Retirement Plans Newsletter |
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| June 19, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Guidance Overview]
Tougher Financial Regulation Proposals May Hinder 401(k) Plan Sponsors
Excerpt: "The Obama administration's string of proposals to regulate the financial services industry may have some negative consequences for 401(k) plan sponsors, particularly smaller ones. Among the proposals, which were announced Wednesday, June 17, is one that would impose 'fiduciary duty' on brokers who provide investment advice, which is a more stringent standard than what they are held to today, experts say. Currently the legal standard that brokers must meet is a 'suitability test,' which means that the broker believes a specific investment option is a reasonable investment for a client of a certain age. The higher standard of fiduciary duty means that the broker is acting in the best interest of clients." (Workforce Management; free registration required)
[Guidance Overview]
IRS's Internal Control Questionnaire to Help Plan Sponsors, Administrators with Plan Compliance
Excerpt: "The questionnaire, which was developed with outside practitioner input, provides examples of questions asked by EP examiners to acquire an understanding of system procedures and internal controls. The questionnaire is divided up into questions concerning plan failures --internal control impact, plan administration, HR personnel, and payroll." (Wolters Kluwer)
DOL Webcast: Investment of 401(k) and Other Retirement Plans in Target Date Type Plans
Excerpt: "[The June 18, 2009, webcast of the joint public hearing of the Department of Labor's Employee Benefits Security Administration (EBSA) and the Securities and Exchange Commission (SEC) heard] testimony on the investment of 401(k) and other retirement plans in target date type plans. [There is also a link to] a list of requests to testify and of comments received by EBSA and the SEC." (U.S. Department of Labor)
Remarks of Deputy Secretary of Labor at Hearing on 401(k) Investments in Target Date Funds
Excerpt: "Deputy Secretary of Labor Seth Harris [addressed the] public hearing to explore the use of target date funds 'as appropriate investments for plan sponsors to use when investing 401(k) plan contributions of participants.'" (U.S. Department of Labor)
Target-Dates Useful but Flawed, Witnesses Tell SEC and DOL
Excerpt: "In a joint hearing on target-date funds before the Department of Labor (DOL) and the Securities and Exchange Commission (SEC), witnesses were in favor of the use of target-date funds, but said the current market for the funds is flawed. In opening remarks, DOL Deputy Secretary Seth Harris noted that recent concerns have been raised about variation in the glide paths of same-date target-date funds offered by different providers, and how this variation may result in plan participants and investors unknowingly placing their retirement assets at risk. He said the hearing will help the agencies determine whether regulatory or other guidance would be helpful to alleviate these concerns." (planadvisor)
Rebuilding Target-Date Investment Options
9 pages. (Meridian Wealth Management)
Is Social Security Part of the Social Safety Net?
Excerpt: "We have four major findings. First, as we expand the definition of income to use more comprehensive measures of well-being, we find that Social Security becomes less progressive. Indeed, when we use an 'endowment' defined by potential labor earnings at the household level, rather than actual earnings at the individual level, we find that Social Security has virtually no effect on overall inequality. Second, we find that this result is driven largely by the lack of redistribution across the middle and upper part of the income distribution, so it masks some small positive net transfers to those at the bottom of the lifetime income distribution. Third, in cases where redistribution does occur, we find it is not efficiently targeted: many high income households receive positive net transfers, while many low income households pay net taxes. Finally, the redistributive effects of Social Security change over time, and these changes depend on the income concept used to classify someone as 'poor'." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
The West Virginia Teachers' Retirement System: DC to DB to DC - Then Back Again
Excerpt: "Until June 30 of this year, participants who transferred into the DB plan also have the option to make up for not making the same contributions by purchasing benefits credits. Since DC plan members only contributed 75% of what DB members contributed (4.5% versus 6%), Lambright says, the basic service transfer was set at 75%. Those who want to purchase the remaining 25% service credit pay a cost based on the 1.5% of pay not contributed, plus 4% interest." (PLANSPONSOR.com; free registration required)
Three Ways to Get Your 401(k) Back on Track
Excerpt: "The easiest fix would, of course, be a full recovery of the stock market. But the returns necessary to repair your retirement accounts are unlikely to happen any time soon. Baby boomers over age 55 who wish to retire in the next two years will need annual investment returns of 13.64 percent to recoup their losses between January 1, 2008 and April 30, 2009, according to calculations released today by Mercer, a benefits administrator and consulting company. Investors who have 5 years to recover will need returns of 5.44 percent annually to get back to where they were a year and a half ago. Those with a longer time horizon will need only a 2.72 annual rate of return to recover over 10 years and just 1.81 percent annually over 15 years." (U.S. News & World Report)
Bridging Employees' Retirement Income Gap with Income Annuities: An Employer's Guide
24 pages. Excerpt: "This paper is intended to help employers assess the feasibility of adding income annuity options and to understand how they can do so with minimal disruption to the plan's administration and cost structure." (Principal Financial Services, Inc.)
