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September 10, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy

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[Official Guidance]
Text of Rev. Proc. 2009-43: Revocation of Elections by Multiemployer Defined Benefit Pension Plans to Freeze Funded Status under section 204 of WRERA (PDF)

5 pages. Excerpt: "Section II of this revenue procedure sets forth . . . circumstances [in addition to those in Notice 2009-42] in which the Service will automatically approve a request to revoke a section 204 election. Section III sets forth the procedures for submitting a request for automatic approval of revocation of a section 204 election. Section IV addresses other requests for approval to revoke a section 204 election." (Internal Revenue Service)


[Guidance Overview]
Criminal Conviction Not Required for Rhode Island Pension Board Action, According to Court

Excerpt: "A Rhode Island state judge has declared that the Providence Retirement Board can cut or reduce a retiring worker's pension under a law governing dishonorable government service, even when the person does not stand convicted of a crime. A news report on television station WPRI's Web site said Associate Justice Michael A. Silverstein of the Rhode Island Superior Court, ruling for the first time on the issue, asserted that the city's Honorable Service Ordinance (HSO) did not require a criminal conviction or a plea bargain before the board can move against a pensioner's benefits." (PLANSPONSOR.com; free registration required)


[Guidance Overview]
IRS Guidance on Accrued Leave Contributions to Qualified Retirement Plans

Excerpt: "Although the IRS guidance confirms the legitimacy of certain basic leave contribution arrangements that sophisticated employers have had in place for some time, several significant issues are left unaddressed, including the following: Would leave contributions be subject to FICA taxes? . . . . Can leave contributions be made to a section 403(b) tax-sheltered annuity plan or a government-sponsored 457(b) deferred compensation plan?" (Ballard Spahr LLP)


[Guidance Overview]
Ninth Circuit Bars ESOP-Owned Company from Advancing Defense Costs of Officers Accused of ERISA Fiduciary Breach by Paying Excessive Compensation (PDF)

Pages 1-3 of 8 pages. Excerpt: "[B]ased on extreme facts, the Ninth Circuit blurred the lines between corporate and fiduciary conduct for ESOP-owned companies, and created risk that such companies may not be able to offer corporate indemnification to ERISA fiduciaries." (Proskauer Rose LLP)


[Guidance Overview]
Judge Rejects 403(b) 'Kickback' Suit

Excerpt: "A federal judge has dismissed a lawsuit alleging a New York state teachers group breached its fiduciary duty by paying 'kickbacks' to ING Life Insurance and Annuity Co. U.S. District Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of New York said she had no jurisdiction over the dispute because the plan involved is a 403(b) program set up by a New York school district. As such, she said, the plan is not covered by the Employee Retirement Income Security Act (ERISA)." (PLANSPONSOR.com; free registration required)


[Guidance Overview]
When Does the IRS Permit the Use of the DOL Online Calculator for Corrections Under EPCRS?

Excerpt: "In the most recent EPCRS issued as Rev. Proc. 2008-50, the IRS addressed this question. Generally, the IRS continues to require the use of its EPCRS defined earnings calculations. However, the IRS does permit the DOL calculator for EPCRS corrections if either the difference in the two calculations is insignificant or if it is impossible to make a precise calculation and it is not feasible to make a reasonable estimate. To be as clear and precise as possible, below we present in quotes, from Revenue Procedure 2008-50 (page 28-29), the IRS EPCRS rule on when the DOL online calculator may be used for an EPCRS calculation . . . ." (McKay Hochman Co., Inc.)


[Guidance Overview]
Rollovers for Business Start-ups

Excerpt: "The primary purpose of ROBS is to provide the necessary funding to establish a business, with franchises often being the business of choice. The typical individual who makes the ROBS transaction accumulates the funds as an employee under a defined contribution account (or possibly a defined benefit plan with a lump-sum option) under a prior employer's plan. The employee leaves the firm and funds a new business with the tax-deferred distribution of funds from the prior employer's plan. These funds are rolled into the new business's 401(k) or other profit-sharing plan and are used to purchase the new firm's stock. Thus, the new business is capitalized with tax-deferred money, avoiding any taxes that usually apply to a retirement plan withdrawal, ROBS typically exist as a defined contribution profit sharing plan with a 401(k) [cash or deferred arrangement (CODA)]. By the way, the acronym ROBS was created by the IRS." (McKay Hochman Co., Inc.)


