Retirement Plans Newsletter |
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| October 9, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Official Guidance]
Final IRS Regulations -- 318 Pages -- on Use of Funding Balances for Single-Employer Defined Benefit Plans, and Benefit Restrictions for Certain Underfunded Plans (PDF)
Scheduled for publication in the Federal Register on October 15. Excerpt: "These regulations reflect provisions added by the Pension Protection Act of 2006, as amended by the Worker, Retiree, and Employer Recovery Act of 2008. . . . Section 412 provides minimum funding requirements that generally apply for pension plans (including both defined benefit pension plans and money purchase pension plans). PPA '06 makes extensive changes to those minimum funding requirements for defined benefit plans that generally apply for plan years beginning on or after January 1, 2008. Section 430, which was added by PPA '06, specifies the minimum funding requirements that apply to single employer defined benefit pension plans (including multiple employer plans) pursuant to section 412. Section 436, which was also added by PPA '06, sets forth certain limitations on benefits that may apply to a single employer defined benefit plan based on its funded status. Neither section 430 nor section 436 applies to multiemployer plans. . . . The final regulations under section 430 apply to plan years beginning on or after January 1, 2010, regardless of whether section 430 applies to determine the minimum required contribution for the plan year. For plan years beginning before January 1, 2010, plans are permitted to rely on these final regulations for purposes of satisfying the requirements of section 430. This reliance applies section by section under the final regulations. Alternatively, for plan years beginning before January 1, 2010, plans are permitted to rely on the proposed regulations . . . . The final regulations under section 436 apply to plan years beginning on or after January 1, 2010. For plan years beginning before January 1, 2010, plans are permitted to rely on the provisions set forth in these final regulations for purposes of satisfying the requirements of section 436. Alternatively, for plan years beginning before January 1, 2010, plans are permitted to rely on the proposed regulations . . . ." (Internal Revenue Service)
[Guidance Overview]
IRS Releases Funding and Benefit Restriction Regulations (PDF)
2 pages. Excerpt: "The IRS has released final regulations on certain aspects of minimum funding requirements and benefit restrictions. The regulations address many open issues and provide some approaches that will be welcomed by plan sponsors, but they also leave many issues open to be addressed by future regulations. The effective date of the regulations is plan years beginning on or after January 1, 2010, and they can be relied upon for earlier periods. The regulations are over 300 pages long and are quite technical in many areas. Based on our initial review, the key changes from the proposed regulations that should be of most interest to plan sponsors are summarized . . . ." (Towers Perrin)
[Guidance Overview]
Fiduciaries Again Defeat ERISA Stock Claims at Trial in Brieger et al. v. Tellabs, Inc. (PDF)
3 pages. Excerpt: "In Tellabs, the corporate and fiduciary defendants secured another complete victory, proving, once again, that stock drop cases are eminently winnable if the defendants, and their carriers, are willing to stay the course and allow the trier of fact to hear the evidence." (Professional Liability Underwriting Society via Morgan, Lewis & Bockius LLP)
[Guidance Overview]
IRS Permits Switchback to Smoothed Interest Rates for 2010
Excerpt: "The IRS recently provided guidance allowing pension plan sponsors the freedom to select a different yield curve basis for 2010 valuations from what is used for 2009. Here we explain why this is great news for plan sponsors and which options most sponsors should avail themselves of." (JPMorgan Chase & Co.)
