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January 12, 2009

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]
Text of IRS Notice 2009-09: Reporting by Financial Institutions of Required Minimum Distributions for 2009 (PDF)

Excerpt: "Issuers of the 2008 Form 5498, IRA Contribution Information, should not put a check in Box 11. However, in recognition of the short amount of time to make programming changes, if a financial institution issues a 2008 Form 5498 with a check in Box 11, the IRS will not consider such form issued incorrectly solely because of the check in Box 11, provided the IRA owner is notified by the financial institution no later than March 31, 2009, that no RMD is required for 2009." (Internal Revenue Service)


[Official Guidance]
Text of IRS Notice 2009-02: Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)

4 pages. Excerpt: "This notice contains updates for interest rates for funding requirements under sections 412(b)(5)(B) and 430(h)(2) of the Code applicable for November 2008, and updates for interest rates for minimum present value determinations under 417(e)(3) of the Code for October 2008." (Internal Revenue Service)


[Guidance Overview]
FASB Expansion of Disclosures About Postretirement Benefit Plan Assets (PDF)

Excerpt: "On Dec. 30, 2008, the Financial Accounting Standards Board issued FSP FAS 132(R)-1, which amends Statement 132(R) to require more detailed disclosures about employers' plan assets, including employers' investment strategies, major categories of plan assets, concentrations of risk within plan assets and valuation techniques used to measure the fair value of plan assets. The FSP has other components. Read more details about the FSP in this issue of Heads Up, by Deloitte." (Deloitte Development LLC via Financial Executives International)


[Guidance Overview]
IRS Special Edition on New Law Affecting Required Minimum Distributions for 2009 (PDF)

2 pages. Excerpt: "If a beneficiary is receiving distributions over a 5-year period, he or she can now waive the distribution for 2009, effectively taking distributions over a 6-year rather than a 5-year period." (Internal Revenue Service)


[Guidance Overview]
Worker, Retiree, and Employer Recovery Act of 2008

Excerpt: "This newsletter provides a summary of the most important provisions of the Recovery Act." (Blank Rome)


[Guidance Overview]
New Regulations Clarify Disclosure Duties of Qualified Retirement Plan Fiduciaries and Advisors

Excerpt: "Pending regulations from the Department of Labor require retirement plan vendors to disclose in writing just what services they provide to qualified retirement plan sponsors, and what sorts of compensation they're receiving -- including gifts, awards, trips, research, finder's fees, soft-dollar payments, fees deducted from investment returns and other kinds of compensation. The regulations in question represent just one of three key Labor Department proposals published over the course of the past year, aimed at clarifying the duties of plan fiduciaries and plan advisors and supplying clearer, more accurate information to participants." (Financial Advisors)


[Guidance Overview]
FAQ Sheet for Plan Participants: Changes in the Required Minimum Distribution Rules for 2009 (PDF)

Excerpt: "A new law, the Worker, Retiree and Employer Recovery Act of 2008, suspends the minimum distribution requirements applicable to employer sponsored retirement plans (401(k), 401(a), 457, 403(b), IRAs) for the 2009 tax year. As a result of this change, participants over the age of 70½ who would typically need to receive a required minimum distribution (RMD) for 2009 are not required to take payment from their accounts during 2009." (ICMA-RC)


[Guidance Overview]
CORRECTED (WORKS NOW) LINK: 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)


Six Big Retirement Issues the Incoming President and Congress Must Tackle
Excerpt: "[R]etirement experts and lobbying groups are pelting the soon-to-be-sworn-in president with what they view as the big retirement-related problems that must be addressed over the next four years. Here are six major issues experts say should be on Obama's and Congress' to-do list." (MarketWatch)


Can 401(k) Plans Provide Adequate Retirement Resources?
Excerpt: "This paper illustrates that moderate 401(k) contribution rates can lead to adequate income replacement rates in retirement for many workers; that adequate asset accumulation can be achieved using only a 401(k) plan; and that these results do not rely on earning an investment premium on risky assets. Using Monte Carlo simulation techniques, this study also illustrates the investment risk faced by participants who choose to invest their 401(k) contributions in risky assets, or who choose to make systematic withdrawals from an investment account in retirement rather than annuitize their account balance." (Pension Research Council; registration required to download fulltext of paper)


Conflicting Reports of Stance on Future of Retirement Plans Put Lawmaker on Defensive
Excerpt: "Depending on whom you ask, Rep. George Miller (D-Calif.) is either championing or undermining the nation's 401(k) system. To see how the lawmaker got to the point where he had to release a November statement in support of what should be obvious - making sure 'our retirement system is as strong as it can be for our nation's workers and retirees' - you have to go back to one congressional hearing of the House Committee on Education and Labor that Miller held over three months ago." (Employee Benefit News; free registration required)


