Retirement Plans Newsletter |
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| October 19, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Guidance Overview]
Governance and Compliance Advisory Update for Retirement Plans: October 2009
Excerpt: "September saw an increase in significant retirement plan regulatory activity." (Towers Perrin)
[Guidance Overview]
In Pennsylvania, New Killed-in-Service Benefit Requires Immediate Action
Excerpt: "Providing what could be significant relief for many municipal police pension plans, Governor Edward G. Rendell signed Act 51 of 2009 into law on October 9, 2009. Effective immediately, Act 51 provides for a killed-in-service benefit to be funded by the Commonwealth of Pennsylvania equal to the monthly salary of the deceased officer, adjusted annually for the cost of living. The benefit is payable to the deceased's surviving spouse or, if there is no surviving spouse, to the deceased's minor children under the age of 18. If those children are attending college, they can receive the benefit up to the age of 23." (Ballard Spahr LLP)
[Guidance Overview]
2010 Dollar Limitations for Pension Plans Unchanged
Excerpt: "The IRS has announced the cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2010. The dollar limits that apply to qualified plans (and the 403(b) and 457(b) plan deferral limits) remain unchanged from 2009. Recently, practitioners had speculated whether any of the dollar limits actually would decrease for 2010, since the cost-of-living index for the quarter ended September 30, 2009, is less than the cost-of-living index for the quarter ended September 30, 2008. However, the IRS interpreted the applicable statutory provision (Code §415(d)) to mean that any decline in the applicable index cannot result in a reduced limitation. The . . . table summarizes the key dollar limits." (SunGard Relius)
[Guidance Overview]
Multiemployer Plan Wrongfully Suspended Retiree's Benefits After Misreading ERISA's 'Trade or Craft' Rule
Excerpt: "A multiemployer pension plan violated ERISA when it suspended a retired meat cutter's monthly benefit after he obtained employment as a baked goods independent distributor, the U.S. Court of Appeals in St. Louis (CA-8) has ruled in Eisenrich v. Minneapolis Retail Meat Cutters and Food Handlers Pension Plan. The determination of whether two jobs are included within the same 'trade or craft' under ERISA §203 must be based on the specific skills actually used by the retiree in the two jobs, and not the general classification of the two jobs." (Wolters Kluwer)
[Guidance Overview]
Tips Offered on Retirement Plan Changes
Excerpt: "The Internal Revenue Service will change tax forms to allow refunds to be automatically deposited into retirement accounts. Whether the money is directed at an individual retirement account or a defined contribution plan such as a 401(k), employers and their employees need to be sure not to exceed the annual contribution limits for these plans. In 2009, the limit on contributions by individuals to 401(k) plans is $16,500, and the limit on contributions to IRAs is $5,000, with certain exceptions." (The National Underwriter Company; free registration or paid subscription required)
[Guidance Overview]
Short Summary of Final IRS Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)
3 pages. (American Benefits Council)
Withdrawal Rate Strategies for Retirement Portfolios: Preventive Reductions and Risk Management
Excerpt: "This paper builds on the work of Stout and Mitchell (2006), Stout (2008), and Blanchett and Frank (2009) by creating a preventive approach to withdrawal management. Proactive strategies, which reduce the withdrawal rate before there are insufficient funds, are shown to significantly reduce the probability of ruin (shortfall) while maintaining the average withdrawal rate. The paper also explores the micro effects of strategy changes by dividing the simulation iterations into groups which have been positively or negatively affected by any particular change, and demonstrates that conventional reporting of the effectiveness of withdrawal rate management techniques can be improved by examining additional moments of the distribution. Data covers 1926-2008 and the mortality table is extended to 108 years." (Social Science Research Network)
Preserving Financially Sound Defined Benefit Pensions in Challenging Market Environments (PDF)
