Retirement Plans Newsletter |
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| July 27, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
SunGard's Relius Documents (Advert.)
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[Guidance Overview]
DOL's Transitional Relief for 403(b) Plan Form 5500 Annual Reporting and Audit Requirements (PDF)
4 pages. Excerpt: "[Field Assistance Bulletin 2009-02] clarified that plans eligible for the so-called '80-120 rule' would be eligible for a waiver of the audit requirement for the first reporting year. The '80-120 rule' generally provides that if a plan has between 80 and 120 eligible participants as of the beginning of the plan year, the plan administrator may elect to file the same category of annual report (typically the annual report for plans with fewer than 100 participants) that was filed for the previous years. Accordingly, 403(b) plan administrators whose plans have between 100 and 120 eligible participants will be eligible for a waiver of the audit requirement for the first reporting year." (Morgan, Lewis & Bockius LLP)
[Guidance Overview]
Hardship Distributions' Considerations to Avoid Headaches Down the Road
Excerpt: "Today, more and more participants are requesting hardship distributions from their 401(k) plans in an effort to make ends meet. While you no doubt want to comply with their requests, you don't want to do so to the detriment of your plan. It's critical to understand what the law allows and to review your plan's hardship distribution procedures in order to avoid the headaches that will result from impermissible hardship distributions." (Chang Ruthenberg & Long P.C.)
[Guidance Overview]
Issues Affecting Successor ESOP Fiduciaries
Excerpt: "In a prior article, 'So You Want To Be A Fiduciary,' . . . we raised the question of whether a successor fiduciary can be held personally liable for a breach of duty that occurred prior to his or her appointment. In this article, we will question the scope of this duty in the employee stock ownership plan (ESOP) context by looking at two cases in the Ninth Circuit: Barker v. American Mobile Power Corp., concerning the duty to investigate; and Fernandez v. K-M Indus. Holding Co., Inc., concerning the statute of limitations with which successor trustees must be concerned." (Chang Ruthenberg & Long P.C.)
[Guidance Overview]
Tax Court Affirms That Participant's Refinanced Plan Loan Resulted in Taxable Deemed Distribution
Excerpt: "EBIA Comment: This case is an interesting illustration of the way the refinancing regulations under Code Section 72(p) attempt to discourage participants from using refinancing to effectively extend an existing loan beyond the usual 5-year limit. In essence, the regulations count the refinanced balance twice -- once as an outstanding loan and again as part of the balance of the replacement loan -- if the term of the replacement loan ends after the latest permissible term of the refinanced loan. (Note: This rule would not have applied if the replacement loan had been structured as if it were two separate loans, consisting of (1) the replaced loan (with no extension) and (2) a new loan equal to the difference between the replaced loan and the replacement loan.) In this case, the replacement loan by itself exceeded the loan limit. But the refinancing rules significantly increased the amount of the taxable distribution." (Employee Benefits Institute of America)
[Guidance Overview]
IRS Kills Taxpayer's 72(t) Payment Correction Request
Excerpt: "In an IRS Private Letter Ruling (PLR 200925044), the agency ruled that in attempting to change the IRA investments, the client had modified the 72(t) payment schedule. With so many clients changing investments or custodians these days, financial advisers have to be aware of the special rules that apply when a client takes a series of early withdrawals from an IRA." (Investment News; free registration required)
Senate Shoots Down Federal Employee Sick Leave Credit
Excerpt: "An amendment to the Defense authorization bill that would have allowed federal employees under the Federal Employees Retirement System (FERS) to get credit in their pension calculation for unused sick leave was withdrawn Thursday." (PLANSPONSOR.com; free registration required)
Who Should Save in a Roth 401(k)? (It's Not Just About Tax Rates)
Excerpt: "We first show that comparing different saving strategies requires making an apples-to-apples comparison, which can be achieved by keeping take-home pay constant. An individual currently saving pre-tax can maintain the same take-home pay by switching to a lower amount of Roth saving. However, some important rules imposed by either 401(k) plans or the IRS encourage 'tax illusion' by treating pre-tax and Roth dollars as if they were equivalent. First, moderate savers need to take care to understand how switching to Roth saving could lose them free money through employer matching contributions. Second, the IRS limit on annual 401(k) contributions means that aggressive savers who save Roth dollars can save more in a tax-advantaged way than those who save pre-tax dollars. For both of these groups, the conventional wisdom can be completely reversed under fairly normal circumstances." (Social Science Research Network)