[Guidance Overview]
Differential Pay as Plan Compensation

Excerpt: "Prior to the HEART Act being introduced, the IRS viewed differential pay not as wages but as supplemental income. This type of income was reported on a Form 1099-MISC, and employers had the option of treating these amounts as being eligible retirement plan compensation. Effective with 2009, differential pay will be subject to withholding (under Code Section 3401) and reported as W-2 income. Section 105 of the HEART Act created IRC Code Section 3401(h) requiring all differential pay that is paid after December 31, 2008 to be treated as W-2 wages, subject to Federal income tax withholding purposes. New Code Section 414(u)(12) provides for qualified plan contributions to be made on differential pay, and that these amounts are to be treated as if the individual were an employee of the employer making the payment." (McKay Hochman Co., Inc.)


[Guidance Overview]
Towers Perrin Monthly Retirement Regulatory Round-Up, August 2009 (PDF)

Towers Perrin Monthly Retirement Regulatory Round-Up, August 20094 pages. Excerpt: "The Monthly Regulatory Round-Up is a high-level summary of legal and regulatory developments that occurred during July 2009 that may be relevant to large employers. Developments are sorted according to federal legislative developments, federal regulatory guidance, other developments (e.g., significant litigation, studies, select state law developments)." (Towers Perrin)


Aon Consulting's 2009 Benefits and Talent Survey
Excerpt: "The vast majority of survey respondents are not changing their retirement programs in response to the economic downturn. Most defined contribution (DC) plan sponsors have not made changes to their benefits, with 90% reporting no change in 2009 contribution levels compared to last year. More surprisingly, 92% of survey respondents who sponsor defined benefit (DB) plans said that they are not making any changes to their defined benefit plans." (Aon Consulting)


Will the Demand for Assets Fall When the Baby Boomers Retire? (PDF)
33 pages. Excerpt: "Although the shift in demographics caused by that group's retirement from the workforce might affect the U.S. economy in many ways, this background paper focuses on what could happen in just one area: the demand for assets, particularly financial assets, such as stocks and bonds. Some economists have warned of the possibility of a dramatic decline in demand as baby boomers sell off their assets to finance consumption in retirement; they assert that the sell-off could cause a dramatic decline in prices. An evaluation of the evidence, however, indicates that such a dramatic decline in asset demand and prices is unlikely." (U.S. Congressional Budget Office)


New York Local Government Pension Woes Worsen
Excerpt: "The financial troubles for local governments worsened . . . when Comptroller Thomas DiNapoli announced they will need to pay 61 percent more in pension costs in 2011. Although anticipated, the announcement did little to quell concerns of town, village and county governments, which are already grappling with declining sales-tax revenue and higher costs for health insurance and state-mandated programs. The pension fund for public workers will increase in 2011 from 7.4 percent of payroll to about 12 percent, slightly higher than projections a few months ago, DiNapoli said." (Rochester Democrat & Chronicle)


State Correctional System Officers' Retirement Programs: Results from a 50-state survey
Excerpt: "The National Conference of State Legislatures surveyed legislative staff and public pensions system staff of the 50 states and the District of Columbia in July and August, 2009, on their provisions for retirement benefits for correctional system employees. Thirty-one responses were received. . . . Responses are reported by question and state." (National Conference of State Legislatures)


Why Do Investors Sit Tight in 401(k)s?
Excerpt: "There are bears. There are bulls. And there are sitting bulls. These are the legions of 401(k) investors who don't merely buy and hold; they buy, hold and sit stock-still. Even as the U.S. stock market fell 55% between October 2007 and March 2009, these people barely budged. Among the more than three million 401(k) participants served by Vanguard Group, 17% were 100% in stocks in 2007; at year-end 2008, 16% still were. Of the 11.2 million participants served by Fidelity Investments, 15% still have every penny in their 401(k) invested in stocks, including 14% of those between the ages of 60 and 64. The sitting bulls present a problem for hedge-fund managers and other professional investors who have argued that all it would take to shake individual investors' grip on stocks was a good old-fashioned bear market." (The Wall Street Journal)


