Retirement Plans Newsletter |
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| July 13, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Guidance Overview]
SARSEP Plan Fix-It Guide (PDF)
28 pages. Excerpt: "Tips on how to find, fix, and avoid common mistakes in retirement plans. In response to customer feedback, we have also posted user-friendly Fix-It Guides. This enables users to navigate, select and print only the mistakes that are of interest to them." (Internal Revenue Service)
[Guidance Overview]
Chart: Beneficiary Options 2009
2 Charts: Death Before Participant Reached Required Beginning Date (RBD) For Taking Minimum Distributions and Death On or After Participant Reached Required Beginning Date (RBD) For Taking Minimum Distributions (McKay Hochman Co., Inc.)
[Guidance Overview]
Plan Investments: Hard to Value Assets
Excerpt: "The topic of hard to value pension plan assets continues to garner attention. While the accounting and regulatory communities make efforts to push plan sponsors to 'better' value assets, many sponsors are confused about the exact nature of their requirements to report those assets. First we fundamentally discuss issues that hard to value assets raise, followed by a look at recent regulatory activity." (JPMorgan Chase & Co.)
[Guidance Overview]
Automatic Enrollment Final Regs
Excerpt: "EACA uniform default percentage may include QACA exception. An EACA must provide that the default elective contribution is a uniform percentage of compensation. The exceptions to the uniformity requirement for a QACA also applied to an EACA (without regard to whether the arrangement was intended to be a QACA)." (McKay Hochman Co., Inc.)
[Guidance Overview]
Rules Regarding Section 415 Annual Additions for 403(b) Arrangements Are Similar to Those for Qualified Plans, but Different
Excerpt: "The section 415 annual additions limit is applicable to 403(b) plans. There is an aggregation of all 403(b) plans of the same employer for the annual additions limit ($49,000 in 2009), including related employers. Like qualified plans, if an employee participates in more than one 403(b) plan in a year with unrelated employers, the section 415 limit applies separately for each employer. However, with a 403(b), the 415 annual additions limit is generally applied as if the employee, and not the employer, maintains the plan. Thus, generally, the 403(b) plan is not aggregated with the qualified plan for 415 purposes." (McKay Hochman Co., Inc.)
[Guidance Overview]
May a Designated Roth Account Be Rolled to a Roth IRA?
Excerpt: "Upon the occurrence of a triggering event, such as severance from service, a designated Roth account may be rolled into a Roth IRA without regard to the AGI of the individual. The designated Roth account five-year clock will not be carried over to the Roth IRA. Once rolled into the Roth IRA, the designated Roth accounts funds will be considered under the five-year clock of the Roth IRA. Thus, if it is a new Roth IRA, opened with the rollover money, the five-year clock will start as of the first day of the year in which the Roth IRA is opened." (McKay Hochman Co., Inc.)
[Guidance Overview]
Appellate Judges Affirm Years-of-Service Definition for Retirement
Excerpt: "An employer with a legacy cash balance plan could define normal retirement age as the completion of five years of service without running afoul of federal benefits law, an appellate court has ruled." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
Lender and Consultant Are Not Fiduciaries of Employer's 401(k) Plan Because Neither Exercised Discretion or Control Over Plan or Plan Assets
Excerpt: "EBIA Comment: This case illustrates, among other things, the extraordinary reach of some employees' lawsuits to capture employers' delinquent 401(k) plan contributions. The employees did not sue the employer itself (perhaps because the employer was so financially troubled as to be virtually 'judgment-proof'), but they did sue the employer's bank and consultant, neither of whom had any direct relationship to the employer's 401(k) plan. While the bank's rights as a secured creditor made it more difficult for the employer to contribute, the mere exercise of those rights did not, in the court's view, make the bank a fiduciary." (Employee Benefits Institute of America)
Delayed Retirements Are Boon and Bane for Firms
Excerpt: "In a recent survey of more than 2,200 U.S. workers by consulting firm Watson Wyatt Worldwide, 44% of respondents age 50 or older said they plan to postpone retirement; half of those say they plan to work at least three years longer than previously expected. That has added pressure on companies struggling to reduce payroll as profit dwindles. It also threatens to clog the pipeline for companies that want to bring in new blood. . . . But it has turned out to be good news for employers who are unprepared for mass retirements among baby boomers, the 78 million Americans born between 1946 and 1964." (The Wall Street Journal)
Investment Advice Bill: Changes Could Undo SunAmerica Arrangement
