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| January 27, 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]
PPA Technical Corrections Affecting Defined Benefit Plans
Excerpt: "This article is focused on technical corrections that relate to defined benefit plans." (Deloitte LLP via BenefitsLink.com)
[Guidance Overview]
Pension Funding Relief and Technical Corrections to PPA
Excerpt: "The Worker, Retiree and Employer Recovery Act (WRERA), signed into law on Dec. 23, 2008, provides some funding relief to defined benefit (DB) sponsors affected by recent market declines, as well as temporarily waiving the minimum distribution rules for seniors. The act also makes permanent technical corrections to the Pension Protection Act of 2006 (PPA). [This article includes charts of both temporary and key permanent provisions.]" (Watson Wyatt Worldwide)
[Guidance Overview]
DOL's Final Investment Advice Regulations and Related Class Exemption under PPA Subject to Potential Review and Extension by Obama Administration
Excerpt: "The final regulations essentially adopt the proposed rule, released August 22, 2008, which implemented the new statutory exemption for investment advice added to the Employee Retirement Income Security Act of 1974 as amended (ERISA), by the Pension Protection Act (PPA)." (Morgan, Lewis & Bockius LLP)
[Guidance Overview]
Suspension of Minimum Required Distributions for 2009 (PDF)
2 pages. Excerpt: "While the required distributions otherwise due for the 2009 calendar year are waived under the Act, plan provisions may require that these distributions still be paid. Therefore, plan sponsors may want to amend their plans so that these distributions are not paid. The Act specifies that it is permissible for a plan not to pay distributions that the plan document otherwise requires to be paid as required minimum distributions for the 2009 calendar year so long as the plan is amended to conform to its operation (of not paying the distributions) no later than the last day of the plan year commencing on or after January 1, 2011." (Dow Lohnes PLLC)
[Guidance Overview]
DOL Rule Gives More Advice Options
Excerpt: "If it remains in place, the Department of Labor's (DoL) finalized investment advice rule might help business for retirement plan advisers already giving advice. The DoL's rule recently published in the Federal Register updates the Pension Protection Act (PPA) to allow for investment advice from investment companies to participants of 401(k)s and IRAs. It includes provisions to limit the conflict of interest this could create . . . ." (planadvisor)
[Guidance Overview]
State Court Lacks Jurisdiction to Determine Whether a DRO Is a QDRO, According to Appeals Court
Excerpt: "EBIA Comment: The DOL's view that only federal courts have jurisdiction to determine whether a DRO is qualified, is found in a set of frequently asked questions (FAQs) addressing various QDRO issues (available at http://www.dol.gov/ebsa/faqs/faq_qdro.html). As we have previously noted, however, we find more compelling the view that an alternate payee's lawsuit challenging a plan administrator's QDRO determination is a claim for plan benefits under ERISA Section 502(a)(1)(B) over which state and federal courts have concurrent jurisdiction, although if filed in state court, the plan should be able to remove the state court action to federal court, regardless of how the claim is pled in the complaint, pursuant to the 'complete preemption' doctrine . . . ." (Employee Benefits Institute of America)
[Guidance Overview]
Updated IRS Procedures for Issuing Letter Rulings, Determination Letters, and Other Employee Plan Guidance
Excerpt: "EBIA Comment: These revenue procedures are required reading for employers and their advisers seeking plan-specific guidance from the IRS. Those new to the employee benefits arena will welcome the procedures' practical tools, including sample formats for letter ruling requests, checklists to ensure that ruling requests are complete, definitions of basic terms, user fee schedules, and descriptions of how the 2009 procedures differ from their 2008 counterparts." (Employee Benefits Institute of America)
[Guidance Overview]
DOL's Final Investment Advice Regulations That Include Prohibited Transaction Class Exemption
Excerpt: "EBIA Comment: The final regulations make relatively few substantive changes. This leaves some details unsettled, such as the qualifications for service as an eligible investment expert or auditor, which the DOL chose not to further define, primarily on the ground that the task was too difficult and any examples might be unduly limiting." (Employee Benefits Institute of America)
[Guidance Overview]
Analysis: A Waiver of Benefits That Isn't, Says The Supremes
Excerpt: "The Supreme Court settled two issues of workers' benefits law on Monday, giving mostly clear directions to employee plan managers on how they are to deal with the consequences of divorce of a worker. In general, the Court said, an administrator must simply 'look at the plan documents and records conforming to them' to find out who is to be paid the benefits; there is no need, it added, to go to court for the answer." (Akin Gump Strauss Hauer & Feld)
Tracing the Life Cycle of Alternative Investments
Excerpt: "What are the distinct phases of an investment's life cycle, and how can investors use this framework to enhance their investment decisions? A new research paper from Vanguard Investment Counseling & Research, The life cycle of an investment idea: How to consider alternative investments, [https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article?File=InvResLifecycleInvestIdea] explores those questions, using the growth of alternative investments as the focus of the analysis." (The Vanguard Group, Inc.)
