Retirement Plans Newsletter |
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| August 13, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Official Guidance]
IRS Notice 2009-71: Comments Requested on 414(x) Eligible Combined Plans (DB-Plus-DC) (PDF)
10 pages. Excerpt: "Under § 414(x)(2)(A) of the Code, an 'eligible combined plan' is a plan: (1) that is maintained by an employer that is a small employer at the time the plan is established; (2) that consists of a defined benefit plan and an applicable defined contribution plan; (3) the assets of which are held in a single trust forming part of the plan and are clearly identified and allocated to the defined benefit plan and the applicable defined contribution plan to the extent necessary for the separate application of the Code; and (4) that meets the benefit, contribution, vesting, and nondiscrimination requirements under section 414(x). . . . Section 414(x) is effective for plan years beginning after December 31, 2009. It is anticipated that the guidance under consideration in this notice would be prospective. . . . Written comments should be submitted by October 15, 2009." (Internal Revenue Service)
[Official Guidance]
IRS Rev. Proc. 2009-36: Leeway Provided in Remedial Amendment Cycle for Governmental Retirement Plans (PDF)
4 pages. Excerpt: "This revenue procedure modifies Rev. Proc. 2007-44 . . . to provide that a remedial amendment cycle with respect to a governmental plan . . . will not end before the expiration of the 91st day after the close of the first legislative session that begins more than 120 days after a determination letter is issued for the plan (or after the occurrence of certain other events relating to a determination letter application), provided that the application for the determination letter was timely submitted to the Service. This revenue procedure also modifies Rev. Proc. 2007-44 to provide that the sponsor of an individually designed governmental plan may elect Cycle E (instead of Cycle C) as the initial (EGTRRA) remedial amendment cycle for the plan. This change (which was announced in the November 5, 2008, Special Edition of the EP News http://www.irs.gov/pub/irs-tege/se1108.pdf is a one-time modification that does not apply in determining a plan's remedial amendment cycle after the initial (EGTRRA) cycle." (Internal Revenue Service)
[Guidance Overview]
Deadline for FBAR Reporting Requirements for Hedge Funds, Private Equity Funds and Similar Commingled Investments
Excerpt: "In short, while Notice 2009-62 itself only provides an extension for reporting until June 30, 2010, the forthcoming regulations or other guidance might eliminate the filing requirement for pension plans, ERISA fiduciaries and other U.S. persons with interests in foreign commingled funds altogether." (Kilpatrick Stockton LLP)
[Guidance Overview]
IRS Modification of Determination Letter Process for Governmental Plans to Extend Remedial Amendment Period and to Permit Filings in Cycle E (PDF)
3 pages. Excerpt: "In Revenue Procedure 2009-36, I.R.B. 2009-35 (Aug. 31, 2009), the IRS further modified the determination letter process by (1) extending the timeline by which a governmental tax-qualified plan must adopt amendments required as a condition of a favorable determination letter after the favorable letter is issued and (2) formally revising the determination process rules in Revenue Procedure 2007-44 to permit governmental plans to file during Cycle E by January 31, 2011 as provided in the prior guidance published on the IRS website[.]" (Groom Law Group)
[Guidance Overview]
PBGC's Proposed Regs on Interaction of USERRA Rules and ERISA Benefit Guarantee
Excerpt: "The PBGC has issued proposed regulations that would harmonize the ERISA requirement that guaranteed benefits be nonforfeitable on the plan termination date with the reemployment rights provided to service members under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). The proposed rules would apply to reemployments under USERRA initiated on or after December 12, 1994." (Wolters Kluwer)
[Guidance Overview]
IRS Receives Feedback and Questions on Employee Plans Compliance Resolution System
Excerpt: "Joyce Kahn, manager of the IRS's Employee Plans Voluntary Compliance Division, gave practitioners an update on the IRS's employee plans compliance resolution system (EPCRS) during a July 27, 2009 telephone forum. . . . Kahn explained that employers can use the self-correction program to correct insignificant errors in an employee benefit plan at any time during the plan year. However, she reported that some taxpayers were unclear as to the exact definition of an insignificant error. " (Wolters Kluwer)
[Guidance Overview]
Maximum Contribution for Sole Proprietor With Both a DB Plan and a 401(k) Plan
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]
Have Your 401(k)ake and Eat It Too: The Sole Proprietor 401(k) Plan
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). Then, the sole proprietor can put away a deductible amount of up to 25% of compensation to attain the $49,000 limit. If the sole proprietor is age 50 or over, a catch-up contribution of $5,500 for 2009 may be contributed as catch-up contributions are not included in the 415 limit. Thus, the sole proprietor can exceed the $49,000 Section 415 limit by $5,500 for a total of contribution $54,500, all tax deductible for 2009." (McKay Hochman Co., Inc.)
