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January 19, 2009

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


Today's sponsor is Employee Benefits Institute of America (EBIA)

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EBIA's 401(k) Plans Manuals and Seminars!

Since the enactment of the Pension Protection Act of 2006 (PPA), the IRS and DOL have been issuing significant guidance interpreting numerous PPA changes affecting 401(k) plans. EBIA's 401(k) Plans manual, written and edited by five experienced employee benefits attorneys, analyzes and explains the PPA and other new guidance and provides practical guidance on how to comply. If you are not a current subscriber, now is the time to add 401(k) Plans to your library. And don't forget to check out our popular in-person 401(k) plans seminars, which will be presented in several cities this spring.

U.S. Labor Department Finalizes Rule On Investment Advice For 401(k) Plans And IRAs; To Be Published Wednesday
Press release. (Employee Benefits Security Administration, U.S. Department of Labor)


OMB Approves DC Advice Rule
Excerpt: "A Department of Labor proposed regulation setting ground rules for providing investment advice to participants in defined contribution plans was approved by the White House's Office of Management and Budget, according to the Federal Register's website. The regulation has been scheduled for publication in the Federal Register on Jan. 21, according to the website." (Pensions & Investments)


Miller, Andrews Threaten to Block DOL's Advice Regulation
Excerpt: "With the ink barely dry on the Department of Labor's final regulations on investment advice, two Democratic Congressman have promised to block it. Congressman George Miller (D-California), the chairman of the House Education and Labor Committee, and Congressman Rob Andrews (D-New Jersey), issued the following statement: 'We are disappointed that the Bush administration moved forward to enact a new regulation that will make it harder for workers to receive fair and honest advice when making key financial decisions about their futures.'" (planadvisor)


[Guidance Overview]
Federal Agencies' Expansion of Form 5500 Rules for 403(b) Plans (PDF)

Excerpt: "This publication discusses the structure of the Form 5500 and the various schedules to help ERISA 403(b) plan sponsors become more familiar with standard Form 5500 filing requirements. We will provide you with additional information regarding the 2009 Form 5500 filing requirements during the upcoming year. . . . In preparation for the 2009 plan year, sponsors of ERISA 403(b) plans should review the rules in this publication to become familiar with standard Form 5500 rules. Additionally, plan sponsors should begin taking steps to identify a Form 5500 preparation service and if applicable, an independent qualified accountant." (Prudential Retirement)


[Guidance Overview]
The Worker, Retiree, and Employer Recovery Act of 2008: Limited Relief and Technical Guidance for Qualified Retirement Plans

Excerpt: "The Worker, Retiree, and Employer Recovery Act of 2008 makes a number of technical corrections which need be to considered as employers prepare plans for PPA compliance. . . . As employers prepare plan amendments for PPA compliance during 2009, these changes need to be considered. The [target page] is a summary of the key provisions of the Act." (McDermott Will & Emery)


[Guidance Overview]
2009 RMD Rule Changes: A Follow-Up on Specific Issues

Excerpt: "The changes in the required minimum distribution ('RMD') rules for 2009 that are part of the Worker, Retiree, and Employer Recovery Act of 2008 ('WRERA') continue to receive substantial discussion. . . . This Technical Update addresses some issues of continuing interest regarding the interpretation of the new law, as well as informal discussion with IRS National Office personnel." (SunGard)


[Guidance Overview]
Final Regs on Civil Penalty Rules Reflecting PPA Changes

Excerpt: "The Employee Benefits Security Administration (EBSA) has issued final regulations that provide procedures for assessing civil penalties for the failure to disclose certain documents to participants, beneficiaries and others as required by ERISA. The regulations reflect amendments to ERISA §502(c)(4) by the Pension Protection Act of 2006 (PPA; P.L. 109-280) and finalize proposed regulations issued in December 2007 without change. The regulations are effective on March 3, 2008." (Wolters Kluwer)


A More Sophisticated Look at the Benefits of Roth Contributions
Excerpt: "Greg Matthews of Matthews Benefit Group, Inc., (St. Petersburg, Florida), analyzes the question of whether it is better to save in a Roth versus saving in a regular IRA or 401(k)." (Small Business Council of America)


Are Stable-Value Funds Safe?
Excerpt: "I read that a stable-value fund that Invesco manages for Lehman Brothers' 401(k) plan lost money. How safe are other stable-value funds?" (Kiplinger.com via The Washington Post; free registration required)