Fund Industry Fires Back in Supreme Court Fund Fee Case
Excerpt: "Harris Associates, the Investment Company Institute, the Mutual Fund Directors Forum and the U.S. Chamber of Commerce fired their first salvos in the Supreme Court fee case through separate briefs, claiming that market forces and diligent fund trustees keep fees low and negotiated at 'arm's length' bargaining between the investment advisor and the board. They also argue that due to the greater service afforded to retail investors, institutional fees are understandably lower. The case that the Supreme Court is scheduled to hear in November, Jerry N. Jones et al. v. Harris Associates LP, claims that the Oakmark Funds charge individual investor excessive fees. District and federal courts ruled in favor of Harris, but a judge for the Appeals Court for the Seventh Circuit kicked the case over to the Supreme Court, saying that only in cases of fraud have investors ever won. Harris Associates wrote, 'The growth of the mutual fund industry has created a powerful check on fees: Investors are free to transfer their dollars elsewhere.'" (Financial Planning)


[Opinion]
American Benefits Council Comment on Proposed Amendments to Certain Rules Governing Money Market Funds (PDF)

2 pages. Excerpt: "Because of the importance of these funds to retirement plans, the Council commends the SEC's efforts to significantly strengthen the regulatory framework for money market funds to increase their resilience to economic stresses. The Council strongly supports strengthening these rules. The Council is concerned, however, about one proposal raised by the SEC. The proposed regulation requests comments on the possibility of eliminating the ability of money market funds to use the amortized cost method of valuation, resulting in a floating net asset value ('NAV') instead of a fixed $1.00 NAV. The Council believes that other changes proposed would result in less risk to the participant investing in the fund at the same time that a floating NAV would create an impression of more risk since, previously, 'breaking the buck' was a sign that the money market fund was significantly unstable." (American Benefits Council)


[Opinion]
American Benefits Council Letter on Effect of Potential Decline in CPI-U on the 2010 Retirement Plan Limits (PDF)

5 pages. Excerpt: "The American Benefits Council (Council) is submitting this letter in connection with the forthcoming announcement of the retirement plan limitations for 2010. . . . As you know, various dollar limits with respect to retirement plans are adjusted annually based on the Consumer Price Index for July, August, and September (the Third Quarter CPI-U). The affected provisions include, among others, Code sections 401(a)(17), 402(g), 408(k), 408(p), 409, 414(q), 415(b), and 415(c) (collectively, the Limits). It is possible that the 2009 Third Quarter CPI-U will fall from 2008 levels, and we understand that the Internal Revenue Service is actively considering whether all or some of the 2010 Limits will be less than the 2009 Limits in the event of such a decline. As discussed in detail [in this letter], the Council strongly believes that a decline in the Limits would send the wrong message about the importance of retirement saving and that the law is best interpreted to preclude a year-over-year decline in the Limits." (American Benefits Council)


[Opinion]
Will Congress Pull the Plug on ESOPs?

Excerpt: "[The ESOP Promotion and Improvement Act of 2009] was recently introduced in the U.S. Senate and would make beneficial changes in the ESOP law. Let's call that the 'Good News.' Now, it's time to advise you of what could become the 'Bad News.' The Congressional Budget Office ('CBO') recently released a list of 188 options that would either decrease federal spending or increase federal revenue. . . . They are intended to advise Members of Congress on areas where revenue might be raised. The budget options include the possible elimination of the special ESOP tax advantages." (Warner Norcross & Judd LLP)



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Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Your Employee Benefits and the FTC's New Red Flag Rules

Excerpt: "Are the employee benefits that your company offers subject to the new Red Flag Rules? Under new guidance issued by the FTC, the answer is probably not. But if your cafeteria plan includes a Flexible Spending Arrangement (FSA) benefit with a debit card, you may want to take some steps to ensure that the third party administrator issuing the debit card is in compliance with the Red Flag Rules by November 1, 2009. You may also want to take similar steps with the trustee of your 401(k) or other pension benefits." (Warner Norcross & Judd LLP)


[Guidance Overview]
Towers Perrin Monthly Regulatory Round-Up on Executive Compensation, August 2009 (PDF)

