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| February 23, 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]
Final IRS Regs on Automatic Contribution Arrangements Under Section 401(k) and Other Eligible Retirement Plans (PDF)
61 page advance copy; revises the proposed regulations issued on November 8, 2007. Rules applicable to Qualified Automatic Contribution Arrangements apply to plan years beginning on or after January 1, 2008. Rules applicable to Eligible Automatic Contribution Arrangements apply to plan years beginning on or after January 1, 2010. Makes several changes; also takes into account the Worker, Retiree and Employee Recovery Act of 2008 (WRERA). Scheduled for publication in the Federal Register on February 24, 2009. (Internal Revenue Service)
[Guidance Overview]
PBGC Announces no Automatic Waiver of Missed Contribution Notice
Excerpt: "The Pension Benefit Guaranty Corporation (PBGC) announced it is not granting an automatic waiver for 2009 of the requirement to notify the agency of missed quarterly contributions under section 4043 of the Employee Retirement Income Security Act (ERISA) and PBGC's reportable events regulation (29 CFR Part 4043). The nation's private pension insurer said it will still grant case-by-case waivers where appropriate." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
Seventh Circuit Dismissal of ERISA 401(k) Revenue Sharing & Excessive Fee Lawsuit
Excerpt: "The court's ruling in Deere offers much needed guidance to companies that sponsor participant-directed 401(k) plans, but because the Department of Labor filed an amicus brief on behalf of the plaintiffs, it is likely that similar claims will be brought before courts in other Circuits. Deere expressly rejects the alleged need to disclose revenue sharing under then-existing law and provides a valuable defense to a claim of excessive fees where the plan offers a broad range of investment options, and where the options that are offered are in line with the market competition." (Littler Mendelson P.C.)
[Guidance Overview]
Guidance on Defined Benefit Annual Funding Notice Requirements Under PPA
Excerpt: "For a plan year beginning in 2006, the notice must include the funded current liability percentage (as defined in ERISA §302(d)(8) , as in effect prior to the PPA) of the plan for such plan year. Pending further guidance, for a plan year beginning in 2007, in the case of a single-employer plan, the notice should include the plan's funding target attainment percentage determined in accordance with IRS proposed regulations." (Wolters Kluwer)
[Guidance Overview]
Employer and Independent Fiduciary 'Unquestionably' Satisfied Fiduciary Duties in Sales of Employer Stock
Excerpt: "EBIA Comment: This case is a noteworthy example of exemplary fiduciary conduct. Fiduciaries that are looking for guidance on what exactly the prudent person standard requires would do well to study the independent fiduciary's actions. Ironically, this employer's descent into bankrup.tcy spawned another case in which other participants in the same 401(k) plan made the opposite claim -- that the employer breached its fiduciary duty because it failed to sell the employer stock held by the plan . . . ." (Employee Benefits Institute of America)
[Guidance Overview]
Seventh Circuit Ruling Decisive for Defendants in a '401(k) Fee' Case
Excerpt: "Trustee/recordkeeper was not a fiduciary. The court held that the mere fact that the trustee/recordkeeper offered its affiliated mutual funds as investment options, and even 'played a role' in the selection process, was not enough to make it a fiduciary with respect to the plan's investment options." (Katten Muchin Rosenman LLP)
Will You Have Enough to Retire on?: The Retirement Security 'Crisis'
Excerpt: "Controlling for household composition, the Social Security replacement rate for typical workers born in 1940 was 63 percent of average preretirement earnings, and the median total pension replacement rate was 92 percent of prior earnings - well over financial planners' recommended rate of around 75 percent. Even among the younger 1960 birth cohort, for whom the projected median Social Security replacement rate declines to 54 percent, the median total pension replacement rate remains at 82 percent. While policymakers should work to strengthen Social Security and private pension savings, talk of a crisis in retirement income preparedness appears premature." (Social Science Research Network)
Retirement Plan Participation in the United States: Do Public Sector Employees Save More?
