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May 14, 2009 |
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[Official Guidance]
IRS Notice 1036-P: Optional Procedure for Those Making Pension Pension Payments To Offset Withholding Reductions for the Making Work Pay Credit (PDF)
2 pages. Excerpt: "This procedure is optional for those making pension payments subject to withholding under section 3405 of the Internal Revenue Code. The procedure is an approximate offset for the withholding reduction included in the February 2009 withholding tables found in the Publication 15-T, New Wage Withholding and Advance Earned Income Credit Payment Tables, which reflect the Making Work Pay credit. Eligibility for the credit requires earned income, which does not include pension payments." (Internal Revenue Service)
[Official Guidance]
IRS Press Release: IRS Announces Withholding Adjustment Option for Pension Plans and Provides Taxpayer Education
Excerpt: "The change announced today will help some pensioners avoid a smaller refund next spring or even a balance due in limited situations. A wide variety of factors, such as outside jobs and other earned income, can affect how much, if any, withholding is needed by people receiving a pension to satisfy their annual tax liability. The optional adjustment procedure which may be used by those paying pensions is available in Notice 1036-P, Additional Withholding for Pensions for 2009. The on-line version of Publication 15-T, New Wage Withholding and Advance Earned Income Credit Payment Tables, will be updated and available next week." (Internal Revenue Service)
[Guidance Overview]
Self-Directed IRA Myths (PDF)
10 pages. Excerpt: "Many of [the self-directed individual retirement account] products are quite legitimate, and the sponsors work hard to provide meaningful information to help accountholders distinguish between legally acceptable investment practices and activities that may result in unfavorable tax consequences or, worse, complete loss of the tax-advantaged IRA status. Sometimes it is simply impossible to cover a subject in a comprehensive manner, and the materials warn accountholders to hire knowledgeable counsel. Nonetheless, in the opinion of the Richard Matta, most of these materials perpetuate certain myths - even among the lawyers - that range from merely incomplete to outright wrong. [This] article addresses certain self-directed IRA 'myths'." (Groom Law Group)
Podcast and Audiocast Transcript of Retirement Strategies for a Bear Market
Excerpt: "Market declines over the past two years have shrunk retirement savings by $2 trillion, causing concern for many investors. In this podcast, John Ameriks, head of Vanguard's Investment Counseling & Research, discusses investment strategies for those in or near retirement." (The Vanguard Group, Inc.)
What the 2008 Stock Market Crash Means for Retirement Security
Excerpt: "The one-third drop in the S&P 500 index between year-end 2007 and 2008 raises concerns about retirement security since Americans now hold more equities through their retirement plans. Those near retirement will fare the worst because they have no time to recoup their losses. Midcareer workers will fare better because they have more time to rebuild their wealth. They may even gain income if they buy stocks at low prices and get above-average rates of return. High-income groups will be the most affected because they are most likely to have financial assets and to be invested in the stock market." (The Urban Institute)
Hot Topics in Retirement: 2009 (PDF)
29 pages. Results of a survey of human resource professionals. (Hewitt Associates)
Tennessee Employer Changes 401(k) Match to Encourage Deferrals
Excerpt: "The CDE Lightband Power Board approved a new plan for the Clarksville, Tennessee company to rework its retirement savings plan match. A news story in the Leaf-Chronicle newspaper said board members were looking for a new plan that would 'provide strong incentives for the employees to increase their own personal savings.' So, CDE is keeping its existing 401(k) plan, but will change the match to a dollar-for-dollar payment up to 3% of base pay, and a 'progress-sharing' contribution of 3% of base pay. According to the news account, if an employee saves at least 3% of his pay, he will receive a 6% match from CDE. The match will be lower if he saves less than 3%, the newspaper said." (PLANSPONSOR.com; free registration required)
Social Security Finances: Findings of the 2009 Trustees Report (PDF)
8 pages. Excerpt: "According to the 2009 Trustees report, the Social Security trust funds will have an annual surplus of $137 billion in 2009. Annual surpluses are projected to continue for the next 14 years and reserves are projected to grow to $4,332 billion by the end of 2023. Beginning in 2016, tax revenues flowing into the trust funds will be less than total expenditures. In 2037, the reserves are projected to be depleted. At that time, tax income coming into the trust funds will cover about 76 percent of benefits due, according to the 2009 report of the Social Security Trustees." (National Academy of Social Insurance)
Pension Finance Update, April 30, 2009
Excerpt: "After an ominous beginning, the financial environment during 2009 has recently shown signs of stabilizing, and fears that 2009 will be a continuation of the 2008 decline have receded. For pension sponsors, the recovery in stocks from March 6 lows, coupled with rising interest rates, translates to an improvement in funded status as compared with year-end 2008. A typical plan (duration 12 liabilities, 60/40 asset allocation) has likely seen an improvement in funded status so far this year of 6-8%." (JPMorgan Chase & Co.)
