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November 11, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy

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[Official Guidance]
Text of IRS Announcement 2009-82: Hybrid Plan Guidance (PDF)

2 pages. Excerpt: "The Treasury Department and the Internal Revenue Service are announcing relief for sponsors of statutory hybrid plans that must amend the interest crediting rate in those plans. Plan sponsors may rely on this announcement pending publication of the anticipated additional guidance described below. Treasury and the Service expect to issue in the near future final regulations and proposed regulations relating to statutory hybrid plans. The regulations will include rules interpreting the requirement in § 411(b)(5)(B)(i) of the Internal Revenue Code that such plans not have an interest crediting rate in excess of a market rate of return. The rules in the regulations specifying permissible market rates of return are not expected to go into effect before the first plan year that begins on or after January 1, 2011." (Internal Revenue Service via American Benefits Council)


[Guidance Overview]
IRS Relief for Hybrid Plans Pending Soon to be Released Regulations (PDF)

Excerpt: "[T]he IRS issued Announcement 2009-82 providing relief for plan sponsors of statutory hybrid defined benefit plans (including cash balance plans) to comply with the Pension Protection Act of 2006 (PPA) requirement to not have interest crediting rates in excess of a market rate of return." (Buck Consultants)


[Guidance Overview]
IRS Offers Relief on Interest Crediting Rate Amendment

Excerpt: "The Treasury Department and the Internal Revenue Service have announced relief for sponsors of statutory hybrid plans that must amend the interest crediting rate in those plans. The IRS said plan sponsors may rely on announcement 2009-82 pending publication of anticipated additional guidance. Anticipated guidance includes rules interpreting the requirement in § 411(b)(5)(B)(i) of the Internal Revenue Code that hybrid plans not have an interest crediting rate in excess of a market rate of return. The rules specifying permissible market rates of return are not expected to go into effect before the first plan year that begins on or after January 1, 2011." (PLANSPONSOR.com; free registration required)


[Guidance Overview]
Funding Regulations Provide Plan Sponsors with Numerous Elections

Excerpt: "The Final Treasury Regulations on determining the value of assets and liabilities for funding purposes, and on applying the benefit restrictions to underfunded plans, provide plan sponsors with numerous elections that merit identification. 74 Federal Register 53004 (October 15, 2009). The Final Treasury Regulations under Internal Revenue Code §§ 430 and 436 lay out the regime by which single employer defined benefit plans are required to value plan assets and benefit liabilities for funding purposes and also for the application of benefit restrictions for underfunded plans. The regulations identify or otherwise provide the plan sponsor with numerous elections that can be made in this regard. [The document provides a chart on 'Plan Sponsor Elections under Final Funding Regulations.']" (Deloitte via BenefitsLink.com)


[Guidance Overview]
IRS Extends Effective Date of Phased Retirement Regs for Governmental Plans Until 2013

Excerpt: "In Notice 2009-86, the Internal Revenue Service extends to plan years beginning on or after Jan. 1, 2013, the time by which a governmental plan must comply with final regulations on distributions from a pension plan upon attainment of normal retirement age. Those regulations were issued on May 22, 2007. Thus, the 2007 regulations will be effective for a governmental plan (as defined in IRC Sec. 414(d)) for plan years beginning on or after Jan. 1, 2013, but in the case of nongovernmental plans, the regulations were effective as of the date of publication." (Wolters Kluwer)


[Guidance Overview]
President Obama's Retirement and Savings Initiative

Excerpt: "As part of the Obama administration's retirement and savings initiative, the IRS recently issued guidance designed to encourage retirement savings. This new Regulatory Brief provides a summary of that guidance. The new guidance covers: Paid time off contributions to qualified plans. Timing of automatic savings increases in plans using automatic contribution arrangements. Adding automatic enrollment to 401(k) plans. A safe harbor explanation for eligible rollover distributions. Rollover distributions to Roth IRAs." (The Vanguard Group, Inc.)


[Guidance Overview]
The Approaching 403(b) Plan Document Deadline

Excerpt: "Employers that allow employees to contribute to 403(b) plans and arrangements need to adopt a plan document by December 31, 2009 if they have not already done so. In adopting a plan document, employers that have a voluntary 403(b) plan which the employer intends to be exempt from ERISA should review the plan document and their practices to confirm the 403(b) plan is not subject to ERISA." (Dorsey & Whitney LLP)


