Retirement Plans Newsletter |
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| July 30, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
ASPPA (Advert.)
DOL Speaks: The 2009 Employee Benefits Conference –September 14-15,2009 ASPPA and the U.S. Labor Department EBSA co-sponsor this conference, which focuses exclusively on ERISA Title 1 issues. Get the latest information about ERISA regulatory and legislative issues; DOL audit enforcement, retirement plan and group health-plan issues; fiduciary matters, the fundamentals of managing an ERISA plan and more. There also will be information about the Pension Protection Act. Register now. Washington Hilton Hotel /1919 Connecticut Street, NW / Washington, DC. |
[Guidance Overview]
Deductible Contributions on Sole Proprietor's Behalf to Defined Contribution Plan When Defined Benefit Plan Also Exists
Excerpt: "Prior to PPA, the sole proprietor would have been limited to a tax deduction of $78,000 for the DB. (The greater of 25% or the DB minimum funding requirement.) After PPA, the deduction for employer contributions increases to $96,000 with the allowance of a 6% defined contribution plan deduction. Of the additional $18,000 contribution made to the DC plan, the sole proprietor's portion is $13,500." (McKay Hochman Co., Inc.)
[Guidance Overview]
Sole Proprietor 401(k): The Plan in 2009
Excerpt: "The 401(k) advantage for the sole proprietor (or one person plan) is enhanced by EGTRRA's increase in the 415 annual allocation limitation from 25% of compensation (maximum annual additions of $35,000) to 100% of compensation up to a maximum of $40,000 as increased by COLA which for 2009 is $49,000. By adding elective deferrals, the sole proprietor can defer the maximum elective deferral amount ($16,500 for 2009) up to 100% of compensation (provided his or her income exceeds the deferral limit)." (McKay Hochman Co., Inc.)
[Guidance Overview]
In ESOP Setting, ERISA Fiduciary Law May Apply to Decisions Related to Corporate Salaries, According to Ninth Circuit
Excerpt: "A recent Ninth Circuit case highlights the conflicts that can occur where an ESOP is involved. For instance, are decisions relating to corporate salaries, when made by directors and officers who are also fiduciaries of the company's ESOP, subject to ERISA fiduciary law such that the decisions must be made in the best interest of participants and beneficiaries? The Ninth Circuit in Johnson v. Couturier held that such decisions should be subject to ERISA fiduciary law where the fiduciaries stand to 'directly profit' from such decisions . . . ." (ERISA Fiduciary Guidebook)
[Guidance Overview]
Timing Issues for Implementation and Administration of Automatic Enrollment Plans
Excerpt: "[This Technical Update] discusses when the plan must provide notice of the arrangement to a participant, when the plan may implement a participant's default deferrals, and the latest date the plan may implement a participant's default deferrals." (SunGard)
[Guidance Overview]
The Question: Was a Directed Trustee Liable for a Fiduciary Breach for Waiting to Sell Company Stock Held in a Qualified Plan Until Just Days Before the Company Filed for U.S. Bankrup.tcy Court Protection?
Excerpt: "The Ruling: In granting State Street's request to dismiss the suit, Chief U.S. District Judge Gerald E. Rosen of the U.S. District Court of the Eastern District of Michigan said the case turned on a provision in State Street's (the directed trustee) agreements with the Delphi plans that its discretionary authority over dealing with assets in company stock funds was expressly limited as being 'subject to the trust agreement and the written fund policy' for each Delphi investment account." (PLANSPONSOR.com; free registration required)
Inflation or Deflation? Looking for Signs of Future Prices and Effects on Retirement Portfolios
Excerpt: "Members of the Retirement Income Industry Association and friends keep asking me a difficult question: Are retirement portfolios more at risk from inflation or from deflation? Look around, are your clients worried about inflation or do they seek protection from deflation? Some fear Weimar-like hyperinflation caused by excessive government spending. Others fear Great Depression-like deflation from unprecedented levels of stranded debt and de-leveraging. What is it going to be?" (Research Magazine)
SEC Proposal to Curb 'Pay to Play' Practices Directed at Public Pension Plan Management
Excerpt: "Pepper Point: The proposed rules implicate First Amendment issues. Regardless of whether the proposed rules are ultimately promulgated, advisers as a matter of 'best practices' should review and consider making changes to their internal compliance practices consistent with the proposed rules' provisions. As always, all advisers having any dealings with public officials affecting their business should consult with qualified counsel." (Pepper Hamilton LLP)
Target-Date Funds' Slide Prompts Debate on Rules
Excerpt: "Target-date funds continue to face heat from regulators and investors as the debate continues on the level of equity exposure retirees should maintain. These products are intended to help unsophisticated investors manage asset allocation. Most investors assume the funds will grow more conservative and protect their savings as they approach the targeted retirement date. . . . Securities and Exchange Commission Chairman Mary Schapiro has said the performance disparity among like-named target-date funds is troubling. The SEC will consider requiring additional disclosure, she said, that could better align target-date funds' asset allocations with investor expectations and understandings. Possible changes include setting an equity exposure bandwidth for similar funds and requiring the name of the fund to better reflect its aggressive or conservative strategy." (On Wall Street)
