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January 9, 2009

Here are the Web's best new links about compliance and cost aspects of plan operation, design and policy.


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[Guidance Overview]
Suspension of Minimum Distributions in 2009 (PDF)

10 pages. Excerpt: "This article (which was first published in Steve Leimberg's Employee Benefits Newsletter, www.leimbergservices.com) explains the new law and its effects on all retirement plan owners and beneficiaries, along with what we DON'T know (yet)." (Natalie B. Choate)


[Guidance Overview]
Sample Tax Opinion Regarding How to Transfer an IRA Out of a Trust

Excerpt: "Notice to Executors and Trustees: Here is how to transfer an inherited IRA that is payable to the estate (or trust) OUT of the estate (or trust) to the estate (or trust) beneficiary(ies), WITHOUT having a distribution of the entire account." (Natalie B. Choate)


[Guidance Overview]
Statements Regarding the Demise of the Summary Annual Report Are Premature

Excerpt: "In describing the changes made by the Pension Protection Act (PPA), many commentators have stated that for plan years beginning after December 31, 2007, defined benefit plans no longer need to provide summary annual reports (SARs). The Committee Reports accompanying PPA make a similar statement. However, a careful reading of the statutory changes indicates that such statements are too broad." (SunGard)


[Guidance Overview]
Court Rules Retirement Plan Contributions Don't Make Bankrup.tcy Abusive

Excerpt: "[E]ven though Chapter 13 allows a debtor to make contributions to a retirement plan, but Chapter 7 does not, attorneys Arnold F. Lueders, III, and Brett J. Pfeifer, of Credit Solutions S.C. in Milwaukee, successfully argued last month that a Chapter 7 filer could continue to contribute to her plan, without running afoul of sec. 707's presumption of abuse. Because the contributions were reasonable and longstanding, and the debtor led a modest lifestyle, U.S. Bankrup.tcy Judge Susan V. Kelley held that the Chapter 7 petition need not be dismissed or converted to Chapter 13." (Wisconsin Law Journal)


Congressional Lawmakers Renew Battle Against Social Security Provisions Affecting Some Public Sector Retirees
Excerpt: "An old fight resumed on Thursday when two House lawmakers unveiled legislation that would ease the burden of two Social Security laws that significantly reduce benefits for some public sector retirees. The bill (H.R. 235), introduced by Reps. Howard Berman, D-Calif., and Howard (Buck) McKeon, R-Calif., would repeal two provisions in Social Security law -- the Government Pension Offset and the Windfall Elimination Provision -- that reduce or eliminate Social Security benefits for federal employees who entered the government before 1984 and are covered by the Civil Service Retirement System. Employees in CSRS do not pay into Social Security and receive a government pension instead. The Government Pension Offset law cuts the Social Security benefits that some employees -- including widows and widowers -- would have received from their spouses, while the Windfall Elimination Provision reduces benefits for public employees who also worked in private sector jobs where they paid into the Social Security system." (GovernmentExecutive.com)


Fort Lauderdale, Florida, Early Retirement Incentive Program for Public Safety Workers Is Valid
Excerpt: "An early retirement incentive program offered to police officers in Fort Lauderdale does not violate the Age Discrimination in Employment Act of 1967 or the Florida Civil Rights Act of 1992. Fourteen current and former police officers employed by the City of Fort Lauderdale sued the City and the City of Fort Lauderdale Police Officers' & Firefighters' Retirement Board. (The board entered into a stipulation with the parties in which it conceded the court's jurisdiction and agreed to 'comply with any relief that may be ordered by the Court.' Therefore, the subject order binds the board in accordance with the stipulation.)" (Cypen & Cypen)


When to Start Collecting Social Security Benefits: for Married Couples, the Question Is Doubled
Excerpt: "A key factor in the decision of when to commence collecting benefits is life expectancy. A 62-year-old male has a 50% probability of living until 84, a 25% chance of living until 90, and a 10% chance of living to 95. The data for women is two to three years greater across the percentiles. The 50th percentile is well past the SSA's breakeven point. Actual life expectancy is impossible to predict precisely, but by using a break-even analysis and the client's individual circumstances, a good approximation can be made. Of course, individuals with insufficient retirement savings may have no option but to begin collecting benefits at age 62." (Journal of Accountancy)


U.S. Capital Market Update: Year-End 2008 Funded Ratio Drops to New Low (PDF)
4 pages. Excerpt: "This report reviews how capital market performance affected pension plan financing, with a focus on linked asset/liability results. Specific plan results will vary based on such factors as liability characteristics, contribution policy, portfolio composition and management strategy." (Towers Perrin)


