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| December 15, 2008 |
| Here are the Web's best new links about compliance and cost aspects of plan operation, design and policy. |
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[Official Guidance]
Technical Explanation of H.R. 7327, the 'Worker, Retiree, and Employer Recovery Act of 2008,' As Passed by the House on December 10, 2008 (PDF)
43 pages. Excerpt: "The bill makes technical corrections to the Pension Protection Act of 2006 (the 'Act'), and provides for additional amendments to the Act, the Internal Revenue Code (the 'Code'), the Employee Retirement Income Security Act of 1974 ('ERISA'), and the Age Discrimination in Employment Act of 1967 ('ADEA')." (U.S. Joint Committee on Taxation)
[Guidance Overview]
403(b) Updates
Excerpt: "[T]he IRS issued Notice 2009-3 in which the deadline for adopting a written plan for a 403(b) was changed to December 31, 2009, provided the 403(b) plan operates under the final 403(b) regulations for the 2009 calendar year and adopts a written plan effective as of January 1, 2009 by December 31, 2009." (McKay Hochman Co., Inc.)
[Guidance Overview]
Minimum Required Distribution Relief - What It Means and Why Is It Important to Your Retirees Now (PDF)
2 pages. Excerpt: "The IRS and Treasury have indicated they intend to issue relief within the next few weeks. Obviously, this will be too late for anyone who initiates a withdrawal now, knowing that it takes some time to process a distribution. Also, at this time, we do not know what relief will be available for 2008. Our belief is that, most likely, the IRS will allow the retiree to take out 10% of $400,000 rather than 10% of $1,000,000. This would be a significant help. As of now, probably the best advice is to hold off on MRDs until the last possible minute, or until MRD relief is published." (Alston & Bird)
[Guidance Overview]
Sponsors of Non-Calendar Year 403(b) Plans Seem to Have December 31, 2009 Plan Document Adoption Deadline
Excerpt: "Note that this relief applies only to the 2009 calendar year, which implies that plan sponsors operating their plans on a basis other than a calendar year basis must adopt a plan no later than December 31, 2009, regardless of whether the end of the plan year occurs outside of 2009." (McDermott Will & Emery)
[Guidance Overview]
Advantages and Disadvantages of DC Plan Designs
Excerpt: "[This article explores] how employers can use old-fashioned defined contribution plans to provide additional retirement benefits in conjunction with 401(k) plans. [It looks] at how different situations might cause employers to choose varying designs." (JPMorgan Chase & Co.)
[Guidance Overview]
FAS 132 Update: Financial Reporting of Defined Benefit Plan Assets
Excerpt: "In June 2008 we posted an article on the financial reporting of DB plan assets, reviewing Financial Accounting Standards Board deliberations on a proposed FASB Staff Position (FSP). In this article, we begin with a summary of the proposed FSP and then discuss changes that, since our last article, have been tentatively approved by FASB. A word of caution: FASB's process is remarkably open, but it is something of a moving target. There is no final guidance on this issue yet." (JPMorgan Chase & Co.)
[Guidance Overview]
EBSA Issues Field Guidance on ERISA Fidelity Bonding Requirements
Excerpt: "The Employee Benefits Security Administration (EBSA) has issued Field Assistance Bulletin 2008-04 that provides guidance on fidelity bonding requirements under ERISA §412. EBSA investigators frequently confront fidelity bonding questions during their examinations of ERISA plans. The Field Assistance Bulletin was developed to address these issues and is presented in a question-and-answer format consisting of 42 frequently asked questions (FAQs)." (Wolters Kluwer)
[Guidance Overview]
An Examination of Sponsors' Objectives and Constraints, the Market in Longevity, and Buyouts
Excerpt: "While this article is based on experiences in the UK, we believe that the topics above are relevant in many countries with mature defined benefit plans. The difficulties resulting from the recent credit crisis have an impact on all three areas." (Mercer LLC)
[Guidance Overview]
Another Question is Answered in the Who's the Employer Q&A Column
When is the 5th edition of Who's the Employer coming out? (BenefitsLink.com)
Boost Your Variable Annuity
Excerpt: "A popular type of variable annuity -- the one with guaranteed 'living benefits' -- may be the riskiest product ever sold by the insurance industry. Risky to the health of the insurance carriers, that is. The guarantees are costing them far more than the premiums they charge, and their stock prices have plunged. If you bought one of these annuities, you will collect your promised, fixed, minimum income benefits even though your investment may have lost 40 percent in market value. Your future benefit, however, may not rise as you expected. Fortunately, there's a backdoor way to increase your payout . . . ." (The Washington Post; free registration required)