The Pension Factor: Assessing the Role of DB Plans in Reducing Elder Hardships
Excerpt: "Defined benefit pension income plays a critical role in reducing the risk of poverty and hardship for older Americans. Poverty rates among older households lacking pension income are about six times greater than those with such income. The study finds that pensions reduce - and in some cases eliminate - the greater risk of poverty and public assistance dependence that women and minority populations otherwise would face . . . . [You may download the report and PowerPoint charts from the target page.]" (National Institute on Retirement Security)
Considering the Glide Path of Target-Date Funds
Excerpt: "For the purpose of this article, target-date mutual funds come in two 'flavors': those that anticipate being cashed out at the plan's retirement age and those that do not. However, it seems to me that 401(k) plans mainly have one flavor: those that cash out at retirement. By 'cash out,' I mean that, when a participant retires and takes a distribution, the plan sells the target-date fund in his account and issues a check to the IRA designated by the participant. The retired participant then has to make an investment decision." (PLANSPONSOR.com; free registration required)
Pensions Reduce Poverty, According to Study
Excerpt: "Defined benefit pension income plays a critical role in reducing the risk of poverty and hardship among older Americans, according to a new study. The study found rates of poverty among older households lacking pension income were about six times greater than those with such income. The analysis also found that pensions reduce - and in some cases eliminate - the greater risk of poverty and public assistance dependence that women and minority populations otherwise would face. The Pension Factor report authored by Dr. Frank Porell, Professor of Gerontology at the McCormack Graduate School of Policy Studies at the University of Massachusetts-Boston, and Beth Almeida, Executive Director at the National Institute on Retirement Security, says pensions have helped substantial numbers of older Americans avoid material hardships associated with inadequate food, shelter, and health care, and also avoid reliance on public assistance." (PLANSPONSOR.com; free registration required)
Retiring in Debt? Differences between the 1995 and 2004 Near-Retiree Cohorts (PDF)
22 pages. Excerpt: "This article uses the Federal Reserve Board's Survey of Consumer Finances to examine the debt holdings of near-retirees (aged 50-61) in 1995 and 2004. Employing a variety of measures of household borrowing, we find that near-retirees in 2004 -- the leading edge of the baby-boom cohort -- had more consumer and housing debt than their counterparts in 1995. We observe a modest increase in the median debt service and debt-to-assets ratios between the two cohorts, but no statistical difference in the average ratios. Analysis of several demographic and socioeconomic subgroups reveals certain population segments, such as households headed by single women, with significantly higher debt service ratios in 2004. We discuss the implications of these trends for the retirement income security of older baby boomers and suggest further avenues of research." (U.S. Social Security Administration)
Has Target-Date Fund Opportunity Peaked?
Excerpt: "Now that all the hype and barrage of new offerings in the market have died down, is there still opportunity in target-date funds for asset managers? A new Cerulli special report says opportunity still exists, but success hinges on shelf space, product design, regulation and performance. 'We view the industry as being at a crossroads. More than 70% of asset managers feel that they have just begun to tap this opportunity, while a small but growing percentage think it has reached its peak. The top three fund managers currently control nearly 80% of target date fund assets,' says Cindy Zarker, lead analyst of the Cerulli Special Report, Target-Date Funds: Still Viable?, in a press release." (PLANSPONSOR.com; free registration required)
Public Access TV Station Rejects 403(b) in Favor of SIMPLE IRA
Excerpt: "The board of directors for PEGASYS, a public-access television station in Enid, Oklahoma, has approved a change in employee retirement plans. Employees will now participate in a SIMPLE IRA plan, rather than a 403(b) plan. According to the Enid News & Eagle, Wendy Quarles, executive director of PEGASYS, said the change was recommended by an accountant, who told the board the 403(b) plan is no longer suitable for nonprofits." (PLANSPONSOR.com; free registration required)
Morningstar Creates National Retirement Plan Service Directory
Excerpt: "Morningstar has launched a directory of retirement plan service providers that lists assets overseen, fees, top clients, number of plans served and geographic concentration. The company obtains the information on 5,000 investment managers, consultants, recordkeepers and administrators from plan sponsor filings with the Department of Labor." (Financial Planning)