[Guidance Overview]
Excess Contribution Chart Updated July 23, 2009
Excerpt: "Plans without an Eligible Automatic Contribution Arrangement: Return excess and income thereon within 2 1/2 months following close of plan year to avoid the 10% employer penalty." (McKay Hochman Co., Inc.)
[Guidance Overview]
DOL Form 5500 Relief and IRS Proposed Prototype Plan Program May Ease Transition for 403(b) Plans (PDF)
5 pages. Excerpt: "Sponsors of 403(b) plans subject to ERISA should begin to gather information for the Form 5500 filing and to identify and review all annuity contracts and custodial accounts to determine whether any can be excluded from their reporting and audit obligations. All sponsors of 403(b) plans, whether or not they are subject to ERISA, should take steps to have a written plan document by December 31, 2009, to ensure operational compliance under the 2007 final regulations retroactive to January 1, 2009, and to correct any operational errors under EPCRS. Sponsors may want to consider whether to adopt a 403(b) prototype plan once the IRS finalizes the program." (Buck Consultants)
[Guidance Overview]
IRS Extension of the FBAR Filing Date
Excerpt: "Based on this notice, a typical hedge fund, hedge fund manager, hedge fund investor, pension plan, and custodian of a pension plan would not be required to file an FBAR at least until June 30, 2010, if it has not already done so unless (i) it is a U.S. hedge fund or pension plan that directly has foreign bank or securities accounts, or (ii) it is a U.S. person or entity (including a domestic feeder fund) which owns more than 50% of an offshore fund (including a master fund) and the offshore fund has foreign bank or securities accounts. Persons described in (i) and (ii) may have until September 23, 2009, to make FBAR filings for 2008 and prior years." (Katten Muchin Rosenman LLP)
[Guidance Overview]
Towers Perrin U.S. Legislative Tracking Charts: Retirement and Executive Compensation, Updated August 12, 2009 (PDF)
11 pages. Excerpt: "These charts summarize selected federal legislation that would affect employee benefit programs. The bills included on the charts are based on judgments regarding the prominence of the issue, the likelihood of enactment, and the influence of the sponsors." (Towers Perrin)
Economy May Be Bottoming, but 401(k) Matches Won't Be Back Soon
Excerpt: "Since November, 251 of the Fortune 500 companies have suspended or reduced their matches, according to Hewitt Associates. However, a June Watson Wyatt Worldwide survey finds that 42 percent of employers plan to bring back their match in the next 12 months. But most employers probably won't reinstate their matches until late 2010 or early 2011, experts say." (Workforce Management; free registration required)
The Efficiency of Investment Menus and Individual Portfolio Choice in 401(k) Retirement Plans
Excerpt: "Though millions of US workers have 401(k) plans, few studies evaluate participant investment performance. Using data on over 1,000 401(k) plans and their participants, we identify key portfolio investment inefficiencies and attribute them to offered investment menus versus individual portfolio choices. We show that the vast majority of 401(k) plans offers reasonable investment menus. Nevertheless, participants 'undo' the efficient menu and make substantial mistakes: in a 20-year career it will reduce retirement wealth by one-fifth, in fact, more than what a naive allocation strategy would yield. We outline implications for plan sponsors and participants seeking to enhance portfolio efficiency: don't just offer or choose more funds, but help people invest smarter." (Pension Research Council; registration required to download fulltext of paper)
Rebuilding 401(k) Retirement Savings: Three Stages of Rebuilding
12 pages. Excerpt: "In the following paper, we discuss the key factors contributing to an individual's ability to rebuild an account balance based on . . . study results. To facilitate the discussion of this process with participants, these factors have been simplified into three distinct stages: STAGE 1: Emotional to rational; STAGE 2: Passive to active; STAGE 3: Short-term to long-term." (Principal Financial Services, Inc.)
