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February 18, 2009

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


Today's sponsor is ASPPA

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The ERISA Outline Book – 2009 edition

Make sure you have the most up-to-date version available to provide you with the information you need on a daily basis. The 2009 edition is a six-volume asset that includes all the PPA guidance issued in 2008, revised EPCRS procedures, the latest ERISA litigation cases and all notices , rulings and other guidance from DOL, IRS and PBGC issued in 2008. The ERISA Outline Book also serves as recommended reading for the ERPA Exam! Order your 2009 edition NOW!

[Official Guidance]
Text of IRS 'Retirement News for Employers' for Winter 2009 (PDF)

12 pages. Articles include: Did You Amend Your SIMPLE IRA Plan for EGTRRA? New Law Waives Required Minimum Distributions for 2009; Automatic Enrollment 401(k) Plans for Small Businesses; Fixing Common Plan Mistakes: Failure to Limit Contributions for a Participant; New Form 990 Requirements; Desk Side Chat With Monika Templeman - The Biggest Mistake. (Internal Revenue Service)


[Guidance Overview]
DOL's Annual Funding Notice Guidance (PDF)

Excerpt: "[T]he Department of Labor issued some much needed guidance on the Pension Protection Act requirement that plans provide an annual participant notice of the plan's funded status. The guidance is in the form of a Field Assistance Bulletin (FAB) and includes a model notice. The first notice from employers is due for calendar year plans by April 30, 2009, with some delays for small plans. For single-employer plans, the notice must be distributed to participants, beneficiaries, unions (if applicable) and, depending on the plan's funded status, the PBGC. Plan sponsors, who for the most part have delayed action on this issue due to the lack of information, must now assimilate the guidance and develop compliance plans. Here are some of the key points in the guidance as it applies to single-employer plans." (Towers Perrin)


[Guidance Overview]
Downsizing Employers with Ongoing Pension Plans May Face an Immediate and Significant PBGC Liability

Excerpt: "The Pension Benefit Guaranty Corporation -- relying on an obscure ERISA provision that had been largely ignored for decades -- is aggressively pursuing liability against downsizing employers with ongoing pension plans. On the books since 1974, ERISA Section 4062(e) empowers PBGC to make an immediate demand that an employer provide an escrow payment or post a bond in the case of certain cessations of its operations that result in the separation from employment of more than 20 percent of its employees who are participants in its defined benefit pension plan. Until mid-2006, when PBGC issued a final rule that established a potentially workable liability formula under this provision, there was little effort on PBGC's part to pursue this liability." (Keightley & Ashner LLP)


[Guidance Overview]
DOL and PBGC Provide Guidance on Plan Duties in Response to Madoff Investment Scandal

Excerpt: "In separate releases, the Department of Labor's Employee Benefits Security Administration (EBSA) and the Pension Benefit Guaranty Corporation (PBGC), have announced guidance on the duties of plan administrators and other fiduciaries of employee benefit plans that may be adversely affected by the alleged abuses involving Bernard L. Madoff Investment Securities LLC." (Wolters Kluwer)


[Guidance Overview]
Final Rules on Content Requirements Applicable to ERISA's 'Cross-Trading' Exemption

Excerpt: "The Pension Protection Act of 2006 ('PPA') 1/ added §408(b)(19) to the Employee Retirement Income Security Act of 1974 ('ERISA'). The new subsection provides an exception from ERISA's prohibited transaction rules allowing the investment managers /2/ of large ERISA plans to 'cross trade' (i.e., buy and sell) securities between the accounts that they manage on behalf of ERISA plans and the accounts of their other clients. /3/ The final regulations should facilitate the investment of ERISA plan assets in private investment funds, including hedge funds, as well as funds regulated under the federal securities laws." (Tax Management Inc.)


