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May 7, 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]
Final Guidance on Automatic Enrollment Plan Designs (PDF)
7 pages. Excerpt: "These developments affect sponsors of 401(k) plans, 403(b) plans, and governmental section 457(b) plans. Background and summary: The Pension Protection Act of 2006 (PPA) included provisions to encourage sponsors of 401(k) plans, 403(b) plans, and governmental section 457(b) plans to adopt automatic enrollment plan designs. These provisions included the creation of: Eligible Automatic Contribution Arrangements (EACAs), to permit the penalty-free distribution of 'accidental' automatic deferrals and provide a six-month period to distribute excess contributions and excess aggregate contributions without imposition of the 10% excise tax; and Qualified Automatic Contribution Arrangements (QACAs), to provide a safe harbor plan design that exempts plans from certain nondiscrimination tests." (Prudential Retirement)
[Guidance Overview]
Delegation for Plan Sponsors
Excerpt: "Plan sponsors that choose to delegate their responsibilities and liabilities to a professional named fiduciary can, in effect, get out of the retirement plan business and be free to concentrate fully on their business so they can stay in business during these troubled times instead of worrying about fiduciary risks they are neither prepared nor trained to manage. Sponsors never need worry about somehow 'losing control' of their plan, since ERISA requires them to always retain the residual fiduciary responsibility to ensure that those to whom they have delegated authority are--and remain--prudent delegatees. In short, plan sponsors always have the power to 'pull the plug' on such delegatees." (Morningstar)
[Guidance Overview]
IRS Deadline Extension for WRERA Zone Status Freeze
Excerpt: "On April 30, 2009, the Internal Revenue Service (IRS) released Notice 2009-42,1 extending the deadline for certain multiemployer plans to make elections under Sections 204 and 205 of the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA). . . . Under the new guidance: The deadline for a zone freeze election under WRERA §204 is now the later of June 30, 2009 (instead of April 30, 20094) and the date that is 30 days after the due date of the annual certification of endangered or critical status for the election year. The earliest date by which an election for a correction period extension under WRERA §205 is required to be made is now June 30, 2009." (The Segal Group, Inc.)
[Guidance Overview]
Problems to Avoid in ESOP Distributions
Excerpt: "The adverse impact of ESOP distribution provisions on company profits must be balanced with the company's desire to provide meaningful benefits to plan participants. In most cases, ESOP plan design starts with the assumption that distributions should resemble the form and timing for distributions from profit sharing plans or other plans sponsored by the employer. It is not unusual to find ESOPs drafted to provide distributions commencing in the year after separation from service and including single sum distributions. Often single sum distributions are called for in the document to allow distributees to take advantage of capital gain treatment for the appreciation in the stock's value - a sound, but often impractical planning point." (Chang Ruthenberg & Long PC)
More States Start Pension Fund Investment Inquiries
Excerpt: "A survey of practices across the country portrays a far-reaching web of friends and favored associates: political contributors, campaign strategists, lobbyists, relatives, brokers and others, capitalizing on relationships and paying favors. These influential figures can determine how pension funds are invested, as well as state university endowments, municipal bond proceeds, tobacco settlement funds, hurricane insurance pools, prepaid tuition programs and other giant blocks of public money. 'What has developed is a corrupt system, where Wall Street, various fiduciaries, politicians and corporate managers are draining America's savings,' said Frederick S. Rowe, a hedge fund manager who serves on the Texas Pension Review Board, an oversight body." (The New York Times; free registration required)
Political Agents Get Subpoenas in NY Pension Probe
Excerpt: "Investigators probing the role that lobbyists known as ''placement agents'' played in arranging state pension fund investments have subpoenaed a number of politically connected New Yorkers who quietly picked up big paychecks for doing such work. State officials on Wednesday released a list of dozens of agents who received hefty payouts in recent years for acting as middlemen between investment firms and pension fund officials." (AP via The New York Times; free registration required)
Shattering the Retirement Glass Ceiling: Women Also Need a Three-Legged Stool (PDF)
Excerpt: "[This paper] finds that women remain at a higher risk for retirement insecurity than men. [That] risk can be reduced with the combination of a traditional pension, supplemental 401(k)-type individual savings, and Social Security." (National Institute on Retirement Security)
Taxes and Pensions
Excerpt: "Pension benefit rules depend on individual history far more than taxes do, and age plays a much larger role in pension determination than in tax determination. Apart from some simulation studies, theoretical studies of optimal tax design typically contain neither a mandatory pension system nor the behavioral dimensions that lie behind justifications commonly offered for mandatory pensions. Conversely, optimizing models of pension design typically do not include annual taxation of labor and capital incomes. After spelling out this contrast and reviewing (and rejecting) zero taxation of capital income based on the Atkinson-Stiglitz and Chamley-Judd results, this article raises the issue of tax-favored retirement savings, a topic where the two subjects come together." (Center for Retirement Research at Boston College)
