Retirement Plans Newsletter |
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| October 22, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
ASPPA (Advert.)
LIVE! ...on your Computer or Cell Phone! November 4th The ASPPA "Q & A Sessions with the IRS" - Defined Benefit and Defined Contribution With so much change in the air—these two sessions are "must attend" opportunities to hear candid comments from key IRS personnel. We’ll answer your questions about the new DB regulations and cover the latest activity on DC plans. Unable to attend this year’s annual conference? ...We’ve got the solution. For the first time ever, the Q&A Sessions will be streamed LIVE over the Internet. Watch from the convenience of your office. Or, call-in and listen on your cell phone! Year after year, the Q & A Sessions with the IRS offer some of the best takeaway information from the ASPPA Annual Conference. If you can’t be there in person, you can still join us by phone or computer. Register HERE today! |
A Call for Papers: Funding Strategies for Single Employer Defined Benefit Plans under PPA
Excerpt: "The Pension Section Research Team is seeking papers outlining effective funding strategies under PPA. It is not expected that there is a one-size fits all approach. As such, authors are encouraged to share their opinions and perspectives. Primary considerations of interest include what conditions make a given strategy appropriate, when strategies need to be reviewed and/or revised, and how robust a single strategy can be. Papers considering stochastic methodology and issues are also of interest. . . . Please submit an abstract or outline of your proposed paper by December 15, 2009 . . . ." (Society of Actuaries)
Financial Literacy and Financial Sophistication Among Older Americans
Excerpt: "This paper analyzes new data on financial literacy and financial sophistication from the 2008 Health and Retirement Study. We show that financial literacy is lacking among older individuals and for the first time explore additional questions on financial sophistication which proves even scarcer. For this sample of older respondents over the age of 55, we find that people lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice, and investment fees. In view of the fact that individuals are increasingly required to take on responsibility for their own retirement security, this lack of knowledge has serious implications." (Pension Research Council; registration required to download fulltext of paper)
401(k) Fee Litigation Report as of September 2009
Excerpt: "In addition to the lawsuits against plan sponsors, lawsuits have been brought against 401(k) plan service providers. These cases typically are based on allegations that the service providers are 'functional fiduciaries' under ERISA. The plaintiffs claim that, in negotiating for and receiving revenue sharing, the service providers breached fiduciary duties and engaged in 'prohibited transactions' under ERISA. Some of the lawsuits similarly challenge the use of actively managed mutual funds as investment options." (Groom Law Group)
Highest Earners Get Biggest Tax Breaks for Saving for Retirement
Excerpt: "Low wage earners face the most challenges saving for retirement, yet the tax subsidies for retirement saving are skewed overwhelmingly in favor of top earners. Since tax breaks for 401(k)s and similar retirement plans are tied to a participant's income tax rate, low-income taxpayers receive modest or no tax subsidies for each dollar put into these plans. The highest-paid workers, who have more resources to save for retirement without government assistance, receive the largest tax breaks." (Economic Policy Institute)
The Hearts and Minds of Retirement Investors: A Survey (PDF)
12 pages. Excerpt: "Even in today's volatile economy, DC investors overwhelmingly feel that saving for retirement is important. . . . Recognizing the need to -- and importance of -- retirement saving, most individuals prefer an 'automatic' method, with a very strong preference to have the investment directly deducted from a paycheck." (ING Institute for Retirement Research)
Benefits and Finance Departments Collaborate on 401(k)s
Excerpt: "While benefits executives report they are, in general, working well with their counterparts in finance, research points to patterns of divergent perceptions of 401(k) participants' goals and needs, as well as different operational priorities for the plan itself, that could hinder its ultimate success. . . . [A] recent survey did, however, show a basic consensus among benefits and finance professionals that employees are focusing more on long-term 401(k) investment returns than on simply avoiding short-term losses." (Employee Benefit News; free registration required)
Adviser Group Urges Congress to Keep 'Authentic' Fiduciary Standard
Excerpt: "A group of financial planners warned congressional leaders . . . against enacting proposed standards for advisers that are being endorsed by the brokerage industry. The Committee for the Fiduciary Standard, a group of 600 investment professionals, sent a letter to House Financial Services Committee Chairman Barney Frank, D-Mass., and others, voicing concern about proposals to adopt a new fiduciary code of conduct for brokers and advisers. 'The committee is concerned that misunderstandings of the authentic fiduciary standard could inadvertently be reflected in legislation and weaken the standard at the exact time that investors are looking to Congress and regulators to strengthen oversight of the financial system and Wall Street,' the letter said." (Investment News; free registration required)
How to Improve the Defined Contribution Retirement System
Excerpt: "Everyone agrees that 401(k) plan participants simply are not saving enough, but it's not all because of behavior. 'It is vital to address gaps in the defined contribution system,' says Christine Marcks, president of Prudential Retirement and co-author of a new white paper on ways to enhance retirement security for employees. First, says Marcks, retirement income is not protected from poor market conditions, as demonstrated by the recent market downturn. Market declines reduce the amount of retirement income a retiree can draw from their assets. Near-retirees are also vulnerable, as significant asset losses right before retirement impacts an individual's future retirement income." (Employee Benefit Adviser; free registration required)
Companies Plan to Reinstate 401(k) Matches
Excerpt: "Many businesses are quietly restoring plans to match a portion of their employees' 401(k) contributions. About half of the companies that suspended matches will be restoring them in 2010, says Byron Beebe, U.S. retirement market leader at Hewitt Associates. The majority of employers never expected to make the suspension permanent, says Mr. Beebe. Already, some big companies, including American Express Co. and Motorola Inc., have announced that they would reinstate suspended matches in 2010. Until recently, many employers have offered up to 6% of gross pay. Some companies are considering offering a lower match or using a tiered approach, which takes into account a person's length of employment." (The Wall Street Journal)
Should You Use 401(k) Money to Buy an Annuity?