[Guidance Overview]
Whipsaw Calculation Case Filed by Two Cash Balance Participants Deemed Class Action

Excerpt: "A federal judge in Wisconsin has declared as a class action a lawsuit by two cash balance participants over the failure to use a whipsaw calculation in determining pre-retirement lump-sum distributions. U.S. District Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin turned aside arguments by the Alliant Energy Cash Balance Pension Plan that the claims by the two named plaintiffs were not typical of other workers because they agreed not to sue over their pension benefits as part of their severance agreements." (PLANSPONSOR.com; free registration required)


Talks Begin on Possible Legislative Enhancements to Federal Thrift Savings Plan
Excerpt: "Thrift Savings Plan officials have started discussions with Congress on proposed legislative improvements to the retirement savings program, including adding a Roth Individual Retirement Account option." (GovernmentExecutive.com)


The Effect of Defined Benefit Pension Plan Funding Ratio on Investment Decision-Making
Excerpt: "Many pension plans that started 2008 comfortably funded have seen this cushion undone by the dramatic drop in the financial markets. As a result, they are considering adjusting their investment strategy. But before making any strategy-changing decisions, plan sponsors would be well served to first consider a plan's beginning funding status, since it is the driver of the investment process. In this 7-minute video, Catherine Gordon, head of Vanguard Institutional Advisory Services, and Kimberly Stockton, investment analyst in Vanguard Investment Counseling & Research, explain why this is so, and explore appropriate strategies based on funded status." (The Vanguard Group, Inc.)


It's Not Easy Being Gray: The New Rules of Retirement
Excerpt: "Older Americans face an uncertain retirement future. Policies are urgently needed to shore up Social Security and Medicare, get health care spending under control, and make staying in the labor force at older ages easier, while still protecting disabled workers. This policy brief summarizes a wide-ranging discussion of retirement issues to explore how public policies might adapt to an aging population." (The Urban Institute)


Boost in Target-Date Funds Hurts 401(k)s, Greenwich Says
Excerpt: "Defined contribution plan participants have been exposed to more financial market risk by the increased use of target-date fund strategies as default investment options and away from more secure investments, according to a new study by Greenwich Associates. According to the report, 'U.S. Defined Contribution Pension Plan Research Study,' from 2007 to 2008, the share of plan sponsors using money-market or stable-value funds as their default investment option dropped to 19% from 35%, while the share of plans using target retirement date funds jumped to 53% from 35%." (Pensions & Investments)


DC Plan Executives Ready to Apply New Lessons Learned from Year of Market Devastation
Excerpt: "The devastation defined contribution plans suffered in last year's market mayhem is expected to lead to major changes in plan design and asset allocation, as well as increased emphasis on retirement income, industry professionals say. Lessons learned by plan executives and their service providers should produce: Decreased equity exposure, especially in target-date funds; Increased use of existing automatic features and introduction of new ones, such as auto diversification; Renewed emphasis on annuities and other investment vehicles to improve the chances participants will have enough money for a secure retirement; and Even more investment education on the virtues of diversification." (Pensions & Investments)


The Outlook for ERISA 'Stock-Drop' Litigation
Excerpt: "Following the implosions of Enron and WorldCom, ERISA 'stock-drop' class actions surged, with dozens of cases being filed each year. Many district courts were reluctant to dismiss the actions at the pleadings stage, and many defendants ultimately were forced into sizeable settlements. With the current economic downturn, there has been a similar surge in filings of ERISA stock-drop class actions. These newly filed cases may follow a different path." (New York Law Journal)


The Saver's Credit Toolkit
Excerpt: "A new resource from AARP -- a Retirement Made Simpler partner -- has been developed for HR professionals to help employees make the most of the Saver's Credit -- a federal income tax credit of up to $1,000. Toolkit materials include intranet content, an e-mail message, materials for open enrollment packets, FAQs and more." (Retirement Made Simpler)


Summary of Key Terms and Definitions Associated with Retirement Income Products (PDF)
Chart. 8 pages. (Institutional Retirement Income Research Council)


Forced Investment in the Market Seems Like Bad Timing to 401(k) Participants
Excerpt: "Greenwich Associates' new U.S. Defined Contribution Pension Plan Research Study indicates almost 79% of eligible employees participated in their companies' 401(k) plans in 2008, up from 77%-78% in 2006. One big reason for this increase, according to a Greenwich press release, is that more than 40% of large DC plans and almost half of smaller plans have implemented automatic enrollment. As they move to automatic enrollment, companies also have been shifting default investment options from conservative money market and stable-value funds to target retirement date funds." (PLANSPONSOR.com; free registration required)