Improving Workers' Financial Literacy: A Symposium Summary
Excerpt: "Financial literacy and a basic understanding of employer and national retirement programs are essential as older workers transition from full time work into retirement. The retirement process requires individuals to make a series of decisions that will influence their retirement income and economic well-being throughout the rest of their life. However, considerable evidence indicates that workers of the verge of retirement have a rather low level of financial literacy. Many employers have developed pre-retirement financial education and retirement planning programs for their retirement eligible workers. A recent symposium examined the use of employer programs, their effectiveness in enhancing worker knowledge, and the impact of improved financial literacy on retirement plans. This working paper presents a summary of the discussion and highlights the important findings of the symposium." (Pension Research Council; registration required to download fulltext of paper)


Why Are Stocks So Risky?
Excerpt: "The relatively high long-term return on equity makes investments in stocks seem both an attractive and suitable means of accumulating the substantial wealth that savers will require. Yet, the 50 percent drop in the Standard & Poor's 500 Index from May 2008 to March 2009 is only the latest reminder that stocks pose considerable risk for investors." (Center for Retirement Research at Boston College)


Roth IRA Conversions: The Basics of the 2010 Rule
Excerpt: "Still your tax bill can be hard to predict. To have some control over how much you pay the government each year, you should have both taxable and non-taxable accounts from which to draw your retirement income. Imagine it this way. Perhaps early in retirement you choose to continue to work part time and supplement your income from retirement savings accounts. The combined income may put you into a higher tax bracket. However, if you take some money from a Roth IRA that year, because withdrawals are nontaxable, it could help keep you in the lower bracket." (Investment News; free registration required)


12 Things You Should Know About Asset-Allocation Funds
Excerpt: "[T]he recent market turmoil has drawn a fresh, heightened scrutiny to the philosophy and structure of these popular defined contribution choices and, certainly for plan sponsors, reminded us all that there are differences -- significant differences, in fact -- in how these vehicles are constructed, how they are managed, and even the philosophies underpinning those designs. Now, the 'right' answer for your program will, in many respects, be unique to your program. On the other hand, there are certain basic questions that plan sponsors should know the answers to in choosing an asset-allocation solution." (PLANSPONSOR.com; free registration required)



EBIA (Advert.)

Register now for EBIA's "401(k) Plan Roundup 2009." (clickable image)

Register now for EBIA's "401(k) Plan Roundup 2009."

The past year has brought a steady stream of developments for 401(k) plans, creating new compliance obligations and important design opportunities. How well have you kept up? Join our experts in this 90-minute web seminar as they survey the top 401(k) developments, including applicable effective dates, what’s required, what’s permitted, and how the rules affect plan design and administration for 2009 and beyond.

Visit here for more information.


Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
California Supreme Court Addresses Forfeiture Provisions in Incentive Compensation Agreement

Excerpt: "Last week, the California Supreme Court issued its highly anticipated decision in Schachter v. Citigroup, Inc., unanimously holding that the forfeiture provision contained in Citigroup's stock purchase plan did not violate California Labor Code wage payment requirements. The decision provides helpful guidance to California employers regarding the structuring of incentive compensation plans generally. Moreover, in reaching its holding, the court relied upon a variety of principles helpful to employers that had emerged from earlier cases." (Wilson Sonsini Goodrich & Rosati)


Roundup of Recent 409A Developments for NQDC Plans
Excerpt: "Several 409A-related developments of interest to sponsors of nonqualified deferred compensation plans shed some light on current IRS views and compliance activities. The American Bar Association has posted a set of Q&As on 409A and other benefit issues, recapping informal Treasury and IRS guidance offered at meetings earlier this year. In addition, a recently released IRS chief counsel advisory raises 409A concerns about salary advances that offset deferred compensation. Finally, a number of companies have received 409A questionnaires from IRS auditors that focus on certain compliance areas." (Mercer LLC)


Transportation, Other IRS Dollar Limits Remain Unchanged for 2010
Excerpt: "Next year's dollar limits that apply to employer-provided transportation plans will stay the same as this year's, the IRS has decided. The value of excludable benefits under a qualified commuter benefit plan will be limited to $120 a month, and the value of qualified parking benefits will be limited to $230, the IRS said this week." (Employee Benefit Adviser; free registration required)



Press Releases

Deputy Secretary of Labor Testifies before Senate Subcommittee on Paid Sick Leave for Workers and Families
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

ERIC and NBGH Urge Obama Administration to Ensure Preservation of ERISA National Uniformity and Federal Preemption
ERIC (ERISA Industry Committee)

Milliman Analysis Indicates Sixth Straight Month of Pension Funding Declines
Milliman USA

SHRM Testifies Before Senate on H1N1 and Need for Flexible Paid Leave Policies
Society for Human Resource Management (SHRM)

How Would a New Government-run Public Health Insurance Plan Work? Who Would be Eligible to Enroll?
Robert Wood Johnson Foundation

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