6 pages. Excerpt: "The severe decline in the financial markets has resulted in significantly higher contribution rates for many public plans at a time when sponsoring governments are under substantial fiscal stress. As a result, many governments are looking for strategies to mitigate this impact by managing contribution rates, changing benefits, or changing actuarial methods and assumptions. This paper discusses the advantage sand disadvantages of several approaches. However, care should be taken to understand the downside of these strategies and their likely long-term impact on plan funding." (Gabriel Roeder Smith & Company)
Employers Begin Driving the 401(k)
Excerpt: "Businesses are taking more control of workers' 401(k)s, retreating from the 30-year experiment with employees running their own accounts. Barclays PLC's Barclays Global Investors now urges employers to automatically direct 8% of workers' pay into 401(k) savings and build from there. T. Rowe Price Group Inc. in the past year has seen a sharp increase in plans moving all participants into target-date retirement funds -- even if those participants previously selected their own investments. Prudential Financial Inc. on Monday plans to announce a sweeping 401(k) package that, among other things, encourages employers to prohibit workers from borrowing against their retirement savings." (The Wall Street Journal)
Virginia Retirement System Defers Accounting Rule to Cut Costs
Excerpt: "The board of the Virginia Retirement System agreed to an accounting change that will save the government from large contribution rate increases to fund the plan for state employees, teachers, and other public employees. The Richmond Times-Dispatch reports that the Board of Trustees voted unanimously to suspend an accounting rule that requires the state to fund the retirement plan within 20% of its fair market value. Without the change, the state would have had to raise its contribution rate for state employees and public school teachers by almost 50%." (PLANSPONSOR.com; free registration required)
Retirement Income Products Fall Short of Retirees' Needs
Excerpt: "According to Fidelity, 85% of Americans aged 55-70 now value guaranteed monthly income more than above-average returns. In response to the need of pre-retirees for products that guarantee income and the impending retirement of the baby boom generation, retirement plan providers have continued to invest in income-oriented product innovation." (BusinessWeek)
Four in Five Investors Misusing Target Date Funds, AllianceBernstein Study Finds
Excerpt: "The study found that 76% of defined-contribution-plan participants who are using target date funds think these all-in-one investment options provide better performance than they could get if they selected individual mutual funds on their own. Eighty-six percent of all target date fund users plan to maintain or increase their investment in such funds. However, the same study found that only 19% percent of the more than 1,000 participants polled had put 80% to 100% of their assets in a target date fund - the way in which they are intended to be used. Sixty-percent of those investors don't want to put all of their assets in a single target date fund because they 'don't want to put all of their eggs in one basket,' according to a release issued by AllianceBernstein." (Investment News; free registration required)
Social Security $250 Payments' Debate Revs Up
Excerpt: "President Obama's plan to send $250 checks to more than 50 million Social Security recipients who won't get cost-of-living adjustments in January is gathering support in Congress, but outside experts and budget watchdogs say the payments are unjustified. . . . Experts on Social Security blasted the plan, both as a replacement for the COLA and as a way to stimulate the economy. Seniors don't deserve the money without inflation, they said, and don't need it as much as those laid off in the recession." (USA TODAY)
The Question of Moving 401(k) After-Tax Contributions to a Roth
Excerpt: "A financial newsletter has reported that the IRS has issued a private ruling that after-tax contributions to a 401(k) plan can be pulled out in a lump sum and rolled over to a Roth IRA without triggering income tax. I can find no confirmation of this on the IRS Web site or in any other venue. Can you confirm this? . . . The Internal Revenue Service issued what is known as a private-letter ruling late last year on this subject -- but its scope could be more limited than what the reader describes above, according to Robert S. Keebler, a certified public accountant in Green Bay, Wis." (The Wall Street Journal)
Proposed Colorado Public Employees Retirement Association Pension Fund Fix Includes Greater Contributions from Workers