Excerpt: "About a quarter of all companies these days offer their employees the option to purchase annuities with their 401(k) money, according to the Profit Sharing/ 401(k) Council of America, an industry group for plan sponsors. But these are lump-sum purchases that typically happen at the brink of retirement and aren't too popular with employees, says David Wray, president of the PSCA. What insurers have been working on during the past several years are specially-designed guaranteed-income products that can be purchased in small chunks with each paycheck, just like shares of a mutual fund." (SmartMoney)
Influential Tax Journal Features Respected ERISA Expert Saying 'Kill ESOPs'
Excerpt: "Andrew Stumpff [and Norman Stein] have recently written a piece for Tax Notes's Shelf Project entitled - 'Repeal Tax Incentives for ESOPs.' The article appears in the October 19, 2009 issue of Tax Notes. Professor Stein is a sought after advisor to the Congress on retirement savings policy, and is highly respected by staff policy makers in the Administration and the key Congressional tax committees. Tax Notes's Shelf Project is a collaboration among tax professionals to develop proposals to help Congress raise revenue without raising tax rates. While a close read of the article reveals more of a dislike, or debunking if you will, of the economic theories of ESOP originator Louis O. Kelso, its bottom line is ESOPs do not improve company performance, do not increase wealth consistently, and therefore do not deserve to be ERISA plans nor have tax benefits." (The ESOP Association)
Watson Finds Employer Spending on Retirement Benefits Declining
Excerpt: "Employers' investment in workers' retirement benefits, measured by benefit values as a percentage of pay, has dropped consistently over the last decade, according to research by Watson Wyatt. A Watson Wyatt analysis of 183 employers found that the total value of retirement benefits -- DB, DC and retiree health plans -- provided to employees decreased from 7.8% of pay in 2002 to 6.9% of pay in 2008, according to a press release. For the 79 companies that maintained DB plans throughout this period, the value of the overall benefits declined from 9.4% to 8.6% of pay, mostly due to a significant cut in post-retirement health benefits." (PLANSPONSOR.com; free registration required)
Defined Benefit Pension Sponsors Implementing Lump Sum Restrictions Need Not Notify Retirees
Excerpt: "Pension plan sponsors implementing PPA's lump sum restrictions do not need to notify individuals in pay status who no longer can elect a lump sum regardless of the PPA restriction, according to an IRS newsletter. The guidance helps sponsors facing an October deadline under ERISA Section 101(j) to notify participants and beneficiaries of restrictions that took effect on Oct. 1 or the earlier AFTAP certification date. But the newsletter's scope is narrow, so plan sponsors should review with counsel whether notices must be provided more broadly given their plans' terms." (Mercer LLC)
Advisers Can Now Officially Become Retirement Specialists
Excerpt: "The Retirement Income Industry Association has formally introduced a new educational course designed to help financial advisers be certified as 'retirement management analysts.' As Investment News first noted in March, the association has been developing the course in response to demand from member advisers who said they needed more tools and support in helping clients handle the post-retirement 'decumulation' phase, according to Stephen Mitchell, acting chief operating officer of RIIA." (Investment News; free registration required)
Advisers Find Roth IRA Conversion Opportunity a Tough Sell
Excerpt: "[M]any advisers are having a hard time persuading clients to make the conversion and pay taxes now instead of later, given that most of them have taken such a huge hit from the market downturn, advisers said. Starting Jan. 1, people making more than $100,000 annually will be eligible to convert their traditional individual retirement accounts or 401(k) plans with previous employers into Roth IRAs. Currently, only those who make less than that amount a year are eligible to convert. Logically, it would make sense for many of these clients to convert next year, since their portfolios and their taxable income are probably smaller now than they will be years from now . . . ." (Investment News; free registration required)
[Opinion]
Do We Still Need ERISA? Only If We Want to Shortchange Savers
Excerpt: "With the technological advancements in money management platforms and payroll systems, one has to wonder whether the costs associated with ERISA compliance could be removed from the retirement plan system. If we could safely remove those costs, it's likely we could help employees accumulate between 20% and 30% more money for retirement. So it's worth considering. Since most employees work for small employers, and the costs of complying with the Employee Retirement Income Security Act of 1974 are high for small plans, most plans are carrying a big compliance drag. While it's difficult to estimate the exact drag on retirement assets, it's probably somewhere in the range of 0.5% to 1% of assets, depending on the size of the plan." (Investment News; free registration required)
DATAIR Employee Benefit Systems, Inc. (Advert.)
