BenefitsLink |
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| December 18, 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.)
| DATAIR’s TWO for ONE sale* |
| *The Best TPA Software *The Best Support *The Best Price
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[Guidance Overview]
Documenting Procedural Prudence Enables Fiduciaries to Avoid Liability for Payment of Allegedly Excessive Fees
Excerpt: "In a potentially significant fee litigation case, a federal trial court in California has ruled in Kanawi v. Bechtel Corp. that plan sponsors and other plan fiduciaries were not subject to liability under ERISA for paying allegedly excessive fees to a mutual fund or maintaining underperforming investment options where they were able to document that their decisions were the function of procedural prudence. The court also held that the payment by the plan sponsor of fees to an investment advisor affiliated with the sponsor did not constitute a prohibited transaction because the fees were not paid from plan assets." (Wolters Kluwer)
[Guidance Overview]
Final Fiduciary Safe Harbor for Selection of DC Plan Annuity Providers
Excerpt: "The U.S. Department of Labor (DOL) has finalized regulations establishing a safe harbor for the selection of an annuity provider and purchase of annuity contracts for defined contribution (DC) plans. The final regulations simplify the safe harbor proposed in September 2007 and clarify that the safe harbor is an optional means of satisfying the fiduciary standards of the Employee Retirement Income Security Act (ERISA). The regulations took effect Dec. 8, 2008." (Watson Wyatt Worldwide)
[Guidance Overview]
IRS Proposed Regulations on Consequences of Failing to Defer for DB and DC Plans
Excerpt: "The IRS has proposed regulations that would require plan sponsors to include more information in the participant notices explaining the consequences of failing to defer a distribution. The regulations also would extend from 90 days to 180 days the election period for waiving the Qualified Joint and Survivor Annuity (QJSA) and the period for distribution of notices addressing rollover eligibility and the tax treatment of distributions." (Watson Wyatt Worldwide)
401(k) Plans: Too Risky for Retirement Security?
Excerpt: "With 401(k)s], the risks and responsibilities of investing in the market are placed squarely on the shoulders of employees themselves, unlike in traditional company pension plans, which guarantee lifetime payments based on salary and years of service. As a result, those who make poor 401(k) investment decisions or save too little or take withdrawals may not have enough at retirement to last a lifetime. Even when things are done right, there's no guarantee of a reliable retirement income stream. Because the plans are tied to the market, workers who have had the misfortune to retire during a downturn could outlive their savings -- a signal failing of a retirement system." (AARP)
Cycle C Determination Letter Deadline is Groundhog Day
Excerpt: "For those who end up waiting until the last minute to file a Cycle C determination letter application, the IRS has these words in their latest Employee Plan Newsletter . . . ." (Attorney B. Janell Grenier via Benefitsblog.com)
GM Pays Inflation Bonuses to UAW Retirees
Excerpt: "General Motors, which is seeking a government bailout, paid up to $700 in year-end inflation adjustments to each of its 284,000 hourly retirees on Monday, December 15, said GM spokesman Tony Sapienza. With an additional 73,000 surviving spouses receiving as much as $455 each, the total cost to GM may surpass $200 million. Ford Motor Co. intends to make its payments next week, said Ford spokeswoman Marcey Evans. They will go to 115,000 hourly retirees as part of longstanding contract provisions with the United Auto Workers. Chrysler LLC did not respond immediately to a request for numbers on its payments." (Workforce Management; free registration required)
The Importance of a Corporate Finance Approach to Managing Defined Benefit Plans (PDF)
8 pages. Excerpt: "A number of factors influence the investment objectives of pension plan sponsors and the risk measurements they use in managing assets in defined benefit plans. This brief focuses on the financial status of the sponsoring company. We provide guidelines for assessing the impact of the plan on the company, and describe how this will influence its decisions about asset allocation." (The Vanguard Group, Inc.)