Excerpt: "The House Education & Labor Committee has approved bills related to fee disclosure and financial advice from financial institutions. One bill provides for enhanced fee disclosure for retirement plan participants, providers and sponsors. If enacted, the bill would require investment returns to be compared to appropriate benchmarks. It would also require the Department of Labor (DOL) to study whether benchmark provisions were helpful to plan participants. The other bill would roll back the expanded investment advice provisions contained in the Pension Protection Act of 2006 that allowed plan providers to give advice on their own funds to plan participants. The bill, if enacted, also would suspend provisions in the SunAmerica ruling that guide how some financial institutions deliver investment advice to retirement plans." (ICMA-RC)
Companies That Cut Retirement Plan Matching Funds May Be Sowing Seeds of Discontent Among Employees
Excerpt: "Some say that eliminating matching contributions to 401(k) plans is a no-brainer. But that isn't necessarily true. The author of a new study on retirement benefits says companies that suspend or eliminate matching contributions to 401(k)s and other retirement plans may save money in the short term. However, finance chiefs may want to consider such cost-cutting measures in light of longer-term implications, particularly how corporate belt-tightening colors the thinking of former employees." (CFO.com)
How San Jose Workers Do in Retirement: A Comparison
The short item compares public employees with Social Security recipients. (San Jose Mercury News)
403(b) Plans: Best Practices for Multiple Vendor Plans Remittance and Census Data Elements (PDF)
33 pages. Excerpt: "This Best Practices document sets forth certain best practices for the transmission of remittance and census data between employers or employer representatives and vendors, and identifies a basic file convention layout. The document does not define best practices for the methods and frequency of data transmission. The intended benefits of the Best Practices include: More cost effective to support and maintain. Facilitates uniform expectations among parties sharing information. More robust information to help facilitate compliance with 403(b) regulations. More robust information to help employers and their representatives operate their retirement plan." (The Spark Institute)
Best Practices for 403(b) and Related Retirement Plans Information Sharing: Minimum and Comprehensive Data Elements (PDF)
42 pages. Excerpt: "This document sets forth certain best practices with respect to the data elements for information sharing between 403(b) plan employers or employer representatives and vendors (the 'Best Practices'). The document also identifies a basic file convention layout. The document does not define best practices for: (1) the methods and frequency of data transmission, or (2) information sharing with respect to specific plan transactions or events (e.g., loans)." (The Spark Institute)
Best Practices for 403(b) and Related Retirement Plans Information Sharing: Sample Files, Data Sharing Formats, and Coding 'Pipe Delimited' Data (PDF)
6 pages. Excerpt: "This document is arranged in two parts. Part I provides sample file and data sharing formats in connection with The SPARK Institute Best Practices for 403(b) Plans Information Sharing. The Part I material is new. Part II provides guidelines for coding pipe delimited data. Part II was previously released as a stand-alone document. The SPARK Institute is taking this opportunity to combine the Part II material into this document because the subject matter is closely related. Additionally, we clarified certain issues that have been identified in questions we received. No changes were made to the format." (The Spark Institute)
Stock Contributions to Pension Plans
Excerpt: "With the current cash-tight environment, some sponsors are considering using stock in lieu of cash as a contribution to pension plans. In this article, we highlight key considerations for plan sponsors considering a stock contribution." (JPMorgan Chase & Co.)
Observations on the Enrolled Retirement Plan Agent Examination
Excerpt: "There have been several improvements in the administration of the ERPA exam, according to Derrin Watson, SunGard attorney, who took (and passed) the first part of the exam in January and the second part in July. The ERPA (Enrolled Retirement Plan Agent) exam allows pension practitioners to represent plan sponsors before the IRS in retirement plan matters, such as determination letter requests and VCP proceedings. In addition to passing both exams, candidates must submit an application fee, obtain a preparer tax ID number (PTIN), and file an application with the IRS. Perhaps the most significant improvement in the exam is that results are available immediately." (SunGard)
Timing the Collection of Your Social Security Benefits
Excerpt: "Collecting Social Security as soon as you are eligible is a tempting proposition -- but experts agree you should try to resist if you can. The majority of people don't follow that advice, choosing instead to start benefits early. Why wait to collect what is rightfully yours? That logic may sound reasonable now. But in reality, the bigger risk is that you will live to a ripe old age. You can claim Social Security any time from age 62 to 70, but the longer you wait, the larger your monthly check. And many people come out ahead if they wait at least until their full retirement age, which is different from the day you stop working for good." (The New York Times; free registration required)
Pension Cuts Often Miss Top Executives
