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| January 20, 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]
PBGC's Guidance on Minimum Lump-Sum Assumptions for Terminating Single-Employer Plans
Excerpt: "The PBGC has issued a Technical Update which expands guidance provided in prior Technical Update 07-3 on lump-sum valuation issues for single-employer plans that terminate in a standard termination. The Technical Update applies to plans that terminate on or after the effective date of certain amendments to the law as enacted by the Pension Protection Act of 2006 (PPA; P.L. 109-280) and provides guidance on how to apply the PPA changes in the interest rate and mortality table used in calculating minimum lump-sum amounts." (Wolters Kluwer)
[Guidance Overview]
Protective Pension Funding Waiver Applications - Due March 15, 2009
Excerpt: "The deadline for submitting an application requesting a waiver for the 2008 plan year - i.e., for contributions due September 15, 2009 - is March 15, 2009. An application filed by March 15 can later be withdrawn if circumstances dictate. But new applications cannot be filed after March 15: The deadline, set by statute, cannot be extended by the IRS. If in doubt about your ability to fulfill funding obligations in September, file now." (Ivins, Phillips & Barker)
Company Pensions Hurt, But Most Are Well Protected
Excerpt: "The miserable stock market has wreaked havoc not only on your personal portfolio but also on your company's pension fund. 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 those 500 companies, 360 had plans that were underfunded. Are weakened pension plans one more 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 via The Atlanta Journal-Constitution)
Retirement-Oriented Funds Must Start Doing a Better Job of Managing for Distributions
Excerpt: "The primary focus of retirement income portfolios should be risk/volatility control because 'sequence of return' issues represent the greatest risk to distribution portfolios. Those entering retirement this autumn with retirement accounts shrinking before their eyes are coming to realize that the 'when' of taking distributions is just as important as the 'what.'" (Investment News; free registration required)
Changes in Estate Planning: This Year Will See a $3.5 Million Exemption and Lower Estate Values
Excerpt: "The same $3.5 million exemption applies to the Generation Skipping Transfer (GST) tax, which makes the stretch IRA more powerful. Beginning in 2009, we can leave more of our IRA or Roth IRA, free of any GST tax, to grandchildren. Their longer life expectancies will allow the IRA to grow tax-deferred or even tax free (with a Roth IRA) for greater wealth build-up, over time, in stretch IRAs." (Investment News; free registration required)
The No-Cost Way to Fix Flawed 401(k)s
Excerpt: "We already have a perfectly good retirement account available for investors. The IRA gives you an immediate tax deduction and the prospect of tax-deferred growth. It also offers complete investment flexibility, as you can open an IRA with nearly any stock, bond, ETF, or mutual fund you can think of, as well as some other types of investments as well. So, what's the problem? Well, the amount you can contribute to an IRA is quite low compared to a 401(k): $5,000 for an IRA versus $16,500 for 401(k) contributions in 2009. But a simple solution might include . . . ." (The Motley Fool)
403(b) Plans: The Prior Provider Hurdle
Excerpt: "As plan sponsors consider and implement provider changes with an eye toward the new blueprint provided by the 403(b) regulations, they may encounter some unexpected obstacles in bringing together accounts from prior vendor relationships." (PLANSPONSOR.com; free registration required)
Structuring Portfolios for DC Plan Participants by Targeting Age Rather than Retirement Date (PDF)
24 pages. Excerpt: "The distinguishing feature of the popular 'target date' lifestyle funds is that the overall asset allocation automatically becomes more conservative as a participant's retirement date approaches. Another approach -- age-based investing -- automatically adjusts asset allocation to become more conservative based on a person's age, rather than an expected retirement date." (Securian Retirement)
5 New Rules to End Your 401(k) Crisis
Excerpt: "[T]he kind of patient, long-term diversification that has proved so successful in the pension industry is proving to be a poor model for 401(k) plans]. With some trillion 401(k) dollars lost to this bear market . . ., Congress is talking about everything from a little tinkering to what amounts to a super Social Security plan to head off a crisis. But who knows how long that will take or what they'll come up with? In the meantime, we can take steps to solve our own 401(k) crisis. What we need are new rules tailored to today's unprecedented events. Investing, including retirement investing, needs to become less strategic and more tactical." (MSN.Money.com)
[Opinion]
We Need to Save Social Security
Excerpt: "First, we must immediately ratchet up the retirement age, in steps over a 20-year span, to 75. People are far healthier and have better medical care than in 1935, so they can be productive far longer. They can retire earlier if they can afford it or if their children choose to help them. Alternatively, they could have the option of retiring at 65 but getting only half what they would get at 75. It's not the most desirable solution, nor will it be the most popular, but it is the only way to save this vital program. Otherwise we are continuing the Ponzi scheme fraud on our young workforce." (The Hill)
[Opinion]
What Are Top Five Retirement Priorities That the Obama Administration Should Focus On?
Excerpt: "Now, that's a more complicated question than you might think at first glance. For instance, if you were to ask me what ONE thing should be dealt with, I could probably pull something hugely critical out of the air. Not that it wouldn't be hard to come up with just one thing -- but there's a certain clarity to that process. However, once you get going, it's harder than one might think to keep the list to five. Furthermore, there are LOTS of little things that you know would make the system better, but if you can only come up with five -- and five for presidential-level involvement, no less -- well, you also tend to focus on the big picture. In any event, on this Inauguration Day, here's my list . . . ." (PLANSPONSOR.com; free registration required)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]
IRS Expansion of Relief for Section 409A Operational Failures
Excerpt: "The new corrections program, like the earlier one, provides a limited opportunity to correct certain failures that arise in the operation of a plan. The new corrections program does not cover failures by nonqualified deferred compensation plan documents to comply with section 409A in form (i.e., a failure of the plan to meet the written plan document requirements specified in applicable regulations)." (McGuireWoods LLP)
Recessions and Older Workers
Excerpt: "With the economy sliding ever deeper into recession, questions arise about how older workers are faring and how their fate relative to younger workers compares to the past. The answer to these questions turns out to be a little complicated. Two forces are at work. On the one hand, labor force participation among older workers has been rising since the early 1990s, a reversal of the long-standing trend toward ever-earlier retirement. Participation rates among older workers have even continued to rise during both of the recessions in this decade - a dramatic change from previous experience. On the other hand, the edge that older workers used to have relative to younger workers when it comes to layoffs seems to have disappeared, so the rise in the unemployment rate for older workers in recessions now looks similar to that for younger workers." (Center for Retirement Research at Boston College)
2008 Legislative and Regulatory Year in Review and the Outlook for 2009
Excerpt: "This two-part report rounds up key legislation and regulatory guidance enacted in 2008 and forecasts the outlook for legislative activity in 2009 under a new Congress and the new Obama administration." (Hewitt Associates)
[Opinion]
Surviving and Thriving in Economic Turbulence: HR's Response
Excerpt: "As the impact of the financial crisis spreads, no organization will remain untouched. Most of the risks inherent in the crisis are easy to recognize. In tough times, there is a natural tendency to retrench, cut costs, and wait things out. Organizations often overlook or shy away from the growth side of the equation. Companies that first manage the risks and then exploit the opportunities of this crisis in a strategic, deliberate, and speedy manner will emerge as the winners." (Hewitt Associates)
Newly Posted Press Releases
What Recession? Executive Benefits Pension Annuity Plan Post Gains In 2008.
Executive Benefits Design Group
Altigro Pension Services Makes TPA Acquisition
Altigro Pension Services
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