Diversity in Retirement Wealth Accumulation
Excerpt: "Americans save for retirement by building wealth in personal accounts, home equity, pension plans, retirement accounts and Social Security. We use data from the Survey of Consumer Finances (SCF) and methods to estimate the wealth values of Social Security and pension plans to show how wealth builds over the life cycle. We find that the typical household accrues wealth throughout the life cycle. Households in the bottom income quintile, those that did not complete high school and minorities accumulate much less wealth than their counterparts, and Social Security accounts for a large share of their preretirement wealth." (Urban Institute)
Calculating Savings Rates in Working Years Needed to Maintain Living Standards in Retirement
Excerpt: "We establish an empirically based lifecycle model to gauge savings and replacement rates for maintaining a steady living standard over life. We consider a variety of scenarios and demonstrate that savings rates vary substantially with individuals' economic and demographic situations as well as retirement plan provisions. This result highlights that meaningful retirement planning must be specific to individuals or households and be based on a comprehensive knowledge of living means and needs." (Watson Wyatt Worldwide via Social Science Research Network)
2008 403(b) Plan Survey Available to Order from PSCA
Excerpt: "PSCA's 2008 403(b) Plan Survey reports on the 2007 plan year experience of 385 not-for-profit organizations. The survey contains more than 60 tables of data on important topics such as participation rates, organization contributions, asset investment, vesting, loans, Roth features, automatic enrollment, the impact of new 403(b) regulations on plan design, and more. Data is broken out by plan size and often by industry type." (Profit Sharing / 401k Council of America)
Text of the IRS's Employee Plans News, Winter 2009 Edition (PDF)
16 pages. Excerpt: "This edition includes articles such as: Adopting a Pre-Approved Plan?; No Need for a DL Application Under Consideration: Determination Letters without Amendment Date; Has Your Client's Plan Merged with Another Plan? Keep All Plan Documents!; New Address for EP Determination Applications; Common Plan Language Errors; and Tips for Quick Processing of Employee Plans DL Applications." (Internal Revenue Service)
401(k) Assets in Stable Value Reach Historical High
Excerpt: "By the end of the November, the allocation of 401(k) assets to stable value was at a historical high as 401(k) participants continued to transfer out of equities and into fixed-income investments, according to Hewitt. The Index for November shows stable value funds gained $342 million from participant transfers, and by the end of the month, the allocation to stable value was 33.4%, up from 20.5% just one year ago. Balanced and money market funds also received $61 million and $12 million in inflows, respectively, Hewitt said." (planadvisor)
Kentucky Teachers' Pension System Adopts Investment Reforms
Excerpt: "The Kentucky Teachers' Retirement System (KTRS) has adopted investment reforms that include adding additional experts to its investment committees and requiring board members to get more investment education. A news report in the Louisville Business Journal said, in addition to the four investment experts and continuing education, the system will conduct a survey to better determine its optimum asset allocation and will ax administrative regulations found to hamper its ability to invest effectively." (PLANSPONSOR.com; free registration required)
White House Confirms Bush to Sign RMD Bill
Excerpt: "President George Bush will sign into law a bill suspending a requirement that seniors take a required minimum distribution (RMD) from retirement accounts in 2009, the White House has announced." (PLANSPONSOR.com; free registration required)
Motorola Inc. Won't Be Only Major Company to Freeze Its Pension in 2009, Others Expected to Follow Suit
Excerpt: "[E]ven relatively healthy companies may be forced to make changes if Congress doesn't modify pension funding requirements, according to pension experts. Congress last week made some changes to the Pension Protection Act of 2006, but the dramatic decline in stock values in recent months has sent pension assets plunging. As a result, even profitable companies are scrambling to set aside the cash they need to meet the act's more rigorous funding requirements. Businesses and pension experts have asked Congress when it reconvenes in January to make more modifications and delay some of the legislation's requirements." (The Wall Street Journal)
GenCorp Inc. Freezes Pension Plan and Discontinues Employer Matching Contribution to 401(k) Plan
Excerpt: "The moves will affect non-union employees, and save the Aerojet parent company an estimated $29 million a year, the Rancho Cordova company said in a document filed with the Securities and Exchange Commission. The company will freeze the pension plan as of Feb. 1. No employees will lose their previously earned pension benefits. The employer match for the 401(k) plan will end effective Jan. 15, 2009. The company historically matched employee contributions dollar for dollar up to the first 3 percent of an employee's contributions, and 50 cents on the dollar for the next 3 percent." (Sacramento Business Journal via bizjournals.com; free registration required)
[Opinion]
Retirement Account Reforms: The Good and the Bad (PDF)
2 pages. Excerpt: "Conclusion. A panicked reaction to the market should not take the place of common sense when it comes to retirement accounts. Altering the mandatory withdrawal rules for seniors is wise, but scrapping the advantages of 401(k) accounts for workers is not. In the midst of the stock market chaos, let's keep the long-term outlook in perspective." (National Center for Policy Analysis)
[Opinion]
Nix on Early Retirement Incentives As Way to Balance/cut Budgets
Excerpt: "Instead of trimming budgets by making hard decisions, public officials love to play the 'early retirement' card. They offer older workers incentives to leave the workforce voluntarily, in order to achieve staff reductions they are unwilling to make the hard way -- by analyzing the organization and reducing the workforce where necessary." (Governing.com)
University Conference Services (Sponsor)
(Click on company name or banner to learn more.)
