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October 29, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy

ASPPA (Advert.)

LIVE! ...on your Computer or Cell Phone!  November 4th (clickable image)

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!


[Official Guidance]
Disaster Relief Announcement 09-20 Relating to PBGC Deadlines in Response to Severe Storms and Flooding in Georgia

Excerpt: "Pension Benefit Guaranty Corporation ('PBGC') is waiving certain penalties and extending certain deadlines in response to the severe storms and flooding that occurred beginning September 18, 2009, in Georgia." (Pension Benefit Guaranty Corporation)


[Official Guidance]
Disaster Relief Announcement 09-21 Relating to PBGC Deadlines in Response to Severe Storms and Flooding in American Samoa

Excerpt: "Pension Benefit Guaranty Corporation ('PBGC') is waiving certain penalties and extending certain deadlines in response to the severe storms and flooding that occurred on September 29, 2009, in American Samoa." (Pension Benefit Guaranty Corporation)


[Official Guidance]
Text of IRS Notice 2009-86: Notice of Extension Until 2013 for Governmental Plans to Comply with NRA Distribution Regulations (PDF)

3 pages. Excerpt from press release: 'Notice 2009-86 states that the IRS and Treasury intend to extend the time by which a governmental plan must comply with final regulations on distributions from a pension plan upon attainment of normal retirement age ('the NRA regulations') beyond the date previously announced in Notice 2008-98 . . . .These regulations were published in the Federal Register . . . . on May 22, 2007. Taking into account this extension, the NRA regulations will be effective for a governmental plan (as defined in § 414(d) of the Internal Revenue Code) for plan years beginning on or after January 1, 2013. This notice does not change the effective date of the NRA regulations for a plan that is not a governmental plan or modify the relief previously provided in Notice 2007-69, 2007- 2 C.B. 468." (Internal Revenue Service)


[Guidance Overview]
IRS Guidance for Approval of Revocation Requests for Multiemployer Plans (PDF)

2 pages. Excerpt: "On September 9, 2009, the IRS issued Revenue Procedure 2009-43. This guidance provides additional conditions for the automatic approval of requests for the revocation of multiemployer elections provided under the Worker, Retiree and Employer Recovery Act (WRERA)." (Prudential Retirement)


[Guidance Overview]
Guidance on Waiving 2009 Required Minimum Distributions

Excerpt: "Notice 2009-82 requires plan sponsors to take the following actions: Decide by November 30, 2009 how the plan intends to treat 2009 RMDs. Plan sponsors may choose among the following three options: Suspend all RMDs for the 2009 plan year, unless a participant affirmatively requests a distribution; Distribute all RMDs for the 2009 plan year, unless a participant affirmatively elects otherwise; or Continue RMDs in accordance with the terms of the plan with no choice by the participant. Decide by November 30, 2009 whether the plan will permit direct rollovers of distributions of 2009 RMDs from the plan. Plan sponsors may choose among the following three options: Not permit direct rollovers of 2009 RMDs; Permit direct rollovers of 2009 RMDs; or Permit direct rollovers of 2009 RMDs if the 2009 RMD is part of a distribution that would otherwise be an eligible rollover distribution." (Haynes and Boone LLP)


[Guidance Overview]
Foreign Bank Account Reporting for Employee Benefit Plan Investments (PDF)

5 pages. Excerpt: "[I]t is difficult to say what the FBAR filing requirement will look like in the future. However, the retirement plan community is working with the IRS to lessen the burden on plans, and we have already begun to see signs of progress. Specifically, the IRS recently requested comments on the current FBAR form and instructions and indicated that the Treasury is considering issuing FBAR-related regulations. This is an extremely positive development that will, we hope, result in much-needed clarification regarding the filing obligation of U.S. persons with a financial interest in or signature or other authority over a plan's foreign financial account. In particular, it provides the Treasury the opportunity to exempt retirement plans from the FBAR filing requirement or, at the very least, to limit the substantial burden the requirement places on plans and plan fiduciaries." (ABA Trust & Investments via Groom Law Group)


[Guidance Overview]
Fiduciary Liability Insurance vs. ERISA Fidelity Bonds: What's the Difference?

