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December 12, 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.

[Official Guidance]
Text of PPA Technical Corrections Bill (H.R. 7327) as Approved by Senate: 'Worker, Retiree, and Employer Recovery Act of 2008'

(U.S. Library of Congress)

[Official Guidance]
Text of IRS Notice 2009-3: 403(b) Written Plan Document Not Required by End of 2008; Prototype Program Coming (PDF)

2 pages. Excerpt: "The Service will not treat a § 403(b) plan as failing to satisfy the requirements of § 403(b) and the final regulations during the 2009 calendar year, provided that: (1) on or before December 31, 2009, the sponsor of the plan has adopted a written § 403(b) plan that is intended to satisfy the requirements of § 403(b) (including the final regulations) effective as of January 1, 2009; (2) during 2009, the sponsor operates the plan in accordance with a reasonable interpretation of § 403(b), taking into account the final regulations; and (3) before the end of 2009, the sponsor makes its best efforts to retroactively correct any operational failure during the 2009 calendar year to conform to the terms of the written § 403(b) plan, with such correction to be based on the general principles of correction set forth in the Service's Employee Plans Compliance Resolution System (EPCRS) . . . ." (Internal Revenue Service)

[Official Guidance]
Text of IRS Notice 2008-87 (Includes DOL and PBGC Guidance): Funding and Other Relief for Retirement Plans Affected by Hurricane Ike (PDF)

7 pages. (Internal Revenue Service)

[Guidance Overview]
Action by December 31, 2008 -- Should I Waive My Defined Benefit Plan Carryover Balance?

Excerpt: "Defined benefit plan sponsors have learned of many key decision points under PPA. An important one that may have gotten short shrift to date relates to the old law credit balance, now known as the carryover balance. The decision: to waive or not to waive." (JPMorgan Chase & Co.)

[Guidance Overview]
Eliminating 2009 Safe Harbor Match After Notice is Distributed

Excerpt: "So what happens if you (or your employer) distributed a safe harbor notice last October or November that stated there would be a safe harbor matching contribution in 2009, and now, with the worsening economy, the employer needs to rescind that promise of making a safe harbor matching contribution in 2009. Treas. Reg. 1.401(k)-3(g) and Treas. Reg. 1.401(m)-3(h) permits a safe harbor matching contribution to be changed or eliminated after the safe harbor notice has been distributed." (Pension Protection Act Blog)

Pension Plan Sponsors Get a Reprieve from Congress
Excerpt: "Senator Edward M. Kennedy, the Democrat of Massachusetts who is chairman of the Health, Education, Labor and Pensions Committee, said in a statement the bill 'addresses the immediate needs of workers, retirees and businesses hit hard by the financial and economic crisis facing our country.' He said he wanted to work on additional retirement-security measures once Mr. Obama takes office." (The New York Times; free registration required)

Pension Relief for Plan Sponsors Awaits Bush's OK
Excerpt: "In one of its final acts of the year, Congress on Thursday relieved businesses of paying billions of dollars in required contributions to their pension plans in the coming year. Companies say they need the cash to stay afloat in a worsening recession. The legislation has been a priority of business groups, which contend some companies will have to freeze pension plans, lay off workers or even go bankrupt without the relief. A voice vote in the Senate sent the measure to President George W. Bush. The House approved the bill late Wednesday." (AP via Google)

Worker, Retiree and Employer Recovery Act also Includes Number of Technical Updates to Pension Protection Act on Pension Funding
Excerpt: "For example, H.R. 7327 also includes: clarification of pension plan 'smoothing,' allowing plans to recognize unexpected asset gains and losses over 24 months; multiemployer plan relief, permitting plan sponsors to elect to temporarily freeze the status of certain multiemployer plans at the same funding status held in the previous plan year; a rule easing the requirement that would otherwise compel employers to restrict the accrual of pension benefits; and improved transition to the new funding rules, in which the phased-in funding threshold would hold at 92% for another year." (; free registration required)

