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May 22, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy

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[Official Guidance]
DOL Defers Effective Date of Investment Advice Rule; May 22 Date Moved to November 18 (PDF)

2 pages. Excerpt: "This document delays the effective and applicability dates of final rules under [ERISA] and parallel provisions of the Internal Revenue Code . . . relating to the provision of investment advice to participants and beneficiaries in individual account plans, such as 401(k) plans, and beneficiaries of individual retirement accounts (and certain similar plans). These rules were published in the Federal Register on January 21, 2009, and were to have become effective and applicable on March 23, 2009, but were delayed until May 22, 2009 . . . . This document further delays the effective and applicability dates of these final rules from May 22, 2009, until November 18, 2009, to allow additional time for the Department to evaluate questions of law and policy concerning the rules." (Employee Benefits Security Administration, U.S. Department of Labor)


[Guidance Overview]
Circuits Split on Deductibility of Proceeds from Stock Redemption Used to Satisfy ESOP Distribution Obligations

Excerpt: "An Internal Revenue Service (IRS) official recently commented at an American Law Institute-American Bar Association conference that the IRS will continue to litigate the issue of whether a corporation is entitled to a deduction under Section 404(k)(1) of the Internal Revenue Code (the Code) for payments used to redeem its stock to satisfy the distribution obligations under its employee stock ownership plan (ESOP). . . . This comment appears to be in response to the Eighth Circuit's decision on this issue in General Mills v. United States, 554 F.3d 727 (8th Cir. 2009), which although favorable to the IRS, is contrary to the decision reached by the Ninth Circuit in Boise Cascade v. United States, 329 F.3d 751 (9th Cir. 2003)." (Morgan, Lewis & Bockius LLP)


[Guidance Overview]
Office of Labor Management Standards Extends Comment Period for Proposed Regulations on LM-2 and LM-3 Forms

Excerpt: "The regulations were issued on April 21, 2009 and originally, the comment period was scheduled to end on May 21, 2009. The new deadline is June 22, 2009. The notice of proposed rulemaking proposes to withdraw a rule published in the Federal Register on January 21, 2009, pertaining to the filing by labor organizations of the Form LM-2, an annual financial report required by the Labor-Management Reporting and Disclosure Act of 1959, as amended (LMRDA)." (International Foundation of Employee Benefit Plans)


[Guidance Overview]
Second Circuit Affirms Dismissal of 401(k) Fee Lawsuit (PDF)

3 pages. Excerpt: "On May 6, 2009, the Second Circuit Court of Appeals affirmed the dismissal of two related actions, concluding that the plaintiffs failed to state claims based on allegations that plan fiduciaries failed to diversify plan investments and invested in funds that carried excessive fees. The Second Circuit's decision is unpublished, and hence carries no official precedential value. It nonetheless underscores the strict scrutiny that courts are increasingly applying to the plaintiffs' allegations in the high-profile 401(k) fee lawsuits." (Groom Law Group)


[Guidance Overview]
Proposed Regulations on 'Exiting' Safe Harbor Nonelective Issued

Excerpt: "The new rules will apply both to a traditional safe harbor plan leaving the deferral choice totally with each participant and to a qualified automatic contribution arrangement - a QACA - providing for specified levels of automatic contributions in absence of a participant's affirmative deferral election. The proposed regulations respond to an omission in the final regulations perceived by many practitioners. This technical update summarizes the proposed regulations, and explains the current regulatory provisions that provide the context for the proposed regulations." (SunGard)


[Guidance Overview]
Ceasing Safe Harbor Nonelectives

Excerpt: "On May 18, 2009, the IRS released proposed amendments to Treasury Regulation 1.401(k)-3 and 1.401(m)-3 permitting the suspension or reduction of safe harbor nonelective contributions in a qualified plan. Previously, plans were only permitted to cease safe harbor nonelective contributions upon termination of the plan for specified situations. Taxpayers may rely on the proposed regulations." (ftwilliam.com)


Milwaukee County Settles Pension Case for $45 Million
Excerpt: "The Milwaukee County Board approved a $45 million settlement of the county's pension lawsuit against Mercer Tuesday, following a nearly two-hour closed-door session. The vote in favor of settling the case in mid-trial was 18-0. There was no public discussion of the settlement, but supervisors broke into applause after the vote. The Pension Board approved the settlement on an 8-0 vote shortly after supervisors acted. Members of the board exchanged hugs with some of the lawyers who handled the case following that vote. The county expects to receive about $32 million after paying its attorneys and litigation costs, officials said. The funds, by previous resolution, will go to the county's pension fund." (Milwaukee Journal Sentinel)


Shift of Assets to Roth IRA Corporation Constituted Reportable Transaction, Chief Counsel Rules
Excerpt: "A transaction under which a couple set up a corporation, opened Roth IRA accounts, and then each directed their Roth IRA accounts to purchase 50% of the stock of the corporation constituted a reportable transaction, the IRS Chief Counsel has ruled in IRS Letter Ruling 200917030." (Wolters Kluwer)


An Actuarial Perspective on the 2009 Social Security Trustees' Report (PDF)
7 pages. Excerpt: "To bring [Social Security] income and outgo into balance, Congress needs to act reasonably soon. A primary goal of Social Security reform should be sustainable solvency, setting the program on a path toward paying benefits when due for the next 75 years and beyond. With retirees living longer and longer, the American Academy of Actuaries has recommended that increasing the retirement age be a part of any reform proposal." (American Academy of Actuaries)


One of Los Angeles' Biggest Pensioners Warns of the Costs
Excerpt: "Los Angeles Councilman Bernard Parks, City Hall's budget committee chief who is warning that soaring payroll and pension costs threaten the city's financial stability, receives $22,000 a month in city retirement benefits, in addition to his $178,789 a year salary, records and interviews show." (Los Angeles Times)