Stock Losses Leave $400 Billion Deficit in Pension Funding; Shoring Up Funds May Be Costly
Excerpt: "The collapse of the stock market last year left corporate pension plans at the largest companies underfunded by $409 billion, reversing a $60 billion pension surplus at the end of 2007, according to a study released yesterday. Shoring up the plans could cause further pain for workers, businesses and the struggling economy at a time when they can least afford it, pension specialists said." (The Washington Post; free registration required)


401(k) Investment Losses Spur Calls for Change
Excerpt: "The stock-market rout has ignited a crisis of confidence for millions of Americans who manage their own retirement savings through 401(k) plans. . . . About 50 million Americans have 401(k) plans, which have $2.5 trillion in total assets, estimates the Employee Benefit Research Institute in Washington. In the 12 months following the stock market's peak in October 2007, more than $1 trillion worth of stock value held in 401(k)s and other 'defined-contribution' plans was wiped out, according to the Boston College research center. If individual retirement accounts, which consist largely of money rolled over from 401(k)s, are taken into account, about $2 trillion of stock value evaporated." (The Wall Street Journal)


Towers Perrin Sees a New Low Funded Ratio of Pension Plans
Excerpt: "In the latest capital market update from Towers Perrin the funded ratio for Towers Perrin's benchmark pension plan showed a 6.9 percentage point decline for December and a 19.8 percentage point decline for the fourth quarter of 2008. The resulting year-end funded ratio of 66% is the lowest level recorded in the firm's data series, initiated in 1990, Towers Perrin said in a press release. The benchmark plan's funded level at the start of the year was 92.7%." (PLANSPONSOR.com; free registration required)


IRS Publishes Interim Guidance on §457A
Excerpt: "In Notice 2009-8, the Internal Revenue Service has published guidance on the application of §457A to nonqualified deferred compensation plans of nonqualified entities. The IRS notes that Section 457A applies to amounts deferred that are attributable to services performed after December 31, 2008." (PLANSPONSOR.com; free registration required)


What Investors Can Learn from Wall Street's Failures
Excerpt: "What do Wall Street investment banks and retired investors have in common? They both must live off the return on their capital. Here are three important portfolio survival lessons retired investors and their advisers can learn from Wall Street's failures." (Investment News; free registration required)


District Court Consolidates Bear Stearns Suits
Excerpt: "A federal district court judge has consolidated lawsuits that have been filed against Bear Stearns Companies Inc. since its collapse last year. U.S. District Judge Robert W. Sweet of the U.S. District Court for the Southern District of New York said in his opinion that 22 securities class action cases are pending before the court, some alleging violations of the Securities Exchange Act and some alleging fiduciary breaches of the Employee Retirement Income Security Act (ERISA), and one derivatives class action. Sweet consolidated the securities actions, naming the State of Michigan Retirement Systems as lead plaintiff, and consolidated the ERISA actions, with Aaron Howard and Shelden Greenberg as interim co-lead plaintiffs. The derivatives class action was left as a separate case." (planadvisor)


Rhode Island Governor Promoting Pension Reform As Top Priority of Emergency Budget Plan
Excerpt: "In an unprecedented prime time speech Wednesday night, the Governor outlined a three-part plan to reduce the state's retirement spending: 1) Establish Minimum Retirement Age of 59 for all state and municipal workers, including teachers; 2) Eliminate Cost of Living Increases; 3) Move New Hires Into a 401K-Style Plan. All three must be approved by the General Assembly before they can be implemented." (WPRI-TV)


2008 Replacement Ratio Study - A Measurement Tool for Retirement Planning (PDF)
34 pages. Excerpt: "In this edition of the study, we continue to recognize the movement toward defined contribution plans that was initially reflected in the 2004 report. Thus, this report adds a section analyzing how a retiree might spend their savings account after retiring. Retirees without traditional pension benefits will have to take more responsibility, not only to plan for their retirement, but also to live off their account during retirement." (Aon Consulting)


[Opinion]
PSCA Comments on Proposed Rule on Notice to Participants of Consequences of Failing to Defer Receipt of Qualified Retirement Plan Distributions (PDF)

2 pages. Excerpt: "PSCA supports the proposed rule. It reflects the statutory language and, we believe, Congressional intent." (Profit Sharing / 401k Council of America)