IRS Offers Relief on 403(b) Written Plan Requirement
Excerpt: "The IRS issued a notice on Thursday announcing relief for 403(b) plans that do not have a written plan in place by January 1, 2009. Notice 2009-3 says the IRS will treat plans as meeting the requirements of 403(b) and the regulations during the 2009 calendar year if: By December 31, 2009, the plan sponsor has adopted a written 403(b) plan that is intended to satisfy the requirements of 403(b) and the regulations; During 2009, the plan sponsor operates the plan in accordance with a reasonable interpretation of 403(b) and the related regulations; and By the end of 2009, the plan sponsor makes its best effort to retroactively correct any operational failure during the 2009 calendar year to conform to the written plan." (; free registration required)

PBGC Moves To Protect Pensions At Lehman Brothers Holdings Inc.
Excerpt: "According to PBGC estimates, the pension plan is 95 percent funded, with $898.2 million in assets to cover $940.8 million in benefit liabilities. If the plan ends, the agency expects to be responsible for $17.9 million of the $42.6 million shortfall." (Pension Benefit Guaranty Corporation (PBGC))

Supreme Court Revisits Issue of Timing of Discrimination Suits
Excerpt: "Supreme Court Revisits Issue of Timing of Discrimination Suits The Supreme Court may be poised to revisit an issue similar to one that caused a controversial ruling in 2007 -- whether a worker can sue for a discriminatory act that occurred decades before. The previous case involved Lilly Ledbetter, a tire factory supervisor from Alabama who sued her employer, Goodyear, for more than 20 years' worth of paying her less than men who held an equivalent job." (Workforce Management; free registration required)

Cohort Differences in Wealth and Pension Participation of Near-Retirees (PDF)
22 pages. Excerpt: "Our findings indicate that the more recent cohort of near-retirees has a significantly higher pension participation rate over their working life, and therefore greater opportunity to establish pension income through their working life, compared with the earlier cohort (82 percent versus 64 percent). The increase in pension participation was more pronounced among the recent cohort of women, an expected outcome given the increase in labor force participation of women over the past half century." (U.S. Social Security Administration)

Consumer Survey on Retirement Plans: Topline Results (PDF)
5 pages. (Retirement Made Simpler)

AT&T Pension Plan Class Action Lawsuit About Cash Balance Pension Conversions
The site lists and links to documents relating to Engers v. AT&T Management Pension Plan, C.A. 98-3660 (D.N.J.). (

EBSA Semiannual Regulatory Agenda Addresses Plan Assets
Excerpt: "The Employee Benefits Security Administration (EBSA) has released its semiannual regulatory agenda for Fall 2008, which outlines regulations that have been selected for review or development during the next year, as well as any regulations that have been finalized during the last six months." (Wolters Kluwer)

401(k) Plan Participants Respond to Market Declines by Choosing Safer Investments
Excerpt: "Despite the recent market upheaval and poor investment returns, employees are maintaining a long-term focus on retirement saving by continuing to invest in their 401(k) plans, according to a recent analysis by Hewitt Associates. However, some workers are reacting to the market volatility by moving their 401(k) assets into less risky investment funds." (Wolters Kluwer)

Congressional Pension Plan Vests at Five Years Service and Includes Automatic Cost of Living Increases
Excerpt: "When Sen. Elizabeth Dole and Rep. Robin Hayes leave office next month, they won't leave empty-handed. The N.C. Republicans, both multimillionaires and among the richest in Congress, will be eligible immediately for congressional pensions. Dole, who served a six-year term, is eligible for about $15,000 a year for life. Hayes, who served five two-year terms, would get about $25,500 a year, according to the National Taxpayers Union, a government watchdog group that's been estimating congressional pensions for years. Unlike some fixed pensions, the amounts will change with the cost of living adjustment." (The Charlotte Observer)

A Parsimonious Choquet Model of Subjective Life Expectancy
Excerpt: "This paper develops and estimates a closed-form model of Bayesian learning of subjective survival beliefs within the framework of Choquet decision theory. Data from the Health and Retirement Study (HRS) indicate that, on average, young respondents underestimate their true survival probability whereas old respondents overestimate their survival probability. Such subjective beliefs violate the rational expectations paradigm and are also not in line with the predictions of the rational Bayesian learning paradigm which implies convergence of subjective to underlying 'objective' probabilities." (Center for Retirement Research at Boston College)