Excerpt: "This article addresses an issue that every plan sponsor should consider whether they have ever been sued or not. We're talking about the issue of insurance, and more particularly, the distinction between fidelity bonds and fiduciary liability insurance. The issue is important because some confusion exists among retirement plan sponsors about their insurance needs." (Reish & Reicher)


[Guidance Overview]
Government Plans Get Two-Year Reprieve on NRA Rule

Excerpt: "The Internal Revenue Service (IRS) has agreed to give governmental plans two more years to comply with final regulations on participant distributions upon reaching normal retirement age (NRA). An IRS news release said the rules will now be effective for plan years after January 1, 2013, instead of January 1, 2011 . . . . The tax agency said the latest move, announced in Notice 2009-86, does not change the effective date for non-governmental plans." (PLANSPONSOR.com; free registration required)


[Guidance Overview]
IRS's Final Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)

9 pages. Excerpt: "Guidance is still needed on related important areas not addressed in the final regulations. The IRS indicates that future regulations will be issued covering many of these areas, such as participant notices about benefit restrictions, quarterly contributions, mergers/spinoffs, and expenses to be included in target normal cost." (Buck Consultants)


Hearing: Default Nation: Are 401(k) Target Date Funds Missing The Mark?
Held October 28, 2009. Excerpt: "The Aging Committee has also continued with our own investigation of target date funds and it seems the more we learn, the more concerns we have. This afternoon we will discuss three key problems. First, there is a lack of transparency and consistency in the design of target date funds. Second, many funds charge excessive fees, eroding the value of a worker's assets over time. And third, fund managers have a conflict of interest in constructing target date funds and must resist the temptation to put their bottom line above the interests of the participants. Today the Committee is releasing a report detailing each of these issues and their impact on retirement savings." (U.S. Senate Special Committee on Aging)


What the Stock Market Decline Means for Financial Security and Retirement Choices of Near-Retirement Population
Excerpt: "This paper investigates the effect of the current recession on the near-retirement age population. Data from the Health and Retirement Study suggest that those approaching retirement age (early boomers ages 53 to 58 in 2006) have only 15.2 percent of their wealth in stocks, held directly or in defined contribution plans or IRAs. Their vulnerability to a stock market decline is limited by the high value of their Social Security wealth, which represents over a quarter of the total household wealth of the early boomers. In addition, their defined contribution plans remain immature, so their defined benefit plans represent sixty five percent of their pension wealth. Simulations with a structural retirement model suggest the stock market decline will lead the early boomers to postpone their retirement by only 1.5 months on average." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)


How Do Pension Changes Affect Retirement Preparedness? The Trend to Defined Contribution Plans and the Vulnerability of Retirement Age Population to Stock Market Decline of 2008-2009 (PDF)
55 pages. Excerpt: "This document has two parts. The first part presents background information on trends in pensions drawn from our forthcoming book, Pensions in the Health and Retirement Study. Using data from the Health and Retirement Study (HRS), trends in pensions are described among three cohorts: those aged 51 to 56 in 1992, called the HRS cohort; those 51 to 56 in 1998, called the war baby cohort; and those 51 to 56 in 2004, called the early boomer cohort. The second part is a paper which deals with the likely effects of the stock market decline on those approaching retirement age." (University of Michigan Retirement Research Center)


Litigation Against Advisers Is Increasing
Excerpt: "We are seeing an increasing number of claims filed against advisers . . . both as civil lawsuits and FINRA arbitrations. While the increase in claims undoubtedly reflects the recent stock market losses, it is also the result of at least three other factors. Those are: an increasing awareness of the fiduciary standard; the growing focus on retirement savings, including rollovers to IRAs; and heightened expectations about the performance of advisers. Of course, there is always that fourth category . . . crooks who steal money." (Reish & Reicher)


After Revoking Lawyers' Public Pension Benefits, New York Comptroller Has to Pay Them Back
Excerpt: "After issuing more than a dozen press releases since 2008 touting his crackdown on alleged fraud in the state pension system by private attorneys, Comptroller Thomas DiNapoli has quietly restored the benefits to the 62 attorneys who had them revoked. The surprising move came after two recent court rulings in Albany found that DiNapoli didn't provide the attorneys due process before stripping them of their pensions and credits in the system." (The Ithaca Journal)


