Retirement Plans Newsletter |
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| June 22, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
ASC and the ASC Institute (Advert.)
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[Guidance Overview]
Judge Says Motorola Didn't Breach Fiduciary Duties
Excerpt: "The U.S. District Court for the Northern District of Illinois ruled that Motorola Inc. and fiduciaries of its 401(k) plan did not breach their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by continuing to offer company stock as an investment option in the plan. Granting summary judgment for the Motorola defendants, Judge Rebecca R. Pallmeyer said they were protected from liability under ERISA Section 404(c). The plaintiffs alleged that the defendants did not disclose in advance that liability would be shifted to them under the 404(c) plan, but Pallmeyer pointed out that a plan prospectus sent to participants clearly stated that the plan was intended to be a 404(c) plan with defendants not liable for participant investment decisions." (planadvisor)
[Guidance Overview]
New Tax Rules Will Give More People Access to a Roth IRA
Excerpt: "Starting Jan. 1, the income limits that have prevented many individuals . . . from converting a traditional IRA or employer-sponsored retirement plan to a Roth will be eliminated. The change -- one of the biggest and most important on the IRA landscape in years -- will widen the entryway to one of the best deals in retirement planning. With a Roth IRA, virtually all income growth and withdrawals are tax-free." (The Wall Street Journal)
[Guidance Overview]
Plans Failing to Follow Own Procedures Must Pay Spouse Amounts Already Paid to Children
Excerpt: "EBIA Comment: Although the trial court in this case agreed with the plans that it was reasonable to make payment even in the face of a potentially conflicting claim, the reversal on appeal shows that the safer course was to wait and allow the conflict to be resolved before proceeding. This case is another lesson to plan administrators of how important it is to know, understand, and follow their plans' own procedures. But even in the absence of specific procedures, controlling law in many jurisdictions would require plans to investigate conflicting claims or risk the double-payment liability now facing the plans in this case." (Employee Benefits Institute of America)
Cost of Civil Service Retirement System Retirement Plan Fix Pegged at $40 Million Over 10 Years
Excerpt: "A bill aimed at modifying the way retirement benefits are calculated for certain federal employees who work part-time at the end of their careers would cost the government $39 million from 2010 to 2019, the Congressional Budget Office reported this week. The legislation (S. 469), sponsored by Sen. George Voinovich, R-Ohio, would modify the way retirement annuities are calculated for employees covered under the Civil Service Retirement System. Currently, CSRS employees who retire with part-time service late in their careers could see reduced annuities. According to the CBO report, the bill would provide an average of $2,000 more in retirement benefits per year for about 650 of the expected retirees from the CSRS system in 2010. Additional retirements by 2019 would boost the overall cost of the measure to $39 million, according to CBO." (GovernmentExecutive.com)
Rethinking 401(k) Plan Design for Challenging Times (PDF)
18 pages. Excerpt: "Clearly, the economic downturn is causing many companies to reevaluate their 401(k) plan design carefully, and in many cases, rethink their 401(k) plan strategy. Based on the survey responses, many plan sponsors are assessing whether or not to reduce or eliminate the matching contribution feature under their plans. As part of this plan design assessment, companies may want to consider the potential impact of any such change on future participation in the 401(k) plan by eligible employees. Since many employees, especially the so-called 'non-highly compensated employee' group, participate in 401(k) plans because of the matching contribution feature, a key challenge faced by plan sponsors is assessing the impact of reducing or eliminating the matching contribution feature on future plan participation rates." (Grant Thornton LLP)
Employers Cutting Back 401(k) Plans, According to Study
Excerpt: "A quarter of U.S. employers have eliminated matching contributions to employee 401(k) retirement plans since September to save money amid the economy's downturn, according to research released on Monday. A quarter of U.S. employers also have instituted limited enrollment rather than open the savings plans to all employees, according to the study conducted for Charles Schwab Corp. by CFO Research Services." (Reuters)
IRS Adds Tools to Help Plan Sponsors Prepare for Plan Audits
Excerpt: "The Internal Revenue Service (IRS) has recently added updated tools to its Employee Plan Team Audit (EPTA) Web site. An Internal Controls Questionnaire provides examples of questions asked by EP examiners to understand the system procedures and internal controls. The questionnaire is broken up into four areas: Human Resources (HR) personnel; payroll; plan failures; and plan administration. The EPTA Compliance Trends & Tips area lists plan mistakes that IRS Employee Plans sees recurring in large case audits and voluntary compliance submissions." (PLANSPONSOR.com; free registration required)
Worker Preferences for 401(k) Fee Disclosure Highlight of New Study (PDF)
19 pages. Excerpt: "The topic of fee disclosures in 401(k) plans has recently garnered much attention in the government, media, and retirement industry. Findings from the 10th Annual Retirement Survey help to illustrate current levels of awareness of 401(k) fees, employer and worker preferences for receiving information about fees, and opportunities for increasing awareness." (Transamerica Center for Retirement Studies)
Orange County, California, Workers Vote to Change Pension Plan, Retirement Age
Excerpt: "Thousands of Orange County workers will begin voting Saturday on a new contract that includes a two-tier 'hybrid' retirement plan that would require a new state law before it could go into effect. The proposed option would push back the retirement age to 65 from 55 and result in a smaller pension. But the amount of money workers would pay into their pension plan would be cut by nearly half, and the county would match up to 2 percent for a 401(k), according to the Orange County Employees Association, which represents the workers and is backing the proposal." (City News Service)
[Opinion]
Jottings from a Conference on Plan Designs
Excerpt: "'Staying the course' is only a viable strategy if you're on the right track to begin with. It could get worse before it gets worse. If you're automatically enrolling participants, what is your match encouraging them to do? If you can't remember the last time you did a provider search, you're probably overdue." (planadvisor)
AIRE LLC (Advert.)
