Retirement Plans Newsletter |
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| November 23, 2009 \ Compliance \ Costs \ Administration \ Design \ Policy | ||
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[Official Guidance]
Text of Final IRS Regs on ERISA 204(h) Notice of Reduction in Accrued Benefits (PDF)
33 pages. Effective date is Nov. 24, 2009 (when they will appear in the Federal Register) but detailed 'applicability dates' are provided. Excerpt: "This document contains final regulations providing guidance relating to the application of the section 204(h) notice requirements to a pension plan amendment that is permitted to reduce benefits accrued before the plan amendment's applicable amendment date. These regulations also reflect certain amendments made to the section 204(h) notice requirements by the Pension Protection Act of 2006." (Internal Revenue Service)
[Official Guidance]
Text of PBGC Proposed Rule on Reportable Events and Certain Other Notification Requirements (PDF)
12 pages. Excerpt: "Summary: This is a proposed rule to conform PBGC's reportable events regulation under section 4043 of ERISA and a number of other PBGC regulations to statutory changes made by the Pension Protection Act of 2006 (PPA 2006) and to revisions of other PBGC regulations that implement the statutory changes. The rule would also eliminate most of the automatic waivers and filing extensions currently provided under the reportable events regulation and make other amendments to the regulation. For example, the rule would create two new reportable events based on provisions in PPA 2006 dealing with funding-based benefit limits and with asset transfers to retiree health benefits accounts. DATES: Comments must be submitted on or before January 22, 2010." (Pension Benefit Guaranty Corporation)
[Guidance Overview]
New IRS Guidance for Governmental Plans
Excerpt: "The Internal Revenue Service (IRS) recently issued several pieces of guidance relating to rollovers from retirement plans, as well as rules relating to normal retirement ages and required minimum distributions (RMDs) for governmental plans. This Compliance Alert describes the rollover-related guidance and briefly summarizes the rest." (The Segal Group, Inc.)
[Guidance Overview]
Intranet Posting of Schedule SB Containing Actuarial Information
Excerpt: "Posting a scanned version of Schedule SB on an intranet Web site apparently satisfies the PPA requirement for the 2008 reporting year. The DOL has not issued regulations providing additional guidance with respect to the intranet display." (Watson Wyatt Worldwide)
[Guidance Overview]
IRS Guidance on 2009 Required Minimum Distributions from Defined Contribution Plans
Excerpt: "The first section of this Compliance Alert summarizes the critical points for sponsors of DC plans: profit-sharing plans, §401(k) plans, §403(a) and §403(b) plans./3/ (Defined benefit plans, including cash balance plans, are not affected.) The second section provides background information on RMDs. The third provides a general description of the guidance, and the last section lists key decisions for plan sponsors." (The Segal Group, Inc.)
[Guidance Overview]
New Safe Harbor Rollover Explanations and Other Helpful Retirement Plan Guidance
Excerpt: "The Internal Revenue Service (IRS) recently issued several pieces of guidance relating to rollovers from retirement plans and specific design features for individual account plans. This Compliance Alert describes the rollover-related guidance and briefly summarizes the rest." (The Segal Group, Inc.)
[Guidance Overview]
403(b) Universal Availability
Excerpt: "The nondiscrimination rule for eligibility to defer (including Roth) to a 403(b) plan is known as universal availability. Generally, everyone must be able to defer. There is no age and service requirement permitted. The individual must be expected to defer at least $200 a year. The universal availability requirement applies to all 403(b)s, except for church plans. The universal availability rule permits all the right to defer and thus does not favor HCEs; and because the ability to make deferrals is universally available, there is no ADP test. Basically, if one employee can make deferrals, then all employees must have the opportunity to make deferrals. Limited exclusions are permitted." (McKay Hochman Co.)
[Guidance Overview]
Final QDIA Notice Rules
Excerpt: "QDIA regulations do not specify to whom the annual notice should be given to; therefore the safest approach is to provide the notice to all eligible employees. It is also a more conservative approach to provide a notice to all eligible participants since a default investment could be needed at a variety of times and under a variety of circumstances, and the employer will be better protected if the notice is provided to all participants. The notice should be carefully worded to explain that it applies only if the participant has not selected his or her investment options and thus has been defaulted into the QDIA investments as a result of not making a selection." (McKay Hochman Co.)
