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December 8, 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.

(Click on company name or banner to learn more.)
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[Guidance Overview] Sixth Circuit Holds that Disabled Retirees Not Protected by Title I of the ADA
Excerpt: "The Sixth Circuit picked a side this week in a circuit split about whether retirees are covered by Title I of the ADA in McKnight v. General Motors. The plaintiffs in this case retired from General Motors early and then later became disabled, before they reached the normal retirement age. Their pension plans provided that if they became eligible for social security disability benefits before they reached normal retirement age, their pension benefits would be reduced by the amount of social security disability benefits they received. The plaintiffs argued that reducing their benefits because they became disabled violated Title I of the ADA." (Workplace Prof Blog)

[Guidance Overview] Field Guidance in FAQ Format on the Bonding Requirement for ERISA Plans
Excerpt: "Although much of the FAB [field assistance bulletin] is a summary of the detailed temporary regulations, the easy-to-read format makes these rules more accessible to the many parties that need to know and understand the bonding requirements. The FAB gives numerous citations to the underlying regulations so readers can easily find the more detailed discussions in the regulations. And it covers many other issues too numerous for us to cover, including how to calculate the bond amount when multiple plans are covered under a single bond and how the different types of bonds provide coverage. There are also several reminders that selecting and monitoring ERISA bonds is a fiduciary act and a discussion of the differences between fiduciary liability insurance and the ERISA bond." (Employee Benefits Institute of America)

White House Says No to Pension Funding Relief
Excerpt: "Efforts to provide corporations with relief from new pension funding rules that are kicking in just as stock and bond markets have conked out have drawn opposition from the highest of authorities -- the current administration. It's a twist that could derail corporate hopes for speedy approval of changes to pension laws, leaving large private employers potentially on the hook to pump billions into their underfunded pensions after closing the books on 2008 in just a few weeks." (Financial Week)

Pension Funds Beg Congress to Suspend Billions in Contributions
Excerpt: "Pension funds at Pfizer Inc., International Business Machines Corp., United Parcel Service Inc. and dozens of other companies have joined the parade of businesses seeking relief from Congress amid this year's economic meltdown. Instead of money, they want legislation to suspend a federal law that would make them pump billions of dollars into retirement plans to offset stock-market losses as many struggle to find enough cash just to stay in business. They're pressing Congress to consider the issue this week before this year's session adjourns." (Bloomberg L.P.)

New Pension Rules Hitting Companies That Are Already Down - Could Make Painful Recession Worse
Excerpt: "Amid the plunging stock market, much attention has been paid to the slipping fortunes of traditional single-employer pension plans, including the well-chronicled problems at Nortel Networks (NT) and Ford Motor. But lesser-known multi-employer plans may pose a more urgent threat to millions of rank-and-file workers, corporate managers, shareholders -- and the overall economy. Operating in the shadows of their single-employer counterparts, multi-employer plans account for nearly a quarter of the $2 trillion in private pension assets, and include everything from big corporations such as supermarket giant Kroger and shipping titan United Parcel Service to small businesses operating on shoestring budgets (DIS)." (Business Week)

Hidden Risks for Pension Funds?
Excerpt: "Sponsors are facing the prospect of having a much lower funded status -- with the higher balance-sheet liability and contribution requirements that go along with this -- in a year they can least afford it. However, plan sponsors may be substantially underestimating the real value of their pension obligation by using high-quality corporate bond yields to value them, as accounting rules require. Their real pension liability may, in fact, be higher than what they will be obliged to disclose for balance-sheet accounting purposes." (The Vanguard Group, Inc.)

The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2007 (PDF)
24 pages. Excerpt: "Employers that decide to offer 401(k) plans, an optional employee benefit, are confronted with two competing economic pressures: the need to attract and retain qualified workers with competitive compensation packages and the need to keep end products and services competitively priced. As a firm increases overall compensation to its employees, it increases its ability to hire and retain workers, but it also increases the costs of producing its end products and services. Providing and maintaining 401(k) plans require employers to obtain a variety of administrative, participant-focused, regulatory, and compliance services. All of these services involve costs. Generally, the plan sponsor and the plan participants share these costs." (Investment Company Institute)

2nd Circuit Says Adviser Cannot Sue on Behalf of Clients
Excerpt: "The 2nd U.S. Circuit Court of Appeals has ruled that an investment adviser with the authority to make investment decisions and power of attorney to sue but who did not have a valid assignment of shareholder claims does not have constitutional standing to bring an action on behalf of clients under federal securities laws." (; free registration required)

Northern Trust Hit with Another Securities Lending Suit
Excerpt: "FedEx Corp. is accusing Northern Trust Company (NTC) and Northern Trust Investments N.A. (NTI) with breaching their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by investing a large percentage of its pension plan assets in funds substantially involved in securities lending." (; free registration required)

Employer Cleared in Conversion Distribution Dispute
Excerpt: "A federal judge in Kentucky has cleared an employer of charges it violated the Employee Retirement Income Security Act (ERISA) by not including early retirement benefits in a participant's lump sum distribution." (planadvisor)

Percentage of 'Green Zone' Multiemployer Plans Declines; More Expected (PDF)
4 pages. Excerpt: "[This 'Updated Survey of Plans' Actual Zone Status,' is] based on multiemployer pension plan certifications through the end of September 2008. The nearly 350 plans in the survey represent a wide range of industries across the U.S. and combined assets of close to $132 billion. Key Findings: As noted in the survey report, as a percentage of the total, fewer plans are now in the green zone and more plans are in the yellow and red zones." (The Segal Group, Inc.)

