401(k) arena. Hear Arthur Laffer discuss the condition of our new global economy, participate in interactive networking activities and specialized education tracks, and listen to our industry’s leaders discuss where the trends are taking us and how to be prepared. Don’t miss out on the longest running event dedicated solely to the sales and investment segment of our industry, register now.

(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] Avoiding Legal Liability During the Holidays (PDF)
2 pages. Excerpt: "[T]he holidays can provide fertile ground for potential legal liability against employers. Seemingly simple scenarios, such as employees taking time off of work for religious observance, and employers giving end-of-year bonuses and hosting holiday parties, all can have legal consequences. While employers do not need to avoid celebration altogether, preventive planning can go a long way toward avoiding holiday problems." (Snell & Wilmer LLP)


Some Consumers Say Wall Street Failed Them
Excerpt: "With retirement accounts tumbling and millions of homeowners struggling to pay their mortgages, a realization is dawning on many Americans: The banks, brokerage firms, insurance companies and other players in the financial-services industry have failed them. . . . risks previously borne by big banks and employers have been placed squarely on the shoulders of consumers. Individuals increasingly bear the risk of interest-rate fluctuations, rising health-care costs, stock-market gyrations and outliving their retirement savings." (The Wall Street Journal)




Newly Posted Events
(Post Yours!)

401(k) Webex - Fee Disclosure Regulations featuring MassMutual, Groom Law Group, and AFS Financial Group
Nationwide on December 11, 2008
presented by AFS Financial Group

Meeting Your Fiduciary Responsibilities Under ERISA
Nationwide on January 8, 2009
presented by Lorman Education Services

Understanding Your Summary Plan Descriptions
Nationwide on February 10, 2009
presented by Lorman Education Services

Webinar: "4th Quarter Update -- Looking Ahead on Employee Benefits Issues"
Nationwide on December 4, 2008
presented by Ogletree Deakins



Newly Posted Press Releases
(Post Yours!)

Plan Now to Get Full Benefit of Saver’s Credit; Tax Break Helps Low- and Moderate-Income Workers Save for Retirement
Internal Revenue Service (IRS)

State Street Puts Brakes On GM Participants
State Street



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