A Progressivity Index for Social Security (PDF)
20 pages. Excerpt: "Using the Social Security Administration's MINT (Modeling Income in the Near Term) model, this paper analyzes the progressivity of the Old-Age, Survivors and Disability Insurance (OASDI) program for current and future retirees. It uses a progressivity index that provides a summary measure of the distribution of taxes and benefits on a lifetime basis. Results indicate that OASDI lies roughly halfway between a flat replacement rate and a flat dollar benefit for current retirees. Projections suggest that progressivity will remain relatively similar for future retirees. In addition, the paper estimates the effects of several policy changes on progressivity for future retirees." (U.S. Social Security Administration)
U.S. Pension Fallout from the World Financial Crisis (PDF)
Excerpt: "The collapse, takeover, or bailout of such Wall Street heavyweights as AIG, Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, and Merrill Lynch has caused a loss of confidence that has affected Wall Street executives and American families alike. According to the Congressional Budget Office, U.S. pension plans have lost as much as $2 trillion in the current volatile market. The majority of pension assets are held in equities; thus, falling stock prices negatively affect pension plans. Worse, the last 20 years have seen the risk of loss from pension investments pass - mostly through the popularity of 401(k) plans -- from employers to employees and retirees." (IPEBLA International Journal via Paul, Hastings, Janofsky & Walker LLP)
Sources of Support for Pension Reform: A Cross-National Perspective
Excerpt: "Many accounts of pension politics assign primary importance to societal forces. In the well-known formulation, pensions are the 'third rail' of politics: politicians cannot cut benefits without suffering electoral retribution. In addition, some see the preferences of business as a key determinant of pension policy. This study takes aim at this problem by exploring what factors lead citizens and firms to support public pension systems and various reform efforts." (Center for Retirement Research at Boston College)
Retirement and Social Security: A Time Series Approach
Excerpt: "This paper examines labor force participation rates of older workers considering both chronological age and remaining life expectancy. Results show that participation by remaining life expectancy declines for men through the early 1990s, leveling off in the next decade. However, participation by age have been rising for men in their sixties since the mid-1990s. Whether we specify the empirical model by age or by remaining life expectancy, ages 62 and 65 both have strong negative effects on participation, confirming a major role in retirement decisions for Social Security." (Center for Retirement Research at Boston College)
A New Twist: 401(k) 'Re-Enrollment'
Excerpt: "With re-enrollment, your employer can shift your money out of current 401(k) investments and reinvest the money in a diversified portfolio for you. You have the right to opt out, of course, if you don't want to change. It's another sign of how 401(k)s are adopting features of traditional pensions, where workers are automatically signed up and investment decisions are made for them." (The Baltimore Sun)
New Study Says Plan Sponsors Must Improve Fiduciary Practices
Excerpt: "[The MetLife U.S. Pension Risk Behavior Index] considers investment, liability and business risk management among the largest U.S. defined benefit pension plan sponsors. . . . Designed to measure both the aptitude and attitude of employee benefit decision-makers, the research creates a base case gauge as to the current state of pension risk management. Not surprisingly, respondents ranked the following risk factors as 'Most Important,' in part it is believed because they are the simplest to model and measure: Asset Allocation; Meeting Return Goals; Underfunding of Liabilities; Asset and Liability Mismatch." (Pension Risk Matters)
Court Upholds Higher Pension Contribution Requirement for Older Workers
Excerpt: "The U.S. District Court for the District of Maryland has ruled that Baltimore County did not violate the Age Discrimination in Employment Act (ADEA) by requiring older workers to contribute to their pensions at a higher rate than younger workers. In its opinion the court concluded that Baltimore County was motivated by a permissible principle - the time value of money - rather than the age of new hires. The court noted that Baltimore County's former system was based not on age, but on the number of years an employee has until reaching retirement age." (PLANSPONSOR.com; free registration required)
