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December 10, 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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Banner ad for International Foundation of Employee Benefit Plans

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]
ERISA Coverage of Nonprofit 403(b) Plans

Excerpt: "We are deeply concerned about the level of understanding of just what it takes to keep a 403(b) plan out of ERISA. We have attempted to answer questions on this topic as they come up but we are concerned that our assistance may at times be taken out of context. Because of this concern, we have decided to attempt to clarify this topic with a full explanation of the requirements for nonprofits (that are not sponsored by churches or governments) wishing to sponsor 403(b) plans that are not subject to ERISA." (Fort William LLC)

[Guidance Overview]
Surplus Assets Transferred to 401(k) Plan Cannot Fund Matching Contributions

Excerpt: "Two recent IRS private letter rulings indicate that sponsors cannot use surplus assets from a terminating defined benefit plan for matching contributions under a defined contribution replacement plan. The surplus assets can be allocated only as a nonelective contribution. The IRS imposes an excise tax on excess assets recovered from a terminating defined benefit plan. Sponsors can reduce or eliminate the excise tax by transferring some or all of the excess assets to a 'replacement plan,' which can be a 401(k) plan. Among employers that have transferred surplus assets to 401(k) plans, many have been using the assets to fund matching contributions for years. However, the new rulings hold that the practice violates the 2005 regulatory definition of matching contributions." (Watson Wyatt Worldwide)

[Guidance Overview]
Cycle D 2008 Cumulative List of Changes for ERISA Qualified Plans

Excerpt: "According to the IRS, this list is principally to be used by plan sponsors of individually designed plans which are considered Cycle D plans. Generally, a plan is considered a Cycle D plan if the plan sponsor's EIN ends in either 4 or 9, or if it is a multiemployer plan under §414(f)." (Aiken & Aiken)

Findings on Social Security Systems and Mortality Projections
Excerpt: "The Living to 100 Symposium series continues. This article highlights the connection between national population statistics and actuarial mortality projections for social insurance programs." (The Actuary Magazine)

Should Public Pension Plans Disclose a Market Value of Liability?
Excerpt: "Over the past few years, the topic of how to measure public pension plan liabilities appropriately has been discussed widely by actuaries and others working with public pension plans. The crux of the debate is whether public pension plans should disclose a market value of liability (MVL) or whether current disclosures are adequate. While actuaries in this arena are keenly aware of the debate, actuaries not working with public plans - even those in the pension arena - are likely not aware of the discussion." (The Actuary Magazine)

The Past and Future of the Age Discrimination in Employment Act
Excerpt: "How has the ADEA affected U.S. labor markets in the forty years since its passage? Is the ADEA well positioned to meet the challenge of population aging in the coming decades? These questions are the subject of a new working paper by researcher David Neumark, 'The Age Discrimination in Employment Act and the Challenge of Population Aging' (NBER Working Paper 14317)." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext of Working Papers)

How Layoffs Affect Retirement Plans
Excerpt: "It's one of a heap of financial worries that come with a layoff: What happens to your company-sponsored retirement plan? The answer depends on how long you worked for the company, the amount you saved up and whether the money's in a 401(k) or a pension plan. For the most part, federal regulations protect retirement savings, even if a company goes belly up . . . . Since the start of the recession last December, the number of unemployed people in the country has increased by 2.7 million, to 10.3 million. In case you're worried about your job security, here are some questions and answers about your company-sponsored retirement account." (AP Online via NewsEdge via Human Resource Executive Online)

Military Retirement: Background and Recent Developments (PDF)
18 pages. Excerpt: "There are three separate and distinct but related retirement systems within DOD: one for active duty members, one for the Reserve Components, and one for those who become disabled and are generally unable to complete a normal 20-year military career due to their physical disability." (U.S. Congressional Research Service)

PBGC Semiannual Regulatory Agenda Addresses Cash Balance Plans
Excerpt: "The Pension Benefit Guaranty Corporation (PBGC) has released its semiannual regulatory agenda for Fall 2008, which outlines regulations that have been selected for amendment during the next year, as well as any regulations that have been recently finalized." (Wolters Kluwer)

401(k) Plans Move Away from Employer Stock As Investment Vehicle (PDF)
8 pages. Excerpt: "The steady increase in the percent of participants who have investment choices for both employee and employer funds, and the steady decrease in the percent who may choose employer stock as one of those options, reflect both changes in law and regulation, concerns based on high-profile plans, and an increase in investment education among employers and employees. Experimental tabulations further demonstrate that the upper bound of employer stock exposure has declined steadily in the past two decades as plans move toward putting all investment decisions in the hands of employees and providing education to help make those decisions." (U.S. Bureau of Labor Statistics)

