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October 30, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy

SunGard (Advert.)

Get ready for the new 403(b) requirements.  Let SunGard help. (clickable image)

Get ready for the new 403(b) requirements. Let SunGard help.

The Internal Revenue Service (IRS) issued new 403(b) regulations, which became effective in January 2009, replacing regulations that were more than 40 years old. Most 403(b) plans need to comply with new plan document requirements, changes to coverage and non-discrimination testing rules and limitations to transfers and exchanges. Turn to SunGard for our 403(b) plan solutions. For more information, call 1-800-326-7235 x1100 or click here.


[Guidance Overview]
Retirement Plans Must Be Amended Before Year End

Excerpt: "The end of the calendar year is soon approaching. For sponsors of qualified benefit plans, this means that plan amendments must be adopted and certain notices may need to be distributed. {The target page] is a summary of the major amendments and notices that apply to most qualified retirement plans. The IRS has also released the new retirement plan limits for 2010 that are available here. During the year end flurry of activity, employers need to focus on these deadlines, notice requirements and new limits. If employers have not yet been contacted by their plan's service provider, employers should take action now to avoid being in noncompliance." (Littler Mendelson P.C.)


[Guidance Overview]
Notice of Funding-Based Restriction on Lump-Sums Not Required for Participants in Pay Status

Excerpt: "CCH Note: The Treasury Department was authorized by the Worker, Retiree, and Employer Recovery Act of 2008 (P.L. 110-458) to prescribe rules (in consultation with the Labor Department) governing the ERISA-required notice of funding based limitations on distributions. The instant guidance has been issued pursuant to this authority. In addition, the IRS has further indicated that it will set forth (and presumably expound upon) the relief in upcoming guidance." (Wolters Kluwer)


Ways and Means Committee Holds Hearing on DB Plan Funding and Investment Advice
Excerpt: "On Oct. 1, 2009, two panels testified before the House Committee on Ways and Means on retirement-related matters. The first focused on, and lobbied for, defined benefit (DB) pension funding relief. The six panelists, including Watson Wyatts director of Retirement Research, Mark Warshawsky, Ph.D., provided a wide range of experience and expertise. While it was universally accepted that pension relief is necessary, panelists disagreed about its form and who should receive it. Some advocated temporary relief from certain provisions of the Pension Protection Act of 2006 (PPA), while others argued for permanent changes to the law. The second panel focused on investment advice provided to defined contribution (DC) participants, specifically who can give investment advice to employees and how it should be provided." (Watson Wyatt Worldwide)


DB Plan Funding Update: Extending the Analysis Period Shows the Need for Smoother Funding Relief
Excerpt: "In a series of studies since the global financial crisis began, Watson Wyatt has projected the regulatory funded status and minimum required contributions for single-employer defined benefit (DB) plans, in the aggregate./1/ It has serially updated the analysis to reflect changing market conditions, new regulations and enacted or proposed temporary legislative relief. The studies have contributed to fruitful discussions with sponsors, regulators and legislative staff in the pension community; indeed, the article published in the October 2009 Insider underlay Mark Warshawsky's Oct. 1 testimony to the House Ways and Means Committee. This new study continues that effort by incorporating market conditions to Oct. 15, 2009, adding two proposed legislative relief provisions and extending the funding horizon out to 2013." (Watson Wyatt Worldwide)


Bill Would Extend Time to Fund Pension Plans
Excerpt: "A bill introduced on Tuesday in the House would give struggling employers the option of spreading out required contributions to retirement plans over nine years, rather than the seven years they are now allowed. Under the proposal, companies would make only token payments for the first two years. To discourage companies from joining the many businesses that have frozen pension benefits for workers, Congress would also give employers up to 15 years to fully fund their plans if they agreed not to freeze benefits." (The New York Times; free registration required)