Even in Face of Major Economic Downturn, 401(k) Participants Stay Steady, According to Survey
Excerpt: "Hewitt said employee investments in equity fund allocations were at record lows last year. A Hewitt news release about its annual Universe Benchmarks study, which examines the saving and investment behaviors of more than 2.7 million employees eligible for 401(k) plans, showed that the median rate of return during 2008 was -28.3%. The average 401(k) balance dropped from $79,600 in 2007 to $57,200 at the end of 2008, while 43% lost 30% or more of their savings. Only 11% of employees were able to break even or see a gain in their 401(k) portfolios, Hewitt reported. Despite these losses, workers continued to save. Hewitt's research shows that 74% of employees participated in their 401(k) plan in 2008 with the average deferral rate dropping only marginally, from 7.7% in 2007 to 7.4 % in 2008." (PLANSPONSOR.com; free registration required)
Pros and Cons for Plan Sponsors of 401(k) Loans and Early Distributions
Excerpt: "Some employers . . . seek to protect employees and only allow loans for limited purposes, and other employers even restrict hardship distributions. In today's economic climate, it is important to understand the basic rules in making business decisions to allow or not allow such distributions. " (Employee Benefit News)
Developing a Sound Defined Benefit Plan Funding Policy (PDF)
Pages 4-7 of 12 pages. (Milliman)
More 401(k) Plan Sponsors Considering Collective Trusts
Excerpt: "The number of collective investment trusts available to institutional investors is exploding, and the trusts are offering many 401(k) plan sponsors a less expensive way to provide competitive investment options to employees. 'Every penny matters now,' says Pamela Hess, director of retirement research for Hewitt Associates in Lincolnshire, Illinois. 'There are a lot of great ways collective trusts can be used to help employees and manage fees.' Chicago-based Morningstar reported 400 new collective trusts created between September 2007 and September 2008. In total, Morningstar tracks 1,000 collective trusts with $2.69 trillion under management." (Workforce Management; free registration required)
Survey by International Foundation of Employee Benefit Plans Finds DC Sponsors Are Making Plan Changes in Face of Economic Downturn
Excerpt: "An IFEBP news release said 13% of DC plan sponsors have changed their investment product offerings as a result of the crisis -- almost double the 7% who reported doing so six months earlier. Of the 13% who have implemented changes, 21% added more low-risk investment choices, 18% increased diversification, 16% added lifecycle (target-date) funds or money market funds, and 15% added government-backed options. The poll found 16% of DC plan sponsors reduced or eliminated employer matches as a result of the economic situation. Of those who report having changed their match, 44% have reduced the amount of the match and 52% have suspended the match all together." (planadvisor)
What Social Security's Underfunding Means for Your Retirement
Excerpt: "Social Security and Medicare's annual checkup revealed that the recession and longer life expectancies are taxing the health of the entitlement system. The Social Security Board of Trustees report found that program costs will exceed tax revenues in 2016, a year sooner than predicted in last year's report. The trust fund will be exhausted in 2037, four years sooner than the 2008 estimate. Here's a look at how the projections could affect your retirement plans." (U.S. News & World Report)
[Opinion]
Social Security Healthier Than Your 401(k)
