Retirement Plans Newsletter |
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| November 17, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Official Guidance]
Text of EBSA Announcement Delaying Implementation of Participant Investment Advice Regs Until May 2010 (PDF)
2 pages. Excerpt: "This document further delays the effective and applicability dates of these final rules from November 18, 2009, until May 17, 2010, to allow additional time for the Department to complete its analysis of questions of law and policy concerning the rules. . . . A number of . . . comments expressed the view that the final rules raise significant issues of law and policy. Among these, some expressed disagreement with the final rules' interpretation of the statutory exemption, and further questioned the adequacy of the class exemption's conditions in mitigating against the potential for investment adviser self-dealing." (Employee Benefits Security Administration, U.S. Department of Labor)
[Guidance Overview]
Notices to DC Plan Participants Due by December 1
Excerpt: "In recent years, Congress has created a slew of new notices that must be given to all participants in defined contribution plans at least 30 days before the beginning of each plan year. As December 1, 2009, approaches, each sponsor of a defined contribution plan that uses a calendar plan year should make sure that it is prepared to send participants each of the notices that applies to its particular type of plan. In addition, December 1 is the day by which defined contribution plans must adopt procedures to implement the waiver of the 2009 required minimum distributions for terminated employees over the age of 70½." (Seyfarth Shaw LLP)
[Guidance Overview]
2008 Form 5500 Information on Defined Benefit Pension Plans Must Be Posted on Company Intranet
Excerpt: "Employers with defined benefit pension plans that have recently filed a 2008 Form 5500 should address the [disclosure] issues immediately to determine if the posting obligation applies to them, and if so, how to best comply with this new disclosure obligation. At a minimum, employers with an intranet site must make the required information available on the site as soon as possible in order to be in compliance." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview]
Florida Retirement System Classification As 'Special Risk' Not Necessary to Invoke Heart/Lung Presumption, According to District Court
Excerpt: "On October 8, 2009 the Florida First District Court of Appeal issued an opinion holding that Florida Retirement System classification as 'special risk' is not necessary to invoke the heart/lung presumption in Section 112.18(1), Florida Statutes. However, almost immediately thereafter the Court ordered the opinion withdrawn (see C&C Newsletter for October 15, 2009, Item 2). Now, the Court has released its opinion, correcting some apparent factual inaccuracies, but coming to the same conclusion. An analysis of the more recent opinion follows. Crystal sought review of an order from the State Retirement Commission, which oversees the Florida Retirement System, denying his claim for disability retirement. He claimed that his total and permanent disability due to hypertension was presumed to be by accident suffered in-line-of-duty under Section 112.18(1), Florida Statutes." (Cypen & Cypen)
[Guidance Overview]
Where Private Plan Is Substantially Over-Funded, Participants Suffered No Injury from Alleged ERISA Violations
Excerpt: "The parties agreed that at the time McCullough filed his complaint, and at all times relevant thereafter, the plan was substantially overfunded. The parties also stipulated that the plan had never failed to pay benefits owed to participants or beneficiaries, and that AEGON had no intention to terminate the plan. The court of appeals held that its own binding circuit precedent did not permit a participant in a defined benefit plan to bring suit claiming liability under ERISA for alleged breaches of fiduciary duties when the plan was overfunded. McCullough v. AEGON USA, Inc., Case No. 08-1952 (U.S. 8th Cir., November 3, 2009)." (Cypen & Cypen)
PBGC Implements USERRA Final Rule
Excerpt: "The nation's private-sector pension insurer on Monday unveiled a final rule making it easier for returning service members to receive pension and other benefit credits for time spent in the military. A news release from the Pension Benefit Guaranty Corporation (PBGC) said the rule implements provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). That law provides that an individual who leaves a job to serve in the uniformed services is generally entitled to reemployment by the previous employer and, after being rehired, to receive credit for benefits, including employee pension plan benefits, that would have accrued but for the employee's absence due to the military service." (PLANSPONSOR.com; free registration required)
Frequency of Educational Seminars Linked to 401(k) Participation, According to Study
Excerpt: "According to a new study in Economic Inquiry, regular employer-sponsored retirement seminars motivate more employees to participate in and contribute to company 401(k) plans. In the study, direct links were found to exist between how often a retirement seminar is offered and increased levels of 401(k) activity - especially among those employees lower down on the pay scale. Participation rates by non-highly compensated employees are 11.5% higher with plans that offer frequent seminars, than those with no seminars, according to a press release. For highly compensated employees, participation is 6.5% higher when seminars are more regularly available." (PLANSPONSOR.com; free registration required)
Steady Investing Pays Off for Most with 401(k)s, According to Vanguard Study