Excerpt: "More companies are sending chills down employees' spines by freezing their pensions, but that cold front isn't necessarily hitting the executive suites. Even as some of metro Atlanta's largest companies have frozen their traditional pensions or switched to cheaper plans for most employees, several minimized the impact on their executives' hefty pensions by exempting or even boosting their supplemental retirement perks." (The Atlanta Journal-Constitution)
Extra San Jose Public Employees' Retirement Bonus Under Scrutiny
Excerpt: "Former San Jose workers don't just receive monthly pension checks from their retirement plan. For years in which investment returns exceed the pension funds' benchmarks, retirees receive a '13th check' aimed at easing the bite of inflation for those retired the longest and receiving the smallest pensions. That 'supplemental retiree benefit reserve' paid a total of $3 million in bonus checks in recent months to thousands of retired city workers and surviving family members. The checks 'saved a lot of people from having to go back to work,' retired firefighter and former pension trustee Ken Heredia said. 'People who retired before 1985, they had lost a lot of their buying power.' But the benefit is now under fire from city officials who say it makes no sense to send out checks from surplus earnings when the pension funds don't have enough money to cover future benefits. They also note that taxpayers are about to pay an additional $50 million or so into the funds to cover investment losses in the recent market crash." (San Jose Mercury News)
[Opinion]
Constitutional Curbs for Runaway Public Pension Plans
Excerpt: "Putting pension reform on the ballot is a huge task. I'm not convinced that voters will ever get as agitated about imposing limits on public employee benefits levels as they do over tax limitations that directly affect their pocketbooks. Taking benefits away from police officers, teachers and firefighters is not an issue that most Obama voters will support, and they clearly form the popular majority today. But there might be a way for public leaders and taxpayer groups to re-frame the debate by shifting the focus from the size of the benefits to who pays for them." (Governing.com)
[Opinion]
It's Time to Rethink Retirement Plans' Investment Decisions
Excerpt: "For participant-directed portfolios, such as most 401(k) plans, the investment fiduciaries are detached from the execution of investment decisions. They are not able to modify individual portfolios directly, even when circumstances suggest changes are needed to serve the investors' best interests. Instead, they create the conditions under which employees, who rarely have financial backgrounds, are responsible for evaluating their own retirement income needs, analyzing the investment choices available to them and maintaining a portfolio that is appropriate to the changing circumstances they will face on the road to retirement." (Investment News; free registration required)
[Opinion]
7th Circuit Response to Requests That It Reconsider Its Opinion in the Revenue-Sharing/'Excessive Fee' Case of Hecker v. Deere
Excerpt: "The case, of course, was one of the earliest in the litany of those cases to be filed in 2006, and the only one (thus far) to reach the appellate level . . . . To date, the courts have, with little exception, dispensed with these cases harshly. Not that they aren't entitled to do so, of course, and not that this particular generation of filings isn't deserving of such treatment, IMHO. From the beginning, the plans targeted seemed better-designed to fill the pockets of plaintiffs' counsel, if for no other reason than large employers frequently figure that it's cheaper to settle than to fight . . . . That said, the courts -- including the 7th Circuit -- seem to have a more 'generous' view of what it takes to earn the protections of ERISA 404(c) than most ERISA lawyers I know." (planadvisor)
The Knowledge Congress Webcast Series (Advert.)
The Knowledge Congress’ Live Webcast on 401(k) Plans on 07/23/09 401(k)s have long been considered as a rock solid way to plan for retirement. In the wake of the recent economic tsunami, personal wealth has plunged leaving many employees form the executive suite to the mail room scrambling to reassess their 401(k) next egg. A key panel of thought leaders and experts will cover many of the most critical issues surrounding the 401(k) crisis with the goal to help you navigate through the pitfalls in the wake of these turbulent economic times. |
Links to Items on Executive Comp, Benefits in General
[Guidance Overview]Washington, D.C., Recognizes Same-S.ex Marriages from Other Jurisdictions
Excerpt: "This Management Alert identifies some of the employee benefits issues facing employers with employees in the District of Columbia in light of the new law, and outlines how these issues may be addressed." (Seyfarth Shaw LLP)
[Guidance Overview]
IRS Employee's Obligation to Repay Nonqualified Moving Expense Reimbursement Did Not Prevent Its Taxation
Excerpt: "EBIA Comment: This information letter highlights several issues affecting moving expense fringe benefits. First, it reminds us that some moving expense reimbursements are taxable, and that employers must report them as such. Second, it highlights the claim of right doctrine, which can cause amounts to be considered taxable even if they are subject to a contingency that may require them to be repaid. Third, it suggests that if an amount is subject to a repayment obligation, taxation under the claim of right doctrine may be avoided if repayment actually occurs or the repayment obligation is sufficiently acknowledged in the year the amount would otherwise be taxable (acknowledgement alone may not be sufficient in some circuits). Finally, the letter notes that the tax effect of income inclusion may be mitigated by a later itemized deduction." (Employee Benefits Institute of America)