Wells Fargo to Freeze Cash Balance Plan
Excerpt: "Wells Fargo & Co. is freezing its cash balance pension plan, making it one of the largest employers to do so. Effective July 1, employees no longer will earn benefits in the plan. Wells Fargo also is freezing the cash balance plan sponsored by Wachovia Corp., a Charlotte, N.C.-based bank Wells Fargo acquired last year. Wells Fargo will continue to match 100% of employees' 401(k) plan salary deferrals, up to the first 6% of pay." (Business Insurance)
Creative Communications for 403(b) Plans
Excerpt: "Plan sponsors can leverage the Web and their providers to create useful communication strategies for 403(b) participants, according to panelists at PLANSPONSOR's 403(b) Summit. . . . There are two types of communication strategies 403(b) sponsors utilize: required and non-required." (PLANSPONSOR.com; free registration required)
Public Pension Funds Are Masking a Funding Crisis
Excerpt: "Public pension funds across the United States are hiding the size of a crisis that has been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy. The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year. The misleading numbers posted by administrators of retirement funds help mask this reality: Public pensions in the United States had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion." (Bloomberg News via Philly.com)
Putnam Chief Aims to Spearhead Revamp of 401(k) Industry
Excerpt: "Investment executives and retirement plan officials will band together over the next several months to propose some radical enhancements to the nation's 401(k) system, said Robert Reynolds, president and CEO of Boston-based Putnam Investments. In an interview today, he said that he is spearheading an industry attempt to persuade members of Congress to adopt substantial retirement reforms that would solidify the defined contribution system before the end of 2009." (Investment News; free registration required)
[Opinion]
Roth IRAs Were Fiscal Mistake and Should Not Be Extended to Federal Government's Thrift Savings Plan
Excerpt: "The fact is, Congress was not focused on choice when it originally created the Roth alternative. Its goal was to hide the cost of traditional IRAs to the federal budget. Since the contribution is taxed when it is made, the loss of revenue to the Treasury is hidden until the money is withdrawn in the future, usually far beyond the five- or 10-year periods used for federal budget estimates. Even more outrageous, budgetary sleight-of-hand enabled Congress to pretend that they actually raised revenue by creating Roths. Thus, many taxpayers were given the option of converting a traditional IRA into a Roth. Since they had to pay income taxes in the year of conversion, this temporarily increased the amounts collected by the Treasury. The situation will get worse next year. Until now, Roth conversions are only allowed for those whose adjusted gross income is $100,000 or less. In 2010 everyone can convert, and higher-income people almost certainly will. Although taxes will be paid earlier, this will actually be a tax cut for the affluent, and will make our future budget picture much worse." (Pension Rights Center)
[Opinion]
With Pensions at Risk It's Fair to Ask 'Who Will Pay?'
Excerpt: "With GM flirting with bankrup.tcy and Chrysler already there, it's fair to ask whether taxpayers will be expected to cover the costs of the pensions the companies promised their workers. The cost for GM alone is estimated at $13.5 billion. The Big Three automakers' retiree health benefits are not insured by anybody and conceivably could be scrapped. When they reach age 65, retired workers would have to rely on Medicare. But the government does guarantee autoworker pensions, which are insured for as much as $54,000 a year. Though still common in the public sector, 'defined-benefit' pensions exist today in the private sector mainly in heavily unionized industries. U.S. automakers are the poster boys for such generous pensions." (American Institute for Economic Research via McClatchy-Tribune News Service)
[Opinion]
The Relative Meaninglessness of 'Co-Fiduciary' Status
Excerpt: "A while back, deep enough in the history of this blog to keep us from looking for the actual post(s), we suggested that product-pushing players who offered some sort of 'co-fiduciary' services to retirement plans were trafficking in marketing slogans, not sound legal (i.e., ERISA) concepts. So we were pleased to see this treatment of the 'co-fiduciary' concept from attorneys James Baker and David Abbey (via the always-excellent 401khelpcenter.com). Here's a highlight (emphasis added in bold) . . . ." (Interlake Capital Management LLC)
ASPPA (Advert.)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]Legal Issues When a California Public Agency Attempts an Employee Benefits Reduction
Excerpt: "Although seldom discussed, it is well settled in California that the terms and conditions of public employment applicable to retirement and certain other benefit rights cannot be destroyed without impairing a contractual obligation of the employer. This principle rests upon the 'contract clause' of the United States Constitution, which prohibits any state from passing a law 'impairing the obligation of contracts.' Under the contract clause, the seminal case law in this area provides that a 'state can no more impair, by legislation, the obligation of its own contracts, than it can impair the obligation of the contracts of individuals.'" (Chang Ruthenberg & Long PC)
[Guidance Overview]
Why Should Employers Worry About Code Sec. 409A Now?
