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March 30, 2009 |
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[Guidance Overview]
Employee Benefits Security Administration Proposed Extensions of Information Collections
Excerpt: "The U.S. Department of Labor Employee Benefits Security Administration (EBSA) has proposed the extension of four different existing information collections. In four separate notices, the EBSA proposes to continue information collections pertaining to asking for an extension of the deadline to deposit participant retirement plan contributions; the Employee Retirement Income Security Act (ERISA) required Summary Annual Report (SAR); abandoned and terminated individual account plans; and the National Medical Support Notice pertaining to the issuance and processing of qualified medical child support orders issued by state child support enforcement agencies. . . . Comments are due by May 26 to G. Christopher Cosby, Office of Policy and Research, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Ave., Washington, D.C. 20210, or may be submitted via fax to (202) 219-4745, or by email to ebsa.opr@dol.gov." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
Latest Ruling Splits Minnesota District on Former Employee Standing
Excerpt: "A recent ruling by a federal judge in the U.S. District Court for the District of Minnesota splits the district on the issue of whether cashed-out retirement plan participants have standing to sue for Employee Retirement Income Security Act (ERISA) fiduciary breaches. U.S. District Judge Patrick J. Schiltz said he believed the U.S. Supreme Court decision in LaRue v. DeWolff . . . had made a definitive ruling that former employees who cash out of their plans have standing if they can prove a colorable claim to benefits." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
IRS's Guidance on Multiemployer Pension Plan Funding Relief
Excerpt: "The IRS has provided guidance for sponsors of multiemployer defined benefit plans relating to the funding relief provided by the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), and corresponding notice requirements. Section 204(a) of WRERA provides that a multiemployer plan sponsor may elect to temporarily freeze the plan's funding status (critical, endangered, or neither) so that it is the same as the plan's status for the plan year immediately prior to the election year. Specifically, section 204(a)(1) of WRERA provides that a multiemployer plan sponsor may elect that the plan's funding status for the first plan year beginning on or after October 1, 2008 and not later than September 30, 2009 be the same as the plan's status for the prior year." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
New Withholding Tables Apply to Pension Distributions
Excerpt: "The Internal Revenue Service (IRS) has confirmed that the newly released withholding tables that incorporate the Making Work Pay credit included in the economic stimulus law apply to pensions. Marge Martin, Vice President, Aon Consulting, pointed out that pension payments are not eligible for the Making Work Pay credit, so the withholding reduction on the distributions could lead to underpayment penalties when filing 2009 taxes. Aon has told plan administrators they may want to add a warning about the potential consequences of the new pension withholding threshold when changing notices." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
Merck Loses Challenge to Company Stock Fiduciary Claims
Excerpt: "The U.S. District Court for the District of New Jersey has refused to issue summary judgment for Merck & Co. on claims the drugmaker breached its fiduciary duties by continuing to offer company stock as an investment option in its retirement plans. In his opinion, U.S. District Judge Stanley R. Chesler said the facts alleged by retirement plan participants overcome the presumption of prudence allowed for plans that must invest in employer stock according to plan terms, and permit a finding that the fiduciaries abused their discretion by continuing to invest in company stock." (planadvisor)
Policy Options for the Payout Phase of Retirement Plans
Excerpt: "This paper assesses how countries' pension arrangements and regulation shape the appropriate structure and flexibility of retirement payout options. The paper aims at providing a guide to policy makers on how to address the diverse questions posed when designing the payout phase or promoting DC pension arrangements, as well as encouraging a market for annuities. The paper addresses questions concerning the type of retirement payout options for accumulated assets in DC plans a country should allow, which entities should provide annuities, and the type of annuity products that could be allowed. The main recommendation is for policy makers to consider mandating deferred life annuities that start paying at very old ages (e.g. at age 85) and allow for the remaining assets accumulated in DC accounts to be allocated as programmed withdrawals (preferably with flexibility to face contingencies)." (Social Science Research Network)
How to Avoid a Pension Crisis: A Question of Intelligent System Design
Excerpt: "Conventional pension systems suffer from a design defect which makes them financially unsustainable, and a source of inefficiency for the economy as a whole. The paper outlines a second-best policy which includes a public pension system made up of two parallel schemes, a Bismarckian one allowing individuals to qualify for a pension by working and paying contributions in the usual way, and an unconventional one allowing them to qualify for a pension by having children, and investing time and money in their upbringing." (Social Science Research Network)
Retirement Plan Investing Soon to be Affected by TARP?
