Retirement Plans Newsletter |
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| September 21, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
ASC (Advert.)
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[Guidance Overview]
Proposal Updates Eligibility to Provide Actuarial Services to ERISA Plans
Excerpt: "The Joint Board for the Enrollment of Actuaries has released proposed amendments to the regulations governing the performance of actuarial services under the Employee Retirement Income Security Act (ERISA)." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
New Accounting Rules Expand 10K Disclosure for Defined Benefit Plans
Excerpt: "For fiscal years ending after December 15, 2009, employers who sponsor defined benefit pension plans must provide significantly greater disclosure about plan assets in their companies' financial statements. This disclosure is required by a new FASB Staff Position -- FSP FAS 132(R)-1 -- and they drill deeply into plan investment details. This includes providing information about investment policies and strategies, and identifying significant concentrations of risk for expanded categories of plan assets." (The Vanguard Group, Inc.)
[Guidance Overview]
Tax-Qualified Retirement Plans: Year-End Action Items and the HEART Act (PDF)
Excerpt: "[This] checklist describes potential year-end amendments and notices that may be necessary for tax-qualified retirement and savings plans. The list is not exhaustive, but is intended to provide a reminder of the general issues that may need to be reviewed and considered. Also included is information regarding the Heroes Earnings Assistance and Relief Tax Act of 2008 (the HEART Act) and its impact on qualified retirement plans. Although the HEART Act does not require plan amendments by the end of the year, its required changes should be considered now. Additionally, this LawFlash includes a reminder that 403(b) plans must update plan documents to comply with the final 403(b) regulations by December 31, 2009." (Morgan, Lewis & Bockius LLP)
[Guidance Overview]
Compensation Ratio Testing
Excerpt: "Under the Sec. 414(s) safe harbor definition, a nonstandard plan may use an alternative definition for the purpose of elective deferrals and allocating employer contributions provided the definition is reasonable, and is not designed to favor highly compensated employees (HCEs). A ratio compensation test is required anytime an exclusion from compensation is selected on a nonstandard prototype plan. (Keep in mind that standardized prototype plans may not make exclusions from compensation.) The ratio test involves showing that the average percentage of total compensation included for highly compensated employees as a group does not exceed the average percentage for nonhighly compensated employees (NHCEs) by more than a de minimis amount." (McKay Hochman Co., Inc.)
[Guidance Overview]
Listing of Current Retirement & Savings Initiatives
Excerpt: "The Obama administration is promoting retirement and savings. To do so, the IRS has issued a flurry of guidance to make saving and choosing a retirement plan easier by: Expanding opportunities for automatic enrollment in retirement plans, Making it easier to save tax refunds, Showing how employees can save payments they would receive for unused vacation or other similar leave in their retirement plan Helping employees and employers understand their: tax-favored rollover and other savings options and retirement plan design options." (McKay Hochman Co., Inc.)
[Guidance Overview]
Treasury Facilitates Workplace Retirement Savings
Excerpt: "Specifically, the new retirement savings initiatives: Permit 401(k) and profit sharing plans to allow contributions based on the dollar equivalent of unused vacation and sick leave, either on an annual basis or at termination of employment; Allow default 401(k) contribution percentages in automatic 401(k) contribution arrangements to increase annually based on the rate of increase in an employee's eligible pay or on dates other than the first day of the plan year; Allow employers to add automatic salary reduction contribution arrangements to their SIMPLE IRA plans and provide sample plan amendments to do so." (Sonnenschein Nath & Rosenthal LLP)
[Guidance Overview]
Answers to Readers' Questions About New Rules, Starting Jan. 1, Involving Roth Savings Plans
Excerpt: "[Sample question:] I opened a traditional IRA several years ago in anticipation of the 2010 rule changes. None of my IRA contributions were tax-deductible, because my income is too high. And the market meltdown has left the value of my IRA below the amount invested. I assume that for me -- and many others -- a conversion would involve no tax bite whatsoever. True?" (The Wall Street Journal)
What Does It Mean to 'Retire'?