Towers Perrin Monthly Regulatory Round-Up on Executive Compensation, August 2009 2 pages. Excerpt: "The Monthly Regulatory Round-Up is a high-level summary of legal and regulatory developments that occurred during July 2009 that may be relevant to large employers. Developments are sorted according to federal legislative developments, federal regulatory guidance, other developments (e.g., significant litigation, studies, select state law developments)." (Towers Perrin)


IRS Request for Comments on Extension of Information Collection Concerning Form 5558
Excerpt: "The IRS is seeking comments on proposed and/or continuing collection of information concerning Form 5558, Application for Extension of Time to File Certain Employee Plan Returns. The form is used by employers to request an extension of time to file the employee plan annual information return/report (Form 5500 series) or the employee plan excise tax return (Form 5330). The data supplied on Form 5558 is used to determine if such extension of time is warranted." (Wolters Kluwer)


Employers Struggle with Communicating Benefits Cuts
Excerpt: "Salary freezes, salary cuts, shortened workweeks, halting 401(k) matches and layoffs are almost a daily event in many business sectors as employers navigate the tough economy. Employees are aware of the economic downturn, but experts say companies still should tread carefully when deciding how to communicate changes that usually mean less money in employees' pockets. Transparency, without the spin, is a best practice for companies that are scaling back, says Nicole Melton, a Philadelphia-based senior consultant and communication practice leader with Watson Wyatt Worldwide. 'We want [employers] to be straightforward and empathetic,' she says. 'Be candid.'" (Workforce Management; free registration required)


IRS Tax Relief to Victims of Severe Storms, Flooding, and Straight-Line Winds in Kentucky
Excerpt: "The IRS has announced tax relief for taxpayers who reside or have a business in the federal disaster area of Jefferson county in Kentucky affected by severe storms, flooding, and straight-line winds on August 4, 2009." (Wolters Kluwer)



Webcasts and Conferences

"EFAST2: The Future of Form 5500" in Cincinnati
in Ohio on October 6, 2009
presented by SunGard Relius

"EFAST2: The Future of Form 5500" in Seattle
in Washington on October 1, 2009
presented by SunGard Relius

"ERISA Workshop" in Seattle
in Washington on October 2, 2009
presented by SunGard Relius

"Plan Forms, Notices, and Amendments: Streamlined, Effective, and Timely" in Cincinnati
in Ohio on October 6, 2009
presented by SunGard Relius

"Plan Forms, Notices, and Amendments: Streamlined, Effective, and Timely" in Seattle
in Washington on October 1, 2009
presented by SunGard Relius

Analysis of HIPAA Privacy Breach Notification Regulations
Nationwide on September 2, 2009
presented by Gallagher Benefit Services, Inc.

Measuring the ROI of Health Risk Management Webcast
Nationwide on September 24, 2009
presented by International Foundation of Employee Benefit Plans

New HIPAA Breach Notification Rules: Get Ready for a Quick Effective Date
Nationwide on September 9, 2009
presented by EBIA / Thomson Reuters

(Click to post your webcast or conference)

Press Releases

PSCA Applauds New Retirement Plan Guidance
Profit Sharing/401(k) Council of America (PSCA)

National Save for Retirement Week Takes Place October 18-24
ICMA Retirement Corporation

Morningstar Launches Target-Date Fund Series Ratings and Research Reports
Morningstar, Inc.

Commonwealth Financial Network Selects Fiduciary360 to Train Fee-Only Financial Advisors
Fiduciary360 (fi360)

How State and Local Governments Are Funding Retiree Health Obligations
Center for State and Local Government Excellence

Search by Fund Manager, Record Keeper and Broker; Actuary Reports Available in Pensionanalytix.com
Pension Analytix Inc.

(Click to post your press release)

Employee Benefits Jobs

Relationship Manager
for Huntington National Bank
in IN, MI, OH

Pension Administrator
for Chambers Benefit Group
in NM

VP, Tax-Exempt Sales
for Prudential Financial
in CT

Retirement Plan Consultant
for The Retirement Advantage, Inc.
in GA

General Clerk/Receptionist
for Laborers' National Pension and Retirement Funds
in DC

Plan Administrator
for Independent Pension Consultants, Ltd.
in MN

(Click to post your job opening | View all jobs | RSS feed for jobs RSS feed of all jobs )


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