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June 18, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy

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[Guidance Overview]
Second Post-Enron ERISA 'Stock Drop' Trial Victory for Tellabs and Its 401(k) Plan Fiduciaries (PDF)

Excerpt: "The Brieger plaintiffs, on behalf of a nationwide class of plan participants, alleged that Tellabs stock was an 'imprudent' 401(k) plan investment option under ERISA because (1) Tellabs executives (who were also plan fiduciaries) made misstatements to the market and to participants regarding sales/demand for Tellabs' products, which operated to artificially inflate the stock price; and (2) the stock lost about 90% of its value between December 2000 and July 2003, when Tellabs and other telecom companies went through a significant industry downturn and Tellabs had reduced sales and multiple rounds of layoffs." (Morgan, Lewis & Bockius LLP)


[Guidance Overview]
Company Directors and ERISA Fiduciary Status

Excerpt: "In this DOL Interpretative Bulletin issued over 20 years ago--29 CFR 2509.75-8 - Questions and answers relating to fiduciary responsibility under the Employee Retirement Income Security Act of 1974--the DOL answered this question: In the case of a plan established and maintained by an employer, are members of the board of directors of the employer fiduciaries with respect to the plan?" (ERISA Fiduciary Guidebook)


[Guidance Overview]
IRS Will Focus on Qualified Retirement Plan Failures This Year

Excerpt: "The IRS has listed on its website the most common failures in qualified retirement plans. The apparent purpose of the listing is to raise awareness of the more common failures so that sponsors may have an opportunity to take corrective action and perhaps begin steps towards voluntary compliance before an audit." (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC)


Hearing on Social Security: Keeping the Promise in the 21st Century
June 17, 2009. Excerpt: From Senator Herb Kohl, Chairman. 'We all know that health care reform is the number one priority of the administration and of my colleagues here in the Senate. But with an urgent need to contain the federal deficit, there is no doubt that sometime soon all eyes will turn to Social Security. When that time comes, this committee wants to be prepared to act as a repository of ideas for reform proposals. As our witnesses will confirm today, Social Security can be strengthened, benefits for those who need them most can be increased, and long-term solvency can be ensured with just a few, small common-sense changes." (U.S. Senate Special Committee on Aging)


Fun, Easy and Automatic: Not a Sure Path to Sufficient Retirement Income (PDF)
Excerpt: "[G]ood communication and education must attract employees' attention. And attention-gaining techniques often include fun and games...snappy brochures, fun YouTube videos, intriguing Facebook pages for the plan, and maybe even scratch and sniff enrollment forms. But every education and communication effort must be aimed at enlightening employees about the things successful users of 401k plans do. Getting employees' attention is the start -- not the end." (Ackley Associates)


Is GM Facing a Repeat of Bankrup.tcy?
Excerpt: "In the thunderous collapse of GM, one detail seems to have gone almost unnoticed. The old GM's US pension fund, with its near-$100bn of liabilities, is being transferred lock, stock and barrel to the new entity. As a direct result, the new GM could be bankrupt again in a very few years. GM's US fund is, of course, in deficit, but the company has made no contributions since 2003. Back then, it put in $18.5bn, which it raised through a bond issue. Since this counted as a pre-payment, GM is not obliged to pay any more for the next year or two. However, it will then have to start plugging the gap, under the new rules set down by the Pension Protection Act of 2006." (Alberto Dominguez via What's an Actuary?)


Rep. Pomeroy Introduces Bill to Boost Annuity Tax Breaks
Excerpt: "Rep. Earl Pomeroy (D-ND) and Rep. Ginny Brown-Waite (R-FL) have introduced the Retirement Security Needs Lifetime Pay Act (H.R. 2748). Similar to legislation introduced by Pomeroy in the 110th Congress, the bill contains several provisions to encourage retirees to create annuities as part of their retirement savings plans. The bill excludes from income a portion of lifetime income payments received from IRAs, qualified retirement plans (other than defined benefit plans), and non-qualified annuities. It also excludes the value of longevity insurance from amounts subject to required minimum distributions (RMDs); and it clarifies the taxation of payments from deferred annuity contracts." (ICMA-RC)


Four New Mexico Public Employee Unions Sue to Stop 'Wage Tax' for Pensions
Excerpt: "Four of New Mexico's public employee unions are suing the state to stop the enactment of a new law that decreases the state's payment into public employee pension funds by 1.5 percent for two years. . . . If enacted . . . the law will force more than 66,000 public employees to shore up the state's budget deficit by paying 1.5 percent more out of their paychecks into PERA and ERB, the state's public employee pension funds." (The New Mexico Independent)


Stock and Bond Subclasses Key to Target-Date Fund Performance
Excerpt: "Target-date funds' allocations among stock and bond subclasses were among the primary determinants of the funds' performance, new Vanguard Group research finds. A Vanguard news release said the new study 'Target-Date Funds: Looking Beyond the Glide Path in 2008' by the firm's Investment Counseling & Research Group found that the losses realized in 2008 in the equity portions of target-date funds were magnified by larger allocations to developed and emerging international markets, whose results lagged the U.S. stock market by 6 and 16 percentage points, respectively." (PLANSPONSOR.com; free registration required)


Target-Date Funds: Looking Beyond the Glide Path in 2008
Excerpt: "This paper outlines some target-date methodologies across providers, highlighting different risks associated with the various strategies and illustrating the impact of those strategies on TDFs' performance over both a longer period as well as a shorter, more volatile, period like that of 2008." (The Vanguard Group, Inc.)