| Find Your Way Out of Today’s Plan Management Maze |
| Many plan sponsors are feeling lost in a maze of uncertainty. Volatile financial markets, a battered economy and a changing regulatory environment seem to obscure the pathway to effective plan management. The San Francisco Mid-Sized Retirement & Pension Plan Management Conference, March 10–13, 2009, is the ideal place to explore the issues, hear what plan management experts have to say and gain new ideas you can implement immediately. |
Links to Items on Executive Comp, Benefits in General
[Guidance Overview]
The Role of Severance in Today's Employment Environment (PDF)
4 page. Excerpt: "How companies respond to the business imperative of downsizing and layoffs, as well as how employers 'take care' of terminated workers, is a critical element of business policy that affects both their business culture and, ultimately, the national economy. Traditionally, companies have extended severance benefits to employees who become unemployed for reasons other than 'cause.' Over the years, severance payments have become as standard as salary earned for time worked. (See Severance: A Benefit Essentially Unchanged Throughout Changing Times in the right column [on target page].) This InsightOut addresses three issues related to severance benefits . . . ." (Buck Consultants)
409A Affecting NFL Players
Excerpt: "NFL agents were sent an urgent memo this week from the NFLPA, requiring immediate attention to Federal Tax Code 409A. This provision, originally aimed at bloated executive compensation packages, potentially calls for a full tax burden on signing bonuses and future guaranteed money in the year the package is negotiated, even if the money is deferred over several years. This would have dramatic ramifications. Virtually every signing bonus of any significance in an NFL contract is paid out over a period of at least a couple of years." (Attorney B. Janell Grenier via Benefitsblog.com)
Pennsylvania Public School Pensions to Halt Investment Staff Bonuses
Excerpt: "The Pennsylvania Public School Employees' Retirement System (PSERS) board plans to end the practice of paying bonuses to 21 investment staff members by year end, according to a media report. An Associated Press news report said the 21 investment employees received a total of more than $864,000 in bonuses for the 2007-2008 fiscal year." (PLANSPONSOR.com; free registration required)
The New Executive Remuneration Paradigm
Excerpt: "As the global financial crisis unfolds, directors and senior management teams are trying to come to grips with the implications for their business strategies and for their employees. Governments are imposing restrictions on executive remuneration at financial institutions that benefit from rescue efforts, and these constraints may be a harbinger of future regulation of executive remuneration programs, particularly in the US and Europe. Shareholders are seizing the moment as well. They are calling for constraints across industries, continuing their demands for 'pay for results' and decrying 'pay for failure.' This is a time for organizations to take a balanced approach to executive rewards - one that recognizes the external realities while continuing to support human capital strategy." (Mercer LLC)
Newly Posted Events
Pension Bailout: The New Worker, Retiree and Employer Recovery Act
Nationwide on January 27, 2009
presented by ABA Joint Committee on Employee Benefits
The Roth Factor Advisor Workshop
in Massachusetts on February 5, 2009
presented by Convergent Retirement Plan Solutions, LLC
Newly Posted Press Releases
Assistant Secretary Bradford P. Campbell Announces Nearly $12 Billion Record Results For Employee Benefit Plans Since 2001
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
U. S. Labor Department Publishes 2008 Form M-1 For Multiple Employer Welfare Arrangements
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Financial Engines Celebrates 10 Years of Providing Advisory Services to America’s Employees
Financial Engines, Inc.
TRI-AD Wins Another “Eddy” Award from Pensions & Investments Magazine
TRI-AD
Drug Cost Regulations Would Hurt Future Medical Innovation; Lower Copays a Better Option
RAND Corporation
ERPA Exam Initial Window Begins January 6
AIRE, LLC (American Institute of Retirement Education)
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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