Risky Defined Benefit Pensions and Household Saving Over the Life Cycle
Excerpt: "In this paper we develop an empirical dynamic programming framework to investigate household saving decisions in a model economy with risky DB pensions. The model incorporates important sources of uncertainty facing households, including asset returns, employment, income, and mortality, as well as pension freezes. Applying a compensating variation measure of welfare, we find that pension freezes reduce welfare by a maximum of about $6,000 for individuals with a high school degree and about $2,000 for individuals with a college degree." (Center for Retirement Research at Boston College)

Goldman Sachs Raises Age for Retirement Benefits
Excerpt: "The Goldman Sachs Group Inc. is planning to change its retirement incentive rules next year. New York-based Goldman will raise the age at which employees may receive a retirement payout from 55 to 60. This will bring the firm more into conformity with its peers, according to a company spokeswoman." (Investment News; free registration required)

New Jersey Senate Panel OKs Governor's Plan Allowing Towns to Skip Pension Payments
Excerpt: "Gov. Jon Corzine's plan to allow local governments skip about half of the $1.1 billion in pension payments next year to avoid a big surge in property taxes cleared the Senate budget committee today, but a key lawmaker said she could not predict whether it will have enough votes to pass in the full Senate." (New Jersey On-Line LLC)

The Tribune Bankrup.tcy and Breach of Fiduciary Duty Litigation over Its ESOP

Excerpt: "[N]ot too long ago and in a very prescient move, a number of participants in the Tribune's ESOP filed a breach of fiduciary duty suit related to Sam Zell's use of the ESOP stock in the transaction by which Zell or entities he controlled acquired the Tribune; we now are learning that this apparently deeply flawed transaction . . . placed the ESOP plan participants' holdings at greater risk than the assets of others involved in funding the transaction, including Zell himself. Targeting the fiduciaries for possibly having allowed the ESOP assets to be used in a more risky way than others were willing to do with their own investments sure smells like a pretty credible theory to me." (Stephen Rosenberg of The McCormack Firm, LLC)

IRS & AIRE, LLC (Sponsor)

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The Enrolled Retirement Plan Agent Program is now available!

Earn the privilege of practicing before the IRS with the new Enrolled Retirement Plan Agent (ERPA) designation. The initial exam window opens on January 6, 2009. Be prepared and register NOW!

Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Section 409A Proposed Regulations Addressing Income Inclusion

Excerpt: "[A]mounts deferred under a nonqualified deferred compensation plan are includible in income unless certain requirements are satisfied. The proposed regulations interpret this rule to provide that failures to comply with §409A(a) apply to amounts deferred under a plan in the year in which the failure occurs and all previous taxable years, to the extent such amounts are not subject to a substantial risk of forfeiture and have not previously been included in income. As a result, each taxable year is analyzed independently with respect to whether there is a failure." (Deloitte)

[Guidance Overview]
IRS Provides Limited Relief for Certain Section 409A Operational Failures

Excerpt: "Notice 2008-113 applies only [to] inadvertent and unintentional failures in operation of a plan that otherwise complies with section 409A. In addition, the service recipient must take commercially reasonable steps to avoid recurrence of the failure." (Deloitte)

[Guidance Overview]
Proposed Regulations Regarding Section 409A Violations and Deferment of Reporting Requirements

Excerpt: "Notice 2008-115 generally extends the reporting and withholding guidance provided in Notice 2006-100 and Notice 2007-89 applicable to 2005, 2006, and 2007; however, the Notice provides that compliance with the proposed regulations will also constitute compliance with the Notice. The Notice is effective for 2008 and is expected to remain in effect for subsequent years until the proposed regulations are finalized and effective." (Morgan, Lewis & Bockius LLP)

Effect of the Economy on Executive Compensation Programs: Survey Results (PDF)
8 pages. Excerpt: "The current financial crisis is significantly affecting the executive compensation programs of most companies. Compensation committees and management are being challenged to balance their need to retain key executive talent while responding to economic and public pressures to adjust executive pay levels and program components. Overall, executives will see their compensation decrease in 2009: half of all companies surveyed will cut the size of their annual bonus pool compared to the prior year; nearly 40 percent have decreased planned merit increases or expect to do so; and almost one in four companies have frozen salaries, or expect to do so. In addition, one-quarter of companies expect to decrease the value of their longer-term incentive grants in 2009." (Watson Wyatt Worldwide)