Excerpt: "Government workers would have to contribute more of their salaries while getting less in benefits under a plan proposed Friday to rescue the foundering Colorado Public Employees Retirement Association pension fund. PERA is facing $27.5 billion in unfunded liabilities, threatening the long-term existence of the retirement plan. The proposal unanimously approved by the PERA board Friday would require association members -- who include teachers, state-government workers, judges, college employees and municipal workers -- to contribute an additional 2 percent in the form of smaller salary hikes in the future." (The Denver Post)
[Opinion]
American Benefits Council and ACLI Comments to IRS on Special Rules Governing Eligible Combined (DB(k)) Plans (PDF)
3 pages. Topics include Application of Accrual and Nondiscrimination Rules to Cash Balance Formula, Flexibility of Plan Design -- Contributions and Benefits above the Minimum, Determination of Final Average Pay, Notice Requirements, Annuity Contracts and Custodial Accounts. (American Benefits Council)
DATAIR Employee Benefit Systems, Inc. (Advert.)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]2010 Cost-of-Living Adjustments for Retirement, Social Security, and Health Benefits (PDF)
2 pages. (Milliman)
[Guidance Overview]
Cost-of-Living Adjustments for Transportation Benefits, Adoption Assistance, and More
Excerpt: "EBIA Comment: Employers with adoption benefit plans will need to confirm whether their plans automatically apply the latest limits or whether an amendment is needed to recognize the cost-of-living increases. If employers are applying the higher limits, they should communicate the increases to employees. (Transportation plan limits are unchanged for 2010, so employers will not need to consider or communicate any increases for those plans this year.) We note that, although 2010 parameters have been released for Archer MSAs, the Archer MSA pilot program expired at the end of 2007, which means that no new Archer MSAs can be established after that date unless Congress acts to extend the program again. Many who previously had Archer MSAs have switched to HSAs, which are generally more favorable." (Employee Benefits Institute of America)
[Guidance Overview]
Montana Supreme Court Upholds Award in Executive Pension Plan Case
Excerpt: "The Montana Supreme Court has upheld a $21.4 million award in a case filed by 15 retired Montana Power Co. executives whose supplemental retirement benefits were cut off in 2005 without notice. With a purchase agreement between NorthWestern Corp. of South Dakota and Montana Power Co. in 2002, NorthWestern Corp. assumed responsibility for the supplemental pensions offered to some Montana Power employees for taking early retirement. . . . However, after NorthWestern emerged from bankrup.tcy reorganization in late 2004, its board of directors decided to stop paying the supplemental pensions, without telling retirees." (PLANSPONSOR.com; free registration required)
[Guidance Overview]
Many Companies Need to Amend for 162(m) by Year End
Excerpt: "Many companies will need to amend their employment agreements, equity plans and awards, and other incentive plans and agreements by December 31, 2009, to preserve the deductibility of performance-based awards and amounts under Code Section 162(m) [the $1 million limit on public companies ability to deduct compensation payments to its named executive officers] in light of Rev. Rul. 2008-13." (Winston & Strawn)
Physical Exams for Executives: Effective? Inequitable?
Excerpt: "The theory is the extensive series of medical tests and exams are more likely to expose health risks, perhaps even life-threatening ones. Identifying these concerns early helps ensure executives aren't sidelined, thus minimizing chances for leadership disruptions and productivity losses. Considering this bundle of benefits, who would oppose executive physicals?" (Human Resource Executive Online)
Telework Programs Can Provide Myriad Benefits If Companies Get the Appropriate Policies in Place
Excerpt: "Technology has enabled telework programs to evolve beyond images of people dialing up in pajamas to remote workers tapping advanced collaboration tools that increase productivity and ensure business continuity. In some cases, disaster recovery plans have spawned well-structured and documented telework programs. But at the majority of companies, there are no formal telework policies in place, even as more and more workers go mobile. . . . Here are 10 simple steps that can help organizations advance their telework programs from ad hoc to admirable." (Network World)
Commuter Benefit Offerings Increase, According to Survey