What Does It Cost to Guarantee Returns?
Excerpt: "The [current financial] crisis highlights the fragility of existing 401(k) plans as the only supplement to Social Security and has sparked proposals to reform the retirement income system. One component of such a system could be a new tier of retirement accounts. Given the declines in the share of earnings Social Security will replace, these accounts would bolster replacement rates for low-wage workers and increase the security of middle- and upper-wage workers who increasingly rely on their 401(k) plans to supplement Social Security. However, these new accounts could face the same risk of collapse in value seen over the past year in 401(k)s. So policymakers may find some form of guaranteed return or risk sharing desirable to prevent huge variations in outcomes. This brief explores the feasible range and the cost of the first option - guarantees... " (Center for Retirement Research at Boston College)



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Links to Items on Executive Comp, Benefits in General



[Official Guidance]
Text of Correction (Insignificant) to Proposed 409A Regulations Issued Dec. 8, 2008

Changes the phone number of an IRS contact. (Internal Revenue Service)


[Guidance Overview]
Labor Department Guidance on ERISA Bonding Requirements (PDF)

2 pages. Excerpt: "Section 412 of the ERISA generally requires that every fiduciary of an ERISA-covered employee benefit plan, and every person who handles funds or other property of such a plan, must be covered by a bond. The bonding requirement is intended to protect employee benefit plans from risk of loss due to fraud or dishonesty by persons who handle plan funds. The Department of Labor recently issued guidance on ERISA bonding requirements as a means to protect employee benefit plans." (Employee Benefit Plan Review via Winston & Strawn LLP)


[Guidance Overview]
The Stimulus Bill and Other Congressional Action Create New Obligations for Benefit Plan Sponsors

Excerpt: "The President's signing of the American Recovery and Reinvestment Act of 2009 (the 'Stimulus Bill') on February 17, 2009 is just one in a string of recent events which impose new obligations on sponsors of employee benefit plans. This client alert is intended to summarize the employee benefit developments raised by the Stimulus Bill, as well as some other issues now facing employers sponsoring health and retirement plans." (Michael Best & Friedrich LLP)


[Guidance Overview]
Stricter Executive Compensation Limits for TARP Recipients

Excerpt: "On the heels of substantial criticism that the U.S. Treasury's Troubled Asset Relief Program (TARP) did not go far enough to curb excessive compensation being paid to executives of institutions receiving taxpayer assistance, the American Recovery and Reinvestment Act of 2009 (ARRA) imposes stricter restrictions on executive compensation for past and future TARP recipients. ARRA's new executive compensation restrictions most likely will compel TARP recipients to make significant changes to their executive compensation practices." (Ballard Spahr Andrews & Ingersoll, LLP)


[Guidance Overview]
Stimulus Bill's Strict New Executive Compensation Restrictions for TARP Participants

Excerpt: "[The America Reinvestment and Recovery Act of 2009 ('ARRA')] replaces the executive compensation restrictions previously imposed by the Emergency Economic Stabilization Act of 2008 (EESA). In doing so it continues all the same restrictions and adds substantially to the restrictions in several areas. The ARRA also goes substantially beyond the Treasury Department's separate executive compensation guidelines for TARP participants that were announced on February 4. The ARRA restrictions are retroactive, meaning they apply to all TARP participants, whether such companies received money under TARP prior to or after the enactment date, February 17, 2009." (McGuireWoods LLP)


Executive Pay Caps Might Hurt the Already-Troubled Financial Sector in Attracting and Keeping Key Talent
Excerpt: "The financial stimulus package approved by the House and the Senate last week and signed into law by President Barack Obama on Feb. 17 prohibits cash bonuses and other incentives for the five most-senior officers and the 20 highest-paid executives at companies that receive money under the Treasury's Troubled Asset Relief Program (TARP). While earlier versions of the bill proposed a $500,000 cap on these executives' salaries, the final bill restricts not salaries but bonus pay to no more than one-third of annual salary. Any bonus would have to be in the form of long-term incentives, such as restricted stock, which may not be cashed out until the TARP money is repaid in full." (Human Resource Executive Online)