Savings Rates: Hybrid Tools for Better Retirement Mileage (PDF)
4 pages. (Milliman)
2009 PBGC Premium Instructions and Forms
For plan years beginning in 2009, this site has links to: Estimated Flat-Rate Premium Payment Instructions for Large Plans and to the Illustrative 2009 Form 1-ES. (Pension Benefit Guaranty Corporation)
Need a Loan? Tap Your 401(k), Without Penalty
Excerpt: "Here's how it works. An entrepreneur, aided by the outside adviser, creates a corporation. The newly formed entity starts a 401(k) plan, and an individual rolls over existing retirement funds into the account. Under 401(k) rules, the plan can purchase shares in the corporation -- money that can be plowed into a small business that sells a product or service. Those deals are considered investments, which is the key. By investing the money rather than withdrawing it, entrepreneurs avoid triggering a penalty that amounts to 10% of the assets." (Business Week)
Advantages of Using Conventional Actuarial Approaches in Public Plans
Excerpt: "National Conference on Public Employee Retirement Systems has published a new Research Series paper entitled The Advantages of Using Conventional Actuarial Approaches in Valuing Public Pension Plans. Financial economics is a branch of economics that studies capital markets, examining why people invest, how investments should be valued and how investment risk and return should be measured. Over the past decade, adherents to these theories have successfully advocated applying principles of financial economics to corporate pension plans through calculation of a 'market value liability.'" (Cypen & Cypen)
NCPERS and NASRA/NCTR Responses to Market Conditions
Excerpt: "National Conference on Public Retirement Systems feels that despite current conditions in the world's financial markets it is imperative that NCPERS member funds educate their various constituencies -- beneficiaries, elected officials and the media -- on the state of public plans and the need to remain calm in the face of adverse market conditions. Following are some points that can be made in discussing public funds with the above-mentioned constituencies . . . ." (Cypen & Cypen)
Key Technical Corrections in the Worker, Retiree, and Employer Recovery Act (PDF)
1 page. The document lists six key provisions. (American Benefits Council)
Federal Railroad Retirement Disability Board Couldn't Say No
Excerpt: "Operating out of public view, with little scrutiny from Congress and even from its former inspector general, the retirement board has become the agency that cannot say no, last year approving virtually every single disability application it received -- almost 98 percent. . . . An examination of the board by The New York Times, including dozens of interviews and a review of government records, found a disability program plagued by labor-management infighting, weak standards and a failure to use tests that could better weed out specious disability claims." (The New York Times; free registration required)
Best Practices for Avoiding Fiduciary Litigation under ERISA
Excerpt: "In these trying times, allowing your employees to be free to direct their own financial future is not always foolproof. With corporate scandals and collapses in companies such as Enron and Worldcom, employees are angry, and may look to you for guidance - or blame - if their 401k accounts lose money or are depleted. In the last two years, we have seen a rise in ERISA litigation brought against fiduciaries, including administrators of 401k plans. Many times these fiduciaries did not realize their status under ERISA until it was too late. Identifying a fiduciary is not always easy under ERISA. Persons are deemed to be fiduciaries based on the work and services they perform on behalf of the plan, not necessarily by their job title." (LexisNexis)
The Response of Household Saving to the Large Shock of German Reunification
Excerpt: "German reunification was a large, unexpected shock for East Germans, with different economic consequences for different birth cohorts. Exploiting German reunification as a natural experiment, I analyze the validity of the life-cycle consumption model. In the empirical part, I derive three stylized features concerning the saving behavior of East vs. West Germans in the 1990s: (i) East Germans have higher saving rates than West Germans after reunification, (ii) this East-West gap in saving rates is increasing in the age of the birth cohort, and (iii) for every cohort, this gap is declining over time. The theoretical part investigates whether a comprehensive life cycle model can predict these three features. I find strong evidence in favor of rational, forward looking saving behavior. The precautionary saving motive is essential in replicating the features from the data." (Center for Retirement Research at Boston College)
What Happened to Lehman Brothers Employee Pensions?