Excerpt: "Like it or not, Code Sec. 409A is here to stay, and just because employers have met the deadline for documentary compliance does not mean that their worries are over. Employers can expect to continue to confront Code Sec. 409A related issues in terms of: Code Sec. 409A operational defects; failure to amend properly; discovering 'plans' subject to Code Sec. 409A that have not been amended at all; and ongoing preparation of documents with respect to new arrangements or amendments or renewals of existing documents. This article also highlights the risk and potential penalty exposure to employers who do not meet their withholding and reporting obligations under Code Sec. 409A, and suggests actions employers may want to consider in ensuring Code Sec. 409A compliance." (Pension and Benefits Week via Epstein Becker & Green, P.C.)
Maine Governor Signs Same-Sex Marriage Bill
Excerpt: "Maine Governor John Baldacci signed a bill Wednesday approving same-sex marriage, making the state the fifth to do so. The Associated Press reports that the Maine Senate voted 21-13, with one absent, for a bill that authorizes marriage between any two people rather than between one man and one woman, as state law currently allows. The House had passed the bill Tuesday. Maine is now the fourth state in New England, to allow same-sex marriages." (PLANSPONSOR.com; free registration required)
Webcasts and Conferences
(Click to post your webcast or conference)Ask Secretary Solis About the FY 2010 Budget Webcast
Nationwide on May 7, 2009
presented by U.S. Department of Labor
Behind The Numbers: 2010 Medical Costs and Their Impact on 2009 Employer Decisions
Nationwide on July 16, 2009
presented by MCOL
ICD-10: Maximizing the Strategic Advantage of Your Compliance Efforts
Nationwide on June 11, 2009
presented by MCOL
Pandemic Influenza: Health Plan and Employer Preparedness
Nationwide on May 28, 2009
presented by MCOL
Press Releases
(Click to post your press release)U.S. Department of Labor Obtains Consent Order Requiring President of Nashville Entertainment Company to Restore Pension Funds
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Many Companies with Frozen Pension Plans Come One Step Closer to Plan Termination, Says Aon Consulting
Aon Consulting
RolloverSystems Creates New Sales Positions
RolloverSystems
Actuarial Consultants, Inc. Passes ASPPA'S Stringent Test For Retirement Plan Recordkeepers
Actuarial Consultants, Inc.
Incentives and Pharmacist Coaches Lead to Improved Health and Lower Health Care Costs for Diabetic Patients
Midwest Business Group on Health
Research Shows that Physician Pay-for-Performance Programs Work with Appropriate Incentives
Bridges to Excellence (BTE)
New Research Finds That Women Need A Three-legged Stool To Break The Retirement Glass Ceiling
National Institute on Retirement Security
U.S. Labor Secretary Hilda L. Solis Will Discuss Department of Labor’s Fiscal Year 2010 Budget Through Live Web Chat
U.S. Department of Labor
Employee Benefits Jobs
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Retirement Sales Wholesaler - Inside Sales
for ExpertPlan, Inc.
in NJ
Defined Benefit Consultant / Administrator
for Boyce & Associates, Inc.
in AZ
Defined Contribution/401(k) Administrator
for Boyce & Associates, Inc.
in AZ
Senior Consultant / Client Services Manager
for Boyce & Associates, Inc.
in AZ
Employee Benefits Manager
for County of Sonoma, CA
in CA
Regional Sales Director Mid-West
for DailyAccess Corporation
in IL, IN, MI, MO, OH
EmployeeBenefitsJobs.com (Sponsor)
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