[Guidance Overview]
IRS Guidance on 2009 Waivers of Required Minimum Distributions; DOL Says Summary Prospectus Satisfies ERISA Section 404(c) (PDF)
3 pages. Excerpt: "The IRS has issued Notice 2009-82 providing needed guidance for employers on the waiver of 2009 required minimum distributions (RMDs), including sample plan amendments. The guidance also provides plan operational relief for the period of January 1, 2009 through November 30, 2009, rollover relief until November 30, 2009, and Q&As that address miscellaneous issues related to the waiver of 2009 RMDs. Separately, the DOL issued Field Assistance Bulletin (FAB) 2009-3 providing that the prospectus requirement for ERISA Section 404(c) compliance can be satisfied by furnishing participants with a 'Summary Prospectus,' a new short-form prospectus approved by the Securities and Exchange Commission (SEC) earlier this year as part of its enhanced disclosure framework for mutual funds." (Buck Consultants)
Outsourcing Pension Longevity Protection
Excerpt: "Steadily improving mortality rates are boosting pension liabilities, and plan managers are starting to evaluate ways to handle this exposure. We explore the impact of increasing longevity on pension plans and what can be done about it. Responses include plan design changes, transferring this risk to an insurance company, and development of strategies to hedge this risk without completely eliminating it." (Pension Research Council; registration required to download fulltext of paper)
Rebuilding Workers' Retirement Security: A Labor Perspective on Private Pension Reform
Excerpt: "This chapter surveys the issues facing policymakers and workers' organizations thinking about rebuilding a viable retirement security system in the United States, in the context of declining defined benefit coverage and persistent serious flaws in defined contribution plans. The chapter lays out principles for a universal system of supplemental retirement income coverage based on mandatory contribution levels, mandatory portability, limitations on early withdrawals, and annuitization. The structure outlined envisions continued participant and employer choice of both investment strategy and benefit design, with incentives built in for collective asset management." (Pension Research Council; registration required to download fulltext of paper)
Consideration of DB Features for DC Plans Guide from the NAGDCA Automation of DC Plans Taskforce (PDF)
17 pages. Excerpt: "The Task Force prepared the . . . document in four sections to address the different elements of the DB-type plan features currently being implemented or considered by DC plans . . . ." (National Association of Government Defined Contribution Administrators, Inc.)
Hardship Requirement in Proposed Safe Harbor 401(k) Regs Too Harsh, According to Witnesses at IRS Hearing
Excerpt: "Witnesses at an IRS hearing on September 23, 2009 urged the IRS to remove the requirement in proposed regulations that employers maintaining safe harbor 401(k) plans prove 'substantial business hardship' before reducing or suspending required nonelective 401(k) plan contributions. Both individuals offering testimony, Jason Bortz, representing the American Benefits Council, and Robert Richter, vice president of Sunguard, and commenting on behalf of the American Society of Pension Professionals and Actuaries (ASPPA), also called for eliminating the proposed regulations' additional supplemental notice requirements because they are too complex and unnecessary." (Wolters Kluwer)
Seven Qualitative Due Diligence Factors in Investment Selection
Excerpt: "A good due diligence process begins by measuring investments using quantitative factors against set benchmarks and in relation to peers. The fi360 Fiduciary Score, for example, is calculated using eleven quantitative factors that we consider to be the minimum due diligence criteria that you should use when evaluating an investment. But in addition to quantitative analysis, fiduciaries should consider applying qualitative factors, which can help detect organizational instability. Organizational instability, over time, usually leads to underperformance.' (Investment News; free registration required)
Hispanics at Disadvantage on Saving for Retirement, According to Report
Excerpt: "An Insured Retirement Institute (IRI)-sponsored report suggests that Hispanic Americans continue to disproportionately face financial hurdles in preparing for retirement. According to the report, Hispanic retirement savings rates are falling. Recent data shows that 41% of Hispanic workers say they have saved money for retirement (outside of their work or otherwise), compared to 60% in 2003." (PLANSPONSOR.com; free registration required)
The Continuing Debate Over Adding a Mutual Fund Option to Federal Retirement Investment Plan
Excerpt: "[The passage in June of a tobacco regulation bill (H.R. 1256) included several measures affecting federal employees.] The House bill included sweeping changes to the Thrift Savings Plan, including a new Roth IRA feature, spousal accounts to ensure that survivors of TSP enrollees can maintain their funds, and an automatic enrollment provision that is expected to swell the ranks of plan participants. But the bill's most controversial reform was a measure allowing - but not requiring - the TSP's governing body to create a means for participants to put part of their investments in mutual funds." (GovernmentExecutive.com)
Compromise Defense Authorization Bill Measure Advances Retirement Reforms