Tribune Bankrup.tcy Filing Exposes Risks of ESOPs
Excerpt: "Retirement savings of Tribune Co. employees appear to have emerged largely unscathed after the media company's Chapter 11 bankrup.tcy filing Monday. But the filing highlights the risks of plans that invest employee savings into company stock. One big potential exposure came via the employee stock ownership plan, or ESOP, which the company set up in 2007. Under the ESOP, Tribune was planning to contribute shares -- worth about 5% of each employee's pay -- into employee accounts each year. The first contribution was expected to be made in the first quarter, and it isn't clear whether this will happen or whether the shares will have any value after Tribune's bankrup.tcy filing. At this point, the employees technically haven't lost anything in the ESOP because their balances are still zero." (The Wall Street Journal)

Emergency Economic Stabilization Act of 2008 Program Summary (As of October 31st, 2008) (PDF)
8 page chart. (Winston & Strawn LLP)

PBGC Looking for Securities Lending Partners
Excerpt: "The Pension Benefit Guaranty Corporation (PBGC) has issued a Request for Information (RFI) to assess the viability of expanding its securities lending program to qualified sources in the commercial and public sector market. The agency said it issued the RFI 'to determine if additional competing of the securities lending business will benefit the PBGC.' The agency said it is seeking qualified companies that can enhance its current activities and gain a better understanding of costs and benefits associated with modifying and potentially expanding the provider base of the program." (; free registration required)

MetLife Releases Research on Four Benefits Profiles of Employers
Excerpt: "MetLife vice president Ronald Leopold, M.D. unveiled proprietary research that suggests employers fall within four key profile types when it comes to workplace benefits investments and strategies. A MetLife announcement said that understanding their profile can help employers maximize the return on their benefits investment. 'The four employer benefits profiles were developed by examining market research data on employer attitudes about benefits business objectives and strategies focusing on funding and choice in benefits,' the announcement said." (; free registration required)

Schwab Finds Participants Paying More Attention to Retirement Plans
Excerpt: "Charles Schwab has found that participant engagement in Schwab-serviced 401(k) plans increased dramatically both online and over the phone in the months of September and October 2008. A Schwab news release said participant activity online increased 37% and phone calls into Schwab service teams were up nearly 30% over monthly averages from January through August 2008." (; free registration required)

Reforming Pensions: Principles, Analytical Errors and Policy Directions
Excerpt: "This article, based on two books (Barr and Diamond 2008, forthcoming), sets out a series of principles for pension design rooted in economic theory: pension systems have multiple objectives, analysis should consider the pension system as a whole, analysis should be framed in a second-best context, different systems share risks differently, and systems have different effects by generation and by gender. That discussion is reinforced by identification of a series of widespread analytical errors: tunnel vision, improper use of first-best analysis, improper use of steady-state analysis, incomplete analysis of implicit pension debt, incomplete analysis of the impact of funding (including excessive focus on financial flows, failure to consider how funding is generated, and improper focus on the type of asset in trust funds), and ignoring distributional effects. The second part of the article considers implications for policy . . . ." (Center for Retirement Research at Boston College)

The Impact of Changing Earnings Volatility on Retirement Wealth
Excerpt: "This project assesses the effect of the volatility of individual and family earnings on asset accumulation and projected retirement wealth using survey data matched to administrative earnings records." (Center for Retirement Research at Boston College)

Argentina Makes Pension Fund Takeover Official
Excerpt: "A bill transferring $23 billion in private pension funds to the state has been published in Argentina's official gazette, meaning the nationalization is now law. Congress approved the bill last month. The law published Tuesday says the state guarantees pensioners benefits that are 'equal or greater' to what they received under the private system." (The Daily Advance)

AARP Asks Supreme Court to Uphold Fairness for Retired Women

Excerpt: "To put it simply, while retired women need more money than men for a longer period of time, they actually have access to less. Because the typical woman receives a pension that is about half of what her male counterpart receives, it is not surprising that older women find themselves chronically vulnerable in financial matters. Thus it is with great interest that all eyes are on the U.S. Supreme Court as it considers a case involving gender equity in AT&T's pension plan." (AARP)

Cutting Public Employee Benefits: The Wrong Way and the Right Way

Excerpt: "[W]e are now beginning to hear about cutbacks in employee benefits. Up until now, this was a topic that wasn't up for discussion in most governmental circles. Now, benefits rollbacks are on the table, but not all proposals are truly 'above board.' Some are just political gimmicks to avoid biting the bullet, rather than real reforms and real cost reductions. Here's my favorite example of political double-speak: New Jersey Governor Jon Corzine (whom I genuinely admire as a competent and honest governor) has publicly called for labor groups to sacrifice their benefits while simultaneously calling for pension holidays for local governments." (

Actuarial/Consultant Letters to Congressional Committees Regarding Pension Funding Issues (PDF)