[Opinion]
Why the Social Security System Is Not Like a 401(k) Plan

Excerpt: "Like most people, I've taken a pretty big hit in my 401(k) plan. But I don't think you can blame that on a flaw in the program, nor is there any way to regulate the risk out of such a system. If you get a stock market crash of this magnitude, any stock-based retirement plan is going to be hurt. Period. I understand the impact it has had on people close to or in retirement, but there's no solution to it. However, this is a damn fine illustration why it would have been foolish to tie Social Security benefits to the market. If SSI payments had fallen in addition to the collapse of 401(k) accounts, the pain would have been doubled for millions of people. As it is, the defined-benefit basis of Social Security at least provides a firewall in retirement." (The Wall Street Journal via The Atlanta Journal-Constitution)



401khelpcenter.com (Sponsor)

(Click on company name or banner to learn more.)
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Links to Items on Executive Comp, Benefits in General

[Official Guidance]
Text of Notice 2009-08: Guidance on 457A; Deferred Compensation by Foreign Corporations and Partnerships (PDF)

38 pages. Excerpt: "Notice 2009-08 [which is scheduled to appear in IRB 2009-4, dated January 26, 2009] provides interim guidance on recently enacted §457A which became effective January 1, 2009. Section 457A generally provides that compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is includible in gross income when there is no substantial risk of forfeiture of the right to such compensation. For this purpose, the term nonqualified deferred compensation plan has the meaning provided under §409A(d), subject to some modifications, and the term nonqualified entity means (a) any foreign corporation unless substantially all of its income is (i) effectively connected with the conduct of a trade or business in the U.S., or (ii) subject to a comprehensive foreign income tax, and (b) any partnership unless substantially all of its income is allocated to persons other than (i) foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax, and (ii) tax-exempt organizations. The guidance focuses on identifying which plans are covered by §457A, including identifying the plan sponsor and whether the sponsor is a nonqualified entity." (Internal Revenue Service)


[Guidance Overview]
Recoverability of Equity-Based Compensation Deferred Tax Assets

Excerpt: "As the stock market slides, more stock options and related deferred compensation instruments are 'underwater,' and the related deferred tax assets may no longer be recoverable. The balance sheets and tax footnotes of many entities highlight the magnitude of these equity-based compensation deferred tax assets. When and how they are written off could have a significant impact on the income statement. As a result, and in light of the recent trends in market prices, equity-based deferred compensation plans need to be monitored quarterly for events that trigger the fixing of the corporate tax deduction and the recoverability of the related tax asset." (Journal of Accountancy)


General Motors Corp. Chief Executive Rick Wagoner says automaker can survive long-term without cutting benefits to retired workers
Excerpt: "Wagoner made the remarks on NBC's Today Show, where he was joined by United Auto Workers President Ron Gettelfinger. The two made the appearance from Detroit ahead of their renewed labor negotiations scheduled to begin next week." (AP Online via NewsEdge via Human Resource Executive Online)


The Public Sector Workforce - Past, Present, and Future
Excerpt: "This paper outlines past and current demographics of the state and local government workforce, contrasted against the demographics of the private sector, and explores the projected public sector workforce needs of the future as the baby boomer generation begins to retire. This paper also briefly details issues that state and local government executives describe as major challenges their governments are facing as they look to recruit and retain the next wave of public servants." (Center for State and Local Government Excellence)


New York City Employee Pay Is Outpacing Private Sector, Report Says
Excerpt: "Bolstered in part by Mayor Michael R. Bloomberg's spending, the average New York City employee cost the city $107,000 a year in wages, health insurance, pension and other benefits in the 2008 fiscal year, an increase of 63 percent since 2000, according to a new report." (The New York Times; free registration required)




Newly Posted Events

Section 409A(a) Proposed Income Inclusion Regulations: Revealing the Real Sting of 409A - Webcast
Nationwide on January 14, 2009
presented by BNA, Inc.



Newly Posted Press Releases

U.S. Department Of Labor Sues Mondsview, Minnesota, Trucking Company For Abandoning Profit-sharing And 401(k) Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

SLIA Employee Benefits Division Appoints New VP Sales & Marketing for New York Region
Sumitomo Life Insurance Agency America, Inc.



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Senior Defined Benefit Data Analyst
for Diversified Investment Advisors, Inc.
in MA

401(k) Enrollers/Independent Contractors – Part Time
for Diversified Investment Advisors
in ANY STATE

Consulting Actuary
for New York Life Retirement Plan Services
in MA




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