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December 5, 2008

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

Today's sponsor is International Foundation of Employee Benefit Plans

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E-learning Benefit Courses From the International Foundation

If you need compliance education and are under pressure to cut travel expenses, the International Foundationís e-learning courses are the perfect choice. With the Foundationís commitment to high quality education, you can be certain you are receiving need-to-know employee benefit information. A wide range of benefit topics are available, from the basics to compliance technicalities. Stay within your travel budget and stay on top of benefit complexities with the International Foundationís e-learning courses.

[Guidance Overview] Fee Transparency: Key Required Disclosures for 2009 Form 5500 Schedule C
Excerpt: "In this ErisaALERT we will discuss some of the key disclosures required for the 2009 Schedule C. While you may be thinking that you don't have to worry about this until the 2010 filing date, you should know what the requirements will be and whether or not your vendors will be able to provide the information to you! You may wish to have the following information available as you attempt to apply the new requirements to your particular situation - FAQs About the 2009 Form 5500 Schedule C ( and the 2009 Form 5500" (ERISAdiagnostics Inc.)

[Official Guidance] Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)
4 pages. Excerpt: "This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under section 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under section 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under section 417 (e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under section 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under section 417(e)(3)(D) as in effect for plan years beginning after 2007." (Internal Revenue Service)

[Guidance Overview] Supreme Court to Hear Arguments on Crediting of Pregnancy Leave by Retirement Plans
Excerpt: "Next Wednesday, the Supreme Court will hear oral argument in AT&T v. Hulteen (the ScotusWiki page with links is here), a case involving pregnancy leave and the calculation of years of service for retirement benefits. The plaintiffs are women who worked for AT&T and its predecessor, Pacific Bell, who took leave related to pregnancies before 1979, and who retired between 1994 and 2000. Before 1979, the company limited the amount of pregnancy leave that would count towards service for calculating pension benefits, but did not limit the amount of other temporary disability leave that would count for service. In other words, before 1979, the company treated pregnancy leave differently from other temporary disability leave to calculate pension benefits at retirement." (Workplace Prof Blog)

[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
Who can truly sponsor a plan? Or, when is an Employer really an employer? My client has a corporation that (after the owner has died) sells all of its assets (not the stock). The spouse of the deceased owner and his two adult kids simply "manage" the corporation's assets ($5 million; their wages total $500,000 per year to do that, but mostly they engage in helping poor people in Africa with no intent to make income there). Don't they need to be engaged in a trade or business? Doesn't compensation need to be reasonable? (

[Guidance Overview] DOL Publishes Final Rules on Annuity Selection for Defined Contribution Plans (PDF)
2 pages. Excerpt: "On October 7, 2008, the Department of Labor (DOL) published final regulations regarding the selection of annuity providers and annuity contracts for defined contribution plans. The final regulations establish a safe harbor in selecting an annuity provider for benefit distributions. . . . A fiduciary who wants to take advantage of the safe harbor may perform his review either when: Selecting an annuity provider and contract for making payments to a specific participant or beneficiary; or Selecting a provider to provide annuity payments at future dates to participants or beneficiaries. In this situation, the fiduciary must periodically review the annuity provider's financial ability to make all future payments under the annuity contract, as well as the reasonableness of the cost of the contract in relation to the benefits and services to be provided under the contract." (Prudential Retirement)

[Guidance Overview] Fiduciary Focus: Managing Accountability (PDF)
4 pages. Excerpt: "Are you the sponsor of a 401(k) plan? If you are, does the investment advisor to your plan acknowledge in writing its status as a section 3(38) 'investment manager' operating as a section 405(d) (1) 'independent fiduciary' under the Employee Retirement Income Security Act (ERISA)? If not, you face two problems. First, you subject yourself to the risk of legal liability for your investment advisor's own imprudent conduct. Second, you have missed the chance to transfer significant risk and responsibility, and hence potential liability, to your investment advisor. Both of these problems are unnecessary and both of them can be solved." (Prudential Retirement)

Pension Funds Take Another Pounding
Excerpt: "If there's any doubt America faces its gravest financial crisis in decades, consider this sobering evidence: Pension plans for some of the 1,500 largest U.S. companies have lost about $280 billion so far this year. In November alone, pension plans lost about $130 billion, marking the second consecutive month of record declines, according to a new report from Mercer, the financial consulting firm. The companies Mercer studied -- those in the Standard & Poor's 1,500 index, which includes household names like 3M and Coca Cola -- reported their pension plans ended 2007 with a $60 billion surplus. So the swiftness of this year's decline is astonishing." (Time Inc.)