Excerpt: "House-Senate negotiators included a number of pay and retirement provisions in a compromise version of the 2010 Defense authorization bill, overcoming the objections of Republican senators who blocked the language from the Senate version of the bill. The conference report, approved on Wednesday morning, includes a provision that would allow workers in the Federal Employees Retirement System to count unused sick leave toward their retirement. The provision would be phased in over a four-year period. Until Dec. 31, 2013, employees would receive 50 percent credit for unused sick time; they would receive full credit beginning on Jan. 1, 2014." (GovernmentExecutive.com)
Cost-Cutting Moves at Computer Sciences Corp. Have Included Freezing the Company's Pension Fund and Ditching Executive Car Perks
Excerpt: "[To mitigate the effects of capping the earned benefit of the defined benefit pension plan] to the U.S. employee population, we took a big portion of our savings and enhanced our contribution to the 401(k). We literally doubled our match in the 401(k) program, which in today's workforce is probably more meaningful. That's because, unlike for our forefathers, in today's world it's unlikely that the younger employees will spend their length of service with any one company. The workforce is much more mobile, company-to-company, and the 401(k) program is more meaningful because they can take their contributions with them." (CFO.com)
New York State Attorney General Wants to Revoke State Comptroller's Control Over New York's Pension Fund
Excerpt: "Cuomo has proposed new legislation that creates a 13-person board of trustees, which collectively would control pension fund decisions. Currently, one person -- state Comptroller Thomas DiNapoli -- has that power. New York is one of at least four states that have sole trustees of their pension funds, along with Michigan, North Carolina and Connecticut, according to the National Association of State Retirement Administrators. Most states use boards to manage pension funds." (The Business Review (Albany) via bizjournals.com; free registration required)
[Opinion]
Groom Law Group Comments on FBAR Filing Requirement for Pension Plans (PDF)
20 pages. Excerpt: "We write to respond to the Treasury's request for comments regarding FBAR and the accompanying instructions. As noted in our July 29, 2009 letter and discussed in more detail below, the policy goals of FBAR - to detect and prevent taxpayers from hiding assets offshore to avoid income taxes or launder money - are not advanced by requiring U.S persons to file an FBAR with respect to 'foreign financial accounts' held by or for the benefit of Plans. Nevertheless, Treasury may expect at least a 40 percent increase in annual FBAR filings (nearly 75,000 additional filings) from Plans qualified under Code section 401(a), which would test IRS's already limited resources to identify violators. Thus, we respectfully make the following recommendations . . . ." (Groom Law Group)
[Opinion]
Pension Accounting Committee Comments Concerning Exposure Draft 2009/10, Discount Rate for Employee Benefits (Proposed Amendments to IAS 19) (PDF)
2 pages. Excerpt: "Because Academy members' practice primarily involves financial reporting under the standards of the Financial Accounting Standards Board, rather than the IASB, we have limited our comments to those areas where our experience might be relevant to the board's deliberations or where there is an opportunity to further the goal of converging standards." (American Academy of Actuaries)
[Opinion]
Why It's Time to Retire the 401(k)
Excerpt: "If you have even peeked at your account statements in the past year, it's painfully obvious that something is wrong with the way we save. The tax-deferred 401(k) plan, and others like it, such as the 403(b) and the IRA, have become our nation's go-to retirement piggy bank. Invented nearly 30 years ago as an executive perk -- one more way to dodge Uncle Sam -- the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation's retirement system. But propelled by a combination of companies looking to cut costs and consumers who wanted control of their retirement destiny, that's exactly what happened." (Time Inc.)
[Opinion]
Generational Battle Brews Over Gilded Public Employee Baby-Boom Pensions
Excerpt: "Generation X and Gen Y are getting fed up and might not take much more. That's what I'm hearing from a number of younger public employees who responded to my column last month on the incumbent employee conundrum. The gist of their feedback was this: They don't appreciate bearing the brunt of pay cuts and benefits reductions -- the ones imposed by employers who try to balance the books on their pension and retiree medical plans by slashing compensation for younger employees and new hires. They'd like to see their elders share in the pain -- or at least pay their share." (Governing.com)
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Links to Items on Executive Comp, Benefits in General
The 2009 Top 250 Survey on Long-Term Incentive Grant Practices for Executives (PDF)30 pages. Excerpt: "Key findings from the Frederic W. Cook & Co. 2009 Top 250 report include the following: The shift from the use of stock options (and stock appreciation rights) and time-vesting restricted stock awards to long-term performance awards (performance shares and performance units) appears to have stabilized, though long-term performance awards continue to grow in prevalence. Long-term performance awards are almost as common as stock options (combined with stock appreciation rights). Design variations to 'plain vanilla' stock options remain virtually extinct. Vesting periods of awards remain fairly stable while performance periods for performance awards have decreased slightly. Use of profit measures in long-term performance plans has increased in prevalence and remains the most widely used performance measure category." (Frederic W. Cook & Co., Inc.)