Excerpt: "The U.S. Treasury Department (UST) will participate in a Public-Private Investment Program (PPIP) with qualified fund managers in order to purchase 'Legacy Securities' (formerly referred to as 'Toxic Assets'). The qualified fund manager will raise funds from private investors and create a private investment vehicle. . . . The UST expects that fund managers will structure the investment funds to accommodate ERISA Plan investors. This likely means that ERISA 'benefit plan investors' should be limited to 25 percent of any investment fund. Some managers may be willing to comply with the ERISA restrictions, in which case, assuming the structures can also be vetted for ERISA compliance, their investment fund could accept more than 25 percent of its investments from benefit plan investors." (Michael S. Melbinger via Winston & Strawn LLP)
Reaction Mixed As SEC Shelves Reform of 12(b)-1 Fees
Excerpt: "Reforming Rule 12(b)-1 had been a front-burner issue because critics contended that the primary use of the mutual fund fees has shifted from paying for fund marketing to substituting for a sales load. But it's clear that the SEC has bigger fish to fry right now, industry observers said. 'We certainly supported reform of the 12(b)-1 rule,' said Diahann W. Lassus, chairwoman of the National Association of Personal Financial Advisors in Arlington Heights, Ill. 'It is disappointing that they are not going forward with it at this time.'" (Investment News; free registration required)
Implications of a Bear Market for Retirement Security (PDF)
Excerpt: "This paper examines several hypothetical scenarios over the past 138 years in which investors would have faced historically similar poor markets. We show the impact of a significant market decline on a retiree who followed a 'life-cycle' approach to investing -- that is, moving from an initially high allocation to equities to less-volatile fixed income investments over time. To be sure, whether such an investor retired in 1928, 1973, or 1999 in the United States, or in 1989 in Japan, his asset balances would have declined as a result of the major downturns during those times. However, we also show that if investors focus on areas that they can control -- saving rates/spending, asset allocation, costs, and (limiting) market-timing -- they can measurably improve their long-term prospects for weathering such negative environments, even those investors who are already retired." (The Vanguard Group, Inc.)
PBGC Shifted to Stock Investments Last Year
Excerpt: "Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks. Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds." (The Boston Globe)
Retirement Income: Surviving the Downturn
Excerpt: "InvestmentNews' Special Report on Retirement Income looks at how near-retirees are scrutinizing their advisers, explores the trend toward customized portfolios and the reasons to tweak distributions to reflect the rate of inflation." (Investment News; free registration required)
IRA Proposal Would Prohibit Those Affiliated with Product Companies from Giving Advice
Excerpt: "At a hearing last week, [Rep. Robert] Andrews said that advisers who provide advice on IRAs should be independent of companies that sell investments." (Investment News; free registration required)
[Opinion]
Annuities Can Be Good Distribution Option for Plan Participants
Excerpt: "[B]ased on a new Fidelity Investments survey of fee-for-services financial advisers, other investors also are starting to value predictable returns. According to the advisers surveyed, 83 percent of their investor clients ages 55 through 70 think guaranteed income is more important than above-average gains. After years when everyone was going for the smart money, we're taking a shine to the safe money." (Martha M. Hamilton via AARP)
[Opinion]
The Lost Souls of 403(b): 2009 Form 5500, Participant Counts and the DOL
Excerpt: "One would hope that we could look to the IRS's Rev. Proc. 2007-71 for guidance, to glean some sort of sensible ERISA answer which would be consistent with the Code: perhaps if you don't need to track the participant's contract or account for tax compliance purposes, you wouldn't need to include it in plan counts for ERISA purposes. This, though, has its odd results: the inactive contracts issued prior to 2005 would all be excluded, and inclusion of those in the 2005-2009 'transition' period would depend upon whether they were for active or former employees and whether a good faith effort has failed. Given the difficulties and ambiguities surrounding the implementation of 2007-71, this Rev. Proc. will not provide a testable, objective standard which would pass an auditor's scrutiny." (Giller and Calhoun)
[Opinion]
A Look at the Major Issues That Are Shaping Fiduciary Best Practices Today