Excerpt: "Despite concerns about cutting costs during the down economy, most employers are maintaining -- and in some cases increasing -- tax-free commuter benefits as part of their compensation packages, according to TransitCenter's 2009 Commuter Impact Survey. Eight months after the passage of the American Recovery and Reinvestment Act, which increased the amount of tax-free income employees could use to pay for their mass transit fares from $120/month to $230/month, TransitCenter found that over one-third (35%) of companies surveyed offer a tax-free commuter benefit, according to a press release. The announcement said employees at small businesses have been particularly enthusiastic about the increase in the tax benefit, with TransitCenter showing that 32% of the employees at its existing small business customers who were deducting the monthly maximum of $120 prior to the passage of the bill increased their deductions to above $120 after the bill's passage. The survey found flextime (33%), telecommuting (30%) and Transit (30%) are the top commute-related benefits offered by the surveyed companies. Seventy-two percent of respondents indicated they see tax-free commuter benefits as a way to help reduce their company's carbon footprint." (PLANSPONSOR.com; free registration required)
Employee Ownership Update for October 16, 2009
NCEO Executive Director Corey Rosen reports on the following: the S Corporation ESOP Promotion and Expansion Act of 2009 would provide tax benefits and establish an S corporation employee ownership assistance office at the DOL; the NCEO has developed a list that provides an analysis of employee ownership in the S&P 900 index of large- and mid-cap publicly traded companies; and ESOP companies can get employees and/or outsiders involved at the board level in a non-fiduciary advisory capacity. (National Center for Employee Ownership)
NCEO Provides New Data on Employee Ownership in S&P 900
The NCEO has completed an analysis of employee ownership in the S&P 900 index of large- and mid-cap publicly traded companies. Based on Form 5500 filings, we found 196 of the companies in the index had ESOPs or KSOPs (401(k)-ESOP combinations). Of these, 36 owned 5% or more of the company's outstanding shares. 19 companies had 401(k) plans that owned 5% or more of company shares out of 199 companies that had some company stock in their retirement plans. The data is available for purchase. (National Center for Employee Ownership)
Webcasts and Conferences
COBRA Compliance Workshopin Oregon on November 4, 2009
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
COBRA Workshop
in Oregon on November 5, 2009
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Employee Benefits Half-Day Conference
in Illinois on December 9, 2009
presented by Illinois CPA Society
Free Webcast! Tax-Exempt & Governmental Plan Consultant (TGPC): The Premier Credential for 403(b) and 457 Plan Professionals
Nationwide on October 27, 2009
presented by American Society of Pension Professionals & Actuaries (ASPPA)
Live Q & A Sessions With the IRS - - Defined Benefit and Defined Contribution
Nationwide on November 4, 2009
presented by American Society of Pension Professionals & Actuaries (ASPPA)
Online Enrollment Made Easy! Webinar Demonstrates How To Simplify Complex Benefits Enrollment
Nationwide on October 29, 2009
presented by Benefit Software Inc.
The Key To Improving Employee Morale - Personalized Employee Benefit Statement Webinar
Nationwide on October 29, 2009
presented by Benefit Software Inc.
Webinar: Improve Employee Morale - Produce Personalized Employee Benefit Statements In House On Your Own Computer
Nationwide on November 4, 2009
presented by Benefit Software Inc.
(Click to post your webcast or conference)
Press Releases
U.S. Department of Labor's ERISA Advisory Council Sets November MeetingU.S. Department of Labor, Employee Benefits Security Administration (EBSA)
benefitsCONNECT® and HSA Bank Partner to Simplify Health Savings Account Enrollment
Transcend Technologies Group, Inc.
World's First Global Pension Index Ranks Pension Systems of US and 10 Other Countries
Mercer
The Standard Launches New Retirement Savings Campaigns
The Standard
(Click to post your press release)
Employee Benefits Jobs
Client Services Managerfor AUL/OneAmerica Financial Partners, Inc.
in CA
Deputy / Associate General Counsel
for Lockheed Martin Investment Management Company
in MD
Sales Director
for Goldleaf Partners
in AZ, CO, FL, IA, ID, IL, IN, KS, MO, NE, NM, TX, WI
Client Services Manager
for Garnett-Powers & Associates, Inc.
in CA
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