Impact of Market Volatility on Participant Exchange Behavior (PDF)
5 pages. Excerpt: "Although the number of participants making exchanges in November 2008 was higher than recent quarters, it still represents a relatively small number of Fidelity's record kept participant base. The likelihood of a participant to make an exchange is highly correlated with account balance (i.e. the higher the balance, the more at stake, and the greater the likely level of participant engagement)." (Fidelity Investments)


The Role of CEFEX Certification in Today's Retirement Plan System (PDF)
5 pages. Excerpt: "CEFEX certification is a method for Investment Stewards to implement oversight and verification of fiduciary processes. This article focuses on the participant-directed retirement plan to illustrate how its specific challenges can be mitigated with CEFEX certification." (Centre for Fiduciary Excellence (CEFEX))


Stable Value Fund As the Most Conservative Option for Retirement Money Still a Worry
Excerpt: "For most investors, the market crash shattered the notion of 'safe' investments. Bond funds lost money, the government stepped in to bail out money funds, banks failed. Now millions of workers who invest through their 401(k) plans are finding that one of the last pillars of safety - so-called stable value funds - may be riskier than they assumed." (SmartMoney)


Target-Date Funds Are Not Fool-Proof: Take Time and Attention, Too
Excerpt: "Last year's average loss was nearly 25 percent among 31 funds with 2010 retirement target dates tracked by Morningstar. That's not that much better than the 33.8 percent hit the Dow Jones industrial average suffered in 2008 or the nearly 39 percent drubbing for the Standard & Poor's 500-stock index. And target-date funds, also known as life-cycle funds, are hardly created equal. Their strategies vary widely, which explains last year's vastly different performances among funds with identical target dates, 2010 and otherwise. For instance, depending on which 2010 fund investors were in, the 2008 loss may have been as small as 3.6 percent or as big as 41 percent." (AP via The Washington Post; free registration required)


'Defined Benefit' Plans Cost More But Are National Norm
Excerpt: "At least one national expert contacted by the News-Leader said the city's sales tax plan will help bolster the ailing pension but won't solve the core problem -- that it's a 'defined benefit' plan. Pension analyst Richard Dreyfuss, an actuary and senior fellow with the Commonwealth Foundation for Public Policy Alternatives in Pennsylvania, recommended the city move its police and fire employees from a 'defined benefit' plan to a 'defined contribution' plan, much like a 401(k)." (Springfield News-Leader)


Obama Will Try to Fix Social Security, But Options Are Limited
Excerpt: "Mr. Obama is likely to tackle Social Security by the fourth year of his administration, said Mr. Steuerle, a deputy assistant Treasury secretary under President Ronald Reagan. The president-elect could wait until more urgent issues of the economic recovery and the financial bailout are addressed, or he could package some of the proposals together." (Financial Week)


South Carolina Pension Officials Rebut Governor's 'Near-Criminal' Claim
Excerpt: "Thousands of retired state employees may have flinched earlier this week when Gov. Mark Sanford said South Carolina's overly optimistic pension plan investment projections are 'near criminal' and 'heading toward a disaster,' but the officials who run the program are bristling at his accusations. 'It's real disturbing that he would make a comment like that that's not backed up by truth. I think he owes an apology to everyone. If he's got proof of these problems, he needs to go investigate it,' state Treasurer Converse Chellis said Friday." (AP via Forbes.com)


Merrill to Pay $550 Million in Subprime Settlements
Excerpt: "Merrill Lynch & Co. will pay $550 million to settle claims by the Ohio State Teachers Retirement System and other shareholders that it misled investors about assets backed by subprime mortgages." (Bloomberg L.P.)


Cerulli Projects 5.9% Growth in DC Assets
Excerpt: "The growing popularity of automatic enrollment in defined contribution plans -- and target-date default choices in those plans -- should fuel a surge in retirement plan assets, according to a new report. According the recent Cerulli report, 'Cerulli Quantitative Update: Retirement Markets 2008', private-sector DC will grow at an annual rate of 5.9% from 2008 to 2013, though that is a lower rate compared to previous projections based on worsening net flow forecasts, according to the report. Going forward Cerulli forecasts slower growth in private DB than public DB, with private DB growing at an annual rate of 3.6% through 2013 and public DB growing at a rate of 5.3%." (planadvisor)


Company Owners/Plan Sponsors Must Make 401(k)s a True Benefit
Excerpt: "Individual 401(k) holders and business owners with fiduciary responsibility for administering the company's plan can make several changes this year to make the 401(k) the cornerstone of a secure retirement: better investment decisions, increased fiduciary oversight by the plan sponsor (employer) and greater understanding of fees and their impact on retirement income." (The Scranton Times Tribune)