[Guidance Overview]
Revisions to Instructions for 2008 Actuarial Schedules and Schedule R and Filings for Short 2009 Plan Years
Excerpt: "Supplemental instructions have been issued for the 2008 Form 5500, specifically with regard to Schedule MB, Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information (IRS Notice 1389); Schedule R, Retirement Plan Information (IRS Notice 1388), and Schedule SB, Single-employer Defined Benefit Plan Actuarial Information (IRS Notice 1391). The revisions have been incorporated into the 2008 instructions and, along with the notices, may be found at http://www.dol.gov/ebsa/5500main.html or http://www.irs.gov/pub/irs-pdf/i5500.pdf." (form5500help.com)
[Guidance Overview]
Relief on Contribution Changes Proposed for Safe Harbor 401(k) Plans
Excerpt: "If the plan is not a safe harbor 401(k) plan, this may be as easy as amending the plan to reflect the reduced or eliminated contribution and providing sufficient notice to the plan participants. However, if the plan is a safe harbor 401(k) plan, the issue becomes more complicated. . . . The proposed regulations provide that safe harbor non-elective contributions may now be suspended after the beginning of the plan year, provided certain rules are met. Those rules are the same as the rules governing the suspension of safe harbor matching contributions, with one major exception. The safe harbor non-elective contributions can only be suspended if a plan sponsor incurs what the regulations call a 'substantial business hardship.'" (Employee Benefit Adviser; free registration required)
[Guidance Overview]
PBGC's Final Regulations Protecting Pension Benefits of Service Members (PDF)
1 page. Excerpt: "Under the final regulations, if a service member is reemployed within the time limits set by USERRA, the service member is deemed to satisfy the reemployment requirement for purposes of the benefit guarantee, even if reemployment occurs after the pension plan's termination. The final regulations are effective December 17, 2009, and apply for purposes of any reemployment on or after December 12, 1994." (Buck Consultants)
Recovery in 401(k) Balances
Excerpt: "One of the questions posed following the 2008-2009 market decline was: How long will it take for 401(k) plan participants to recover the wealth they attained at the peak of global stock prices in October 2007? A new Research Note from Vanguard Center for Retirement Research provides an answer: For the median plan participant at Vanguard, recovery took about two years. The main reason -- ongoing contributions." (The Vanguard Group, Inc.)
PBGC Request for Public Comment: Purchase of Irrevocable Commitments Prior to Standard Termination (PDF)
4 pages. Excerpt: "Summary: Practitioners and employers have requested guidance from PBGC on the extent to which plan administrators may purchase irrevocable commitments to provide plan benefits before initiating a standard termination under section 4041(b) of ERISA. PBGC is soliciting public comments to help develop this guidance. The issues on which PBGC seeks comments include the extent to which such purchases of irrevocable commitments violate statutory and regulatory termination requirements, safeguards for participants and beneficiaries, and sanctions for violations. Dates: Comments must be received on or before January 22, 2010." (Pension Benefit Guaranty Corporation)
Growing Number of 401(k) Plans Adding Target Risk Funds to Lineup of Options
Excerpt: "A year ago, 401(k) plan sponsors were rushing to use target date funds as their qualified default investment alternative for employees. Now, many plans selecting a QDIA are considering a target risk fund instead, executives said. Unlike target date funds, which are designed to reallocate automatically to become more conservative as a participant's stated retirement date approaches, target risk funds are static. These investments attempt to expose the investor to a specified amount of risk and typically are labeled as conservative, moderate or aggressive." (Investment News; free registration required)
Target-Date Retirement Funds: The New Defined Contribution Battleground (PDF)
24 pages. Excerpt: "Both Congress and clients have begun to scrutinize the construction and value proposition of target-date products, particularly because the average target-date fund lost 32% of its value during 2008. Nearly 90% of respondents to our survey of plan sponsors . . ., however, were satisfied with their target-date options to some degree. Such support reflects neither apathy nor blind approval: nearly two-thirds of the sponsors we surveyed said they would consider changes to their target-date vehicles. The results imply that plan sponsors regard their target-date funds as first-generation prototypes: they believe in the idea, but now seek to improve its execution." (Casey, Quirk & Associates)
Insight Into IRS Audits
Excerpt: "The Internal Revenue Service recently published an updated list of common plan mistakes found during the agency's Employee Plans Team Audits (EPTA) and an internal controls questionnaire used by EPTA auditors. Although the EPTA program focuses on retirement plans with at least 2,500 participants, the published materials give all plan administrators valuable insights into the IRS's audit process and what the IRS believes plan sponsors can do to avoid common errors in plan administration." (Employee Benefit News; free registration required)
