Retirement Plans Newsletter |
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| August 11, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Official Guidance]
Text of IRS Notice 2009-63: Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)
4 pages. Excerpt: "This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007." (Internal Revenue Service)
[Guidance Overview]
Seventh Circuit Amends Opinion in Fee Dispute Case to Clarify 404(c) Holding
Excerpt: "In response to criticism by the Department of Labor and others of its ruling in a decision involving allegedly excessive 401(k) fees, the Seventh Circuit has amended the opinion to clarify its views on the application of the fiduciary safe harbor in ERISA § 404(c) to a plan sponsor's decisions regarding the selection of investment options. While it declined to rehear the participants' claims in Hecker v. Deere & Company, the court emphasized in its amended opinion that the opinion makes no definitive ruling on whether the ERISA § 404(c) safe harbor applies to the selection of investment options for a plan." (Wolters Kluwer)
[Guidance Overview]
Ninth Circuit Rules That ERISA Fiduciary Responsibility Can Apply to Company Decisions
Excerpt: "In Johnson v. Couturier, Nos. 08-17369, 08-17373, 08-17375, 08-17631 (Ninth Circuit 2009), the Court broadened some of the thinking on the application of ERISA. In this case, in his capacity as president and a director of Noll Manufacturing Company and its successors ('Noll'), the defendant, Clair R. Couturier, Jr. had channeled $34.8 million of company assets to his own possession by applying that amount to buy out certain deferred compensation agreements (the 'Buy Out'). Couturier was also a trustee of Noll's employee stock ownership plan (the 'ESOP'). The plaintiffs, who are participants in the ESOP, filed suit against Couturier alleging breach of fiduciary duties under ERISA. The Court faced a number of issues, including some interesting ERISA matters." (ERISA Lawyer Blog)
Inertia and Retirement Savings: Participant Behavior in 2008 and 2009
Excerpt: "Research on participant behavior from the Vanguard Center for Retirement Research reveals that participants' tendency to avoid making investment decisions can sometimes be beneficial. During the 2008 market decline, this inclination toward inertia meant that most participants didn't overreact to the economic turmoil. Find out how this impacted their accounts and how it may affect their financial futures." (The Vanguard Group, Inc.)
Adviser Explains Reason for Rejecting 403(b) in Favor of SIMPLE IRA
Excerpt: "An investment adviser for a public access television station in Enid, Oklahoma, explains that costs were behind the decision to ditch a 403(b) plan for employees in favor of a SIMPLE IRA. Robbie Bullis with Edward Jones investments told PLANSPONSOR 'our local providers . . . were far too costly for PEGASYS' retirement plan budget.' A local newspaper had reported that the change was recommended by an accountant who told the station's board that the 403(b) plan was no longer suitable for nonprofits . . . . Bullis cleared up that the decision was not based on the suitability for all nonprofits, but only for this particular situation." (PLANSPONSOR.com; free registration required)
Reorienting Retirement Risk Management: Summary of Conference Proceedings
Excerpt: "Leading academics, public pension sponsors, and their advisors met recently to examine ways to reformulate and restructure retirement risk management at the 2009 Wharton Impact Conference sponsored by the Pension Research Council and the Boettner Center for Pensions and Retirement Research. Here we summarize the proceedings from this event . . . ." (Pension Research Council; registration required to download fulltext of paper)
Frequently Asked Questions from Delphi Workers and Retirees about the Pension Plans of Delphi Corp.
Excerpt: "On August 10, 2009, the Pension Benefit Guaranty Corporation assumed responsibility for the pension plans of Delphi Corp. The plans ended as of July 31, 2009. Delphi's six pension plans cover 70,000 workers and retirees. The PBGC will pay pension benefits to those individuals up to limits set by federal law. In the near future, we will contact each person in the plans to let them know about the next steps. [The target page will be updated with answers to frequently asked questions.]" (Pension Benefit Guaranty Corporation)
The U.S. Retirement Market, First Quarter 2009 (PDF)
28 pages. Excerpt: "At the end of the first quarter of 2009, retirement assets were down $4.8 trillion, or 26 percent, from the highest quarterly peak of $18.2 trillion at the end of the third quarter of 2007. Declines in financial markets have lead to declines across all types of retirement plans, with individual retirement accounts (IRAs), defined contribution (DC) plans, private defined benefit (DB) plans, and state and local government pension plans all having similar percentage declines in assets over this period." (Investment Company Institute)
Some 38% of Employers in New Survey Reported Employees Cut Amount of Retirement Savings in 2009
Excerpt: "A news release about the survey conducted by Deloitte, the International Foundation of Employee Benefit Plans (IFEBP), and the International Society of Certified Employee Benefit Specialists (ISCEBS), said 17% of employers polled said have seen an increased volume of hardship withdrawals, loans and other similar activities." (PLANSPONSOR.com; free registration required)
Pennsylvania Lawmaker Proposes Allowing State Pension Takeovers of Public Employee Plans
Excerpt: "A proposal by a Pennsylvania state lawmaker would allow the Keystone State to take over underfunded state pension funds. A news report on the Republicanherald.com Web site said the bill by Representative Tom Caltagirone of Reading would allow such a state takeover if a plan is less than 50% funded. Those funds taken over by the state would not see benefits changes for current workers or retirees, but new employees would have to contribute more to their pensions." (PLANSPONSOR.com; free registration required)