Senate Panel Assesses Risks of Lifecycle Mutual Funds
Excerpt: "The Senate Special Committee on Aging, in a hearing on Wednesday, highlighted some of the risks and potential conflicts of interest in target-date mutual funds. . . . For the big fund companies that also run 401(k) plans, these funds are the gift that keeps on giving. Firms such as Fidelity, Vanguard and T. Rowe Price typically offer employers target-date funds that are made up exclusively of their own proprietary mutual funds. While they might not charge extra to manage the target-date fund, they do collect fees on all the underlying funds, ensuring themselves a stream of income for decades. For a fund company, 'it's the easiest money to get and the hardest money to lose,' says John Rekenthaler, vice president of research with Morningstar." (San Francisco Chronicle)


Investment Regulations and Defined Contribution Pensions
Excerpt: "This paper assesses the impact of different quantitative approaches to regulate investment risk on the retirement income stemming from defined contribution (DC) pension plans. It looks at how such regulations affect the spectrum of investment policies available and, through this channel, how they affect the retirement income that an individual may expect from a DC pension plan. The analysis shows that there is a trade-off between potential retirement income and protection from bad outcomes. Reducing the downside risk on retirement income from DC pension plans requires moving into relatively conservative investment policies where the share of assets allocated to bonds may be quite large. However, this comes at the cost of renouncing potentially higher replacement rates that are attainable but at a higher risk of unfavourable retirement income outcomes. Less risk adverse regulators and supervisors would aim at lower probability requirements as regard the downside risk, which will increase the range of investment policies available and thus the share of riskier assets." (Social Science Research Network)


Automatic Annuitization: New Behavioral Strategies for Expanding Lifetime Income in 401(k)s (PDF)
24 pages. Published July 2009. Excerpt: "Each of the 'automatic' or default strategies outlined here -- including acquiring lifetime income incrementally through the use of employer contributions or embedding a deferred annuity in a QDIA, as well as the Gale-Iwry-John-Walker (2008) automatic trial income proposal -- is designed to draw on experience and insights from behavioral economics to help replicate, within the 401(k), one of the valued features of the traditional defined benefit pension. That feature is guaranteed lifetime income at group rates (combined, in most cases, with professional investment management)." (The Retirement Security Project)


Study Finds ESPPs Motivate Employees
Excerpt: "Recent research by Computershare and the London School of Economics found employees in Employee Stock Purchase Plans (ESPPs) work harder and stay with their employer longer. According to the survey results, employees in the U.S., UK, Australia, and South Africa all said the ESPP had a motivational impact on them. Also, U.S. employees participating in an ESPP said they were more likely to work beyond their contractual hours and to monitor a colleague's work and say something if he or she is not doing a good job. In the U.S., 57% of members of an ESPP work overtime in a given week, versus 41% of non-members." (PLANSPONSOR.com; free registration required)


Target-Date Fund Practices Targeted in Senate Hearing
Excerpt: "Congress once again turned its attention to target-date funds this afternoon. In opening the hearing of the U.S. Senate Special Committee on Aging, titled 'Default Nation: Are Target-Date Funds Missing the Mark?', Chairman Herb Kohl (D-Wisconsin) noted that this was the third hearing in a series the committee had held on the subject of strengthening the 401k system . . . . He also noted that target-date funds were 'developed for the average worker who may understand the importance of saving, but may not appreciate the complexities of investing.' However, regarding target-date funds, Senator Kohl said 'the more we learn, the more concerns we have.'" (PLANSPONSOR.com; free registration required)


IASB Rescinds Discount Rate Proposal for Pensions and Other Retiree Benefits
Excerpt: "IASB has rescinded planned amendments to IAS 19, Employee benefits, that would have required all companies to determine discount rates for valuing pension, retiree health and other post-employment benefits from high-quality corporate bond yields. Companies in countries without deep corporate bond markets currently use government bond yields, resulting in reporting inconsistencies. The board halted the project Oct. 22, after weighing the positives (improved global consistency) against the negatives (subjectively determined discount rates due to lack of country-specific data points)." (Mercer LLC)



DATAIR Employee Benefit Systems, Inc. (Advert.)