Excerpt: "The bottom line . . . is that the 2009 Trustees Report did not reveal any important new information about the finances of the Social Security system. The system has enough money to pay full benefits for decades, although for a few years less than previously reported because of the financial/economic crisis. And the system faces a long run financial shortfall of about 2 percent of taxable payrolls, a figure that is higher than last year's estimate because of the financial/economic crisis but well within the range of deficits estimated over the past 15 years. The new information that we have about Social Security is how well it has withstood the onslaught of the financial/economic crisis. Social Security checks have gone out on time. Though the amounts are not large, the benefits are increased each year to reflect changes in the cost of living, and they continue for as long as the recipient lives. So, despite the modest amounts, the benefits are extremely valuable and people can count on them regardless of what happens to financial markets or the real economy." (Alicia H. Munnell via CNNPolitics.com)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]Compliance Considerations and Issues Surrounding the Repricing of Stock Options
Excerpt: "The accounting for stock options (including re-pricings) is governed in the United States by FAS 123(R). Under this standard, the charge for any new options is only for the incremental value. Thus, in a value-for-value exchange (or one that is less favorable to the grantees), the re-pricing may be a shareholder-neutral event from an accounting expense standpoint." (JPMorgan Chase & Co.)
[Guidance Overview]
Modified Work Arrangements for Employees Under Code Section 409A
Excerpt: "This article examines the application of Section 409A to modified work arrangements -- on-call or reduced time work arrangements, consulting arrangements, leaves of absence, rehire situations and other employment-related changes. Internal Revenue Code Section 409A allows a 'separation from service' to be a payment trigger for deferred compensation, including separation pay, supplemental retirement benefits, account-balance deferred compensation and other payments. [Originally published March 23, 2009.]" (Faegre & Benson)
Using Premium-Priced Options (PDF)
Page 9 of 12 pages. (Milliman)
Same-Gender Marriage Legal in Maine: Employers Should Prepare
Excerpt: "Employers should be aware that they may need to adjust their human resources, benefits and personnel policies in accordance with the new same-sex marriage law in Maine, [scheduled to] go into effect later this year. Same-sex marriage became legal in Maine and likely can be performed there beginning in September, after Gov. John Baldacci (D) on May 6 signed a bill the state Senate approved earlier that day. The new law allows civil marriages but does not require churches to perform or recognize same-sex marriage. It takes effect 90 days after the current session of the legislature ends; this likely means it will go into effect in mid-September." (Thompson Publishing Group)
Maximizing the Value of Benefits in a Recession
Excerpt: "Cash no longer flows as freely as it once did, and employers are responding. Many employers have cut back on funding retirement plans and other benefits. Many employers have cut back on staffing levels. Many employers have cut back on both. However, all employers want to come out of this recession ahead of their competition. History indicates that a workforce focused on achieving the next goal, rather than dodging the ax, will help an employer win. This puts pressure on human resource managers in the classic dilemma of keeping morale high while cutting employee security. Fortunately, most people value more than just cash and have the ability to do so in the workplace just as well as other parts of their life. Tapping into those values offers a source of low cost morale raisers. In this article, we outline a few ideas for motivating a workforce without a large outlay of cash." (JPMorgan Chase & Co.)
Adding More Variable Elements to Total Compensation and Control Fixed Employee Costs (PDF)
Pages 8-11 of 12 pages. (Milliman)
The Art and Science of Delivering Bad News on Layoffs/Benefit Cuts in the Workplace (PDF)
Pages 1-3 of 12 pages. (Milliman)
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Press Releases
(Click to post your press release)IRS Announces Withholding Adjustment Option for Pension Plans and Provides Taxpayer Education
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