Employee Benefits Attorney Nick Ferrigno Dies at 50: A Life Well-Lived
Nicholas William Ferrigno, Jr. 50, died September 28. His friend and employee benefits colleague Frank J. Bitzer tells us more. (Frank J. Bitzer, Esq.)
President's Advisory Council on Financial Literacy to Meet November 3
Excerpt: "The President's Advisory Council on Financial Literacy will convene a meeting which will be open to the public. The purpose of this meeting is to discuss the Council's priorities and how it can best advise the President and the Secretary of the Treasury. The Department of Treasury will also provide an update about the status of the recommendations made by the Council in January 2008. . . . The public is invited to submit written statements to the Council." (International Foundation of Employee Benefit Plans)
Short List of Important Dates to Remember
Excerpt: "The [list] provides insurance agents/brokers, employers and benefits professionals a checklist of key upcoming dates and deadlines related to health benefits. This does not constitute all of the deadlines applicable to employers and some deadlines may be different based on variations in plan year or plan design." (Infinisource)
[Opinion]
What Do You Mean by Compensation Plan Risk?
Excerpt: "The following are a few very simple examples of compensation program features that could provide too much incentive for executives to take risk or otherwise manipulate financial results: The Company's annual (or long-term) bonus plan that provides for a payout equal to 100 percent of base salary if the Company achieves a specified EPS Target -- and no payout if the Company fails to achieve that target. Executives are already under enormous pressure to achieve announced or expected EPS figures. This all-or-nothing approach would only exacerbate the problem. Instead, the Company should consider bonus payouts at 90 percent of base salary for achieving EPS that is barely below the Target and straight-line interpolation downward for other, lesser performance targets." (Michael Melbinger via Winston & Strawn LLP)
Webcasts and Conferences
Pharmacy Benefitsin Georgia on October 15, 2009
presented by WEB (Worldwide Employee Benefit Network) Atlanta Chapter
Re-Envisioning Retirement Security Conference
in District of Columbia on October 21, 2009
presented by Retirement USA
(Click to post your webcast or conference)
Press Releases
U.S. Department of Labor Sues Defunct Cherry Hill, N.J., Company to Protect Participants of Abandoned Retirement PlanU.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Towers Perrin Health Care Cost Survey Shows Employer-Sponsored Medical Benefit Costs to Rise 7% in 2010 to Over $10,000 for the First Time
Towers Perrin
TIME Cover Story on 401(k)s Highlights Proposals to Be Discussed at October 21 Conference
Pension Rights Center
Bankrupt Retailer Appoints Independent Fiduciary on 401k Plan
Matthew D. Hutcheson, LLC
New Study Reveals Significant Challenges Hispanic Americans Face in Preparing for Retirement
Americans for Secure Retirement (ASR)
Creative Plan Designs, Inc. Is Certified To Industry Best Practices
Centre for Fiduciary Excellence (CEFEX)
American Century Investments Launches Collective Trust Program
American Century Investments
ING Unveils New Platform and Support Program for TPA Partners
ING Retirement Services
Expansion of Health Coverage as Safety Net for Young Adults
Green & Seifter, Attorneys, PLLC
New Book: The AARP Retirement Survival Guide
Sterling Publishing Co., Inc
(Click to post your press release)
Employee Benefits Jobs
Employee Benefits Paralegalfor Trucker Huss, APC
in CA
Senior Consultant - H&W, Qualified Plans and Executive Comp.
for Mahoney&Associates
in FL
Retirement Plan Relationship Manager
for Fiserv ISS
in CO
Senior Consultant
for The Segal Company
in CA
Retirement Sales Wholesaler - Inside Sales
for ExpertPlan, Inc.
in NJ
Rollover Sales Consultant
for RolloverSystems, Inc.
in CA
Account Manager
for Nova 401(k) Associates
in TX
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