Market Declines and Public Pensions (PDF)
6 pages. Excerpt: "This issue brief describes how public plans 1) employ strategies to soften the effects of market volatility on plan financing; 2) have weathered past market crises; 3) remain disciplined investors, even in the wake of sharp market declines; and 4) are designed to keep contributions predictable and within historical norms." (National Association of State Retirement Administrators/National Council on Teacher Retirement)

Identifying Local Differences in Retirement Patterns (PDF)
30 pages. Excerpt: "The ability to retire at an age and in a manner of one's choosing depends on one's ability to retain or find employment at older ages, which depends in turn on local labor market conditions. We investigate how local labor markets affect retirement transitions. We match households from the Health and Retirement Study to MSA unemployment rates and estimate multinomial logit regressions on annual job transitions." (Leora Friedberg, Michael Owyang, and Anthony Webb via Center for Retirement Research at Boston College)

What Effect Do Time Constraints Have on the Age of Retirement? (PDF)
26 pages. Excerpt: "Work affects both the time available for non-market activities and the times at which those activities are performed -- and therefore work-induced constraints on time use may influence retirement decisions. We analyze these effects by combining new data from the American Time Use Survey with information on retirement in the Health and Retirement Study." (Center for Retirement Research at Boston College)

Participants Calmer Than You'd Think Amid Market Turmoil
Excerpt: "Recent market volatility has tested the mettle of participants -- from the financially knowledgeable to the less savvy. Are participants heeding the experts' call to stay the course with their retirement plan accounts? Or are they trading and moving money out of equities as much as news headlines would have you believe? The Vanguard Center for Retirement Research (CRR) examined recent transactions and other activities in plans recordkept by Vanguard for nearly 3.5 million active and deferred participants in approximately 2,200 defined contribution plans. The findings show a different picture of participant behavior than recent media reports do, in three key areas . . . ." (The Vanguard Group, Inc.)

Fund Fees Expected to Drop
Excerpt: "The bear market will lead to a proportional decrease in regular fund fees and severe cuts in performance-based fees, according to Boston Consulting Group (BCG). In a recent report, the consulting group said four factors will lead to lower, or at least more volatile, fees: the bear market; margin pressure because of increased investor skepticism; a rising share of performance-based fees; and an increasing share of low-margin products." (planadvisor)

Employer Groups Watch AT&T Pregnancy Discrimination Case
Excerpt: "Employers' groups are watching a pending U.S. Supreme Court case that could decide whether federal mandates for protections against pregnancy discrimination - including in pension issues - should be applied retroactively." (; free registration required)

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview] Net-Settled Stock Option Exercises: Considerations and Analysis (PDF)
7 pages. Excerpt: "Since the publication in the March/April 2008 issue of The Corporate Executive regarding net-settled options, there has been a heightened interest in these instruments throughout corporate America. The purpose of this white paper is to explore several issues with respect to net-settled options that will be of interest to companies actively considering implementing such a program. We will focus on some of the administrative and international issues that have not been highlighted in the published materials thus far." (Baker & McKenzie LLP)

Low-Skill Jobs, Work Hours, and Paid Time Off
Excerpt: "This brief uses data from the 2007 Survey of Employers in the Low-Skill Labor Market to examine the scheduling demands employers place on workers recently hired to fill noncollege jobs and to assess the availability of paid time off, sick leave and other benefits that help workers balance their work and family lives." (Urban Institute)

When Cutting Costs, Employers Should Beware of ERISA Section 510
Excerpt: "This article from Wharton--'As Layoffs Spread, Innovative Alternatives May Soften the Blow'--indicates companies are looking at creative alternatives to layoffs 'such as voluntary retirements or salary cuts, hiring freezes, reductions in hours, or the cancellation of business trips and/or costly perquisites.' The article also notes the trend of cutting 'benefit packages and matching contributions to 401(k) plans.' Whatever the alternatives contemplated, employers need to beware of the minefield of Section 510 of ERISA." (Attorney B. Janell Grenier via

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

Section 409A Violations: What You Need to Do
Nationwide on January 13, 2009
presented by ABA Joint Committee on Employee Benefits

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Client Services Associate
for Milliman, Inc.
in CO, TX

Retirement Services Analyst
for County of Sacramento
in CA

Cafeteria or Flexible Spending Account Administrator
for REDW The Rogoff Firm
in NM

Benefits Manager
for CUNA Mutual Group
in WI

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