2 pages. Excerpt: "It is puzzling why so many deferred compensation and retirement plans use the words 'retire' and 'retirement' in important ways, without defining those terms. It is doubly puzzling because the terms usually aren't intended to have their common meaning - that is, they don't mean when a person has ceased working for good, ready to fill her or his days with grandchildren or fishing, or both. Instead, the notion is usually that the person has terminated employment with the employer maintaining the plan, with some additional condition being met. That additional condition might be the employee having reached a particular age, or perhaps having reached a particular age and completed a certain number of years of employment. Or the term might be used simply to describe the time when a participant has chosen to have benefits commence (following termination of employment)." (Utz, Miller & Eickman, LLC)
Retirement Savings Sentiment and Behavior Among Select Age Groups: Survey Results (PDF)
37 pages. Excerpt: "Although the future is impossible to predict, preparing for it is essential: Workers in their 20s and 30s are not adequately preparing for retirement as other financial priorities take precedent; Life events may not be the only factor; lack of retirement education may also be a problem; Workers in their 40s tend to be the least confident in their retirement; 42 percent expect to rely on 401(k) and IRA accounts as their primary source of income in retirement, yet only 1-in-4 report having saved at least $100,000; Older workers also face their own set of challenges; A relatively high percentage of workers in their 50s have taken loans from their retirement plans; About half of workers in their 50s and one-third of those in their 60s state their greatest financial priority as either 'just getting by' or 'paying off debt'" (Transamerica Center for Retirement Studies)
Small-Business Owners Fret Over Large IRS Fines
Excerpt: "The source of the distress: tax-law changes made by Congress in 2004. At the time, lawmakers were worried that tax shelters, especially from large corporations, were costing the Treasury billions in revenue. To combat it, they imposed enormous fines on taxpayers who failed to tell the IRS of participation in any transaction the agency might consider a tax shelter. 'The fines are not for the shelter itself,' says Mr. Brucker, 'but merely for failing to file the form disclosing the transaction.' The penalty is $100,000 per offense, per year for individuals and $200,000 for businesses. In order to put teeth into the law, the provisions gave the IRS no leeway in imposing the fines and taxpayers no way to get them reviewed in Tax Court." (The Wall Street Journal)
Labor Market Uncertainty and Pension System Performance
Excerpt: "The financial market crisis has prompted policymakers to devote substantial attention to ways in which capital market risks shape pension performance, but few analysts have asked how shocks to human capital shape retirement wellbeing. Yet human capital risks due to fluctuations in labor earnings, employment volatility, and survival, can have a profound influence on pension accumulations and payouts. This paper reviews existing studies and offers a framework to think about how human capital risk can influence pension outcomes. We conclude with thoughts on how future analysts can better assess sensitivity of pension plan outcomes to a labor income uncertainty." (Pension Research Council; registration required to download fulltext of paper)
Inflation-Indexed Bonds Are Good for Retirement Plans As Well As the U.S. Dollar.
Excerpt: "U.S. pension fund trustees and retirement investors should take notice. What's bad for the Chinese would also be bad for you. A weaker dollar will eventually bring U.S. inflation, which is the bane of retirement investors. Pension funds and 457 accounts cannot keep up with inflation, especially with their bond portfolios. The 1970s proved that inflation is also the enemy of the U.S. stock market as companies must replace physical plant and equipment with higher-priced capital stock -- while competing with higher bond yields in the financial markets. Treasury Secretary Timothy Geithner has a potential weapon at his disposal that deserves more consideration than it's been given lately: He can increase the issuance of Treasury Inflation-Protected Securities (TIPS) to give investors better protection against inflation while bolstering the dollar. Treasury has already announced that it will sell more TIPS to the Chinese and other foreign purchases. Now it needs to make this a general debt management policy." (Governing.com)
Financial Crisis Reveals U.S. Retirement-System's Holes with Painful Clarity
Excerpt: "The destructive effects of the financial crisis may be waning, but your retirement account won't soon forget. Savers lost 40% or more in the downturn -- a collective $2.1 trillion disappeared from 401(k) and IRA assets in 2008 alone -- and while the recent stock-market recovery may feel good, it's done little to stem a mounting crisis in the retirement system in the United States. It's not just investments that are the problem: Social Security needs financial resuscitation, and the bursting of the housing bubble that helped spark the financial crisis vaporized the home equity many people were counting on to fund their golden years. Corporations are curtailing traditional pensions and older Americans are being forced to work longer to make up the difference." (MarketWatch, Inc.)
Labor Secretary Hilda Solis Says That Now There Is a Sheriff in Town - One That Talks As Though It Will Use Both a Carrot and a Stick
Excerpt: "While early bets are that the new leadership at DOL will set a different course (some say a very different course) than its predecessors, Borzi laid out a new and vigorous plan for the Employee Benefits Security Administration (EBSA) that she now heads. 'Right now we have a full plate,' she acknowledged, but it was clear that enforcement of the law and promises made will be a driving focus. 'The previous Administration focused on compliance assistance,' she noted, 'but that's only good if it is combined with strong enforcement.'" (PLANSPONSOR.com; free registration required)
Congress to Tackle Rule on Retirement Advice
Excerpt: "Now that the Department of Labor is scrapping a rule proposal that would have allowed brokers affiliated with financial-services firms to provide advice to 401(k) participants, Congress will move forward with legislation that would require that such advice be given by independent advisers, according to a key congressman. . . . The Pension Protection Act of 2006 would have to be changed in order for the Labor Department to issue the kind of investment advice rules Congress would support, [Rep. Robert] Andrews indicated. 'It will take statutory and regulatory change to create the goal of qualified independent investment advice affordable to every investor,' he said." (Investment News; free registration required)
MassMutual Financial Group (Advert.)
2009 Form 5500: Expanded Schedule C Disclosure Need help with prototype document services, participant notices, or DC specialized testing services? We’ve got you covered. Averaging over 20 years of retirement plan experience per person, MassMutual’s ERISA Advisory Services team is truly a group of industry experts. While our clients benefit from a broad range of services, you can benefit from our expertise as well. For more information on how MassMutual’s ERISA consulting experts can help your company, contact EASConsulting@massmutual.com. |
Webcasts and Conferences
Hospital And Physician Managed Care Contracting Update – Reimbursement Models, Negotiation Trends, And IssuesNationwide on October 15, 2009
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Press Releases
TIAA-CREF Institute Survey Shows Income Strategies, Advice and Healthcare Are Retirement PrioritiesTIAA-CREF Institute
Minority Owned Firm Enters Defined Contribution Retirement Plan Market
Retirement Plan Advisors
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