Software for Retirement and Cafeteria Plan Documents DATAIR Plan Document System. Choose your documents: RETIREMENT PLANS: 401(k)/Profit Sharing, 403(b), DB, Cash Balance; CAFETERIA PLANS: 125, HSA, HRA Choose your formats: * Long format Standardized and Nonstandardized Prototypes * Short format Standardized and Nonstandardized Prototypes * IDP format Volume Submitters * Prototype format Volume Submitters Contact sales@datair.com or call 1-888-328-2474 |
Links to Items on Executive Comp, Benefits in General
[Guidance Overview]Tomlinson Reversal May Suggest Fair Pay Act Is Fatal to Ripeness Arguments in ADEA Pension Cases
Excerpt: "The Fair Pay Act provides that, for purposes of Title VII, the Americans with Disabilities Act (ADA) and the Age Discrimination in Employment Act (ADEA), an unlawful act occurs with respect to discriminatory compensation: When the discriminatory compensation decision or practice is adopted. When a person becomes subject to the discriminatory compensation decision or practice. When a person is affected by application of the discriminatory compensation decision or practice, including each time wages, benefits or other compensation is paid, resulting from the decision or practice. As it relates to pension benefits, the Fair Pay Act states that 'nothing in [the] Act is intended to change current law treatment of when pension distributions are considered paid.'" (Faegre & Benson LLP)
[Guidance Overview]
2010 Limits for Benefit Plans (PDF)
4 pages. Excerpt: "Each year, the U.S. government adjusts the limits for pension plans, Social Security, Medicare, and other benefit programs to reflect price and wage inflation, and changes in the law. As a result, employee benefit specialists must annually adapt their benefit plans to accommodate the new limits. All of the numbers in this Alert are official, unless otherwise indicated. Our unofficial numbers should be the same as the official numbers because we used the same inflation data and statutory adjustment formulas that will be used by the federal agencies." (Aon Consulting)
Government to Order Pay Cuts at AIG, Other Firms
Excerpt: "The Obama administration reportedly will order American International Group Inc. and other bailed-out companies to slash the compensation of their highest-paid executives. The New York Times and the Wall Street Journal, citing people familiar with the administration's plans, reported Wednesday that the move stems from the growing furor over executive pay at companies that have received federal bailouts." (Business Insurance)
Financial Literacy among the Young (PDF)
35 pages. Excerpt: "[The paper shows] that financial literacy is low among the young; fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification. Financial literacy is strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings is about 50 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy. These findings have implications for consumer policy." (University of Michigan Retirement Research Center)
Tax-Free Commuter Benefits Enhances Overall Benefits' Offerings
Excerpt: "The economic stimulus package appears to have sparked more employers offering tax-free commuter benefits, reports the TransitCenter, a non-profit group that promotes mass transit use. In its 2009 Commuter Impact Survey, the organization reports a 35% increase in the number of employers with programs for tax-free commuter benefits since Congress passed the American Recovery and Reinvestment Act in February 2008." (Employee Benefit News; free registration required)
Webcasts and Conferences
EFAST 2 - What You Should KnowNationwide on November 10, 2009
presented by ftwilliam.com
Retirement Plan Compliance Assistance Seminar
in Missouri on December 8, 2009
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
(Click to post your webcast or conference)
Press Releases
Employer Commitment to Workers’ Retirement Plans Has Declined Over Last Decade, Watson Wyatt Analysis FindsWatson Wyatt
Newkirk Launches Low-Cost, Multi-Purpose Participant Communication
Newkirk
(Click to post your press release)
Employee Benefits Jobs
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in CT, NJ
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