Congress Wraps Up Busy 2007-2008 Term, More Benefit Activity Expected in 2009
Excerpt: "During the 2007-2008 term, Congress enacted important laws affecting health care, retirement, executive compensation, and the Family and Medical Leave Act (FMLA), and considered new issues such as the investment of pension fund assets. Some of the legislation had been debated for years and received a final push from new Democratic majorities in the House and Senate. Other bills and efforts represent attempts to deal with trouble in the broader economy -- such as the financial crisis and rising food and energy costs." (Watson Wyatt Worldwide)


UAW Yields to Market: Wage Reductions, Job Cuts and Loss of Benefits Among Likely Recovery Concessions
Excerpt: "The United Auto Workers, which once set the standard for organized labor for wages and job protection, said yesterday that it is making concessions as part of the recovery plans submitted by General Motors and Chrysler. The plans are expected to accelerate wage reductions, job cuts and loss of benefits, changes already spurred by foreign competition, declining sales and the worst economic conditions since the Great Depression." (The Washington Post; free registration required)


An Initial Look at Workplace Change in the Obama Era (PDF)
26 pages. Excerpt: "The decisive election of Barack Obama as the 44th President of the United States supported by strong Democratic majorities in the House and Senate has set the stage for unprecedented legislative and regulatory change in employment and labor laws. A unique combination of forces promises to make the magnitude of these changes a once-in-a-generation occurrence. The single thread potentially moderating the coming tsunami is the composition of the U.S. Senate. The closer the Democratic majority is to the magic number of 60 (a filibuster-proof Senate majority), the greater is the ability to deliver on a perceived mandate for employment and labor law change. [Originally published November 2008]" (Littler Mendelson, P.C.)


Employee Ownership Update for February 17, 2009
NCEO Executive Director Corey Rosen discusses the predominance of ESOP and other employee-owned companies in Fortune magazine's 100 Best Companies to Work For in America list; Bureau of Labor Statistics data indicating that the percentage of workers receiving stock options in 2008 was unchanged from previous years; and data from Radford Surveys on equity award exchange patterns. (National Center for Employee Ownership)




Newly Posted Events



"Documented Confusion: Understanding Restatement Procedures" Web Seminar
Nationwide on February 26, 2009
presented by SunGard Relius

"Earned Income: Computing Compensation for the Self-employed" Web Seminar
Nationwide on February 24, 2009
presented by SunGard Relius

"Making and Taxing Corrective Distributions After PPA" Web Seminar
Nationwide on March 5, 2009
presented by SunGard Relius

2009 Legal Education Conference
in Oregon on June 24, 2009
presented by National Association of Public Pension Attorneys (NAPPA)

A Case Study: Using Data to Make Good Benefit Plan Decisions Webcast
Nationwide on March 5, 2009
presented by International Foundation of Employee Benefit Plans

COBRA Subsidy Employer Requirements Webinar
Nationwide on February 27, 2009
presented by W.J. Flynn and Associates, LLC

COBRA Subsidy Employer Requirements Webinar
Nationwide on March 2, 2009
presented by W.J. Flynn and Associates, LLC

The New COBRA Premium Assistance Law: What You Need to Do to Comply Now Webcast
Nationwide on February 24, 2009
presented by Employee Benefit Research Institute (EBRI)

Who’s the Employer: Aggregation Aggravation (Presented by S. Derrin Watson, Esq.)
in Colorado on March 10, 2009
presented by Western Pension and Benefits Conference-Denver Chapter



Newly Posted Press Releases



U.S. Department of Labor Sues Former Insurance Agency in Kennesaw, Georgia, to Protect Participants' 401(k) Contributions
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

U.S. Department of Labor Sues Defunct Herndon, Virginia, Company to Protect Participants of 401(k) Profit-sharing Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

U.S. Department of Labor Sues to Appoint Independent Fiduciary for Former Atlanta General Contractor’s 401(k) Profit-sharing Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Commuter Benefits Leader Accor Services USA Applauds Transit Benefit Cap Increase
Accor Services North America

Mercer to Acquire Callan Associates
Mercer

vWise Wins Eddy Award for Harrah's Entertainment 401k Work
vWise Inc.

Innovative and Creative Marketing Analytics and Pension Data Service Launched
Pension Analytix Inc.



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