Companies Gained Little from Pension Switch - DB to DC
Excerpt: "Companies that have shifted employees to 401(k) accounts from pension plans don't necessarily gain much, according to international consulting firm Watson Wyatt. A review of 82 publicly traded companies that froze or closed their pension plans between 2003 and 2007 found there was an insignificant or negative effect on their stock prices. Contrary to previous research and assumptions, Watson Wyatt said that in 71 of 82 cases, companies' share prices didn't change much in the 23 days around an announcement of retirement-plan changes. 'Freezing a plan may produce some accounting gains, but it will not provide companies with long-term cash-flow relief -- either on an absolute level or volatility -- for many years,' says Mark Warshawsky, director of retirement research at Watson Wyatt. 'Also, even if these freezes do lead to savings, there will be no immediate positive effect on firm value. It could even become diminished in the long run if employees begin to view the firm as an uncompetitive employer in light of its shrinking commitment to retirement and its transfer of risk to employees.'" (TheStreet.com)
IASB Proposal to Change to Discount Rate for Valuing Pension and Other Retiree Benefits
Excerpt: "Planned amendments to IAS 19, Employee benefits, would require all companies to determine discount rates for valuing pension and other post-employment benefits from high-quality corporate bond yields. Currently, companies in countries without deep corporate bond markets must use government bond yields, resulting in reporting inconsistencies as spreads between corporate and government bond yields have widened in the financial crisis. The proposal is on the fast track to take effect for 2009 year-end. IASB intends to issue an exposure draft in August with a Sept. 30 comment deadline." (Mercer LLC)
[Opinion]
Point/Counterpoint on the Future of Public Employee Retirement Plans
Excerpt: "Even after a potential reform, can any public-employee pension stay solvent when the number of retirees is growing? Are 401(k)-style plans inevitable for all state employees? [Scott Adams and Marcia Fritz debate.]" (Los Angeles Times)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]IRS Grant of FBAR Filing Extension for Certain U.S. Persons (PDF)
3 pages. Excerpt: "Notice 2009-62 provides additional administrative relief for the following U.S. persons: Persons with no financial interest in a foreign financial account but with signature or other authority over the foreign financial account; Persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund. For these specified persons, Notice 2009-62 provides that they have until June 30, 2010, to file an FBAR for 2008 and earlier calendar years with respect to foreign financial accounts. Therefore, persons eligible to take advantage of Notice 2009-62 may need to file FBARs for the 2009, 2008, and earlier calendar years on or before June 30, 2010, subject to future guidance." (Morgan, Lewis & Bockius LLP)
Treasury Form, Report of Foreign Bank and Financial Accounts (FBAR); Some Benefit/Pension Trusts May Need to File
Excerpt: "There has been confusion and uncertainty in the industry as to whether or not U.S. pension and employee benefit trusts with foreign holdings as investments must file FBAR. [Target page provides links to government and additional resources on the issue.]" (International Foundation of Employee Benefit Plans)
Work Furloughs Save on More than Just Pay
Excerpt: "A new study has found that 35% of employers have either turned to the use of furloughs as a cost-cutting option during the recession or have a furlough policy in place at their organization. In addition to saving on salary costs, Business and Legal Reports (BLR) says about 60% of the more than 100 respondents to a Hay Group survey said their contributions to defined contribution plans are calculated on the reduced pay created by the furlough. The survey indicates that nearly 40% discontinue health care benefits during the furlough period." (PLANSPONSOR.com; free registration required)
Reflections on the Work-Life Renaissance
Excerpt: "According to The Corporate Executive Board, employees who are happy with their work-life benefits work more than 20% harder and are one-third more likely to stay with the organization. In addition, although many companies have had layoffs and benefits cuts due to recession, maintaining or even adding lower cost work-life benefits will boost employee loyalty and morale. When the economy improves, organizations that support work-life initiatives will be in a better position to retain these employees and recruit new ones." (Employee Benefit News; free registration required)
Webcasts and Conferences
Webinar: How to Communicate Employee Benefits Effectively On Your Own PCNationwide on September 9, 2009
presented by Benefit Software Inc.
Webinar: Improving Employee Productivity With Online Benefits Enrollment
Nationwide on August 20, 2009
presented by Benefit Software Inc.
Webinar: Retaining Key Employees and Improving Employee Morale with Total Rewards Statements
Nationwide on August 20, 2009
presented by Benefit Software Inc.
(Click to post your webcast or conference)
Press Releases
Employers Concerned With Employees' Retirement Preparation, According to Deloitte StudyDeloitte
MassMutual Retirement Services Introduces Industry-Leading Financial Reporting Platform for Defined Benefit and Investment-Only Clients
MassMutual Retirement Services
U.S. Labor Department Sues Trustees of 3 Mendon, Mass., Company Pension Plans Seeking Restoration of More Than $300,000 in Plan Assets
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
MetLife’s Enhanced Benefits Benchmarking Tool Provides Employers and Brokers with Trend Insights for Maximizing Benefits Return on Investment
MetLife
Online Provider of Small Business 401(k)s Launches New Platform for RIAs
ShareBuilder 401k
(Click to post your press release)
EmployeeBenefitsJobs.com (Sponsor)
(Click on banner to learn more.)
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