2 pages. The same letter was sent to the House Ways and Means Committee, the House Education and Labor Committee, the Senate Finance Committee, and the Senate HELP Committee. Excerpt: "The undersigned represent many of the major consulting firms that provide actuarial services to single employer defined benefit pension plans and their sponsors in the United States. This letter summarizes our collective views and observations regarding the defined benefit pension funding issues caused by the current crisis in the financial markets." (American Benefits Council)

Urge Legislators to Enact Pension Funding Relief Legislation Now

Excerpt: "Action Requested: Please continue to contact lawmakers to urge their support for critical pension funding legislation this year. In particular, it is vital that you communicate this message to the House and Senate leadership, the tax-writing committees (the House of Representatives Ways and Means Committee and the Senate Finance Committee) and key agencies of the Bush Administration - the U.S. Department of Labor and the U.S. Department of the Treasury and in particular the White House." (American Benefits Council)

ASPPA (Sponsor)

(Click on company name or banner to learn more.)
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 industryís leaders discuss where the trends are taking us and how to be prepared. Donít miss out on the longest running event dedicated solely to the sales and investment segment of our industry, register now.

Links to Items on Executive Comp, Benefits in General

[Official Guidance]
Text of IRS Notice 2008-115: Reporting and Wage Withholding Under Sec. 409A for 2008 and Later Years (PDF)

21 pages. Excerpt: "Generally, these requirements reflect an extension of the guidance provided in Notice 2006-100 and Notice 2007-89 applicable to calendar years 2005, 2006, and 2007. This interim guidance is effective for calendar year 2008 and will remain in effect for subsequent calendar years . . . ." (Internal Revenue Service)

What Is the Reality Behind the $73 an Hour Number?
Excerpt: "Seventy-three dollars an hour. That figure -- repeated on television and in newspapers as the average pay of a Big Three autoworker -- has become a big symbol in the fight over what should happen to Detroit. To critics, it is a neat encapsulation of everything that's wrong with bloated car companies and their entitled workers. To the Big Three's defenders, meanwhile, the number has become proof positive that autoworkers are being unfairly blamed for Detroit's decline." (The New York Times; free registration required)

Rethinking the Legal Oversight of Benefit Program Exclusions
Excerpt: "This article addresses both the legal and public policy implications of two-tier employment systems that deny some workers the right to participate in employee benefit programs including the use of independent contractor agreements and benefit plan eligibility criteria to restrict benefit program coverage. It concludes with recommendations for how the legal system should respond to this problem." (Rutgers Law Journal via Social Science Research Network)

Do Discount Rates Affect Behaviors Like Saving and Smoking?
Excerpt: "Researchers have long been interested in understanding how people make decisions about behaviors that have long-term consequences for their well-being, like saving or smoking. These decisions require individuals to consider how they value costs and benefits that occur in the future versus those in the present- for example, saving requires sacrificing consumption today in order to have higher consumption in the future. Economic theory predicts that the discount rate - the rate at which individuals discount future costs and benefits - will be a critical factor in these decisions. Different people are likely to have different discount rates, since some people are more patient (low discount rate) while others are more impatient (high discount rate). Do individuals' discount rates help to explain their decisions about behaviors like saving and smoking? This question is examined in a new study, 'Individual Laboratory-Measured Discount Rates Predict Field Behaviors' (NBER Working Paper 14270) . . . ." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext of Working Papers)

IRS Semiannual Regulatory Agenda Includes Further Guidance on 409A
Excerpt: "The IRS has released its semiannual regulatory agenda for Fall 2008, which includes pension and benefit regulations that are currently under development or review." (Wolters Kluwer)

Inaction on Big 3 Would Cost Taxpayers Billions

Excerpt: "Just walking away and letting the struggling Big Three automakers go under would drain government coffers by about as much as the $15 billion bridge loan that lawmakers are preparing, and perhaps much more, according to outside analysts. The costs would come from lower tax collections by the federal, state and local governments and the payment of extra unemployment, pension and other benefits to unemployed or retired auto workers." (AP via The New York Times; free registration required)

Newly Posted Events
(Post Yours!)

ERPA Test Review Web Seminar - Part 1: Compliance and Operational Issues
Nationwide on January 13, 2009
presented by SunGard Relius

ERPA Test Review Web Seminar - Part 2: Plan Document, Reporting, and Distribution Issues
Nationwide on January 27, 2009
presented by SunGard Relius

Health and Welfare Plan Management for Mid-Sized Employers Conference
in Florida on March 1, 2009
presented by University Conference Services

Mid-Sized Retirement & Pension Plan Management Conference
in California on March 10, 2009
presented by University Conference Services

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Defined Contribution Relationship Consultant
for The Douglas Group
in FL, NY

Account Manager (TPA/Insurance)
for Zenith Administrators
in NV

Quality Project Manager
for Ceridian
in FL

Retirement Plan Administrator
for General Atomics
in CA

ERISA Attorney
for Transamerica Retirement Services
in CA

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