Excerpt: "Lehman Brothers, a New York-based financial services firm, filed for the largest Chapter 11 bankrup.tcy protection in U.S. history in September. The capital markets and investment banking operations were then sold to Barclays Capital Inc. for $1.75 billion. More than 26,500 Lehman workers and retirees are eligible for some form of retirement benefits. The U.S. Pension Benefit Guaranty Corp. (PBGC), a government agency that insures private-sector pension plans and pays out benefits if the a plan fails, initiated action to end Lehman's pension plan today because the plan stands to be abandoned following the liquidation of the firm's assets at a Dec. 22 bankrup.tcy court hearing." (U.S. News & World Report)
U.S. Pension Agency Starts Lehman Court Action
Excerpt: "The Pension Benefit Guaranty Corp (PBGC) said on Friday it has gone to court to protect the benefits of more than 26,500 workers and retirees of Lehman Brothers Holdings Inc . . . and its units. The agency filed papers to seek approval from U.S. District Court in Manhattan to end Lehman's pension plan in order to ensure funds can be raised for the plan after Lehman asset sales scheduled for later this month, it said." (Reuters)
Pension Costs Could Shave Company Results Next Week
Excerpt: "With assets in corporate pension plans decimated this year, some of America's largest companies may need to funnel additional money into sponsored retirement plans, potentially trimming next year's profits -- despite relief approved by Congress last week. Companies in the Standard & Poor's 500-stock index collectively face a pension deficit of at least $200 billion, according to a Credit Suisse analysis. If the bill is signed by President George W. Bush, it would reduce firms' near-term pension requirements. But that wouldn't reduce the earnings impact, says Credit Suisse analyst David Zion; the firm says 128 S&P companies could face a pension-related hit to earnings in 2009." (The Wall Street Journal)
[Opinion]
401(k) Trading Restrictions
Excerpt: "Could excessive trading rules, which often limit a participant's ability to execute roundtrip trades within a 90 day period even in the context of a normal, well disciplined rebalancing protocol, be unreasonable in today's volatile investment environment? One might certainly argue so! Investment fiduciaries should be careful not to shoot themselves in the foot under 404(c) while fighting yesterday's battle on market timing." (Fiduciary Investor)
[Opinion]
Here's What Your Savings Plan/401(k) Might Look Like in the Future
Excerpt: "'We've shifted the risk and responsibility for retirement onto individuals,' says David Certner, legislative policy director at AARP. The evidence, he adds 'is at best mixed on how well this is working out.' It's no wonder, then, that proposals are proliferating to overhaul 401(k)s. Some individuals are pushing initiatives to simplify retirement-savings plans in ways designed to appeal to small businesses -- many of which do not provide a plan. A few even go so far as to suggest that the 401(k) itself be retired or returned to the supplementary role it was intended to serve. They favor creating a new system that would cover everyone. What follows are several approaches to fixing the system. Some borrow features from past initiatives, old-fashioned pension plans or systems used overseas. While some of the more sweeping plans face big obstacles -- not least, potential opposition from the powerful financial-services industry -- others enjoy some political support. In the end, they may reshape the way you save for retirement." (The Wall Street Journal)
[Opinion]
Agency That Protects Pension Plans May Be in Jeopardy: Federal Agency May Need a Bailout, Too
Excerpt: "The Pension Benefit Guaranty Corp. was already in the hole before the stock market meltdown and the credit freeze shut down U.S. economic growth this fall. More public companies are expected to file for bankrup.tcy next year. And who knows how many pension plans will fail? 'There's tremendous uncertainty as to what the PBGC might get hit with,' said Frank Todisco, senior pension fellow for the American Academy of Actuaries in Washington." (Detroit Free Press)
[Opinion]
Toward the 21st-Century Plan Design
Comments on values, current economic and political events, and our future. (Mercer LLC)
[Opinion]
Education and Communication Can Help Soothe Panicky 401(k) Participants
Excerpt: "Financial planners say they have been fielding a noticeable increase in calls from 401(k) participants seeking loans or hardship withdrawals from their plans, or just plain reassurance." (Human Resource Executive Online)
ASPPA and IRS (Sponsor)
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| Benefits Conference of the South - January 15-16 - Atlanta, GA |
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]
Compliance Dates for Employee Benefits (PDF)
Chart. 3 pages. (Swerdlin & Company)
[Guidance Overview]
IRS Provision of Relief from Income Taxes for Deferred Compensation Amounts Under IRC Sec. 409A
Excerpt: "As provided by Notice 2008-113, a taxpayer is not eligible for the relief provided in the notice unless all of the specified requirements are met, as well as the requirements of the particular section of the notice providing the applicable relief and the enumerated reporting requirements. In each instance, the taxpayer claiming the relief has the burden of demonstrating that the taxpayer was eligible for the relief and that the requirements of the notice have been met. Any application of the relief provided in the notice is subject to examination by the IRS." (Wolters Kluwer)
[Guidance Overview]
Proposed Section 409A Income Inclusion Regulations and Related Guidance