Kodak Announces Match Suspension, No Executive Compensation Increases
Excerpt: "Saying that 'most signs indicate that we may be facing a prolonged global recession,' Antonio M. Perez, Kodak Chairman and Chief Executive Officer, said the company is taking steps to ensure its solid position remains until the economic recovery. Among steps the company is taking, Kodak announced that where permissible by law, its executives will not receive a salary increase in 2009, and that it will temporarily suspend for 2009 the company's U.S. 401(k) match. A report on the Web site of an NBC news station in Albany said that company management also does not expect a payout in 2009 for the executive Leadership Stock program that is based on 2008 performance." (; free registration required)

Mid-Atlantic Tech Companies Use Flexible Benefits to Attract Workers
Excerpt: "The findings of the KnowledgeBank 2008-2009 Total Compensation Survey of Mid-Atlantic Technology Companies suggest that responding companies embrace flexible human resource practices to recruit and retain staff in a challenging marketplace. According to a press release, 84% of respondent companies provide for variable work schedules and 64% encourage telecommuting. Other perks used to retain and recruit staff include providing special recognition awards (60%) and paying new hire bonuses for referrals (59%)." (; free registration required)

Many Companies Will Continue to Provide Employees with Holiday Bonuses, Gifts, and Parties
Excerpt: "According to a new survey from Hewitt Associates, 42% of companies will continue to provide employees with holiday bonuses this year, although the value of those bonuses may be slightly lower than in the past. Hewitt's 2008 holiday survey of more than 160 organizations reveals that of companies offering holiday bonuses this year, more than half (52%) will provide them in the form of cash - spending an average of $863 per employee, Hewitt said in a press release." (; free registration required)

Rabbi Trust Funding Prohibition?

Excerpt: "Code Sec. 409A(b)(3) could prohibit a public company that has an 'at risk' pension plan anywhere within its controlled group from making contributions to a rabbi trust (or otherwise setting aside funds) for non-qualified plan benefits. It appears that an affected company could still pay non-qualified plan benefits directly from its general assets." (Michael S. Melbinger via Winston & Strawn LLP)

Newly Posted Events
(Post Yours!)

2009 MidWinter Tour: Advanced IRA
in Oregon on January 28, 2009
presented by Ascensus

2009 MidWinter Tour: IRA Essentials
in Oregon on January 27, 2009
presented by Ascensus

2009 Web/Telephone Seminar: Advanced HSAs
Nationwide on January 22, 2009
presented by Ascensus

2009 Web/Telephone Seminar: Basic IRAs
Nationwide on January 27, 2009
presented by Ascensus

2009 Web/Telephone Seminar: HSA Basics
Nationwide on January 13, 2009
presented by Ascensus

2009 Web/Telephone Seminar: Introduction to QRP Distributions
Nationwide on January 29, 2009
presented by Ascensus

2009 Web/Telephone Seminar: IRA Reporting
Nationwide on January 20, 2009
presented by Ascensus

2009 Web/Telephone Seminar: QRP Beneficiary Rollovers to Inherited IRAs
Nationwide on January 15, 2009
presented by Ascensus

Pension Relief Legislation and 403(b) Regulatory Relief
Nationwide on December 16, 2008
presented by Convergent Retirement Plan Solutions, LLC

Newly Posted Press Releases
(Post Yours!)

Recession Forcing Companies to Cut Executive Bonuses, Watson Wyatt Survey Finds
Watson Wyatt

PBGC Moves To Protect Pensions At Lehman Brothers Holdings Inc.
Pension Benefit Guaranty Corporation (PBGC)

Progressive Benefit Solutions Joins Benefit Advisors Network
Benefit Advisors Network

Retirement Plans for Public Schools and Exempt Organizations Get Extension on Time to Complete Written Plans
Internal Revenue Service (IRS)

Statement by ERIC President on House and Senate Passage of Pension Funding Relief
ERIC (ERISA Industry Committee)

Council Commends Senate On Passage Of Pension Relief
American Benefits Council

Finance, HELP Leaders Applaud Senate Passage of Pension Protection Plans
U.S. Senate

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