Kaiser Wilhelm I Decreed First Social Programs: A Very Brief History of Pensions
Excerpt: "Social programs in Germany began in the 1880s. In November 1881, at the direction of Chancellor Otto von Bismarck, Emperor Kaiser Wilhelm I, issued a decree stating, 'those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.' Bismarck wanted social programs that would focus German workers attention on increasing productivity and supporting the government. He concentrated on health insurance, worker's comp, disability insurance, and old-age retirement pensions. The Health Insurance Bill of 1883 was the first program adopted." (The Coloradoan)



401khelpcenter.com (Sponsor)

(Click on company name or banner to learn more.)
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Are you a 401(k) plan sponsor who is looking for a cost-effective way to get your employees to appreciate their plan and save more? "It’s Your Money" information sheets are now available as e-mailable newsletters sent to your employees at the same time that they receive their quarterly 401(k) statements. They can now be customized with your company logo, a valuable retention tool!


Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Treasury Issues Guidance on New Section 457A: More Compliance Headaches for Deferred Compensation Arrangements (PDF)

8 pages. Excerpt: "As discussed [in this article], a critical factor in determining whether the new provisions will apply to a nonqualified deferral arrangement is whether the foreign corporation maintaining the deferred compensation arrangement is resident in a country that is not a party to a comprehensive income tax treaty with the United States or does not otherwise have a 'comprehensive foreign income tax.'" (Miller & Chevalier Chartered)


[Guidance Overview]
Section 409A Follow-Up for 2009

Excerpt: "Yes, I know that we are all sick of 409A work, but the unfortunate truth is that it will be with us for the rest of our careers in the executive compensation field. The following are seven items we all will need to look out for in 2009 (and future years) . . . ." (Michael S. Melbinger via Winston & Strawn LLP)


[Guidance Overview]
Treasury Issues Additional Executive Compensation Rules Under TARP

Excerpt: "The new rule requires the CEO of a participating institution to certify annually within 135 days after the institution's fiscal year end that the institution and its compensation committee have complied with these executive compensation standards." (Michael S. Melbinger via Winston & Strawn LLP)


Treasury Issues Executive Compensation Reporting Requirements Under TARP
Excerpt: "The U.S. Department of the Treasury on Friday issued interim final rules for reporting and recordkeeping requirements under the executive compensation standards of the Troubled Asset Relief Program's (TARP) Capital Purchase Program (CPP). The new rule requires the chief executive officer (CEO) to certify annually within 135 days after the financial institution's fiscal year end that the financial institution and its compensation committee have complied with the standards." (PLANSPONSOR.com; free registration required)


Looking Back at Ten Years of Pension Accounting and Financial Reporting
Excerpt: "The GASB has embarked upon a project that will examine its standards of accounting and financial reporting for postemployment benefits -- including pension benefits and other postemployment benefits (OPEB), most notably retiree health insurance. The project began with a two-year research effort aimed at understanding if the GASB's pension standards -- Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers -- have been effective. Those Statements were issued in 1994 and were fully implemented by the late 1990s." (Governmental Accounting Standards Board)


Lose Your Job? There Could Be Tax Surprises
Excerpt: "If you lose your job, you could be in for some tax surprises - some nice, some nasty. If you receive unemployment benefits or severance pay, cash in a retirement account or have a big change in income, your tax bill could be much more - or less - than you expect. To avoid surprises, here are some tips." (San Francisco Chronicle)


[Opinion]
SBCA Supports Limiting Code Section 409A to Public Companies (PDF)

5 pages. Excerpt: "The SBCA urges Congress to limit the application of Internal Revenue Code Section 409A to publicly traded companies. This onerous code section is applicable to small businesses even though there is no abuse in the small business context. Most small businesses do not even know it applies to them and are totally unaware of the substantial penalties that currently apply." (Small Business Council of America)




Newly Posted Press Releases

Target Date v. TargetAge™: Retirement Investing Based on Reality, Not Hopes
Securian Retirement Services

CareCounsel Contributes to President-Elect Obama’s Transition Health Policy Team
CareCounsel

Treasury Issues Additional Executive Compensation Rules Under TARP
U.S. Department of Treasury

Liberty Mutual Web Site Explains New Federal and State Family Medical Leave Rules
Liberty Mutual

Workshops Educate San Francisco Businesses on Compliance with New Transit Benefit Ordinance
Accor Services North America

Schwab Announces 2008 Highlights for Institutional Services
Charles Schwab Corporation



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