Excerpt: "This study examines retirement plan participation and savings behavior for American public and private sector employees using the Panel Study of Income Dynamics (PSID) data set. This paper also examines the determinants of preference for a diversified portfolio within the retirement plans. The findings of this study indicate that the population's plan participation increases with age, income, and education level. The public sector employees are more likely than others to participate in defined benefits plans. Conversely, they are less likely to participate in the defined contribution plans." (European Journal of Social Sciences via Social Science Research Network)
IRS Pilot Survey of Public Pension Plans
Excerpt: "The Internal Revenue Service has initiated its long anticipated pilot survey [http://www.irs.gov/retirement/article/0,,id=204168,00.html]of a small group of public plans to determine whether the public fund community is 'underserved' by the IRS. The Service expects that it will study the results and then issue a new survey to a larger audience, possibly as large as the entire public plan community. NCPERS has argued that the questions the Service is asking go far outside of its purview, and that IRS oversight of public funds is unnecessary and an arrogation of the rights and duties of state and local governments. Additionally, many of the answers to the questions asked in the survey can easily be obtained by contacting NCPERS or other governmental and pension organizations." (National Conference on Public Employee Retirement Systems)
The Impact of the Recent Financial Crisis on 401(k) Account Balances (PDF)
24 pages. Excerpt: "Impact varies by account balance: This Issue Brief estimates changes in average 401(k) balances from Jan. 1, 2008, to Jan. 20, 2009, using the EBRI/ICI 401(k) database of more than 21 million participants. Not surprisingly, how the recent financial market losses affect individual 401(k) account balances is strongly affected by the size of a participant's account balance. Those with low account balances relative to contributions experienced minimal investment losses that were typically more than made up by contributions: Those with less than $10,000 in account balances had an average growth of 40 percent during 2008, since contributions had a bigger impact than investment losses. However, those with more than $200,000 in account balances had an average loss of more than 25 percent." (Employee Benefit Research Institute)
2008 ERISA Advisory Council Report on Phased Retirement
Excerpt: "This report was produced by the 2008 Advisory Council on Employee Welfare and Pension Benefit Plans, usually referred to as the ERISA Advisory Council (the 'Council'). . . . The Council established a special working group (the 'Working Group') to examine the issues facing employers who wish to create phased retirement plans, the issues facing employees who wish to take part in phased retirement programs, and the various legal and regulatory obstacles to the implementation of a phased retirement arrangement. The Working Group examined whether there were any actions needed to facilitate an improved system of phased retirement." (U.S. Employee Benefits Security Administration)
Update on DC Participant Activity Amid Market Volatility
Excerpt: "Volatility in the markets during 2008 was of historic proportions. But how did plan participants on the whole react? To assess participant behavior last year, the Vanguard Center for Retirement Research (CRR) examined recent transactions and other activities in plans recordkept by Vanguard. After analyzing the activity of nearly 3.2 million active and deferred participant accounts in approximately 2,200 defined contribution plans, CRR discovered that the overwhelming majority of participants 'stayed the course.' Generally speaking, they haven't abandoned equities, they haven't stopped saving for retirement, and they aren't taking out more loans." (The Vanguard Group, Inc.)