Fixing Social Security: Adequate Benefits, Adequate Financing
Excerpt: "The purpose of this report is to help analysts, policymakers, journalists, constituent organizations, and interested citizens consider how to bring Social Security into long-range balance in ways that address concerns about benefit adequacy. The report outlines approximately 30 options for putting Social Security's finances into 75-year balance and more than 10 ways to make Social Security more adequate for those who rely on it. All options have long-range cost estimates from Social Security actuaries. Benefit adequacy options in the report target such financially vulnerable groups as: The oldest beneficiaries (over 85 years); Widowed spouses of low-earning couples; Low-paid workers generally; Workers with gaps in paid work due to childcare; and Students in college or vocational school who have lost parental support due to death or disability. Other adequacy options would increase benefits across the board for current and future beneficiaries." (National Academy of Social Insurance)


Social Security and the Joint Trends in Labor Supply and Benefits Receipt Among Older Men
Excerpt: "Using data from the Current Population Surveys, we find an increase in the fraction of older American men who worked without receiving Social Security retirement benefits and a decline in the fraction of men who claimed benefits without working during the period 1980-2006. Using bivariate probit regressions, we find that an increase in Social Security's normal retirement age decreased labor force participation rate regardless of benefits receipt status; that an increase in the delayed retirement credit increased benefit receipt regardless of labor force status; and that labor force participation and claiming Social Security benefits are strongly and negatively correlated." (Center for Retirement Research at Boston College)


The Role of Information for Retirement Behavior: Evidence Based on the Stepwise Introduction of the Social Security Statement
Excerpt: "In 1995, the Social Security Administration started sending out the annual Social Security Statement. It contains information about the worker's estimated benefits at the ages 62, 65, and 70. I use this unique natural experiment to analyze the retirement and claiming decision-making. First, I find that, despite the previous availability of information, the Statement has a significant impact on workers' knowledge about their benefits. These findings are consistent with a model where workers need to gather costly information in order to improve their retirement decision. Second, I use this exogenous variation in knowledge to analyze the optimality of workers' decisions." (Center for Retirement Research at Boston College)


SEC Will Begin to Scrutinize Risks Related to Retirement Investment Products
Excerpt: "The Securities and Exchange Commission will begin scrutinizing products related to retirement investing. 'Issues related to disclosure, product development and marketing for retirement products will be areas of focus in the coming year at the SEC,' Securities and Exchange Commission Chairman Mary Schapiro said at the Securities Industry and Financial Markets Association's annual meeting in New York on Tuesday, October 27. Responsibility for identifying potential risks related to investing in those products will fall primarily on the SEC's newly formed division of risk, strategy and financial innovation. That unit, which was formed last month, combined the agency's office of economic analysis and its risk assessment division." (Workforce Management; free registration required)


State Retirement Plan Administrators Reaffirm Strong Opposition to Pay-to-Play
Excerpt: "In response to heightened media attention to isolated but high profile cases of so-called 'pay-to-play' in the public sector, the Executive Committee of the National Association of State Retirement Administrators (NASRA) unanimously voted at its fall meeting to reaffirm the Association`s long-held resolutions promoting ethics policies and disclosure requirements for those entrusted with the investment and management of public pension funds." (Reuters)


IRS Delays Retirement Age Rule for Public Pension Plans
Excerpt: "The Internal Revenue Service has given sponsors of state and local government pension plans a second extension to comply with an IRS rule that defines the 'normal' retirement age for a pension plan. In Notice 2009-86 published Wednesday, the IRS said public plan sponsors generally will have until Jan. 1, 2013, to comply with the rules. The IRS originally set a Jan. 1, 2009, effective date, but last year delayed the effective date to Jan. 1, 2011. The IRS said the latest extension is intended to give the agency and the Treasury Department more time to consider comments made by public plan sponsors on the impact of the regulations." (Business Insurance)