Excerpt: "Financial markets can gyrate wildly, as the past two years have demonstrated to nearly every investor. But if you haven't looked at the performance of your 401(k) retirement plan in a good long time, you may be in for a pleasant surprise. Despite the nastiest stock market dive in two generations, one that has left the Dow Jones industrial average about 30 percent below its peak, your retirement account may actually be worth more than before the market mayhem started. That's what researchers at the Vanguard Group, one of the nation's leading managers of 401(k) plans, discovered recently when they looked at the records of 1.7 million of their individual account holders. About 60 percent of all participants in 401(k) and other defined-contribution plans who continued to contribute throughout the two-year period ending in September 2009 had as much in their accounts -- or more -- as they did in September 2007, when the stock market was closing in on a historic high." (AARP)
Florida State Senator Wants to Get State Government Out of the Pension Business
Excerpt: "The Republican state senator from New Port Richey has re-filed his bill that would rename the Public Employee Optional Retirement Program the 'Retirement Investment Program' for public workers. The name change signals a new pension philosophy -- leaving the safe, relatively low-paying assurance of a 'defined benefit' pension for the market-driven, possibly more profitable 'defined contribution' retirement system. Under Fasano's 91-page bill (SB 660), all new employees would have to join the defined contribution plan after Jan. 1, 2011. All current Florida Retirement System members, whether they work for the state or one of the hundreds of school boards and local governmental units whose pension funds are invested by the State Board of Administration, would still be guaranteed their regular pension benefits. The PEOPR allows employees to manage their own retirement money in 20 investment options -- including safe money market and bond funds or riskier stocks." (Tallahassee Democrat)
New Law May Revive Workers' Pension Plans
Excerpt: "[C]hanges in pension laws that go into effect in January could revive so-called defined benefit pension plans in a new form. If your employer has 500 or fewer employees, you may see a new plan called a DB(k). As the name suggests, it combines features of a defined benefit pension and a 401(k) account. The plan comes in two parts: a defined benefit funded entirely by the employer and a contributory retirement account with investment options like a traditional 401(k). Participating employers must establish a pension that will pay up to 20% of an employee's average annual pay over the last few years at work." (NYDailyNews.com)
Utah's Public Employee Retirement System Must Change, Says Lawmaker
Excerpt: "Change appears to be in the cards for Utah's retirement system, perhaps including one revolutionary option of doing away with the nearly century-old pension system altogether for new hires and replacing it with individual 401(k)s. 'Something has to be done in my opinion. How does it look? What should we do?' are questions that remain, said Sen. Dan Liljenquist, R-Bountiful, chairman of the legislative committee that oversees retirement. But the push for change was met with a unanimous chorus of opposition from public employee unions that urged lawmakers Thursday to go slow and give the current pension system a chance to recover from its battering by the economic downturn." (The Salt Lake Tribune)
State Street Bank's Notice of Proposed Settlement of ERISA Class Action
Excerpt: "A proposed settlement has been made in the State Street Bank and Trust Company consolidated ERISA Class Actions (collectively, the 'Action') in the amount of $89,750,000.00. The terms and conditions of the proposed settlement are set forth in a Settlement Agreement dated August 18, 2009 (the 'Settlement Agreement'). The Action has been brought as a class action on behalf of a class of ERISA Plans that invested in unregistered commingled funds (listed at Schedule A of the Settlement Agreement) (the 'Funds') that were managed by State Street. For the sake of clarity, the term 'Funds' shall not include any investment portfolio of SSgA Funds, a series mutual fund registered under the Investment Company Act of 1940, as amended. The Action alleges that State Street violated its fiduciary duties under the Employee Retirement Income Security Act ('ERISA') by, inter alia, imprudently managing the Funds, causing the various ERISA Plans to suffer losses." (Online Legal Media)
Labor Department Delays Investment Advice Rule
Excerpt: "The Department of Labor . . . announced it postponed the effective date of a controversial Bush administration investment advice regulation until May 17, 2010. This is the third time the DOL has delayed the effective date of the Bush administration advice rule; it had originally been delayed to May 22. Without the latest extension, the regulation would have gone into effect Nov. 18." (Pensions & Investments; free registration required)
CalPERS Board Votes to Tighten Disclosure Rules for Middlemen
Excerpt: "The beleaguered board of the California Public Employees' Retirement System tightened rules requiring outside investment managers to disclose information about the sales intermediaries who help them do business with the $200-billion pension fund. Today's unanimous vote comes as CalPERS tries to contain growing controversy over the huge fees paid to the middlemen, so-called placement agents. . . . The new CalPERS policy would expands on a disclosure plan created in May that required fund managers to detail whether they used placement agents, the fees paid to them and their contractual relations. Today's action would make fund managers list all campaign contributions or gifts made to board members by placement agents, putting CalPERS rules in line with a new state law that applies to all government worker pension funds. At the same time, the 13-member board, meeting as the Investment Committee, rejected a proposal that external fund managers be hit with big monetary penalties if they fail to fully disclose the existence or details of their dealings with placement agents." (Los Angeles Times)
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Links to Items on Executive Comp, Benefits in General