Actions at Different Life Stages Hinder Retirement Savings Potential with Long-Term Savers Rewarded
Excerpt: "An analysis of 401(k) data by Fidelity Investments has identified key behaviors that are hindering savings for workers at different life stages. While the portion of workers in their 20s who participate in a workplace savings plan such as a 401(k) or 403(b) has increased in recent years with the help of auto enrollment, the majority still do not participate, according to data on plans Fidelity administers. Less than half (44%) of eligible workers in their 20s contribute to their workplace plans today Fidelity's quarterly release on trends in 401(k) industry suggests." (PLANSPONSOR.com; free registration required)
[Opinion]
Spending, Not Investing, Is Key to Retirement
Excerpt: "Simply, I've come to believe that successful retirement is a matter of saving enough and not spending too much, rather than being a function of successful investing. Before all you planners and advisers stone me to death in the comment section, let me explain. First, what's successful retirement? To me, it's having enough money to live pretty much the way you lived when you were working, having enough to take care of emergencies such as a medical problem or a leaky roof, and having enough to give money to your children or others. That's my definition, and I know there are many, many others. But play along with me." (Investment News; free registration required)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]Labor & Employment Legislative Update Newsletter, Summer 2009
The newsletter covers pending legislation that may affect employers and employees. (Troutman Sanders Strategies)
[Guidance Overview]
EEOC's Guidance on Discrimination Waivers and Releases
Excerpt: "Given the recent economy and resultant 'rightsizing' of workforces, many employers are asking employees to sign releases in exchange for severance pay. Various statutes and cases regulate the enforceability of those release agreements. Consequently, employers should take care to assure that their separation agreements comply with the applicable legal requirements." (Briggs and Morgan P.A.)
[Guidance Overview]
Towers Perrin U.S. Legislative Tracking Charts: Human Resources, Updated August 12, 2009 (PDF)
9 pages. Excerpt: "These charts summarize selected federal legislation that would affect employee benefit programs. The bills included on the charts are based on judgments regarding the prominence of the issue, the likelihood of enactment, and the influence of the sponsors." (Towers Perrin)
New Legislative Focus on Executive Compensation and Risk
Excerpt: "Outlook: The executive compensation issue is expected to be rolled into broader financial market reform legislation later this year. On July 30, Chairman Frank and Agriculture Committee Chairman Collin Peterson (D-Minn.) had reached an agreement-in-concept on regulating derivatives, another element of the reform efforts. Say-on-pay and corporate governance legislation is pending in the Senate as well. For example, Senate Banking Committee member Charles Schumer (D-N.Y.) has sponsored a bill, and Senator Durbin has introduced two bills aimed at regulating executive pay. However, given the Senate's plan to focus on health care reform in September, corporate governance and financial market reform might be pushed to the back burner." (Watson Wyatt Worldwide)
Judge Approves $925M UnitedHealth Backdating Options Suit Settlement
Excerpt: "UnitedHealth Group Inc. and its former chief executive William McGuire will pay $925 million to resolve an investor class-action lawsuit accusing the health insurer of improperly backdating stock options, Reuters reports. . . . Given that there was 'significant risk' to the plaintiffs recovering nothing had the case been fully tried, 'the $925.5 million settlement amount is substantial,' U.S. District Court Judge James Rosenbaum wrote in his 26-page order dated August 10, according to Reuters." (PLANSPONSOR.com; free registration required)
Webcasts and Conferences
Five Reasons Why You Haven't Been Able to Cut Your Health Care Spend WebcastNationwide on September 15, 2009
presented by International Foundation of Employee Benefit Plans
Retirement Plan Issues for Tax Exempt Organization
in Pennsylvania on September 15, 2009
presented by PEBA --Penjerdel Employee Benefits & Compensation Assn.
(Click to post your webcast or conference)
Press Releases
PBGC Negotiates Deal to Strengthen Pension Funding at Cooper Tire & RubberPension Benefit Guaranty Corporation (PBGC)
Great-West Retirement Services Adds Sales Staff In Step To Further Support Its Adviser And TPA Channels
Great-West Retirement Services
HSA Bank Launches Enhanced Website
HSA Bank
TPAA Partners With ConnectYourCare for Consumer-Directed Healthcare Administration Services
ConnectYourCare
(Click to post your press release)
Employee Benefits Jobs
Benefits Analyst Ifor Milliman, Inc.
in WA
Defined Contribution Plan Administrator
for Papalia Retirement Plan Services, Inc.
in PA
Senior Pension Administrator
for American Fiduciary Corporation
in MA
Retirement Plan Specialist
for First National Bank
in NE
Retirement Plan Specialist
for RubinBrown LLP
in MO
Defined Contribution Administrator
for McGregor & Associates, Inc.
in KY
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