International Accounting Standards Board Agrees to Weigh in on Use of Discount Rate for Pension Funding
Excerpt: "The International Accounting Standards Board (IASB) has agreed to delay publication of an exposure draft on pensions accounting in order to address certain aspects of the use of the discount rate in pension funding calculations. According to a BNA news report, 'Some IASB constituents have complained that using an AA-corporate bond discount rate in current markets has led to entities reporting lower pension fund surpluses merely as a consequence of widening credit spreads.'" (PLANSPONSOR.com; free registration required)


Indiana Public Pension Plans Lose Shot at Blocking Chrysler Asset Sale
Excerpt: "A U.S. Bankrup.tcy Court judge turned away an attempt by a group of Indiana pension funds to block the sale of Chrysler assets. An Associated Press news report said U.S. Bankrup.tcy Judge Arthur Gonzales denied the pension funds' request to halt the asset sale to Italy's Fiat Group SpA. Lawyers representing The Indiana State Teachers' Retirement Fund, Indiana State Police Pension Trust and Indiana Major Moves Construction Fund argued that proceeds from the asset sale would go to unsecured creditors such as the United Auto Workers union and U.S. Treasury Department, rather than the pension programs." (PLANSPONSOR.com; free registration required)


PBGC May Need Aid as Deficit Soars
Excerpt: "The federal agency that guarantees corporate pensions was $33.5 billion in the red at the end of March, triple its deficit six months earlier, the agency's head told a Senate committee yesterday. The recession threatens to add to the strain on the Pension Benefit Guaranty Corp. by pushing more companies into bankrup.tcy and leaving the struggling agency responsible for their pensions. . . . If the PBGC's condition continues to deteriorate, the government could come under pressure to shore it up with taxpayer funds, the GAO said in testimony to the Senate's Special Committee on Aging." (The Washington Post; free registration required)


Are General Motors Pensions in Peril?
Excerpt: "James Seward, an associate professor of finance, investment and banking at UW-Madison, said if GM files for bankrup.tcy, it likely would terminate the pension plan and offload its obligations to the Pension Benefit Guaranty Corp. The PBGC insures private-sector pension plans and pays benefits to workers when plans fail. It likely would pick up a portion -- but not all -- of the unfunded obligations. . . . The shortfall likely would hit retirees in the form of smaller benefits. Some analysts have said retirees on average could see a 10 to 20 percent reduction in monthly pensions. But that reduction likely will be much larger for workers age 55 to 62, said Karen DeOrnellas of the newly formed General Motors Retirees Association." (The Janesville Gazette)


Traditional Company Pensions Are Going Away Fast
Excerpt: "The number of companies offering traditional defined benefit pension plans was shrinking even before the recession, but the downturn has accelerated the decline. Since the beginning of the year, at least 20 companies have frozen their defined pension plans, exceeding the number of plan freezes for all of 2008. A recent survey by Watson Wyatt found that, for the first time, the majority of Fortune 100 companies are offering new salaried employees only one type of retirement plan: a 401(k) or similar 'defined contribution' plan. . . . [Pension freezes are] particularly hard on older employees, who have less time to make up the difference by saving more. In addition, traditional pensions 'are worth a lot more at the end of your career than at the beginning of your career,' Friedman says. 'If the freeze comes in your 40s and 50s, you end up with a much smaller benefit.'" (USA Today)


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Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Protecting Non-Qualified Deferred Compensation

Excerpt: "Why have protection issues become some important recently? Clearly the bankrup.tcy filings by several prominent companies have brought to light the issues. But there have been many bankrup.tcy filings in past downturns (think 2000-2002). What is different this time around is that Code Section 409A now prevents companies and executives from using certain strategies that could have protected their non-qualified deferred compensation funds and promises." (Michael Melbinger via Winston & Strawn LLP)


Lawmakers Unveil Bipartisan Federal Employee Domestic Partner Benefits Bills
Excerpt: "A bipartisan group of legislators has introduced House and Senate bills that would grant the domestic partners of g.ay and les.bian federal employees the same health and retirement benefits as the spouses of heterose.xual workers. . . . [Rep. Ileana] Ros-Lehtinen and Rep. Tammy Baldwin, D-Wis., who co-chairs the Congressional Les.bian G.ay Bise.xual and Transgender Equality Caucus, introduced the 2009 Domestic Partners Benefits and Obligations Act in the House. Sens. Joe Lieberman, I-Conn., and Susan Collins, R-Maine, unveiled the Senate version." (GovernmentExecutive.com)


Updated Employee Ownership 100 List: America's Largest ESOP and Other Employee-Owned Companies
The NCEO has published on its Web site the newest version of its Employee Ownership 100 list, which lists the largest U.S. companies with least 50% of their stock owned by an ESOP, a stock purchase plan in which most full-time employees can participate, a profit sharing plan or other trust, or some combination of such plans. (National Center for Employee Ownership)



Press Releases

U.S. Labor Department Further Extends Effective Date of Rules on Investment Advice
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

U.S. Labor Department Publishes Process to Appeal Denials of COBRA Subsidy Under American Recovery and Reinvestment Act of 2009
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

American Association For Long-Term Care Insurance Recognizes Four Marsh Professionals Among Top 40 U.S. Producers
Marsh Global Consumer

(Click to post your press release)

Employee Benefits Jobs

Defined Contribution Analyst I/II/III
for The Standard
in OH

Senior Consultant/Client Services Manager/Efficiency and Streamlining
for Great Lakes Pension Associates, Inc.
in MI

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