Pension Plan Executives Look to Reduce Expenses
Excerpt: "Faced with high fees from hedge funds, poor returns from traditional active managers and sharp declines in their defined-benefit plans' funded status, corporate executives are looking to squeeze fees, adopt passive strategies and close or freeze their plans." (Workforce Management; free registration required)
A Boot Camp to Prepare for Retirement
Excerpt: "Marcia Tillotson and Joy Kenefick aren't your typical drill sergeants. They run what they call a retirement boot camp, aimed at making sure their investment clients who are contemplating retirement know exactly what they're getting into. The exercise focuses primarily on finances . . . ." (The New York Times; free registration required)
Public Plans: Using Risk Profiles to Manage Funding Goals (PDF)
31 pages. (Society of Actuaries via Milliman)
Local Government Pension Costs May Triple in New York State
Excerpt: "The most sobering and scary official report so far on the status of public pension plans is a recent analysis published by the New York State comptroller's office. It expects local governments in the Empire State to face a tripling of employer pension costs in the next six years. The impact of the 2007-09 bear market will compel the state's pension plan to bill employers as much as 30 to 40 percent of their payrolls in order to cover pension costs actuarially." (Governing.com)
Consumer Financial Protection Agency Won't Oversee Mutual Funds or Retirement Plans, According to Frank
Excerpt: "In responding to concerns raised by industry lobbyists, Mr. Frank, D-Mass., the chairman of the House Financial Services Committee, said the bill would not affect products -- such as mutual funds -- already regulated by the Securities and Exchange Commission. He also said the CFPA would not play a role in regulating 401(k) plans or annuities. 'This (the CFPA legislation) does not affect the Securities and Exchange Commission jurisdiction,' Mr. Frank said during a July 22 press conference." (Pensions & Investments)
Union Pensions in the Red: Labor Chiefs Are Doing Better Than the Workers
Excerpt: "We've all read about underfunded corporate pensions, but here's an unreported story: Union pensions are even more in the red, and it's one reason union chiefs are so eager to rig organizing rules to gain more dues-paying members. Only last week, the country's largest union local re-opened the contract for its 145,000 members two years early and gave up raises and reduced retirement benefits for future hires. The SEIU's United Healthcare Workers East struck this unusual deal so employers could instead plug a gaping pension hole." (The Wall Street Journal)
Asset Allocation: An Inside Look at Glide Paths
Excerpt: "When Charles Schwab Investment Management announced in late April a shift in its retail target-date funds to match the more conservative allocation of its institutional target-date funds, it was 'the first blink that I have witnessed' by a target-date provider since the market turmoil began in September, says Joseph Nagengast, a Marina del Rey, California-based Principal at Target Date Analytics LLC. He anticipates that others will follow, with changes affecting 401(k) participants. 'We expect managers to remake their portfolios, but to do it under the guise of some other reason [like demographic changes] -- not to be as upfront as Schwab was,' he says." (PLANSPONSOR.com; free registration required)
Northern Trust Countersues BP in Index Fund Dispute
Excerpt: "Northern Trust Co. and Northern Trust Investments have countersued the BP Corp. North America Inc. savings plans investment oversight committees over alleged securities-lending losses in index funds, accusing the committees of possibly violating ERISA and seeking counterdamages. The countersuit, filed earlier this month, was the latest salvo in the dispute between the two parties. In October, the BP committees sued Northern Trust, claiming it had mismanaged four index funds available to employees participating in BP's savings plan that engaged in securities lending, and is seeking unspecified damages." (Pensions & Investments)
Can You Still Afford to Retire? Try These 5 Financial Calculators
Excerpt: "The average 401(k) plan balance fell 27% in 2008, according to Fidelity Investments. If you're in your 20s, you've got plenty of time to recover. If you're in your 50s, though, you may be wondering whether it's time to develop a taste for Fancy Feast. But is it really all that grim? We tested several online retirement calculators to find out what a fictional 50-year-old couple saving 10% of their salaries (see box) would need to do to get back on track. We also asked Financial Engines, which provides investment advice to 401(k) plan participants, to analyze their situation." (USA Today)
Pension Funds Could Be Caught in Treasury's Widening Reporting Net
Excerpt: "Pension plans must file reports with the Treasury Department on investments made with offshore hedge funds and private equity firms, in a new requirement causing an uproar among ERISA attorneys. What's worse, pension plan officials might have to amend their personal income tax filings for the past five years to include such information, on the theory that they have authority over plan investments. . . . These reporting requirements stem from a new interpretation by Treasury officials of the department's Report of Foreign Bank and Financial Accounts form, known as FBAR, which is geared to catching money launderers and tax evaders." (Pensions & Investments)