Pension Provision: Government Failure Around the World
Excerpt: "This monograph surveys the results of government intervention in the market for retirement income provision throughout the world. The authors begin by looking at high-income democracies in which governments have, to a large degree, taken over the function of providing pensions. They find that state provision crowds out private provision and places a considerable fiscal burden on developed country governments." (Social Science Research Network)
BenefitsLink Vendor Directory (Advert.)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]Service Provider's Notice of Overpayment Imputed to Plan Administrator
Excerpt: "The Fifth Circuit recent affirmed this district court opinion wherein the court held that a two year statute of limitations applied and that knowledge of an 'overpayment' by a service provider may be imputed to the plan administrator for purposes of the discovery rule." (Roy Harmon III via Health Plan Law)
Proposed IRS Paradoxical Changes to Tax Rules for Employer-Provided Cell Phones
Excerpt: "[T]he Internal Revenue Service (IRS) has proposed three alternative methods for meeting the substantiation requirements and has invited public comment on the proposed new rules. (See IRS Notice 2009-46). Adding to the confusion, the Commissioner of the IRS has recently announced that the Obama administration is asking Congress to change the current tax laws to eliminate any tax consequences to employers or employees for personal use of work-related cellular phones and PDAs. Both of these developments are described in greater detail [in the target document]." (McGuireWoods LLP)
[Guidance Overview]
More States License Same-Gender Marriages
Excerpt: "Maine, Vermont and New Hampshire have joined Massachusetts and Connecticut in licensing same-gender marriages, and legislation is pending in other states (most notably New York). Iowa has also started to license same-gender marriages in response to a court decision from that state's highest court." (The Segal Group, Inc.)
[Guidance Overview]
July 1, 2009, Is a Key Date for Section 457A Transition Relief
Excerpt: "Companies with significant non-U.S. income, and partnerships that include foreign or tax-exempt partners, will need to assess whether new Internal Revenue Code Section 457A applies to their deferred compensation plans. If so, they will need to decide whether to take advantage of transition relief by amending plans to provide for immediate vesting before July 1, 2009." (Seyfarth Shaw LLP)
[Guidance Overview]
'Say on Pay' Votes to Become Mandatory Under Obama Administration Proposal (PDF)
3 pages. Excerpt: "On June 17, President Barack Obama proposed broad changes to the manner in which the U.S. government supervises financial markets. Among the numerous elements of the administration's plan is a requirement that public companies implement 'say on pay' rules, under which they would submit executive compensation packages to a nonbinding vote of their shareholders. The brief description contained in the plan suggests that the 'say on pay' requirement would extend to all public companies, regardless of size, though details of the proposal and the timing of any eventual adoption have not yet been announced." (Morgan, Lewis & Bockius LLP)
[Guidance Overview]
TARP Compensation Guidance and Other Executive Compensation Proposals
Excerpt: "The Department of the Treasury, the Securities and Exchange Commission, and Congress have continued their assault on executive compensation practices. Some of these recent measures will have an immediate impact on TARP recipients, while other actions prescribe guidelines or principles or set forth proposals for further consideration, all of which may influence or subsequently change compensation disclosure and 'best' practices for all public companies." (Jones Day)
[Guidance Overview]
TARP Guidance on Compensation and Corporate Governance from Treasury (PDF)
11 pages. Excerpt: "This letter discusses the provisions of the interim final rule applicable to TARP recipients that received financial assistance under the Capital Purchase Program. The discussion of the extensive provisions of the interim final rule, after explaining who is a 'covered employee,' is organized into two main topics: (1) the provisions that affect the compensation of covered employees and (2) the provisions that impose structural limits and administrative procedures with respect to executive compensation." (Frederic W. Cook & Co., Inc.)
[Guidance Overview]
Treasury Dept. Equity Purchases Under EESA Are Not Code Sec. 409A Permissible Payment Events
Excerpt: "CCH Note: This guidance does not address whether a Treasury equity acquisition transaction under EESA is a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets of the corporation, for any other purpose. . . . The IRS intends to amend the regulations under Code Sec. 409A to incorporate this guidance. The guidance is effective for, and the amended regulations will be applicable to, Treasury equity acquisition transactions pursuant to EESA occurring on or after June 4, 2009." (Wolters Kluwer)
Press Releases
Target-Date Funds Require Better Benchmarking, Watson Wyatt SaysWatson Wyatt
Older Workers Delaying Retirement, Watson Wyatt Survey Finds
Watson Wyatt
ExpertPlan Purchases ADP's Retirement Services TPA Program Business in Kansas
ExpertPlan
ExpertPlan Hires Steven Hart as VP of Sales and Business Development
ExpertPlan
Target-date Fund Regulations Must Focus on Existing Investment Selection Process, Provide Flexibility
American Benefits Council
John Marshall's Kathryn Kennedy Named To IRS Advisory Committee For TE/GE
John Marshall Law School, The
(Click to post your press release)
Employee Benefits Jobs
401(k) Relationship Managerfor Wells Fargo Advisors, LLC.
in CA
Director, Communication & Education Consultant
for Prudential Financial
in CT
Education & Enrollment Specialist
for Prudential Financial
in NE
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