Pension Plans' 8% Solution No Solution Anymore As Diminishing Returns Puts Plan Sponsors at Risk, with Underfunding Now Epidemic
Excerpt: "[W]hile higher savings rates are ultimately what the economy needs, most company pension plans that promise a payoff based on workers' final salaries assume an overall return on assets of about 8% a year. Individuals and their investment counselors are often even more optimistic, penciling in 9 or 10% a year and often maximizing exposure to riskier assets to try and get there. 'The available return from markets has been for some time a lot lower than people have understood,' said Gary Dugan, chief investment officer at Merrill Lynch's wealth management arm in London. Returns have been flattered by debt; both that employed in investment strategies to magnify returns and that taken out by consumers and partly recycled into corporate profits." (Reuters via Financial Week)
Delay on Advice Rule May Lead to Revamp
Excerpt: "The new rule wasn't scheduled to go into effect until March 23, but a Jan. 20 memo from Rahm Emanuel, the president's chief of staff, asked federal agency heads to put all last-minute Bush administration regulations on hold. The wait on the investment advice rule is expected to result in delays and, perhaps, dramatic revisions, ERISA attorneys said. Even without Mr. Emanuel's memo, prospects for the regulation were iffy because it had been vehemently opposed by leading Democrats, including House Education and Labor Committee Chairman George Miller, D-Calif." (Pensions & Investments)
Stock Market Crash Leaves State of Illinois' Pension Plans Critical Just As Baby Boomers Set to Retire
Excerpt: "The State of Illinois has the most underfunded public pension plans in the nation, with a funding gap that is now approaching $50 billion. The low balances in the state's pension accounts have been made worse by the stock market crash, which has also hit Chicago's and Cook County's employee pension plans." (The Chicago Sun-Times)
$18 Billion in Pension Assets Between Pfizer and Wyeth
Excerpt: "Pfizer Inc.'s proposed $68 billion acquisition of Wyeth would bring together two of the largest U.S. corporate pension funds, with combined defined benefit assets of $10.138 billion and total defined contribution assets of $8.255 billion, with virtually no overlapping investment managers. Pfizer, based in New York, had $6.759 billion in defined benefit assets and $5.72 billion in 401(k) assets. Wyeth, Madison, N.J., had $3.379 billion in defined benefit assets and $2.535 billion in 401(k) assets." (Pensions & Investments)
[Opinion]
ASPPA Comments on the Suspension of Required Minimum Distributions in 2009 (PDF)
5 pages. Excerpt: "The American Society of Pension Professionals & Actuaries (ASPPA) appreciates this opportunity to comment on the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA). These comments relate to WRERA § 201 which suspends the application of Internal Revenue Code (IRC) § 401(a)(9) in 2009 for certain retirement plans." (American Society of Pension Professionals & Actuaries)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]
IRS's 2009 Schedule of Employee Plan User Fees
Excerpt: "The IRS has updated its user fee schedule, effective January 5, 2009, for requests for various types of employee plan letter rulings and determination letters, and other matters under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division." (Wolters Kluwer)
[Guidance Overview]
Additional Q&A Guidance on Executive Compensation Requirements for Participants in Capital Purchase Program under Troubled Asset Relief Program (PDF)
3 pages. (American Benefits Council)
Where -- And How Much -- Do Employers Spend on Compensation? (PDF)
1 page. Excerpt: "Employers spent nearly $8 trillion on total compensation for workers in 2007. Where was that money allocated? As the chart below shows, wages and salaries accounted for the largest share, $6.4 trillion (or 81.4 percent), while benefits made up the remainder, $1.5 trillion (or 18.6 percent). Also, total employer spending on health benefits is beginning to approach the amount spent on retirement benefits." (Employee Benefit Research Institute)
Federal Employment Laws Expected to Be Introduced This Year That May Create Additional Regulatory Burdens