Questions for a Custodian After Scams Hit IRAs
Excerpt: "Three unrelated Ponzi schemes, including Bernard L. Madoff's, erased more than $1 billion from hundreds of individual retirement accounts set up through a single financial company. At a minimum, this coincidence would appear to be a mystery worthy of investigation by regulators. After all, that financial company is part of an important industry that is supposed to help keep America's retirement savings safe from crooks like Mr. Madoff." (The New York Times; free registration required)
[Opinion]
Another Taxpayer Donation to GM and the Auto Workers Union
Excerpt: "Welcome to the General Motors bailout, part three -- or is it four, or five? It's hard to keep up, but this week the federal Pension Benefit Guaranty Corporation took over the pension liabilities of Delphi, the auto-parts spinoff of GM that has been working its way through Chapter 11 since 2005. As with the previous taxpayer rescues, this one includes a special favor for the United Auto Workers. Under the agreement, the PBGC will assume some $6.2 billion in pension liabilities from Delphi, including both hourly and salaried employees. That's the second biggest pension bailout in PBGC history, and it takes billions of liabilities off the books for GM. As Delphi's former parent, GM had agreed to take responsibility for billions of dollars of Delphi's pension obligations to its hourly employees." (The Wall Street Journal)
[Opinion]
MetLife Testimony at ERISA Advisory Council on Employee Welfare and Pension Benefit Plans Hearing, 'Stable Value Funds and Retirement Security in Current Economic Conditions'
Excerpt: "MetLife's testimony provided an overall perspective on stable value, including its purpose, how it evolved, how it's used in practice today, how well stable value has met its objectives, key considerations in designing financially sound stable value products and how stable value differs from other investment alternatives. MetLife testified that we believe stable value funds should be included as a fourth Qualified Default Investment Alternative (QDIA) without restrictions." (Metropolitan Life Insurance Company)
[Opinion]
On Inquiries from Readers Looking for Help in Choosing a Plan Provider
Excerpt: "Yes, picking the best provider for a retirement plan is one of the most important decisions a plan sponsor can make -- both in terms of fulfilling their fiduciary obligation and in what might affectionately be called job sanity. That said, many plan sponsors really don't have the time -- or the expertise -- to pick the best provider (much less monitor that performance), and so, the smart ones do what ERISA requires -- they hire the expertise to pick (and monitor) the best provider. And that's where the retirement plan adviser comes in." (planadvisor)
University Conference Services (Advert.)
Are You On Top of Your Game as a Plan Sponsor? Managing your organization’s retirement plans has never been more challenging than in today’s economic and political environment. How do you create a win-win situation for yourself as a fiduciary and for your plan participants? The Chicago Mid-Sized Retirement & Pension Plan Management Conference, October 4–7, will help you get well conditioned and on top of the plan management game. |
Links to Items on Executive Comp, Benefits in General
[Guidance Overview]EEOC's Employee-Friendly Guidance on Separation Agreements
Excerpt: "Most U.S. employers continue to offer downsized employees severance benefits in exchange for a release of claims. Recognizing this, the U.S. Equal Employment Opportunity Commission (EEOC) issued new guidance on July 15, 2009 titled Understanding Waivers of Discrimination Claims in Employee Severance Agreements. In form, EEOC's new Severance Agreement guidance is unusual in that it is directed to employees in a Q&A format." (Seyfarth Shaw LLP)
[Guidance Overview]
Mergers and Acquisitions: Employee Benefits Review (PDF)
3 pages. Excerpt: "A critical part of the due diligence conducted before a buyer acquires the stock or assets of a target company is a review of the employee benefits offered and maintained by the target company. The objective of employee benefits due diligence is to identify all of the potential issues and liabilities associated with the target's employee benefits and to adequately address these issues in the acquisition agreement." (Morgan, Lewis & Bockius LLP)
[Guidance Overview]
The State of the Same-S.ex Union: Part Two in a Three-Part Series
Excerpt: "As we described in Part One of this series, the battle over same-s.ex marriage in the United States has been hard-fought in legal, political, and social arenas. Proponents and opponents have scored both victories and losses, leading to the checkered current landscape, in which same-s.ex couples' rights can vary widely from state to state. The rights of same-s.ex couples to gain formal recognition of their relationship differ by state - in terms both of whether any recognition is available and, if it is, what kind of recognition. Here, in Part Two, we describe in detail the states in which same-s.ex couples can obtain formal recognition from the state - whether in the name of 'marriage' or some alternative status - and the states in which recognition is banned. We also explain why significant additional changes to the landscape are unlikely in the near future." (FindLaw)