Calculation Error Inflates Contra Costa, California, Pensions
Excerpt: "The Contra Costa County retirement association has mistakenly overpaid former public workers for more than a decade, according to a new legal analysis that will set off a battle over tens of millions of taxpayer dollars and could send government workers rushing into retirement before fixes are made. The analysis concludes that the Contra Costa County Employees' Retirement Association, which manages pensions for 18,500 current and retired employees, improperly allows workers to boost their retirement pay by including unused vacation time in the calculations. To correct that, the association could retroactively recalculate nearly 4,000 pensions for retirees who stopped working after Sept. 30, 1997. Even if changes were only made for future retirees' pensions, county taxpayers could immediately save about $20 million a year." (The Oakland Tribune)
[Opinion]
Comments on DOL Withdrawal of its Investment-Advice Regulation
Excerpt: "The PPA struck a balance that would have facilitated the provision of additional types of advice. Was the balance struck in the statute the precisely correct one? That, of course, is always open to discussion, but Congress did act. There now are proposals in Congress that would recut the rules, in effect eschewing any effort to balance the competing considerations and deciding that no conflict is tolerable, and the approach taken in those proposals is extreme. I think it would be unfortunate if Congress were altogether to take away from employers the ability to arrange for reasonably crafted inside advice delivered with proper safeguards (what I've called 'conflict-safe,' as opposed to 'conflict-free,' advice)." (Pension & Benefits Blog)
[Opinion]
401(k) Plans Work If Employer Contribution Rates Are High
Excerpt: "[G]enerous contribution rates are common among universities, according to a 2007 survey by the American Association of University Professors. About 30% of responding institutions reported a typical contribution rate of 10% and 14% contribute more. In fact, most universities have offered a successful 401(k)-style plan since the 1940s . . . ." (Jane White of Retirement Solutions)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]Publicly Held Corporations Should Evaluate Bonus Compensation Arrangements Before 2010
Excerpt: "We are approaching the end of the transition relief period under the Revenue Ruling for publicly held corporations that provide bonus compensation based on calendar year performance periods that is intended to be 'performance-based compensation' under Section 162(m). Such corporations should review and, if necessary, revise, in accordance with applicable amendment procedures, the terms of their performance-based bonus plans, employment agreements, severance agreements, change of control agreements and similar arrangements not later than December 31, 2009." (Cooley Godward Kronish LLP)
[Guidance Overview]
Year End Tax Planning: Consider Accelerated Recognition of Accrued SERP Benefits for FICA Purposes
Excerpt: "Under Treas. Reg. § Reg. §31.3121(v)(2)-1(e)(4), the plan sponsor/employer under a nonaccount balance plan - such as a defined benefit SERP - may delay taking into account for FICA purposes the benefit amounts accrued until the amounts are 'reasonably ascertainable.' An amount deferred under a nonaccount balance plan is not 'reasonably ascertainable' as long as it is necessary to use any assumptions other than interest, mortality, and cost of living assumptions to value the benefit. In practice, this means a defined benefit SERP or excess plan often provides a benefit that does not need to be taken into account until the employee retires. Ordinarily, this is good, as it avoids withholding taxes before earnings are paid to the employee." (Michael Melbinger via Winston & Strawn LLP)
Summary of New Rules Affecting Benefits in 2009
Excerpt: "During 2009 numerous new rules have been issued and/or gone into effect that may impact your benefit programs. Other rules require compliance by the end of 2009 or in 2010. Legislation ranging from a complete overhaul of our health care system to additional pension funding relief is pending[.] [This] alert is intended to provide an overview of some of the employee benefit issues you should consider before year-end." (Thorp Reed & Armstrong, LLP)
House Committee Approves Federal Employee Same-S.ex Partner Benefits
Excerpt: "After a heated debate over g.ay rights and extending benefits in an economic downturn, the U.S. House Oversight and Government Reform Committee on Wednesday passed 23 to 12 legislation that would provide health care and other employment benefits to the same-s.ex domestic partners of federal employees, Govexec.com reports. The 2009 Domestic Partnership Benefits and Obligations Act (H.R. 2517) would provide all of the employment benefits made available to the spouses of heterose.xual federal employees, including health insurance, retirement, disability, and other benefits . . . . The provisions apply to partners of current employees, former employees, and retirees." (PLANSPONSOR.com; free registration required)
Change in Federal Rules Regarding Time Computation (PDF)