Market Mauls 'Safe' Target Funds, Too
Excerpt: "Last year's massive declines in stocks, as well as hefty losses in some parts of the bond market, led to big differences in returns among the offerings from different fund companies with similar target dates." (The Wall Street Journal)


401(k) Plan Sponsors Wrestle with Whether to Use Benchmarks to Gauge Performance of Target-Date Funds
Excerpt: "Given the recent market volatility, the pressure to monitor performance is more intense than ever. A number of companies, such as Dow Jones, Morningstar and Standard & Poor's, have launched or are developing target-date indexes employers can use to compare the performance of the target-date funds in their plans. 'Plan sponsors and consultants really need to have a neutral, objective and transparent benchmark that enables them to hold their providers to,' says David Krein, senior director of institutional markets for Dow Jones Indexes, which has two target-date fund indexes." (Workforce Management; free registration required)


Court OKs Pension Garnishment for Former Louisiana Public Employees
Excerpt: "The U.S. District Court for the Eastern District of Louisiana has ruled that the federal government can garnish benefits of Louisiana Sheriff's Pension and Relief Fund (LSPRF) participants. The court decided that the Mandatory Victims Restitution Act (MVRA) preempts any state law that may limit what can be garnished or any state law pension anti-alienability provisions for those who have been found guilty or who have pleaded guilty to crimes. Kerry DeCay and Stanford Barre pleaded guilty in criminal proceedings and along with other defendants, were ordered to pay restitution of more than $1 million under the MVRA." (PLANSPONSOR.com; free registration required)


Market Losses Lead to Wisconsin Public Pension Payment Cutbacks
Excerpt: "For the first time in the 26-year-history of the Wisconsin Retirement System, pension checks drawn on the Core Fund will fall by at least 2.5%, a casualty of the market losses afflicting pension plans around the country. Many retirees and beneficiaries will see an even bigger bite out of their checks, according to a Milwaukee Journal Sentinel article, with their new benefit payouts plummeting by double-digit percentages. The cuts are scheduled to go into effect in May, with the amounts set to be calculated in February." (PLANSPONSOR.com; free registration required)


IRS Modifies 2009 Reporting Requirements for IRA RMDs
Excerpt: "The Internal Revenue Service (IRS) has issued Notice 2009-09 which modifies the reporting requirements applicable to required minimum distributions (RMDs) from individual retirement accounts (IRAs) to reflect the waiver of the RMD rules for 2009." (PLANSPONSOR.com; free registration required)


Social Security Reform: Work Incentives (PDF)
28 pages. Excerpt: "This sixth and final Treasury issue brief on Social Security reform discusses Social Security's effect on work incentives and the implications for reform. Social Security discourages work effort in much the same way as does an ordinary tax on labor income. . . . Two key goals for Social Security reform are to raise more than $13.6 trillion in net taxes from current and future workers fairly and with as little effect as possible on work incentives. This net tax will be assessed under any permanently solvent Social Security system, and will involve some combination of increased revenue and lower benefits relative to what is scheduled under current law." (U.S. Department of the Treasury)


The Quality of Your Financial Plan May Depend on Whether or Not You Paid for It
Excerpt: "Financial planning provides a way to analyze your current situation, compare it with a defined set of goals and dreams and assess the likelihood of success in achieving them. So, what is a financial plan? A financial plan can be comprehensive or modular. A modular plan will address a specific segment or module of one's financial life, like retirement. A comprehensive plan examines all areas simultaneously." (Forbes.com)


PBGC Raises Concerns About Car Makers' Pensions
Excerpt: "The government agency that protects pensions for Americans is raising fresh concerns about the repercussions if one or more of the U.S. auto makers were to collapse, saying 1.3 million workers and retirees could see their pensions slashed if that were to happen. The head of the U.S. Pension Benefit Guaranty Corp. acknowledged in an interview that General Motors Corp., Ford Motor Co., and Chrysler LLC have well funded pensions according to the standard accounting rules applied by the Securities and Exchange Commission. But by the PBGC's measures, the pension funds of Detroit's Big Three would be underfunded by as much as $41 billion if one or more of the auto makers went under and killed their pension plans, PBGC Director Charles E. F. Millard said." (The Wall Street Journal)


Interview with Author of 'When I'm Sixty-Four: The Plot Against Pensions and the Plan to Save Them'
Transcript from the interview. Excerpt: "Professor Ghilarducci, explain what's happening now in light of all -- well, Obama just spoke on the economy yesterday. TERESA GHILARDUCCI: It's really the end of a thirty-year experiment with a do-it-yourself pension system. The United States stood above all other nations in saying, 'Look, we're going to hand over this saving and investing responsibility over to individuals. They want control. The stock market is healthy.'" (Democracy Now! via Independent Media Institute)