DC/401(k) Administration Software from DATAIR (clickable image)

DC/401(k) Administration Software from DATAIR

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Chart of 2009 and 2010 Retirement Plan and Other Inflation-Adjusted Benefits (PDF)

3 pages. Also included are transportation and adoption benefits. (Seyfarth Shaw LLP)


Details on the Pay Czar's Cutbacks on Executive Pay
Excerpt: "[O]ne aspect of the Special Master's process troubled me. By his own account, the Special Master did not consult one person in the private sector (i.e., those of us actually working with executive compensation issues on a daily basis in the real world, as opposed to pondering them in the abstract). The professors with whom he consulted are brilliant people no doubt, but I wonder whether any of them have actually attended a Compensation Committee meeting or negotiated an employment agreement?" (Michael Melbinger via Winston & Strawn LLP)


Pay Czar Cuts Total Compensation, Increases Base Pay for Some Executives
Excerpt: "While Treasury Department pay czar Kenneth Feinberg cut by half total executive compensation at seven firms that received bailout packages, he substantially increased regular salaries or base pay, according to the Wall Street Journal. An analysis of government data by the Journal shows that on average, base salaries climbed to $437,896 a year as a result of Feinberg's review, compared with $383,409 previously - a 14% increase. Of the 136 employees under Feinberg's review, 89 saw their base salaries increase." (PLANSPONSOR.com; free registration required)


Last Chance for Some Companies to Amend Incentives to Secure 162(m) Deductions
Excerpt: "Employers that want to deduct incentives granted to executives in 2010 without hitting Section 162(m)'s $1 million cap on deductible pay should act now to review these arrangements. Incentive plans that guarantee payment on termination for good cause, involuntary termination or retirement may not qualify as performance-based compensation exempt from the 162(m) limit. IRS transition relief for many arrangements expires at the end of 2009." (Mercer LLC)


New Edition of An Introduction to ESOPs
The NCEO presents excerpts from the 10th edition of 'An Introduction to ESOPs,' its most popular publication. This short book explains the rules, uses, benefits, and other aspects of ESOPs. It is useful as an introduction to the subject, as an accompaniment to a full-length book related to ESOPs, or as a concise reference for laypeople. Consultants often buy them in volume to give out to clients or potential clients interested in ESOPs, while ESOP companies buy them to hand out to employees. (National Center for Employee Ownership)


[Opinion]
Crackdown on Executive Pay: Too Much or Not Enough?

Excerpt: "Last week, the Obama administration's 'pay czar,' Kenneth Feinberg, announced that the government will impose caps on compensation for the 25 highest-paid executives at seven companies that received 'exceptional assistance' through the Troubled Asset Relief Program -- including American International Group (AIG), Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC. Under the new regulations, salaries will be reduced by an average of 90%, and total compensation (including bonuses and stock options) will be lowered by 50%. Knowledge@Wharton spoke with Wharton accounting professor Wayne R. Guay and then with finance professor Alex Edmans about what these changes could mean for Wall Street, company shareholders and taxpayers. The [target page] is an edited transcript of the interviews." (Wharton School of the University of Pennsylvania)



Webcasts and Conferences

401(k) Update
in California on November 19, 2009
presented by ABA Joint Committee on Employee Benefits

The Art and Science of Roth Conversion Optimization
Nationwide on November 19, 2009
presented by Convergent Retirement Plan Solutions, LLC

(Click to post your webcast or conference)

Press Releases

Hewitt Study Shows Nearly Half of U.S. Employees Cash Out Their 401(k) Accounts When Leaving Their Jobs
Hewitt Associates LLC

PBGC Protects Pensions at Pueblo International LLC
Pension Benefit Guaranty Corporation (PBGC)

U.S. Labor Department Recovers Funds for Abandoned 401(k) Plan of Lexington, Massachusetts Employer
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

US Department of Labor Official Testifies Before Senate Aging Committee on 401(k)-type Plans
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

US Labor Department Bars Raymond Palombo From Running Federally-Regulated Health Plans
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

University at Albany-SUNY Student is Recipient of Annual Employee Benefits Conference Scholarship
International Foundation of Employee Benefit Plans

Pension Benefit Information and RolloverSystems Form Joint Venture
RolloverSystems

New 401(k) Fee Comparison Book Released
401k Averages Book

(Click to post your press release)

Employee Benefits Jobs

Pension Administrator
for Pension Administration Firm located in Westchester, NY
in NY

401(k) Administrator
for Duncan Financial Group, LLC
in PA

Trust Officer
for CPS, Inc
in IL, MI

Retirement Plan Administrator
for Caras & Shulman, PC
in MA

(Click to post your job opening | View all jobs | RSS feed for jobs RSS feed of all jobs )


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