Excerpt: "Final regulations implementing the requirements of Section 409A take effect on January 1, 2009. As a result, Section 409A nonqualified deferred compensation plans must be brought into full operational and written compliance with those requirements by January 1, 2009. As the January 1 effective date draws nearer, increasing attention is being focused on how to determine the tax impact of Section 409A failures. The proposed regulations provide some initial insight into how to determine this tax impact, although they are likely to be revised in certain respects. However, under IRS Notice 2008-115 (issued separately on December 10, 2008), the proposed regulations can be relied upon with respect to the calculation of income includible under Section 409A and the calculation of the additional taxes until the issuance of final regulations." (McGuireWoods LLP)
Executive Pay Limits May Prove Toothless as Loophole in Bailout Provision Leaves Enforcement in Doubt
Excerpt: "Congress wanted to guarantee that the $700 billion financial bailout would limit the eye-popping pay of Wall Street executives, so lawmakers included a mechanism for reviewing executive compensation and penalizing firms that break the rules. But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money." (The Washington Post; free registration required)
Strategies for Fiduciary Best Practices After LaRue and Glenn (PDF)
Excerpt: "The U.S. Supreme Court's recent landmark decisions in Metropolitan Life Insurance Co. v. Glenn and LaRue v. DeWolff, Boberg & Associates Inc. put a spotlight on fiduciary governance and could prompt lawsuits against retirement plan fiduciaries accused of breaching their duties under the Employee Retirement Income Security Act. In this analysis, Winston & Strawn attorneys Michael S. Melbinger and Ranjan S. Emani lay out strategies identified ''by reading between the lines'' of the decisions, arguing that employers and fiduciaries can take proactive steps to ensure that plan disputes are channeled through a plan committee and that the committee's decisions receive deference from the court." (The Bureau of National Affairs, Inc. via Winston & Strawn LLP)
Global Study Shows 31% of Companies Anticipated the Dramatic Business Dropoff
Excerpt: "The news release said the study also found that: Most employers are keeping benefits programs relatively intact including health and retirement plans." (PLANSPONSOR.com; free registration required)
The Long-Term Effects of the Divorce Revolution: Health, Wealth, and Labor Supply
Excerpt: "This paper contributes to the evaluation of the change in divorce laws by examining a less studied area: the long-term effects of this policy change on the well-being of men and women who were young adults when the laws were changing . . . ." (Center for Retirement Research at Boston College)
New Jersey State Commission Urges Marriage Equality Now
Excerpt: "A key issue now is whether Governor Jon Corzine will allow a marriage bill to move before his 2009 reelection bid. In a report comprehensive in scope and sweeping in its conclusions, an official government commission in New Jersey recommended that the Legislature change state law 'to allow same-sex couples to marry' and to do so 'expeditiously because any delay in marriage equality will harm all the people of New Jersey.' The findings, released on the morning of December 10 and which ran to 45 pages plus appendices, were issued in the 'final report' of the New Jersey Civil Union Review Commission, a 13-member body established when civil unions were enacted in late 2006 [a link to the complete report is on the target page]." (G.ayCityNews)
Retired San Jose Officers and Firefighters Again Seek Benefit for Spouses They Marry After Retirement
Excerpt: "[F]or employees who marry after retiring, their spouses are not eligible for survivorship pension benefits unless the employee had agreed to a reduced pension, and those spouses cannot receive health benefits from the plan after the retired officer or firefighter dies. Such restrictions are commonplace; San Jose officials say no other major California city extends the desired benefits to spouses married after retirement." (The Mercury News)
Expat Benefits: Achieving Parity in a Global Arena
Excerpt: "Recent years have witnessed a surge in the number of expatriates, as companies pursue international business expansion and global growth in an environment of acute skill shortages. It is no longer enough for companies to rely upon traditional generous perquisites and allowances to make up for the lack of adequate employee benefits. As a result, expatriate (expat) benefit programs are becoming increasingly complex, as companies strive to maintain global consistency among plans while allowing sufficient flexibility to ensure appropriate and adequate coverage in an increasing number of, often challenging, locations around the world. This is no easy task, and Mercer's recent Benefits Survey for Expatriates and Globally Mobile Employees was designed to assess how employers are dealing with these issues." (Mercer LLC)
[Opinion]
Automakers' Insolvency Opens All the Benefit Cutback Targets and Problems to Examination
Excerpt: "The insolvency (whether or not in Chapter 11 reorganization) of the three automakers brings 'legacy costs' back to the center stage of ERISA cutback negotiation and litigation. The automakers have already put themselves on the cutting edge of many of these issues outside of bankrup.tcy." (Pension & Benefits Blog)
Newly Posted Events
Wellness Programs: Rewards, Penalties and Legal Risks
Nationwide on February 26, 2009
presented by Lorman Education Services
Newly Posted Press Releases
Pittsburgh Post-Gazette Selects Great-West to Manage 401k Plan
Great-West Retirement Services
New York Life Retirement Plan Services Expands West Coast Presence
New York Life Investment Management
401k Advisors Launches Retirement Plan Hotline
401k Advisors
GAFRI Will Help Schools Comply With 403(b) Regulations
Great American Financial Resources
Newly Posted or Renewed Job Openings
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in CA
Attorney
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in CA
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