Retirement Plans Newsletter |
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| June 29, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Guidance Overview]
7th Circuit Panel Limits Ruling's 404(c) Effects
Excerpt: "Faced with pressure to take another look at its February 2009 decision in a widely watched 401(k) excessive fee case, a federal appellate court has turned down the rehearing request but issued an addendum sharply limiting the earlier ruling's scope on the issue of 404(c) protections. While the three judge panel at the 7th U.S. Circuit Court of Appeals refused to disturb the court's earlier holding in Hecker v. Deere & Co., Circuit Judges Daniel A. Manion, Diane P. Wood and John Daniel Tinder made clear the Hecker decision was not intended as a sweeping statement to be broadly applied to all similar fee disputes." (planadvisor)
[Guidance Overview]
Debtor Can't Deduct 401(k) Loan Repayments Under Bankrup.tcy Means Test As Necessary Expense
Excerpt: "A debtor's repayment of a 401(k) plan loan did not constitute a payment of secured debts or a necessary expense that could be deducted from the debtor's monthly income for purposes of applying the means test under Chapter 7 of the Bankrup.tcy Code, according to the U.S. Court of Appeals in San Francisco (CA-9), in Egjebjerg v. Anderson, a case of first impression." (Wolters Kluwer)
Life Cycle Finance and the Design of Pension Plans
Excerpt: "This article reviews recent scientific literature on consumer financial decisions over the life cycle outlining its implications for the design of pension plans. It begins with a review of advances in the theory of rational financial planning and wealth management. It then summarizes the recent empirical literature on the actual behavior of households regarding saving, investing, and insuring their consumption in old age. Finally, it briefly comments on the practical implications of the theory for the design of pension systems and outlines areas of future research." (Boston University School of Management Research Paper Series via Social Science Research Network)
Big Surprise: Even the AARP Decides to Suspend Its 401(k) Match for at Least Nine Months
Excerpt: "Given its track record of fighting for the financial rights of retirees, it seems shocking that the organization would turn around and take from its own 2,200 or so employees what they'd hoped would be a big pile of matching money. It's almost as if the Teamsters decided to build a new national headquarters and hired nonunion labor to do it." (The New York Times; free registration required)
Seventh Circuit Comments on Denial of Petition for Rehearing in case of Hecker v. Deere
Excerpt: "The Seventh Circuit has denied a rehearing in the Hecker v. Deere case. . . . Plaintiffs, the Department of Labor and other interest groups had called for a rehearing. You can access a couple of the amicus briefs filed in the petition for rehearing on the Guidebook's 404(c) webpage. The Seventh Circuit made [several] points in response to the Amicus Brief filed by the DOL . . . ." (ERISA Fiduciary Guidebook)
Picking the Right Target-Date Fund
Excerpt: "[T]he concept is still valid for some investors, especially for those who are too busy to rebalance their portfolios to make them more conservative over time. The tricky part, of course, is picking the right fund. . . . The pace at which a fund becomes more conservative is known as its glide path. Find out how often the fund reduces its stock allocation. Ideally, it will do so gradually each year -- by about 1 percent. Avoid funds that make big adjustments every five or 10 years . . . ." (The New York Times; free registration required)
St. Joe Company Annuitizes $93 Million in Plan Liabilities
Excerpt: "St. Joe Co., Jacksonville, Fla., annuitized $93 million of its pension plan liabilities by transferring them along with $101 million of its pension plan assets to Massachusetts Mutual Life Insurance, the real estate development company announced Thursday. The annuitization will raise the plan's funding ratio to 260% from 145%, reducing the company's risk, said William S. McCalmont, St. Joe executive vice president and CFO, in the statement. Once the transaction is completed, the plan is expected to have $73 million in assets and $28 million in liabilities; it had $174 million in assets and $121 million in liabilities as of May 31, the statement said." (Pensions & Investments)
Los Angeles City Council Approves Early Retirement Plan Despite Opposition
Excerpt: "The proposal also calls for postponing raises for thousands of workers to balance the budget without layoffs or closing City Hall twice a month. But one union threatens a court challenge." (Los Angeles Times)
Chrysler Bankrup.tcy Cuts Deep Into Retirees' Pensions
Excerpt: "The collapse of the old Chrysler isn't just hitting the folks on the line. Federal law protects pension funds held in qualified plans from the company's creditors in bankrup.tcy. But a non-qualified plan participant technically becomes an unsecured creditor in a bankrup.tcy case. Executives and other managers can be offered a non-qualified plan once the company and/or the employee already has hit the limits for funding contributions into qualified plans. Then, bonus money or other compensation can apply to nonqualified plans. Trouble can hit, though, once companies go through bankrup.tcy." (Detroit Free Press)
Securing the Next Generation of Life Cycle Funds
Excerpt: "We think that financial providers, policymakers and plan sponsors should find ways to lower the volatility of life cycle offerings near retirement and enhance their ability to provide lifelong income reliably. Here are four steps that could create a more robust model for the next generation of life cycle funds." (Investment News; free registration required)
[Opinion]
Obama Retirement Plan Places Primary Responsibility for Retirement Saving on Households (PDF)
3 pages. Excerpt: "Tucked into the blueprint for financial regulatory reform /1/ released last week is an outline of the president's proposals for strengthening retirement plans and encouraging retirement savings. Though some of the proposals in the Department of Treasury's white paper are welcome and overdue, they should not be mistaken for the kind of comprehensive reform that is needed to fix a system in crisis. . . . The White House plan is two-pronged. First, it would require many employers who do not offer retirement plans to set up automatic payroll deductions into Individual Retirement Accounts (IRAs), using inertia to boost participation by having workers opt out rather than opt in. Second, it would expand eligibility for the Saver's Credit and make it refundable, giving low- and moderate-income families who owe little or no income tax an incentive to save." (Economic Policy Institute)