[Opinion] Saving Retirement from 'Bah, Humbug!'
Excerpt: "I was speaking at a conference in New York last week when a fellow panelist made a remarkable claim - the U.S. could no longer afford to provide the kind of retirement security middle class Americans came to expect in the post-World War II decades. The remark sounded very Ebenezer Scrooge...'Retirement security? Bah, Humbug!' I found this astonishing. As any economist will tell you, our nation can afford everything we enjoyed in 1950 and more. Our nation's gross domestic product is roughly six times larger than it was in 1950 and household incomes have grown by a similar amount." (National Institute on Retirement Security)

[Opinion] Analysis of Research Paper Titled: 'Intergenerational Transfer of Public Pension Promises' (PDF)
4 pages. Excerpt: "This . . . memorandum analyzes a recent research paper from the University of Chicago projecting public pension costs and liabilities. The memorandum concludes that certain simplifying assumptions made in the research paper resulted in a significant overestimation of related costs and liabilities." (Gabriel Roeder Smith & Company)

[Opinion] Should the 401(k) Be Killed?
The latest Curious Capitalist column is online and in the latest issue of Time. It is about Teresa Ghilarducci's comments on 401(k) plans and the reaction to them. (The Curious Capitalist via Time Inc.)

[Opinion] 401 Not O(k)
Excerpt: "A wonky e-mail from a reader: I'm an ERISA employee benefits attorney who started out working for Nebraska's state pension plans. I've thought a lot about the 'defined contribution' (e.g. 401(k)) versus 'defined benefit' (e.g. traditional state pension) debate. I tend to agree with most of the criticisms of 401(k) plans that you cited -- But I think you need to think more about the actual state of large state defined benefit pension plans." (Andrew Sullivan's column via The Atlantic)

Sponsored by: IRS & AIRE, LLC

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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

[Official Guidance] Text of Proposed IRS Regs: Calculation of Taxable Income When Nonqualified Deferred Comp Plan Fails 409A Requirements (Federal Register Version) (PDF)
24 pages. These regulations should not be relied upon for 2008 plan years until further guidance is issued. Excerpt: "The Treasury Department and the IRS anticipate issuing interim guidance during 2008 addressing the extent to which taxpayers may rely on the proposed regulations with respect to the calculation of the amounts includible in income under section 409A(a) and the calculation of the additional taxes under section 409A(a). The interim guidance is also expected to address the calculation of the amounts includible in income and additional taxes under section 409A(b) and service recipient reporting and withholding obligations with respect to amounts includible in income under section 409A(a) or (b) for taxable years beginning before the final regulations become applicable. The Treasury Department and the IRS anticipate that such interim guidance will provide that taxpayers may rely upon the proposed regulations in their entirety (but that taxpayers may not rely on part, but not all, of the proposed regulations)." (Internal Revenue Service)

[Official Guidance] Text of IRS Notice 2008-113: Relief for Failure of Nonqualified Deferred Compensation Plan to Comply with Section 409A in Operation (PDF)
66 pages; scheduled for publication in IRB 2008-51 on December 22. Excerpt: "On December 3, 2007, the Treasury Department and the IRS issued Notice 2007-100 . . . . The Treasury Department and the IRS have reviewed all of the comments submitted, and are issuing this notice as a successor to Notice 2007-100. This notice incorporates, clarifies and expands upon the guidance provided in Notice 2007-100, and accordingly Notice 2007-100 is obsoleted." (Internal Revenue Service)

[Guidance Overview] New 409A Guidance Issued and 457A Guidance Expected Shortly
Excerpt: "Employers must ensure that all of their compensatory arrangements are reviewed for 409A compliance and amended as necessary prior to December 31, 2008." (McDermott Will & Emery)

Alzheimer's Growing Concern for Businesses: How Employers Can Help Affected Workers Stay Productive and on the Job
Excerpt: "As the workforce ages, the number of people working with early symptoms of dementia is likely to grow. Many large corporations hope to hold on to skilled employees past traditional retirement age. While most older employees are likely to be healthy, two out of every 100 people 65 to 74 years old have Alzheimer's disease.' (Workforce Management; free registration required)

Economic Downturn Imperils Benefits
Excerpt: "Many small businesses trying to weather the recession are cutting employee benefits along with other expenses -- reducing or even eliminating their contributions to health care insurance and retirement plans. These are painful moves that many companies undertake to save their cash flow and, in some cases, employees' jobs. Human resources consultants say owners should aim at making these cutbacks temporary -- and to let employees know that their benefits will be restored as soon as possible." (AP via The Houston Chronicle)