Relief for Active Defined Benefit Plans in the Works
Excerpt: "Corporations might get relief from stringent pension-law funding requirements -- but with a big string attached that some experts see as a step toward a mandatory retirement system. Under a proposal now being considered by senior Democratic congressmen, companies with active plans would get a break from the 2006 Pension Protection Act's onerous new funding requirements, but only if they agree not to freeze their plans to new employees -- perhaps for several years." (Pensions & Investments)
Obama Finds Resistance in His Party on Addressing Social Security
Excerpt: "President Obama is eager to seek a bipartisan solution to ensure the long-term solvency of Social Security, people who have spoken with him say, but he is running into opposition from his party's left and from Democratic Congressional leaders who contend that his political capital would be better spent on health care and other priorities." (The New York Times; free registration required)
Disclosure Regs for 401(k) Fees, and Plan Sponsors, in Limbo
Excerpt: "[T]he Bush administration's failure to win final approval of new fee disclosure regulations for defined contribution plans. That failure, say industry experts, could well turn into a major headache for corporate executives. That's because existing Department of Labor regulations require them to report fee and compensation information they might not be able to get, ERISA attorneys and pension industry consultants said." (Financial Week)
House Education & Labor Committee Will Hold Hearings on Retirement Security
Excerpt: "On Tuesday, February 24th, the House Education and Labor Committee will begin a series of hearings 'to explore the shortcomings of our nation's retirement system and look at solutions to ensure that Americans can enjoy a safe and secure retirement after a lifetime of hard work.' According to the announcement, the purpose of the first hearing on Tuesday is to 'examine how the current economic crisis has highlighted existing weaknesses in the 401(k) retirement savings system.'" (Attorney B. Janell Grenier via Benefitsblog.com)
Detailed Guidance on Kennedy v. DuPont
Excerpt: "Albert Feuer, whose very helpful work on Kennedy v. DuPont we've used frequently (see here for the latest), is once again giving a hand to those trying to figure out how to deal with the Court's decision. After practitioners who didn't consider themselves ERISA experts asked if he could give them some detailed guidance on how to proceed in a post-Kennedy world, he's generously answered the call with his paper, 'Suggestions for the Treasury, the DOL, ERISA Plan Sponsors, Administrators, Representatives of Plan Participants and Potential Beneficiaries After Kennedy v. Plan Administrator of DuPont Savings and Investment Plan.'" (Workplace Prof Blog)
Coca-Cola Co. Bucks the Trend, Moves to Cash Balance Plan
Excerpt: "The Coca-Cola Co. is adopting a cash balance pension plan for new and current employees. Under the cash balance plan design, employees will receive annual age-weighted credits equal to a percentage of pay. Those credits will start at 3% of pay and increase with age. Employees' cash balance plan accounts also will be credited with interest, though Coca-Cola hasn't yet decided on the interest-rate formula it will use. The plan will be offered to most U.S. salaried and hourly employees hired as of Jan. 1, 2010. Current employees now in Coca-Cola's traditional $1.5 billion final average pay plan will earn future benefits in the new plan starting Jan. 1, 2010." (Financial Week)
A San Diego Pension Program's Interest Rate Is Cut
Excerpt: "San Diego rolled back retirement benefits yesterday for one of the controversial programs granted to employees in a series of actions that led to the city's pension crisis. The program allows employees to collect a pension - while still on the payroll - in an account with a guaranteed interest rate of 7.75 percent. The pension board lowered that rate to 3.54 percent. The change will take effect July 1, leading unions to protest that scores of seasoned employees will retire now to lock in the higher rate before it falls." (San Diego Union-Tribune)
U.S. Senate Weighing New Rules for Retirement Funds
Excerpt: "Target-date retirement funds are coming under increased scrutiny as investors try to contain the damage to their 401(k)s from the worst economic downturn in generations. . . . The Senate's Special Committee on Aging is expected to ask the Department of Labor tomorrow to establish regulations governing the composition and advertising of target funds. It is also planning to request that the Securities and Exchange Commission look into similar concerns." (The Washington Post; free registration required)
Will Pension Funds Suffer the Next Financial Implosion?
Excerpt: "If you are troubled by the loss in value in your 401(k) or other retirement account, you have plenty of company. Even professionally managed pensions suffered an average 26 percent loss in 2008, marking the worst recorded year for defined benefit funds, according to Northern Trust Investment Risk and Analytical Services. Despite the grim results, two radically different retirement profiles have emerged. One is workers with defined benefit plans. These employees are guaranteed monthly payments at retirement based on a set percentage of their last paycheck. Some 80 percent of public-sector employees and 20 percent of private-sector employers participate in defined benefit programs." (The Christian Science Monitor)
[Opinion]
ASPPA Comments on Relief for Employers: §401(k) Safe Harbor 3 Percent Nonelective Contributions (PDF)
3 pages. On February 20, 2009, ASPPA submitted comments to the IRS and Treasury requesting relief for certain sponsors of 401(k) safe harbor plans who will be unable to make 3 percent nonelective contributions under IRC §401(k)(12) for the entire year due to economic conditions. (American Society of Pension Professionals & Actuaries)
University Conference Services (Sponsor)
(Click on company name or banner to learn more.)