Excerpt: "[Two of the proposed laws are the] Working Families Flexibility Act. Description: The bill's provisions would require employers to negotiate employee requests concerning a change in location or the number of hours and times the employee is required to work. . . . [And the] Family Medical Leave Act Amendment: Description: A change has been proposed to make the FMLA applicable to employers with 25 employees as opposed to 50." (Employee Benefit News; free registration required)
Presentation Handout: ERISA Litigation: An Update from the Front Lines (PDF)
20 pages. Presented to the ASPPA Benefits Council of New England. (Stephen Rosenberg of The McCormack Firm, LLC)
Florida Man Gets 4 Years for Stealing Payroll Taxes and Health Insurance Premium Deductions
Excerpt: "A federal judge today sentenced Patrick Crowe, most recently of Florida, to four years in federal prison for stealing nearly $350,000 in payroll deductions for health insurance premiums and payroll taxes from two trucking firms that he owned in Rhode Island for brief periods in 2004. Crowe is also to pay $22,000 in restitution to Blue Cross & Blue Shield of Rhode Island and UnitedHealthCare along with $46,000 to Drew Oil Company and $10,000 to CSC, a payroll company . . . . As part of the sentencing, Crowe is also to pay about $127,000 in payroll taxes that his companies withheld but failed to pay to the Internal Revenue Service." (The Providence Journal Co.)
Newport News, VA, City Manager to Present Final Proposal on Retirement Pension Plan
Excerpt: "City Council Tuesday during a special meeting will hear the city manager's final proposal about changes to Newport News retirement pension plan, retiree life insurance and health benefit plans. Under the new proposal, City Manager Randy Hildebrandt would lower the city's contribution to future retirees and their families' health insurance. He would also phase out the elimination of the life insurance for all retirees over the next four years, but ramp up the current death benefit from $3,300 to $10,000, according to a recent memo." (Newport News, Va., Daily Press)
Advocates Offer Married G.ay New Yorkers Guidelines
Excerpt: "Those impacts range from eligibility for insurance coverage and workers' compensation benefits . . . . The report, which also spells out several obligations of married same-sex spouses, leaves unresolved, for the moment, key questions related to taxes -- specifically, the right to file jointly on state income tax forms and, also, freedom from having employer contributions to an employee's spousal benefits be treated as income to that employee." (G.ayCityNews)
[Opinion]
Top 12 Pension and Benefits Plan Issues for 2009
Excerpt: "Here are a dozen timely observations and fresh thoughts to consider and act upon in the coming year. They cover many specific economic topics including several of particular concern to pension managers -- and those who have to fund the plans." (Governing.com)
Newly Posted Events
Claims Procedures for Self-Funded Health Plans, Health FSAs and HRAs: What to Do, What to Avoid, and How to Monitor Claims Administration
Nationwide on February 26, 2009
presented by EBIA / Thomson Reuters
Corporate Governance – A Risk Sensitized Executive Pay Governance Process Webcast
Nationwide on February 4, 2009
presented by Buck Consultants, an ACS Company
Dealing With Retirement Issues in a Down Market (60-Minute Power Series) Webcast
Nationwide on February 10, 2009
presented by International Foundation of Employee Benefit Plans
How to Comply with Health Care Claims Appeals (60-Minute Power Series) Webcast
Nationwide on February 17, 2009
presented by International Foundation of Employee Benefit Plans
Maximize Your Health Plans Generic Drug Savings Webcast
Nationwide on February 12, 2009
presented by International Foundation of Employee Benefit Plans
What Your Data Tells You About Health Care Cost Drivers (60-Minute Power Series) Webcast
Nationwide on February 24, 2009
presented by International Foundation of Employee Benefit Plans
Newly Posted Press Releases
Americans Focus on Preventive Care, Embrace Workplace Wellness Benefits as Health Care Costs Rise
Principal Financial Group
Employee-Owned Companies Abound on Fortune Magazine’s Top 100 List for 2009
ESOP Association
Global Obesity Epidemic Weighs Heavily On Retirement Preparedness
The Hartford
Securian Retirement of St. Paul, MN Is First To Be Certified For Fiduciary Excellence
Centre for Fiduciary Excellence (CEFEX)
Newly Posted or Renewed Job Openings
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Director of Compliance
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Handy Links:
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