Retirement Plans Newsletter |
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| October 12, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Guidance Overview]
IRS Guidance on Safe Harbor Distribution Notices; Automatic Enrollment/increase Arrangements; Contribution of Unused Paid Time Off to Qualified Plans
Excerpt: "The IRS recently published a myriad of guidance concerning new safe harbor rollover notices, additional information on automatic enrollment/increase arrangements and the contribution of unused paid time off to qualified plans. Here we review the rulings and notices." (JPMorgan Chase & Co.)
[Guidance Overview]
Will My Client Be Able To Navigate IFILE? More FAQs on EFAST2
Excerpt: "[Addressed here are] the issues and procedures with which the 5500 preparers and plan sponsors will need to familiarize themselves to make the transition to electronic filing. Many 5500 preparers expect the transition to mandatory electronic filing to be difficult. The primary reason for this concern is that clients (plan sponsors) will need to obtain and enter filing signer credentials electronically. Some 5500 preparers also are considering preparing the Form 5500 (in this article, references to Form 5500 include the schedules and attachments) on their desktop software and then sending it to their client to file using the DOL's IFILE system. In this article, we address the issues that a 5500 preparer will need to consider in determining whether having the client file under IFILE is a feasible option." (SunGard Relius)
[Guidance Overview]
Pension Calculation Dispute Thrown Out on Appeal
Excerpt: "Three pension participants who sued their employer over a pension calculation dispute can't pursue their claims because they have no written proof the employer misrepresented plan rules, a court has ruled. The 2nd U.S. Circuit Court of Appeals, in issuing that decision, upheld a ruling by U.S. District Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of New York." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
Plan Termination 2009: Updated the Document First
Excerpt: "To terminate a plan always requires bringing it up-to-date with any law and regulatory changes that occurred since the document was last updated." (McKay Hochman Co., Inc.)
[Guidance Overview]
IRS Model 402(f) Notice: What's New
Excerpt: "Section 402(f) of the Internal Revenue Code (the Code) requires an administrator of a qualified plan and 403(b) arrangement to provide a written explanation prior to the distribution of an 'eligible rollover distribution.' Contents of the 402(f) notice must include a description of the direct rollover rules, the participant rollover rules, and the mandatory 20% federal income-tax withholding rules for eligible rollover distributions that are not rolled over. The notice also explains other taxation rules involving distributions and rollovers and has always been a great source of tax information for participants." (McKay Hochman Co., Inc.)
[Guidance Overview]
Towers Perrin Monthly Retirement Regulatory Round-Up, September 2009 (PDF)
5 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)
Retirement Planning Beyond the Longevity Tables
Excerpt: "WHEN financial markets began to plummet two years ago, many retirees faced the very real prospect of outliving their money. As a solution, many academic researchers have long advocated 'fixed life annuities': investment vehicles that pay a set amount each year until the investor -- or, sometimes, a spouse -- dies. These annuities are not to be confused with a range of other products with 'annuity' in their names, including many known loosely as 'variable' annuities. Most of these other products don't directly address retirees' risk of outliving their money. These vehicles also generally exact higher fees. Only a tiny minority of the products sold as annuities in the United States are of the 'fixed life' variety, enjoying that academic seal of approval." (The New York Times; free registration required)
Retirement Income: Fundamental Issues
Excerpt: "A number of issues are covered by the phrase 'retirement income' - annuities vs. lump sums, defined benefit (DB) vs. defined contribution plans (DC), adequacy and 'leakage' all come to mind. Overarching all these issues is the question: will American workers have enough money for their retirement years? And in that regard, a central issue is - what is the role of the individual, the employer and the government in making sure they do? . . . In this article, we review what we consider to be the retirement income 'basics' in the United States: (1) competing theories of adequacy (that is, what should the retirement income target be?); (2) key priorities from both the participant's and the sponsor's point of view; and (3) the role of the employer and the government (via Social Security and Medicare) in providing retirement income." (JPMorgan Chase & Co.)
Selecting and Documenting Mortality Assumptions for Pensions (PDF)
29 pages. Excerpt: "This practice note was prepared by the Pension Committee of the American Academy of Actuaries (Academy) to provide information to actuaries on current and emerging practices in the selection and documentation of the mortality assumptions for measuring obligations of defined benefit pension plans and other post-retirement benefits plans. It represents collective, but not unanimous, views of the individual members of the Committee. The intended users of this practice note are the members of actuarial organizations governed by the Standards of Practice of the Actuarial Standards Board." (American Academy of Actuaries)
What's a More Typical 401(k) Balance: $12K or $86K?
