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July 2, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy

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.


[Guidance Overview]
Supreme Court Accepts Xerox ERISA Case for Review

Excerpt: "U.S. Supreme Court justices have agreed to consider an appeal of an Employee Retirement Income Security Act (ERISA) violations case involving the method used by the Xerox Corp. pension plan to figure out how much to offset a participant's benefits to properly reflect distributions already taken." (PLANSPONSOR.com; free registration required)


[Guidance Overview]
Avoiding Personal Liability for 401(k) and Retirement Plan Investments: From Fees to Losses (PDF)

6 pages. Excerpt: "Now is the time for ERISA risk management. Plan fiduciaries should engage in a deliberative process that demonstrates their attention to the 'money' issues involving plan investments - from their selection, costs, and performance, to the credentials, terms, conditions, and costs associated with the professionals who recommend them. With this in mind, presented below are five general questions that all plan fiduciaries should be asking . . . and getting answered. They should drill deeper these days, which is why the Appendix lists the critical investment issues that plan fiduciaries should now be addressing with their advisors. ERISA demands careful attention to plan investments, and this is needed to protect plan fiduciaries from personal liability during these turbulent and unpredictable times." (Bloomberg Law Reports via Paul, Hastings, Janofsky & Walker LLP)


[Guidance Overview]
Anheuser-Busch Sued Over QDIA Selection

Excerpt: "Anheuser-Busch has been hit with a federal court lawsuit alleging the beermaker and a trustee improperly designated an overly risky qualified default investment alternative (QDIA) for participants' cash proceeds from a stock sale. Employee David K. Parsons alleged that Anheuser-Busch was obliged under the Employee Retirement Income Security Act (ERISA) to pick a less risky QDIA in November 2008 to house funds in participants' accounts generated when InBev acquired Anheuser-Busch by paying shareholders $70 a share. Shareholders included participants who had built up blocks of stock through their pension plan. According to Parsons' complaint, which seeks class action status, Anheuser-Busch circulated a flyer to its employees just after the sale was completed telling them they would have until November 7 to choose an investment fund for the cash from their stock sale and that if they did not, the money would go to an 'Indexed Balanced Fund.'" (PLANSPONSOR.com; free registration required)


Public Pension Funds to Lead Suit Against Bank of America
Excerpt: "A group of five public pension funds, including state funds in Ohio and Texas, have won the right to lead investor class-action lawsuits against the Bank of America Corporation over its acquisition of Merrill Lynch & Company. Judge Denny Chin of United States District Court in Manhattan granted lead plaintiff status on Tuesday to funds including the State Teachers Retirement System of Ohio, the Ohio Public Employees Retirement System and the Teachers Retirement System of Texas. Investors are accusing Bank of America of misleading them about the state of Merrill's health ahead of the Jan. 1 closing, even as it was becoming clear Merrill was on its way to what would be a loss of $15.84 billion in its fourth quarter." (The New York Times; free registration required)


The Effect of Uncertain Labor Income and Social Security on Life-Cycle Portfolios
Excerpt: "This paper examines how labor income volatility and social security benefits influence life-cycle household portfolios. We examine how much the individual saves, and where, taking into account liquid financial wealth and annuities, and stocks versus bonds. Higher labor income uncertainty and lower old-age benefits boost demand for stable income in retirement, but also when young. In addition, a declining equity glide path with age is appropriate for the worker with low income uncertainty but for the high income risk worker, equity exposure rises until retirement. We also evaluate how changes in social security benefits influence retirement risk management." (Pension Research Council; registration required to download fulltext of paper)


Actuarial Methods and Public Pension Funding Objectives: An Empirical Examination (PDF)
35 pages. Excerpt: "This paper examines the degree to which certain actuarial methods satisfy public pension plan funding objectives. It compares the funding patterns that result from a conventional actuarial approach used by the majority of public plans with patterns that result from the 'market value of liability' (MVL) approach. The comparison is made by applying these approaches to a modeled public plan based on historical demographic, economic, and investment data over the period from 1978 to 2008. The paper finds that funding under the MVL approach would likely result in rapid and erratic changes to a public plan's normal costs, accrued liabilities, and funded levels, largely due to changes in the MVL discount rate. By contrast, conventional funding results in measures that are more stable and predictable over time. Consequently, the paper concludes that the conventional approach is more effective in meeting the funding objectives of public pension plans." (Paper Presented to Society of Actuaries Public Plans Finance Symposium by Gabriel Roeder Smith & Company)