SEC's Investor Advisory Committee to Weigh In on Fiduciary Duty Debate
Excerpt: "The SEC's Investor Advisory Committee has jumped into the debate over whether all financial advice providers should be required to put clients' interests first. The 15-member committee, which was formed in June to give investors more input into SEC decisions, discussed the issue at its inaugural meeting Monday in Washington." (Investment News; free registration required)
If Your 401(k) Contribution Is Not a Factor in Your Budget, Your 401(k) Savings Are Not Significant
Excerpt: "For those just getting into the workforce, a 401(k) seems like something that you should dump extra change into and leave to accrue interest until you retire. But that chump change won't wind up being enough for the average length of retirement. The average retirement savings is between 6% and 8% of a person's income a year, which is likely not enough." (Forbes.com)
[Opinion]
Group Letter to Congress Urging Defined Benefit Pension Relief (PDF)
2 pages. Excerpt: "On behalf of plan sponsors that provide retirement security benefits to millions of workers, the undersigned organizations urge you to enact legislation this year that would ensure that pension contributions are not out of proportion to those required before the market downturn and that benefit restrictions are not allowed to go into place simply because of the recession and sudden market downturn." (American Benefits Council)
[Opinion]
SOA Testimony before the ERISA Advisory Council, 'Approaches for Retirement Security in the U.S.' (PDF)
6 pages. Excerpt: "The SOA Pension Section has sponsored the Retirement 20/20 project over the past three years to systematically explore new models for retirement systems that go beyond today's defined benefit and defined contribution system. My testimony will focus on the lessons learned in that project." (Society of Actuaries)
[Opinion]
Watson Wyatt Testimony at DOL/SEC Joint Hearing on Target-Date Funds
Excerpt: "[Mark J. Warshawsky, Director of Retirement Research at Watson Wyatt Worldwide, presented remarks] at a joint hearing of the U.S. Department of Labor (DOL) and the Securities and Exchange Commission (SEC) in Washington, D.C., on June 18, 2009. 'I appreciate the opportunity to offer some comments on the risk characteristics of target-date funds, both when used as an accumulation vehicle in retirement accounts and when used for retirement distributions. I base these comments on a comprehensive analysis we have conducted recently in the Research and Innovation Center.'" (Watson Wyatt Worldwide)
DATAIR Employee Benefit Systems, Inc. (Advert.)
DATAIR’s DB Valuation System DB Administration, Discrimination Testing and Proposal software with Multiple Plan and Cash Balance Plan handling. PPA’06 Pension Funding. * Funding Target and Target Normal Cost with 3-rate segments * 404(o) Cushion; 430 minimum and 404(o) maximum contributions * Funding Target Attainment Percentages (FTAPs) Schedule SB reports and links to our 5500/PBGC System, and our FAS 158 and Termination Calculation reporting systems. sales@datair.com or call 1-888-328-2474 |
Links to Items on Executive Comp, Benefits in General
[Guidance Overview]
House Financial Services Committee Passes Barney Frank's Bill on Executive Compensation
Excerpt: "[On July 28], the House Financial Services Committee passed a mark-up of Barney Frank's H.R. 3269. The provisions of this bill are not limited to financial institutions. The changes were relatively minor, but very surprising. What follows is a description of the entire legislation that will now go to the full House." (Michael Melbinger via Winston & Strawn LLP)
[Guidance Overview]
SEC's Proposed Amendments to Compensation and Corporate Governance Disclosures and Proxy Solicitation Rules (PDF)
3 pages. Excerpt: "On July 10, 2009, the Securities and Exchange Commission (SEC) proposed amendments to compensation and corporate governance disclosure rules applicable to proxy statements. You can find the text of the proposed amendments at http://www.sec.gov/rules/proposed/2009/33-9052.pdf. Comments to the SEC on the proposed amendments are due on September 15, 2009. The proposed amendments fall in the following five categories . . . ." (Thompson Hine LLP)
House Financial Services Committee Passes Executive Compensation Measure
Excerpt: "The U.S. House's Financial Services Committee . . . approved legislation to put an end to 'compensation practices that encourage executives to take excessive risk at the expense of their companies, shareholders, employees, and ultimately the American taxpayer.' Specifically, according to a Committee statement, H.R. 3269 would give shareholders a 'say on pay' for top executives and ensure that they have a nonbinding, advisory vote on their company's pay practices. In addition, the bill would require federal regulators to proscribe inappropriate or imprudently risky compensation practices as part of solvency regulation of all financial institutions." (PLANSPONSOR.com; free registration required)
Press Releases
Study Reveals Many Business Owners Have No Plan for RetirementPrincipal Financial Group
Employee Cost Sharing Rises Dramatically in Prescription Drug Plans, According to Buck Consultants Survey
Buck Consultants, an ACS Company
Poverty Risk Six Times Greater for Older Americans Lacking Pensions
National Institute on Retirement Security
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