Excerpt: "Several readers asked how is it possible that the typical U.S. worker had an average balance of $86,513 in their 401(k) account at the end of 2008, based on data this week published by the Employee Benefits Research Institute and the Investment Company Institute. . . . [Response from Dallas Salisbury of the Employee Benefit Research Institute:] Great question. That is why the report provides all of the numbers for all participants by many factors including age, tenure, etc. And, for two continuous groups. In the report, those 2003 to 2008 and in the appendix, 1999 to 2008. And, as the comment above notes, the data for those over 60 with over 30 years of tenure provides a picture of what these programs can do for a full career worker. Any average is misleading, but using many averages for different groups, and also publishing medians, allows the user to get a complete picture. Just the facts is the role of EBRI. Not advocacy of what should or should not be. I encourage everyone to look at the detailed study to compare themselves to those fitting their income, age, tenure, to see how you are doing in relative terms." (BusinessWeek)
Congress Extends Retirement Benefits for Tens of Thousands of Current and Former Civil Servants
Excerpt: "The Senate-House Defense Authorization Act contains three big legislative wins that were long shots just a few weeks ago. Lobbyists and aides to friendly Democratic and Republican legislators toned down the usual rhetoric last week while deals were made behind the scenes." (The Washington Times)
Steep Losses Pose Crisis for Pension Funds: Cut Benefits or Take Greater Risks to Rebuild Assets
Excerpt: "The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees. The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both. Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade." (The Washington Post; free registration required)
Mixed Reaction to Attorney General Andrew Cuomo's Pension Fix for New York
Excerpt: "Attorney General Andrew Cuomo's push to create a 13-member oversight board to end pay-to-play in the state pension fund got mixed reviews Thursday. Three state senators, including Democratic leader John Sampson and Long Island Republican John Flanagan, appeared with Cuomo to support the bill, which essentially would eliminate the state controller as sole trustee of the fund. 'This bill will provide the necessary checks and balances to root out abuse and restore confidence in our state retirement systems,' Sampson said." (NYDailyNews.com)
[Opinion]
Book Review: 'The Smartest Retirement Book You'll Ever Read'
Excerpt: "The first problem is inflation. Even if it runs at a relatively tame 3 percent a year, the impact will be substantial. . . . Second, you'll need to figure out how to withdraw enough money during retirement to live the way you want, but without outliving your savings. [The author] sets out to deal with both topics, throwing in advice about other retirement issues like health care costs and estate planning." (The New York Times; free registration required)
[Opinion]
Five Major Public Pension Problems: One Simple Solution
Excerpt: "Unsolvable Problems: Expecting 8% returns in a 4% world. When 30 year treasury bonds are yielding 4%, the dividend yield of the S&P 500 is 2%, and the S&P 500 PE is 140 (26 if you use operating earnings), 8% returns are from Fantasyland. Pension benefits start too early. People are living longer. Private employees do not receive these kind of benefits. Public employees should not either, especially at taxpayer expense. Indeed, continuing to chase high-yield in a low-yield world is a guarantee those plans will blow up again down the road. Pension plans are so underfunded that it is virtually impossible to catch up, no matter what risks the plan managers undertake. When asked how long it would now take for its investments to put the fund back on track, Ohio officials simply said: 'Infinity.'" (Mike Shedlock)
[Opinion]
The Real Problem with Public Employee Pensions
Excerpt: "The Washington Post reports today ('Steep Losses Pose Crisis for Pensions') on the sorry state of funding in state and local employee pensions, focusing on the impact of recent poor stock returns. While a poor investment climate certainly hasn't helped, it's not the biggest reason public employee funds are in bad shape. A bigger reason the plans are underfund is that, in effect, we told them they can be. State and local pension plans use different and far less demanding accounting rules than do corporate pensions, even though public employee benefits are guaranteed by law while corporate pension benefits are not. The key issue is how to 'discount' future benefit obligations to the present, which tells us how much plans must have on hand today to fund their future liabilities. A high discount rate lowers the present value of a future obligation, while a low discount rate implies a higher present value." (American Enterprise Institute)
[Opinion]
When SunAmerica Opinion Was Published December 2001, It Was Clear That Something Big Had Just Happened
Excerpt: "Not only did the Labor Department sanction an arrangement that, for the first time, allowed an investment management firm to offer advice on its own funds and be paid for that advice -- even if that advice impacted the compensation received -- it made the effort to make that decision public; IMHO, signaling to the industry that the model sanctioned in the Advisory Opinion could serve as a blueprint for other investment firms (and advisers) to follow in those footsteps. Indeed, it was issued not as a prohibited transaction exemption in a specific situation (though that was what had been requested), but as an advisory opinion on the program's structure." (PLANSPONSOR.com; free registration required)
Retirement Solutions, LLC (Advert.)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]What is the Top-Paid Group Election?
Excerpt: "Even when using the 'top-paid group election' to determine highly compensated employees, the 5% owners rule must be considered since 5% owners may not be in the top 20% group. How can these rules be reconciled?" (McKay Hochman Co., Inc.)
[Guidance Overview]
Towers Perrin Monthly Regulatory Round-Up on Executive Compensation, September 2009 (PDF)
3 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)
Webcasts and Conferences
Retirement Plan Distributions Phone ForumNationwide on October 28, 2009
presented by Internal Revenue Service (IRS)
The "New" Miller Bill: How Will the 401(k) Fair Disclosure and Pension Security Act of 2009 Affect Plan Fiduciaries and Their Providers?
Nationwide on October 15, 2009
presented by Fiduciary Risk Management, LLC
(Click to post your webcast or conference)
Employee Benefits Jobs
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