Advisers Step In Amid 401(k) Match Cuts
Excerpt: "Financial advisers are stepping in when companies stop matching 401(k) retirement plan contributions. They're encouraging clients to continue saving and, in some cases, they're taking a second look at the types of retirement accounts clients are using. . . . 'When they take the match off the table, it's a whole different ballgame,' says Charles Bennett Sachs, a certified financial planner at wealth management firm Evensky & Katz. That's because financial advisers have long advised clients to contribute at least enough to their company-sponsored retirement plan to capture any matching contributions - which is essentially free money. Without the match, investors need to look more closely at their specific situation, including their projected tax exposure, and decide whether they need to adjust their retirement savings strategy." (The Wall Street Journal)


Public Pension Shortfall is Worse than You Think
Excerpt: "A new research paper, 'Public Pension Promises: How Big are They and What are They Worth?,' from the University of Chicago looks at nationwide public pension obligations and funding. . . . The bottom line of this paper is that: a) By the most realistic measure, public pensions in America are underfunded by more than $10 trillion. b) Future taxes to pay for the benefits promised but not funded by current political leaders will be very burdensome and will distort the economy. Future generations will curse us for this." (The Reason Foundation)


Public Pension Promises: How Big Are They and What Are They Worth?
Excerpt: "We calculate two present value measures of already-promised state pension liabilities using discount rates that reflect their risk. If benefits have the same priority in default as general obligation debt, aggregate underfunding is $1.21 trillion. If states cannot default on these benefits, underfunding is $3.12 trillion. The first measure is a lower bound on the value of the liability to taxpayers, and is more than the $0.94 trillion in state municipal debt. The second measure is a better benchmark for funding adequacy. We also estimate broader concepts of accrued liabilities that account for projected salary growth and future service." (Social Science Research Network)



DATAIR Employee Benefit Systems, Inc. (Advert.)

DATAIR 5500 / PBGC / 1099-R / 5300 / FAS 158 Software (clickable image)

DATAIR 5500 / PBGC / 1099-R / 5300 / FAS 158 Software

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* Qualification & Termination: 5300/5310-series and PBGC 500/600-series forms
* FAS 132/158: Audit Letter, Worksheets, Schedules
sales@datair.com or call 1-888-324-2474

Links to Items on Executive Comp, Benefits in General

SEC May Tighten Executive Pay Rules
Excerpt: "U.S. securities regulators are considering changing how companies are required to disclose stock options awarded to executives, people familiar with the Securities and Exchange Commission's thinking told Reuters on Tuesday. At an SEC meeting on Wednesday, the commissioners also will propose giving investors a greater voice in setting executive pay at companies that were given taxpayer funds under the U.S. government's Troubled Asset Relief Program. Among the possible changes is a revision to how companies value equity awards in the 'summary compensation table' for top executives that they file with the commission each year. The SEC is considering requiring companies to include the estimated value for stock options granted during the year, the people said. The sources requested anonymity because the proposal is still being crafted and may change." (Reuters)


Stock Options Opened for 'Call Writing'
Excerpt: "Briefly, the SEC approved a rule on June 17, 2009, which would permit public companies to allow their employees to use vested stock options as collateral for writing exchange-listed calls. Permitting this activity would require some affirmative actions by the Company, such as revise plan documents and putting in place guidelines. A company also should consider whether this activity is consistent with its stock ownership guidelines." (Michael Melbinger via Winston & Strawn LLP)


SEC Votes on New Executive Compensation Disclosure Proposals
Excerpt: "The Securities and Exchange Commission voted on Wednesday to propose sweeping new disclosure rules about a company's leadership and compensation practices. According to the Wall Street Journal, the proposed rules, approved for consideration in a 5-0 vote, would require public companies to include information in proxy and information statements about an array of things, such as the relationship of a company's overall compensation policies to risk and the background and qualifications of directors, executive officers and nominees . . . ." (PLANSPONSOR.com; free registration required)


Employee Ownership Update for July 1, 2009
NCEO Executive Director Corey Rosen, in his first column on the newly revised NCEO Web site, reports on what's new in the employee ownership world: SAIC changed its stock structure to eliminate the 10-to-1 voting rights that preferred shares held by employees were given when the company went public, the SEC issued a rule allowing employees with vested stock options to use them as collateral to purchase call options, and the NCEO is soliciting material for a book on what not to do with an ESOP. (National Center for Employee Ownership)



Webcasts and Conferences

Executive Compensation: Planning Your Next Steps in the Lively and Complex Regulatory Environment
Nationwide on July 23, 2009
presented by Buck Consultants, an ACS Company

(Click to post your webcast or conference)

Press Releases

PBGC Assumes Pension Plans of Interlake Material Handling Inc.
Pension Benefit Guaranty Corporation (PBGC)

New Online Resource from The Principal Estimates Time it Might Take to Rebuild 401(k) Account Balance
Principal Financial Group

(Click to post your press release)

Employee Benefits Jobs

Pension Administrator
for Primark Benefits
in CA

Benefits Manager
for SIRIUS XM Radio
in DC

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EmployeeBenefitsJobs.com (Sponsor)

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