Excerpt: "Section 404(a)(1)(A) of ERISA states that fiduciaries should pay only fees that are 'reasonable'. Asserting that many of the nation's largest employers, and the individuals responsible for their 401(k) plans, have failed that fiduciary duty, the St. Louis law firm of Schlicter, Bogard and Denton filed class-action lawsuits in 2006 that continue to be heard in the judicial system today. While acknowledging evidence that some of the defendants have been negligent in their processes and that some 'may not have been behaving admirably' /i/, the courts are typically ruling in favor of the plan sponsors and the plan providers. The burden of proof has been difficult and revenue-sharing, the root cause of the lawsuits, continues on." (Capital Directions Investment Advisors, LLC)
SunGard (Advert.)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]409A Correction Chart
Excerpt: "Last December, the IRS announced an expanded correction program for certain operational errors under Code section 409A. Correction of an error under this program can eliminate, or greatly reduce, the adverse tax consequences for affected executives. Importantly, the IRS program provides an expanded ability to correct errors in past years, but only during 2009. The attached chart summarizes key features of the different correction mechanisms available under the IRS program and outlines generally applicable requirements." (Groom Law Group)
Outplacement Becomes a Coveted Benefit in These Hard Times
Excerpt: "As mass layoffs become more common, Nielsen [Business Media] is just one of the employers offering outplacement services to employees. Once thought of as a benefit for only top executives, today these services are mainstream, says Kevin Gagan, executive vice president in charge of strategy and practice development at Lee Hecht Harrison, a Woodcliff Lake, New Jersey-based provider of outplacement services. These offerings, which range from online-only services to face-to-face coaching, can cost anywhere from $1,000 to several tens of thousands of dollars per employee. But it appears that many employers believe in the return on investment. A recent Lee Hecht Harrison study of 1,000 HR executives found that the top reason their companies use outplacement is to maintain positive relationships with employees." (Workforce Management; free registration required)
Aging Boomers Require Workplace Flexibility, Says American Management Association
Excerpt: "[Ed Reilly] recently spoke with Workforce Management staff writer Ed Frauenheim. Workforce Management: Why should companies care about demographic changes? Ed Reilly: There's no question that over the next several years, the group of people who are 30 to 45 years old will assume the management positions in America, and this group is smaller in number than the baby boomers." (Workforce Management; free registration required)
Overview of Severance Pay Studies
Excerpt: "[E]ven with today's woeful economic conditions, some recently released studies point out that many employers are resorting to a kinder, gentler strategy when letting employees go. And the experts behind those reports say that such a strategy makes sense because a critical part of the severance process is that, if you do it poorly, the damage could run deep, hurting a company both internally right now, and later externally, when it comes time to restock talent." (Human Resource Executive Online)
Auto Retiree Groups Joining Forces: Seeking Protection for Their Benefits, Pensions
Excerpt: "The Delphi Salaried Retirees Association has joined with similar groups from Detroit's Big 3 to seek government funding to preserve its benefits. A letter from DSRA, Ford Co., General Motors Corp. and Chrysler LLC salaried retirees has been set to Treasury Secretary Timothy Geithner and Larry Summers, director of the National Economic Council requesting the Auto Task Force provide funding to retain the retirees' benefits and take steps to protect pensions." (Kokomo Tribune)
Webcasts and Conferences
(Click to post your webcast or conference)403(b) EP Phone Forum
Nationwide on April 16, 2009
presented by Internal Revenue Service (IRS)
Healthcare Reform: Lessons Learned from the States
in Washington on April 17, 2009
presented by International Society of CEBS - Pacific NW Chapter
Press Releases
(Click to post your press release)PBGC Assumes Patton Corp.'s GAC/Flxible Pension Plan
Pension Benefit Guaranty Corporation (PBGC)
Fidelity Investments Estimates $240,000 Needed to Pay Health Care Costs in Retirement
Fidelity Investments
MassMutual Retirement Adds to Sales Management Team
MassMutual
Error in DOL New Model Notice For COBRA Subsidy
Vita Benefits Group
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