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Links to Items on Executive Comp, Benefits in General
[Official Guidance]IRS Information Letter on Benefits Provided to Volunteer Firefighters and Emergency Medical Responders (PDF)
2 pages. Excerpt: "[The IRS was asked] for an explanation of the types of benefits that section 139B of the Internal Revenue Code (Code) excludes from gross income, and the meaning of the term 'qualified reimbursement payment.'" (Internal Revenue Service)
[Guidance Overview]
Employee Discounts on Products Made by Employer's Former Parent Company Are Subject to Income and FICA Tax
Excerpt: "EBIA Comment: The perpetuation of a parent company's employee discount program when a subsidiary is sold or otherwise ceases to be part of the discount provider's controlled group raises a variety of legal and practical issues, several of which are nicely illustrated by this CCA. Discounts that might have been excludable as qualified employee discounts when entities were part of the same controlled group cease to be excludable after the transaction. And if the discount provider ceases to supply information sufficient to accurately determine the fair market value of its discount, the employer must either find some other way to obtain that information or consider ending the discount program. The employer will not be relieved of its reporting and withholding obligations just because the information necessary to meet those obligations is difficult to obtain." (Employee Benefits Institute of America)
[Guidance Overview]
Court Rejects ERISA Section 510 Interference Claim Because Employee Was Not Entitled to Plan Benefits
Excerpt: "EBIA Comment: The three-stage 'burden shifting' framework that courts often use in analyzing ERISA Section 510 claims requires an employee to first establish a right to benefits. . . . If, as in this case, the plan documents clearly demonstrate that the employee simply wasn't entitled to plan benefits, then the claim will fail at the very first stage. Whether the employee was entitled to benefits under the plan being litigated is, therefore, one of the first things an employer should consider in defending an ERISA Section 510 claim." (Employee Benefits Institute of America)
IRS Suggests Workers/Retirees Check Withholding Levels in Light of the Making Work Pay Credit
Excerpt: "With 2009 nearly half over, the IRS reminds individual taxpayers there is no better time to check their 2009 federal income tax withholding levels to make sure they do not face any surprises when returns are due next spring. The Making Work Pay Credit lowered tax withholding rates this year for 120 million American households. However, particular taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is withheld: multiple job holders, families in which both spouses work, and workers who can be claimed as dependents by other taxpayers and pensioners. Failure to adjust the withholding could result in potentially smaller refunds or may cause a worker to owe tax rather than receive a refund next year." (International Foundation of Employee Benefit Plans)
New Mercer Survey Reveals Ongoing Impact on HR of Global Economic Downturn
Excerpt: "The survey findings paint a vivid picture of the HR, human capital and benefits challenges that organizations continue to face as a result of the global economic downturn. [To learn about the survey findings - download a complimentary executive summary from the target page.] Highlights include: Eighty-two percent of respondents globally anticipate reduced business and financial performance levels in 2009 compared to 2008. While most organizations have refrained from taking steps such as cutting salaries or eliminating benefit programs altogether, they have implemented a range of cost-cutting actions, such as freezing pay at 2008 levels, making workforce reductions, reducing annual bonuses and increasing employee contributions for health benefits." (Mercer LLC)
Towers Perrin + Watson Wyatt = Towers Watson & Co.
Excerpt: "Towers, Perrin, Forster & Crosby, Inc. and Watson Wyatt Worldwide, Inc. have combined to form a new entity, Towers Watson. The firms announced today that their respective Boards of Directors unanimously approved a definitive agreement under which Towers Perrin and Watson Wyatt will combine in a merger of equals to form the new, publicly listed company called Towers Watson & Co. Based on the closing price of Watson Wyatt common stock on June 26, 2009, the implied equity value of the transaction is approximately $3.5 billion . . . ." (PLANSPONSOR.com; free registration required)
Webcasts and Conferences
"403(b) Plans for 401(k) Practitioners" - A Three Part Web SeminarNationwide on July 22, 2009
presented by SunGard Relius
The Changing Pharmacy Benefit Landscape: Seizing Cost-Saving Opportunities
Nationwide on July 15, 2009
presented by Buck Consultants, an ACS Company
(Click to post your webcast or conference)
Press Releases
The Political Incentives of Reforming Teacher Pension PlansAmerican Enterprise Institute
Towers Perrin and Watson Wyatt to Combine to Form Towers Watson
Watson Wyatt
Society of Actuaries Announces Call for Models and Invites Entries for New Tier Retirement Systems
Society of Actuaries
Great-West Retirement Services® Launches East Start 401(k)sm
Great-West Retirement Services
Ohio Congressional Members Urge U.S. to Provide GM Retirees Medical Benefits
United Steelworkers
Employees Concerned About Changes in Insurance Coverage and Their Ability to Pay
Colonial Life
(Click to post your press release)
Employee Benefits Jobs
Plan Administratorfor The Allocation Company, Inc.
in TX
Financial Specialist
for BPAS
in PA
Defined Benefit Administration Specialist
for Consulting Actuaries Incorporated
in NJ
Plan Administrator
for Blue Ridge ESOP Associates
in VA
Benefits Analyst
for Catholic Healthcare Partners
in OH
Compliance Manager
for EPIC Advisors, Inc.
in NY
(Click to post your job opening | View all jobs |
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