Excerpt: "On December 1, 2009, the time computation amendments to Rule 6 of the Federal Rules of Civil Procedure will take effect, simplifying the computation of deadlines and changing the timing requirements of many rules. Under amended Rule 6, every day, including weekends and holidays, will now be counted in calculating filing deadlines. Under the soon-to-be-old rule, for time periods of less than 11 days, intervening Saturdays, Sundays and holidays were not counted. In addition, the response time periods in more than 20 rules have been changed, with most time periods adjusted to the nearest multiple of seven. Generally, one-, three-, and five-day time periods will become seven days; 10- and 11-day time periods will become 14 days; and 20-day time periods will become 21 days." (Sutherland Asbill & Brennan LLP)
New York Court OKs Out-of-State G.ay Marriage Benefits
Excerpt: "New York state's top court ruled on Thursday that public officials have the authority to recognize out-of-state g.ay marriages and pushed state lawmakers to decide whether to legalize same-s.ex marriage. G.ay marriage opponents had challenged decisions in 2006 by the New York State Department of Civil Service and Westchester County to give health insurance and other benefits to same-s.ex couples legally married in other states or countries. The ruling by the New York State Court of Appeals upheld the decision of lower courts, which had dismissed the challenge." (Reuters via Yahoo! News)
New York High Court Upholds Benefits Rights for Same-S.ex Married Couples
Excerpt: "New York's top court on Thursday rejected a Christian legal group's challenge to the provision of public employee benefits to same-s.ex couples legally married elsewhere. In a 4-3 decision the Court of Appeals did not address whether the state must recognize same-s.ex marriage, according to a news report on Leagle.com. However, with Thursday's court decision, legally married same-s.ex couples will be entitled to public employee health insurance coverage and certain other benefits provided to heterose.xual couples. The court ruling noted that while same-s.ex marriage isn't legal in New York under the state Constitution, it doesn't address whether New York can recognize a same-s.ex marriage legally performed in another state. In its decision the court urged lawmakers to clear up the matter." (PLANSPONSOR.com; free registration required)
[Opinion]
Wall Street Bonuses: Where's the Outrage?
Excerpt: "So institutional shareholders are upset at the bonuses Goldman Sachs Group is planning to shell out, as we read in today's WSJ. But what about investors at other financial institutions? Where is the outrage there? The complaint of Goldman shareholders is simple: Despite record net income, Goldman's per-share earnings will be 22% lower this year than in 2007 and roughly equal to its 2006 earnings, according to Thomson Financial. Goldman is, of course, the whipping boy of the moment. Whether the criticism is fair or not, Goldman has come to symbolize the perceived inequity between Wall Street and Main Street. And while the government bailed out Wall Street, unemployment stands above 10%, while Goldman's per-employee compensation reaches $717,000." (The Wall Street Journal)
[Opinion]
It's Time to Kill Stock Options
Excerpt: "With Silicon Valley clawing its way back from the great recession, I want to make a radical proposal. It's time to kill the stock option. I know such a notion seems unthinkable. Even mild criticism of them in these parts gets labeled as heresy. The stock option is so deeply embedded in the culture and mythology of Silicon Valley that it seems hard to imagine how the world's leading hub of innovation could exist, much less thrive, without it. But hear me out. The evidence is clear to me that stock options have outlived their purpose, and have actually become a liability to the valley's innovation economy. At a moment when the economy stands at a crossroads, the time feels right to fundamentally rethink the incentives the valley offers to employees for their risk-taking and inventiveness." (San Jose Mercury News)
Webcasts and Conferences
Beyond the Bad Economy: Jobs, Retirement, Health and Social Insurancein District of Columbia on January 21, 2010
presented by National Academy of Social Insurance
Decumulation and Defined Contribution Plans & EFAST2 Is Around the Corner: Will You Be Ready?
in Illinois on December 17, 2009
presented by ASPPA Benefits Council of Chicago
Get Smart Fiduciary Training Event
in Michigan on December 9, 2009
presented by Freedom One Financial Group
(Click to post your webcast or conference)
Press Releases
Transamerica Announces New Fund Platform for Company-Sponsored Retirement PlansTransamerica Retirement Services
Medication Compliance Is a Key Concern for Employers, According to New Survey
National Pharmaceutical Council
(Click to post your press release)
Employee Benefits Jobs
Pension Administratorfor Pension Administration Firm located in Westchester, NY
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Pension Administrator
for Jordan & Associates
in CA
Daily Valuation Manager
for PensionTrend, Inc
in MI
Account Manager
for Alliance Benefit Group
in KS, MO
401(k) Administrator
for Iron Administration, LLC
in IL
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