[Official Guidance]Text of Final IRS Section 6039 Regs Affecting Information Reporting Requirements for Statutory Stock Options
6 pages. Excerpt: "These final regulations will apply as of January 1, 2007. However, taxpayers are not required to comply with the return requirements of Sec. 1.6039-1(a) and (b) of these final regulations for stock transfers that occur during the 2007, 2008 and 2009 calendar years. Notwithstanding the waiver of the return requirements for 2007, 2008 and 2009 stock transfers, taxpayers must furnish information statements to employees for such stock transfers." (Internal Revenue Service)
[Official Guidance]
Text of IRS Final Regs on Options Under Section 423 Employee Stock Purchase Plans (PDF)
14 pages. Excerpt: "Commenters requested clarification of whether options with terms that are inconsistent with the terms of the plan will be eligible for the special tax treatment of section 421. As provided in . . . the proposed regulations, . . . these final regulations [provide] that, if the terms of an option are inconsistent with the terms of the employee stock purchase plan or an offering under the plan, then the option will not be treated as granted under an employee stock purchase plan. However, an option may still qualify for the special tax treatment of section 421, even if the terms of the plan are inconsistent with any of the requirements . . . of these final regulations, if the option is granted under an offering with terms that comply with the requirements of Sec. 1.423-2(a)(3)." (Internal Revenue Service)
[Guidance Overview]
Employers Should Review Employee-Related Plans and Practices Now
Excerpt: "With increased pressure on the IRS to collect amounts that have previously fallen between the cracks and the focus on executive compensation by Congress, the Treasury Department, the Securities and Exchange Commission and the press, the IRS is more likely to focus on employee-related issues within company tax audits. A current review of all employee-related plans and practices will increase the likelihood of employers finding most, if not all, discrepancies, thereby reducing the company's potential exposure in an IRS audit. Employers should review all employee plans and arrangements now to ensure that the company is in compliance with all laws and regulations. By doing so, a company will be able to better defend its taxation positions in the event of an IRS audit." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview]
Tax and ERISA Implications of Non-Qualified Non-Equity-Based Incentive Arrangements for Closely Held C-Corporations
Excerpt: "The most favorable tax treatment of deferred compensation is generally found by way of qualified plans. However, the uniform treatment of eligibility, vesting, accrual and funding, demanded by the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (IRC) severely limits an employer's ability to reward its employees in proportion to their particular value to the company. Non-qualified deferred compensation arrangements (NQDCs) are one way around this limitation." (ERISA SHMerisa!)
Pay Czar Reduces Executive Pay for Firms Receiving Exceptional TARP Assistance
Excerpt: "In an effort to tie compensation more closely to long-term performance and appropriate competitive levels, Special Master for TARP Executive Compensation Kenneth R. Feinberg has directed companies that received exceptional Troubled Asset Relief Program assistance to cut compensation for top executives by an average of 50 percent. While the pay cuts apply to only seven firms, the levels and structures could become a template for compensation at other financial institutions that participate in TARP. Feinberg also clarified that these firms are subject to the same corporate governance provisions that apply to other TARP recipients, including say-on-pay votes, clawbacks, compensation consultant disclosures, risk reviews, perquisite disclosures, prohibition on tax gross-ups and chief executive officer/chief financial officer certifications." (Watson Wyatt Worldwide)
Employee Ownership Update for November 16, 2009
NCEO Executive Director Corey Rosen reports: The United Steelworkers and the Mondragon Corporation agreed to develop U.S. manufacturing companies organized as worker cooperatives with steelworker representation. The ill-fated ESOP at the Tribune Company will be replaced with a 401(k) plan. A survey of employee stock purchase plan (ESPP) participants found they are more interested in the company, work harder, and are less likely to look for a job in the coming year than those not in the plan. (National Center for Employee Ownership)
Webcasts and Conferences
2009 Form 5500 and EFAST2in New York on December 3, 2009
presented by ASPPA Benefits Council of New York
Self-Auditing Your Retirement Plans
Nationwide on December 1, 2009
presented by Society for Human Resource Management (SHRM)
(Click to post your webcast or conference)
Press Releases
Final Rule On USERRA Benefits Under ERISA Title IVPension Benefit Guaranty Corporation (PBGC)
Metlife And Fidelity Partner on New Retirement Income Annuity
MetLife
CPI Opens Consulting Office Covering Michigan and Wisconsin
CPI Qualified Plan Consultants, Inc.
Wellness Survey: Businesses Look to Wellness Programs to Improve Productivity and Lower Absenteeism
Buck Consultants, an ACS Company
ING Retirement Services Takes Commitment to Education Professionals to a ‘Higher’ Level
ING Retirement Services
New Boston Firm Steps Into 401k Advice Market
Participant Level Advice Network
(Click to post your press release)
Employee Benefits Jobs
401(k) Administratorfor Long Island Employee Benefits Group
in NY
Retirement Plan Administrator
for McHenry Advisers, Inc.
in OH
401k/Qualified Plan Sales Consultant for Third Party Administration Firm
for G & T Benefits Group, LLC
in FL
Retirement Plan Specialist - Internal Sales
for DailyAccess Corporation
in AL, KS
Director, Relationship Management-Stable Value
for Prudential
in NJ
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