Pension Funding Relief, PBGC Improvements Called for in HELP Committee Hearing
Excerpt: "In testimony Thursday before the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP), witnesses urged legislators to loosen up funding rules for defined benefit pension plans. Richard Jones, Chief Retirement Actuary at Hewitt Associates, said the perils that DB plans are facing today are not only due to the struggling economy, but are exacerbated by regulatory changes that limit the flexibility in how and when companies fund their plans. 'The imminent need is for temporary relief to help employers solve the funding problems exacerbated by the recession,' he said." (PLANSPONSOR.com; free registration required)


401(k) Plans: Several Factors Can Diminish Retirement Savings, but Automatic Enrollment Shows Promise for Increasing Participation and Savings
Testimony presented by Barbara D. Bovbjerg, director, education, workforce, and income security, before the Senate Special Committee on Aging, October 28, 2009. 22 pages. Excerpt: "Recently, policy makers have focused attention on the ability of 401(k) plans to provide participants with adequate retirement income and the challenges that arise as 401(k) plans become the predominant retirement savings plan for employees. As a result, GAO was asked to report on (1) challenges to building and maintaining of savings in 401(k) plans, and (2) recent measures to improve 401(k) participation and savings levels." (U.S. Government Accountability Office)


GAO Testimony: Pension Benefit Guaranty Corporation: Workers and Retirees Experience Delays and Uncertainty when Underfunded Plans Are Terminated
Testimony presented by Barbara D. Bovbjerg, director, education, workforce, and income security, before the Senate Committee on Health, Education, Labor, and Pensions, October 29, 2009. 18 pages. Excerpt: "The committee asked GAO to discuss our recent work on PBGC. Specifically, this testimony describes: (1) PBGC's process for determining the amount of benefits to be paid; and (2) PBGC's recoupment process when the estimated benefit provided is too high and a retiree receives an overpayment that must be repaid. To address these objectives, GAO relied primarily on a recent report titled Pension Benefit Guaranty Corporation: More Strategic Approach Needed for Processing Complex Plans Prone to Delays and Overpayments (GAO-09-716, Aug. 2009). In that report, GAO made numerous recommendations. PBGC generally agreed and is taking steps to address the concerns raised. No new recommendations are being made in this testimony." (U.S. Government Accountability Office)


Creditor Protection for Your 401(k)
Excerpt: "Under the Bankrup.tcy Abuse Prevention and Consumer Protection Act of 2005 (a.k.a. the Bankrup.tcy Reform Act) tax-exempt retirement plan accounts (including qualified plans, traditional IRAs, Roth IRAs, 403(b) plans, 457(b) plans, SEPs, and SIMPLE plans), are protected from an employee's creditors in the event of bankrup.tcy. With the exception of the Traditional IRA and Roth IRA assets, all of these tax-exempt retirement assets are protected without a dollar limit." (The Boston Globe)


Defined Benefit 401(k)s Set to Make Debut
Excerpt: "Small business owners have plenty of options to choose from when it comes to a qualified retirement plan for the company. It can range from a Savings Incentive Match Plan for Employees (SIMPLE) to a Simplified Employee Pension (SEP) to a 401(k). But now there's a new kid on the block. Strategy: Consider the defined benefit 401(k) plan (called the 'DB/401(k)' for short) for small business clients. This hybrid plan combines some of the advantages of a traditional pension plan with a regular 401(k). Why haven't you heard more about the DB/401(k)? The authority for this new plan, which becomes available on Jan. 1, 2010, was buried deep within the massive Pension Protection Act of 2006. But interest in DB/401(k)s is expected to heat up during the coming year." (accountingweb.com)


[Opinion]
Bill to Ease Multiemployer Pension Funding Is Introduced in Congress (PDF)

2 pages. Excerpt: "Funding relief legislation for multiemployer pension plans was introduced in the U.S. House of Representatives on October 27. H.R. 3936, the Preserve Benefits and Jobs Act (PB&J Act), sponsored by Representatives Earl Pomeroy (D-ND) and Patrick Tiberi (R-OH), includes extensive relief for single employer plans as well. This is a notable starting point, but Congress is still a long way from passing legislation to make it easier for trustees, employers and unions to deal with the impact of the 2008 market losses on pension plan funding." (The Segal Group, Inc.)