A Warning on Motown's Pensions
Excerpt: "The Detroit News and The Wall Street Journal are reporting that Motown automakers' pensions funds are no longer fully-funded. 'The outgoing director of the U.S. Pension Benefit Guaranty Corp. warned Friday that Detroit's Big Three automakers face a $41 billion pension shortfall. 'We're not trying to tell people that the pension house is on fire,' quoth E.F. Millard in the DetN. 'The point is that in many ways this has a similar look to other situations, such as a Bethlehem Steel.' Not surprisingly, the WSJ has an even more alarming sound bite. 'An awful lot of people seem to think these plans are well funded or overfunded. Each of these plans is significantly underfunded [and] in three years I don't want people coming back and saying, 'How come the PBGC never told us that?'' Let's drill down, then." (The Truth About Cars)


Stock Market Effects on Your Company's Pension Fund
Excerpt: "The pension plans of the companies in the Standard and Poor's 500-stock index were underfunded by about $362 billion in 2008, according to David Zion, an analyst at Credit Suisse. Of the 500 companies in the index, 360 had plans that were underfunded. Are the weakened pension plans yet another reason to fret about your financial future? If the retirement experts who track the numbers are right, the answer is no. Your pension is most likely still better off than your 401(k) account." (The Washington Post; free registration required)


401(k) Match Cut? No Need to Stop Saving
Excerpt: "With more companies cutting their retirement plan matches and implementing pay freezes, 2009 is shaping up to be a bad year for the nest egg. The Pension Rights Center counted about 20 major corporations in December that publicly announced changes (mostly negative) to their 401(k) matches. Many others have discontinued or downsized their traditional pension plans or announced salary freezes, experts said. At least to this point, however, savers don't seem to be bailing out." (Chicago Tribune)


[Opinion]
ASPPA Comments on Notice of Consequences of Failing to Defer Receipt of Distribution (PDF)

4 pages. Excerpt: "The final Regulations should provide that delivery of the Internal Revenue Code (IRC) §402(f) notice satisfies the requirement that a participant be provided with a description of federal tax implications for failing to defer receipt of a distribution." (American Society of Pension Professionals & Actuaries)


[Opinion]
Municipal Workers Across Country Lost Money After Their Pensions Gave Funds to Advisers Who Invested with Madoff

Excerpt: "[Bloomberg] reports that losses at municipal pensions are spurring an investment warning: Municipal-pension managers shouldn't give money to advisers who invest it in funds run by others, a practice that sparked $14 million of losses tied to Bernard Madoff, labor union investment official Richard Ferlauto said." (Leo Kolivakis)


[Opinion]
Springfield, Missouri, Will Vote on Tax to Fund the Deficit of the Police/Fire Pension Fund

Excerpt: "The one-cent tax has a sunset provision of five years or when the police/fire pension fund becomes 100 percent funded. This tax will generate $40 million annually, of which visitors end up paying 50 percent. This equates to $1 per $100 taxable sale. Discussion about the pension needs to continue beyond the passing of this tax. I understand the fear that the passing of the tax will halt the urgency of the city to continue negotiations and the loss of leverage for pension members to agree to future changes." (Springfield News-Leader)



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Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Initial Guidance and Limited Transition Relief for Nonqualified Deferred Compensation Plans Subject to New Section 457A

Excerpt: "The U.S. Treasury Department and the IRS anticipate issuing additional guidance under Section 457A and have requested comments regarding Notice 2009-08 and Section 457A. Until further guidance is issued, taxpayers may rely on this guidance for purposes of Section 457A. Any further guidance that would expand the coverage of Section 457A will be prospective." (McDermott Will & Emery)


New Article on Stock Options, Restricted Stock, Phantom Stock, SARs, and ESPPs
NCEO Executive Director Corey Rosen has written a new article for the NCEO's Web site on stock options, restricted stock, phantom stock, stock appreciation rights, and employee stock purchase plans. (National Center for Employee Ownership)




Newly Posted Events

Cafeteria Plan Election Changes: What's Permitted and What Isn't?
Nationwide on February 12, 2009
presented by EBIA / Thomson Reuters

Executive Compensation Proxy Disclosure: Best Practices When Storm Clouds Are Ready to Burst
Nationwide on February 10, 2009
presented by ABA Joint Committee on Employee Benefits

Health and Welfare Plan Management for Mid-Sized Employers
in Massachusetts on April 26, 2009
presented by University Conference Services

Just Released! IRS Notice 2009-9 - RMD Relief Reporting Requirements
Nationwide on January 13, 2009
presented by Convergent Retirement Plan Solutions, LLC



Newly Posted Press Releases

Council Issues Landmark Health Care Reform Proposal
American Benefits Council

Millennium Trust Adds Senior Vice President for Business Development
Millennium Trust Company, LLC



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