[Guidance Overview]
EEOC's New Guidance on Discrimination Waivers and Releases
Excerpt: "On July 15, the Equal Employment Opportunity Commission (EEOC) issued a new guidance document concerning discrimination waivers and releases contained in employee severance agreements. The full text of the guidance, titled 'Understanding Waivers of Discrimination Claims in Employee Severance Agreements' (EEOC Guidance), is available online at www.eeoc.gov/policy/docs/qanda_severance-agreements.html. The EEOC Guidance does not dramatically change the EEOC's detailed regulations concerning age discrimination waivers and releases, which center around the complex requirements imposed under the Older Workers Benefit Protection Act of 1990 (OWBPA). However, the new EEOC Guidance is important in several respects . . . ." (Morgan, Lewis & Bockius LLP)
[Guidance Overview]
SEC Proposal on Executive Compensation and Corporate Governance Disclosure Requirements and Proxy Solicitation Rules (PDF)
14 pages. Excerpt: "On July 10, the Securities and Exchange Commission (SEC) issued a release proposing various rule amendments that would add or revise executive compensation and corporate governance disclosures in proxy and information statements, and address certain issues relating to proxy solicitations (Proposal Release). Comments on the proposed amendments must be submitted by September 15, 2009. If the proposed amendments are adopted, the SEC expects that they will be effective for the 2010 proxy season." (Morgan, Lewis & Bockius LLP)
Reform Efforts on Compensation Aim at Financial Industry
Excerpt: "[Rep. Barney Frank] has made broker-dealers, investment advisers, banks and credit unions targets for additional compensation reforms in a proposal that he introduced to the House of Representatives last week. 'These financial institutions are the capital engines that drive our economy and manage our wealth,' said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware in Newark. 'So anything that can directly influence the success or failure of their businesses will be a logical target for lawmakers -- and for better or worse, that means executive compensation.'" (Investment News; free registration required)
Mergers and Acquisitions: Due Diligence (PDF)
2 pages. Excerpt: "Before agreeing to acquire a company, the buyer should conduct a thorough investigation of the target. This 'due diligence' process serves to determine the value of the target, identify any problems, and assist with structuring the deal. The buyer should examine the target's business operations, financial information, and legal documentation. Due diligence in the United States is often more extensive than comparable investigations performed in other jurisdictions." (Morgan, Lewis & Bockius LLP)
The Impact of the Recession on Employers (PDF)
31 pages. Excerpt: "This study is designed to address the following questions among a nationally representative sample of U.S. employers with 50 or more employees: 1. What percentage of employers have taken steps to reduce labor and operational costs in the past 12 months? 2. Among these, what specific cost reduction strategies have they used? 3. What are employers doing to help employees deal with the recession? 4. What is happening with workplace flexibility during the recession? 5. Do the strategies employers use for dealing with the recession differ for employers that have larger proportions of women or men; of hourly or salaried employees; of unionized or non-unionized employees? Do they differ for employers that are nonprofit or for-profit? And do they differ for employers of various sizes? 6. What are employers doing that they think would serve as useful examples for other employers? Throughout the report, we include employers' responses to this open-ended question." (Families and Work Institute)
A Benefits Primer for New Employees
Excerpt: "Human resources professionals often underestimate how complicated a benefit packet can appear to new employees, particularly if they are young or are recent entrants to the workforce. Here's basic guidance you can use to inform them about role benefits play in total compensation." (Workforce Management; free registration required)
Webcasts and Conferences
"July 2009 ERPA Test Review - Part 1" Recorded Web SeminarNationwide on July 24, 2009
presented by SunGard Relius
(Click to post your webcast or conference)
Press Releases
Rapid Growth in Health Care Costs Hurts Economic Performance of U.S. IndustriesRAND Corporation
EPIC Advisors Inc. Announces Director of Consulting and Risk Management
EPIC Advisors, Inc.
(Click to post your press release)
Employee Benefits Jobs
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Plan Document Manager
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Channel Management Segment VP
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