ABC Suggests Improvements to Fee, Advice Bills
Excerpt: "The House Subcommittee on Health, Employment, Pensions and Labor has approved The 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984), which requires simple-to-understand fee disclosure on the investment options contained in employers' 401(k) plans, as well as the Conflicted Investment Advice Prohibition Act (H.R. 1988). . . . However, before the committee's vote, American Benefits Council President James A. Klein commended the subcommittee for preserving the broad-based provision of investment advice to employees while still protecting the many non-conflicted advice arrangements approved by IRS before the enactment of the Pension Protection Act of 2006 (PPA), but identified several liability issues raised under the bills." (PLANSPONSOR.com; free registration required)


California's Governor Opposes the CalPERS Proposal to Spread Losses Over 30 Years
Excerpt: "The state's largest pension plan is scheduled to vote today on a proposal to spread this year's severe investment losses over 30 years and save cash-strapped state and local governments hundreds of millions of dollars initially. But Gov. Arnold Schwarzenegger opposes the move as a 'pass-the-buck-to-our-kids idea.' The California Public Employees' Retirement System, the fund for state and local government workers, has to take action to cover tens of billions in losses from the recession. Its holdings were valued at $239.2 billion at the start of last July but plummeted nearly 30% by the end of March, a month when key stock market indexes fell to their lowest levels in more than a decade." (Los Angeles Times)



AIRE LLC (Advert.)

Enrolled Retirement Plan Agent (ERPA) Exams Open (clickable image)

Enrolled Retirement Plan Agent (ERPA) Exams Open

Retirement plan practitioners who seek the new Internal Revenue Service Enrolled Retirement Plan Agent designation and who now are ineligible to act as clients agents pursuant to IRS Form 2848 may register now. Register by July 6, 2009 and take the examination up to August 31, 2009. Get valuable resources to prepare for the ERPA special enrollment examination at www.airellc.org.

Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Clarification and Softening of IRS 'Crackdown' on Taxation of Business Cell Phones and PDAs (PDF)

5 pages. Excerpt: "The IRS Commissioner has indicated a very significant change in IRS direction on this issue with the successive release of IRS Notice 2009-46 last week and his important statement [on June 16]. The extent of this shift in the IRS position is demonstrated when it is placed within the context of the IRS audits that have created this compliance nightmare." (Morgan, Lewis & Bockius LLP)


Administration Proposal for Financial Regulatory Reform Contains Several Items Related to Executive Compensation
Excerpt: "{Example:] Under the topic 'Promote Robust Supervision and Regulation of Financial Firms,' and the subheading 'Strengthen Capital and Other Prudential Standards Applicable to All Banks and BHCs,' the Administration repeats its intention (from the June 10 proposal) to focus on five principles to better align compensation practices with the interests of shareholders and the stability of firms and the financial system." (Michael Melbinger via Winston & Strawn LLP)


Alabama Cancels Deferred Compensation Plan with Nationwide
Excerpt: "The State Personnel Board cited a lack of financial transparency Wednesday when it canceled a contract with Nationwide Retirement Solutions to provide a deferred compensation plan for active and retired state workers in Alabama. The board voted 3-0 to cancel the contract, with board members saying the company is not providing financial information they want." (AP via Forbes.com)


Obama Backs Extension of Benefits to Same-S.ex Partners of Federal Employees
Excerpt: "President Obama on Wednesday directed the Office of Personnel Management to extend long-term care benefits and family and parental leave to the same-s.ex partners of g.ay and les.bian federal employees, and ordered agencies to conduct internal reviews to identify other benefits that they could extend as well. . . . Obama stopped short of granting employees' domestic partners access to health care benefits, saying he legally could not do so, but endorsed legislation that would provide such benefits." (GovernmentExecutive.com)



Press Releases

Investment Advice, 401(k) Fee Legislation Improved but Additional Safeguards for Employers Still Needed
American Benefits Council

President Obama to Announce Comprehensive Plan for Regulatory Reform
U.S. Department of Treasury

Will the 64% Increase in Business Bankruptcies Create More Abandoned Retirement Plans?
Penchecks, Inc.

McGraw Wentworth Mid-Market Group Benefits Survey: West Michigan Employers Keep Health Care Cost Increases Below National Trend
McGraw Wentworth

(Click to post your press release)


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