| Navigating Uncharted Waters in Retirement Plan Management |
| An economic storm of epic proportions, steep asset declines, tough decisions on matching contributions and heightened potential for fiduciary liability have many plan sponsors feeling as if they are lost at sea. The Boston Mid-Sized Retirement & Pension Plan Management Conference, May 5–8, 2009, brings together an impressive array of plan management experts who delve into the momentous challenges you face and explore solutions for guiding your plan to calmer waters. |
Links to Items on Executive Comp, Benefits in General
[Guidance Overview]
Increased Monthly Limit for Transit/Vanpool Benefits Under Qualified Transportation Plans
Excerpt: "EBIA Comment: Employers will want to decide quickly how to respond to this increase. Many plans do not automatically implement increases in the qualified transportation plan limits, so for those plans a decision to implement the higher limit will require plan changes. (Employers are not required to provide the maximum benefit.) Plans that use pre-tax compensation reduction elections to fund the benefits are also likely to need new employee elections. Employers should check their plan documents and employee communications carefully to see what actions, if any, are needed. As a practical matter, many employers may find it impossible to implement the increased limit in March when it first becomes effective, and may need to delay any changes until they can be fully analyzed, documented and communicated to employees." (Employee Benefits Institute of America)
After Huge Losses, a Move to Reclaim Executives' Pay
Excerpt: "Executives at seven major financial institutions that have collapsed, were sold at distressed prices or are in deep to the taxpayer received $464 million in performance pay since 2005, according to an analysis performed for The New York Times. Almost half of that consisted of cash compensation. Yet these firms have reported losses of $107 billion since 2007, a result of their own missteps and the ensuing economic downturn. And $740 billion in stock market value has been lost since these companies' shares peaked in 2007, just before the housing bubble burst. Against that landscape, a growing chorus is demanding that executive compensation snared shortly before problems emerged be given back." (The New York Times; free registration required)
Stingier Severance Pay Adds to Workers' Woes
Excerpt: "With layoffs on the rise, companies are looking to cut the cost of firing workers. Some, like Tribune Co., are reducing their formulas for calculating severance pay, offering one week of compensation for each year of service instead of two. Others, including J. P. Morgan Chase & Co., are cutting the total amount of severance pay a worker can receive. Human resources consultants expect cuts in outplacement services and health insurance for laid-off workers next." (Crain Communications, Inc.)
Stimulus Provisions Mean Payroll Considerations
Excerpt: "The newly approved stimulus bill and other economic proposals will have practical implications on employer payroll, tax filings, and benefits offerings, according to Paychex, provider of payroll, human resource, and benefits outsourcing solutions for small- to medium-sized businesses. According to a Paychex press release, the American Recovery and Reinvestment Act of 2009 includes a 'Making Work Pay' provision which dictates that workers receive a rebate/credit for the 2009 and 2010 tax years of the lesser of $400 for individuals and $800 for couples, or 6.2% of earned income. The credit will be received by workers in their net paychecks through adjusted tax withholding tables, Paychex points out." (PLANSPONSOR.com; free registration required)
Newly Posted Events
401(k) Plans After the Fall: What Now?
in Illinois on March 19, 2009
presented by Katten Muchin Rosenman LLP
ARRA Tightens Executive Compensation Rules - What do You Need to Do to Restructure Your Company's Arrangements
Nationwide on March 19, 2009
presented by ABA Joint Committee on Employee Benefits
Family and Medical Leave Act: What Employers Need To Know
in Virginia on March 6, 2009
presented by Capital Chapter ISCEBS
Fiduciary360 National Conference to “Uncover Trends and Opportunities in Uncertain Times”
in Arizona on May 6, 2009
presented by Fiduciary360 (fi360)
Productivity, Service, and Partnership: What They Mean to Your Law Firm's Future Webcast
Nationwide on March 3, 2009
presented by Two-Step Software, Inc.
Newly Posted or Renewed Job Openings
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401(k) Plan Sales
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in NJ
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in PA
Implementation Specialist
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in NJ
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