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]Supreme Court Ruling Increases Burden on Employees in Age Discrimination Cases
Excerpt: "On June 18, 2009, the U.S. Supreme Court issued a ruling substantially increasing the evidentiary burden imposed on plaintiffs in federal age discrimination cases. Whereas plaintiffs could previously establish age-based disparate treatment claims by showing their age was a 'motivating factor' in the challenged employment decision (e.g., termination, demotion, failure to hire or promote), plaintiffs must now demonstrate their age was the 'but for' cause of the challenged decision. In other words, employees must now prove their age was the reason why their employer took the disputed action, and not merely a reason that motivated the employer in making the disputed employment decision." (Pepper Hamilton LLP)
[Guidance Overview]
U.S. Supreme Court Increases Employee Burden of Proof in Age Bias Cases (PDF)
2 pages. Excerpt: "In Gross v. FBL Financial Services, Inc., decided on June 18, 2009, a deeply divided U.S. Supreme Court imposed a heightened proof burden on employees to establish age discrimination against their employers. In a 5-4 decision, the Court concluded that the literal text of the Age Discrimination in Employment Act ('ADEA') does not allow a worker to prove discrimination by demonstrating that age was one 'motivating factor' for the employer's adverse employment action. Rather, in the majority's view, workers must prove that age was the decisive factor or 'but for' cause underlying the employer's adverse job action." (Haynes & Boone)
[Guidance Overview]
Court Denies Penalties for Document-Request Failure When Participant Not Harmed
Excerpt: "EBIA Comment: It should be noted that courts disagree on whether a participant or beneficiary must show harm from a failure to provide documents in order to be awarded ERISA penalties. Most courts appear to consider the presence of prejudice or bad faith as only one factor in determining whether penalties should be imposed for a failure to produce documents. Although this court emphasized the employee's failure to take follow-up efforts to obtain the requested documents, other courts have reached the opposite conclusion, reasoning that the purpose of these penalties is to punish plan administrators who do not comply with requests for documents." (Employee Benefits Institute of America)
[Guidance Overview]
Non-Qualified Plans under the Interim Final Rules of TARP/EESA/ARRA
Excerpt: "As I noted on June 15, 2009, the new EESA/ARRA Interim Final Rules on Executive Compensation for TARP institutions shot down nearly every proposed strategy or work around that practitioners had devised for dealing with the more onerous EESA/ARRA TARP restrictions. One of the options taken off the table by the recently issued TARP Interim Final Rules is an employer contribution to, or benefit accrual under, a non-qualified deferred compensation plan." (Michael Melbinger via Winston & Strawn LLP)
Employees Appreciate Lighter Schedule During Summer Months, New Survey Suggests
Excerpt: "Flexible schedules (38%) and leaving work early on Fridays (32%) are the most coveted summer benefits, according to workers polled by OfficeTeam. Other benefits employees would appreciate include social activities such as a picnic or potluck party (6%) and a more relaxed dress code (5%). 'Employees appreciate flexibility in their jobs because it gives them greater control and enables them to handle other commitments without sacrificing their work performance,' said Robert Hosking, executive director of OfficeTeam, in a press release." (PLANSPONSOR.com; free registration required)
Benefits for Ex-City Employees Examined in San Diego
Excerpt: "For weeks after leaving their city jobs, more than 100 San Diego employees enjoyed benefits such as health insurance, holiday pay and pension contributions, according to a new audit. In the past year, the city spent $660,000 to pay the benefits to 111 employees, the report by City Auditor Eduardo Luna found. The workers received the benefits by staying on the payroll while they were paid vacation and sick time they had coming. In part because of union contracts, they were treated as active employees and enjoyed the same benefits as before." (The San Diego Union-Tribune)
Press Releases
PBGC Assumes Pensions at Lehman Brothers Holdings IncPension Benefit Guaranty Corporation (PBGC)
A Plan Sponsor’s Guide: Bridging Employees’ Retirement Income Gap with Income Annuities
Principal Financial Group
Think the Economic Outlook Is Bad for You? Try Being an Aging Woman
Women’s Institute for a Secure Retirement (WISER)
Mercer Sees Defined Contribution Account Balance Recovery As A Significant Challenge For Near Retirees
Mercer
Employers Back 401(k) As Vital Retirement Savings Tool According To New Study From CFO Research And Charles Schwab
Charles Schwab Corporation
Study Illuminates 401(k) Participants’ Preferences for Fee Disclosures
Transamerica Center for Retirement Studies
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