[Guidance Overview]
SEC Proposal on TARP 'Say on Pay' Votes; Non-TARP Companies Should Also Take Heed (PDF)
4 pages. Excerpt: "The SEC proposals would implement Section 7001 of the American Recovery and Reinvestment Act of 2009 (ARRA),2 which amended Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA),3 to require any recipient of financial assistance under TARP to solicit nonbinding shareholder approval of 'the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Commission (which disclosure shall include the compensation discussion and analysis, the compensation tables, and any related material).' Although the SEC proposals apply only to TARP recipients, other non-TARP companies should also be interested in these proposals." (Morgan, Lewis & Bockius LLP)
[Guidance Overview]
'Annual Compensation' Mystery for TARP Companies
Excerpt: "The determination of 'annual compensation' for purposes of the TARP rules comes into play in at least two key situations: (1) determining covered employees, and (2) determining the maximum long term restricted stock grant that a company can award to a covered employee (which is limited to a maximum of 1/3 of the employee's 'annual compensation'). While the TARP rule provides a definition of the term 'annual compensation,' the ambiguity of that definition makes it difficult to answer a question that many TARP recipients may be struggling with: Is it permissible to include the actuarial increases in pension plans and above market earnings on deferred compensation in the calculation of annual compensation when determining the maximum award of long term restricted stock?" (Michael Melbinger via Winston & Strawn LLP)
Small Business Benefits: Cost-Effective Strategies for Maximizing ROI (PDF)
16 pages. Excerpt: "Since 2002, MetLife has tracked and analyzed small business employer and employee attitudes toward workplace benefits through its annual MetLife Study of Employee Benefits Trends. While traditionally, small business employees (except where indicated small business is defined as employers with 2 - 499 employees) express less satisfaction with their workplace benefits overall than their large-company counterparts, this may be due to the fact that smaller employers simply haven't offered as wide an array of benefits as larger employers. It's not that small business employers don't want to offer a wider array of benefits. They may simply lack the ability to do so cost-effectively given their resources." (METLIFE, INC.)
Webcasts and Conferences
Acquisitions, Divestitures, and Second-Stage ESOP Transactionsin Missouri on October 6, 2009
presented by National Center for Employee Ownership
Administrative Issues for S Corporation ESOPs
Nationwide on November 18, 2009
presented by National Center for Employee Ownership
An Ownership Tale
Nationwide on September 9, 2009
presented by National Center for Employee Ownership
Challenges & Solutions for Mature ESOP Companies
in Missouri on October 7, 2009
presented by National Center for Employee Ownership
Communicating Your ESOP
Nationwide on November 5, 2009
presented by National Center for Employee Ownership
Don't Do That With Your ESOP
Nationwide on September 15, 2009
presented by National Center for Employee Ownership
Fiduciary Implications of Stock Drop Lawsuits in 401ks and ESOPs
Nationwide on October 14, 2009
presented by National Center for Employee Ownership
Handling the ESOP Repurchase Obligation
in Missouri on October 8, 2009
presented by National Center for Employee Ownership
Health Care Reform: What It Means for Employers and Employees
Nationwide on July 28, 2009
presented by Buck Consultants, an ACS Company
Legal Issues Affecting S Corporation ESOPs
Nationwide on November 17, 2009
presented by National Center for Employee Ownership
Mid-Sized Retirement & Pension Plan Management Conference
in Illinois on October 4, 2009
presented by University Conference Services
Minimizing Cynicism
Nationwide on October 7, 2009
presented by National Center for Employee Ownership
Navigating the 409A Deferred Compensation Plan Rules
Nationwide on November 12, 2009
presented by National Center for Employee Ownership
Running an Effective Board
Nationwide on October 15, 2009
presented by National Center for Employee Ownership
Transferring Ownership to Employees in Business Transitions
in Colorado on September 15, 2009
presented by National Center for Employee Ownership
Using ESOPs as an Acquisition Strategy
Nationwide on November 4, 2009
presented by National Center for Employee Ownership
Valuation for S Corporation ESOPs
Nationwide on November 19, 2009
presented by National Center for Employee Ownership
(Click to post your webcast or conference)
Press Releases
ERIC and NBGH Urge Supreme Court to Consider Petition to Overturn San Francisco Health OrdinanceERIC (ERISA Industry Committee)
Lockstone Advisors, LLC Announces New Partner
Lockstone Advisors, LLC
(Click to post your press release)
Employee Benefits Jobs
Senior Plan Consultantfor Scholz, Klein & Friends Enlightened Retirement Group, Inc.
in TX
ERISA Compliance Team Member
for Sentinel Financial Group
in MA
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