What to Expect from Washington with a New White House and Congress: Critical Legislative and Judicial Issues That Will Affect Employers
Excerpt: "This interactive webcast . . . discussed issues that included: Significant changes that have already been enacted in 2008 (e.g., the Genetics Information Nondiscrimination Act (GINA) and amendments to the ADA); Why 2009 could see the biggest changes in labor and employment laws in decades; Specific legislative and regulatory changes that are expected to be enacted and how employers can prepare now for such changes" (Morgan, Lewis & Bockius LLP)

A Look Back at Benefits in 2008: Deadlines, Tough Times, and Opportunity
A review, with links, of previous articles on benefits issues in 2008. (Chang, Ruthenberg & Long PC)

Many Employers Offering Financial Education Programs for Their Employees
Excerpt: "A recent survey of employers conducted by the International Foundation of Employee Benefit Plans found that 43 percent of U.S. respondents offer financial education/literacy programs for their workers." (Chiropractic Economics)

CRS Report Describes Pension, Healthcare Obligations of Big 3 Automakers; Overview of Proposed Bailout (PDF)
44 pages; see pages 23 through 35 for information on pension, healthcare and executive compensation discussion. Excerpt: "Bankrup.tcy filing could also threaten health plans for union workers and nonunion workers and retirees. Under a liquidation, there would presumably be no health plans remaining for any former workers or retirees. In the event of a bankrup.tcy reorganization under Chapter 11, if a firm continues to provide health benefits to its workers, certain individuals would be entitled to purchase health benefits through COBRA . . . ." (Congressional Research Service, U.S. Library of Congress)

[Opinion] Ongoing Developments and Other Issues from TARP
Excerpt: "[W]e are starting to see some unions filing some EESA-related shareholder proposals seeking more stringent compensation reform at TARP-participating institutions. For example, one proposal seeks to limit annual incentive compensation and severance payments to no more than one times the senior executive's annual salary, and require the institution to award long-term compensation in the form of performance-vested equity instruments. On the positive side, some companies are freezing new stock option awards and/or require senior executives to hold at least 75 percent of stock obtained through equity awards while they are employed (so-called 'Hold 'Til Retirement')." (Michael S. Melbinger via Winston & Strawn LLP)

Newly Posted Events
(Post Yours!)

2009 Pharmacy Benefits Academy
in Illinois on August 4, 2009
presented by Midwest Business Group on Health and Pharmacy Outcomes Specialists

403(b) Information Sharing: A Presentation and Q&A with the Experts Webcast
Nationwide on December 10, 2008
presented by SPARK Institute

All-Day Seminar with Sal Tripodi, Esq., APM
in Colorado on December 9, 2008
presented by Western Pension and Benefits Conference-Denver Chapter

ERPA Test Review Seminar - Part 1: Compliance and Operational Issues
Nationwide on January 14, 2009
presented by SunGard Relius

ERPA Test Review Seminar - Part 2: Plan Documents, Reporting, and Distribution Issues
Nationwide on January 15, 2009
presented by SunGard Relius

Health and Welfare Roundup 2008: This Year's New Laws and How They Affect You
Nationwide on December 4, 2008
presented by EBIA / Thomson Reuters

The Role of Smoking Cessation Treatments in the Workplace - Webcast
Nationwide on December 10, 2008
presented by Edelman

Newly Posted Press Releases
(Post Yours!)

The SPARK Institute Issues New Version Of Best Practices For 403(b) Plans Information Sharing, Schedules Webcast To Discuss Issues
SPARK Institute

Saving Employee Health Care Benefits: Impossible?
HighRoads, Inc.

Pharmacy Benefits Academy Set for 2009
Midwest Business Group on Health

Integrated Benefits Institute Helps Employers Make the Business Case for Health and Productivity Improvement
Integrated Benefits Institute

Latest DSG Study Finds That the Mutual Fund Industry Has Raised the Stakes in the Battle with Insurers for Retirement Income Assets
Diversified Services Group, Inc. (DSG)

Health Plans Achieve Bridges to Excellence Physician Incentive and Reward Program Endorsement
Bridges to Excellence (BTE)

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ERISA Attorney
for Employee Benefits Boutique
in DC

Litigation Attorney
for Employee Benefits Boutique
in DC

Consultants - Nonqualified Deferred Compensation
for Retirement Capital Group, Inc
in CA

Sr. Trust Analyst
for Kibble & Prentice, A USI COMPANY
in WA

ERISA Consultant
for Charles Schwab
in TX

Retirement Plan Conversion Manager
for Charles Schwab
in AZ, TX

401(k) Plan Administrator
for Southern Pension Services
in FL

Major Account Representative
for Ceridian
in CA, ID, MT, NV, OR, UT, WA, WY

ERISA Compliance Specialist
for Primark Benefits
in CA

Benefits Manager
for Symetra Financial
in WA

Defined Contribution/401(k) Administrator
for Arizona Qualified Plan Services, Inc.
in AZ

Senior Manager Global Benefits
for Discover Financial Services
in IL

Relationship Manager
for PenServ Plan Services, Inc.
in SC

401(k) Administrator
for Heartland Consulting Group, Inc.
in KS, MO

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