[Opinion]
The 401(k): Don't Believe the Hype

Excerpt: "If someone made me America's personal-finance dictator, I'd scrap the 401(k). These workplace retirement plans are inequitable, as some companies offer good ones, some bad ones and others none at all. Fees are often too high. And even the better plans often don't provide enough investment options. Instead, I'd like to see the Roth IRA opened up to allow 401(k)-sized contributions - $16,500 a year instead of $5,000. (Or $22,000 and $6,000 for people 50 and over.) And I'd like to see the Roth's income limits lifted, so anyone could have one. . . . But since I'm not running things, the best I can do is suggest ways to make the traditional 401(k) work best." (Community Television Foundation of South Florida Inc.)



SPARK (Society of Professional Asset Managers and Record Keepers) (Advert.)

2009 SPARK Forum – The Premier Conference for the Retirement Services Industry (clickable image)

2009 SPARK Forum – The Premier Conference for the Retirement Services Industry

Register now for the 2009 SPARK Forum, Nov. 8-10 at The Breakers in Palm Beach, FL. Join the top marketing, sales, administration and record keeping professionals at the retirement services industry’s leading educational and networking event. Gain insights into the latest business, marketing and sales strategies, market trends, and legal issues; attend sessions designed for TPAs, Financial Advisors and RIAs; network with peers; enjoy golf and other events; and earn Continuing Education Credits.

Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Federal Reserve Proposed Supervisory Initiatives Over Compensation Practices at Banks (PDF)

5 pages. Excerpt: "Comments Requested: The FRB is seeking comments on whether the proposed guidance would impose undue burdens on, or have unintended consequences for, banking organizations and, particularly, regional and small organizations. It has been estimated that the proposed guidance, if adopted in final form, would apply to 3,002 small banking organizations (defined as banking organizations with $175 million or less in total assets). Comments are requested by November 27, 2009. Conclusion: In light of the FRB's proposed guidelines, all banking organizations, large and small, should start to take immediate steps to evaluate their incentive compensation arrangements and related risk management, control, and corporate governance processes and immediately address deficiencies." (Buck Consultants)


More 409A Relief Coming?
Excerpt: "A hot new rumor in the world of executive compensation professionals is that the IRS will be announcing a 'one last chance to fix your documents for 409A' program in the very near future (okay, so we tend to get excited by little things). IRS Senior Counsel Stephen Tackney made the announcement at an ABA meeting. Apparently the document correction program would function like the operation failure correction program in IRS Notice 2008-113. That is, plan sponsors would have to self-correct the errors and bear any costs associated with the correction. However, Mr. Tackney also suggested the plan sponsors must attach information about their corrections to their tax returns for the year and affected participants must attach the same information to their personal returns." (Michael Melbinger via Winston & Strawn LLP)



Webcasts and Conferences

Learn More About ftwilliam.com's New Administration Software
Nationwide on November 12, 2009
presented by ftwilliam.com

New Age Marketing: What Worked In The Past Is No Longer Effective
in Illinois on October 6, 2010
presented by Center for Due Diligence

Q&A with the U.S. Department of Labor, LA Regional Office: Plan Audits and DOL National/Regional Objectives
in California on November 19, 2009
presented by Western Pension & Benefits Conference - Orange County Chapter

(Click to post your webcast or conference)

Press Releases

MassMutual Retirement Services Reports Highest Sales Month in History
MassMutual Retirement Services

House Health Care Reform Bill Will Require Substantial Changes To Earn Employer Support
American Benefits Council

Pension Rights Center Asks Senate HELP Committee to Provide Funding Relief for Companies that Continue Workers’ Pensions
Pension Rights Center

(Click to post your press release)

Employee Benefits Jobs

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in NJ, NY

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for Ascensus
in PA

Account Manager
for Ascensus
in PA

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