Retirement Plans Newsletter
December 16, 2009

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[Official Guidance]
Text of the Exelon 401(k) Fee Case Dismissal, December 14, 2009 (PDF)

10 pages. (United States District Court via The Spark Institute, Inc.)



[Guidance Overview]
Bringing Higher Education 403(b) Plans Up-to-Date with Current ERISA Fiduciary Best Practices

Excerpt: "The white paper, released by Diversified Investment Advisors, Inc., was developed to help higher education plan sponsors understand when and how ERISA applies to 403(b) plans, as well as provide best practice recommendations for complying with fiduciary requirements. Diversified partnered with Groom Law Group to prepare the paper in light of the urgency surrounding compliance with the final 403(b) regulations and the pressing concern regarding the application of proper fiduciary practices." (Groom Law Group)



[Guidance Overview]
Misinterpreting the IRS' New PPA Amendment Deadline Could be Costly

Excerpt: "A careful reading of Notice 2009-97 indicates that the extension is available only for amendments that: Comply with the funding-based benefit limitations that apply to defined benefit plans. Apply certain of the new rules to cash balance and other hybrid plans. Implement the diversification requirements for 401(k) and other defined contribution plans that invest in employer stock." (Osler, Hoskin & Harcourt LLP)



[Guidance Overview]
DOL Clarification of its Position on Short 2009 Plan Year Filings

Excerpt: "We received a number of emails inquiring whether SunGard intended to modify its technical update on short 2009 plan year filings. We [asked if] the DOL intended to modify its instructions or FAQs. [The DOL will not be changing its position] (i.e., only short 2009 plan year filings with a filing deadline before 2010 are eligible for the paper option). However, [it] indicated that a plan sponsor maintaining a plan with a short 2009 plan year that has a filing deadline after December 31, 2009 and which has a difficult situation (e.g., terminating plan) could contact the EFAST Contact Center (1-866 GO-EFAST) and explain its circumstances." (SunGard Relius)



[Guidance Overview]
High Court Lets Stand Decision on Discharging PBGC Termination Premiums

Excerpt: "The U.S. Supreme Court has denied review of a federal appeals court's ruling that Oneida Ltd. could not discharge during its bankrup.tcy reorganization termination premiums it owed to the Pension Benefit Guaranty Corporation (PBGC), BNA reports." (PLANSPONSOR.com)



[Guidance Overview]
High Court Ends Indiana Pension Funds' Chrysler Fight

Excerpt: "A battle by three Indiana pension funds to overturn the government-backed sale of bankrupt automaker Chrysler LLC has come to an end at the U.S. Supreme Court." (PLANSPONSOR.com)



[Guidance Overview]
White Paper Helps 403(b) Sponsors with Fiduciary Roles

Excerpt: "Diversified Investment Advisors, Inc., has released a white paper about 403(b) plan compliance with statutes of the Employee Retirement Income Security Act (ERISA). 'Avoiding the Breach: Bringing 403(b) Plans Up-to-Date with Current ERISA Fiduciary Best Practices' was developed to help higher education plan sponsors understand when and how ERISA applies to 403(b) plans, as well as provide best practice recommendations for complying with fiduciary requirements . . . ." (planadviser)



[Guidance Overview]
When a Trust Is Beneficiary, Can the Beneficiaries of the Trust Use the Life Expectancy Payout Method?

Excerpt: "[A] trust may be named as a beneficiary of a qualified plan, 403(b) or IRA participant. However, since it is not a person, a trust may generally not use the life expectancy method of payout, but individuals who are beneficiaries of the trust are able to be treated as designated beneficiaries, and thus use the life expectancy payout method, if the trust meets all of the following four requirements . . . ." (McKay Hochman Co.)



Target-Date Retirement Funds Use Junk Bonds for Yield
Excerpt: "Target-date funds may present greater risks than consumers have been aware of, said Laura Pavlenko Lutton, editorial director in Morningstar's mutual-fund research group. . . . 'I am extremely disturbed by the amount of junk bonds found in many 2010 target-date funds,' said Senator Herb Kohl, a Wisconsin Democrat and committee chairman. 'Stronger regulation is needed to ensure that participants on the brink of retirement are not exposed to such excessive risk.'" (Bloomberg L.P.)



The Three R's of Your 2010 Retirement Resolutions
Read the plan, Replacement Ratio understanding, and Reassess the portfolio. (National Institute on Retirement Security)



Automatic IRA Legislation Likely to Pass in 2010
Excerpt: "Retirement finance experts believe that Congress will reintroduce and pass in 2010 two bills -- S. 1141 and H.R. 2167 -- that would require small- and medium-sized businesses to automatically enroll their employees into an IRA. The Senate bill, sponsored by Senator Jeff Bingaman (D-New Mexico), and the House bill, sponsored by Rep. Rich Neal (D-Massachusetts), are both called the Automatic IRA Act of 2007." (Investment Advisor)



Towers Perrin U.S. Legislative Tracking Charts: Retirement and Executive Compensation, Updated December 11, 2009 (PDF)
13 pages. Excerpt: "Thousands of bills are introduced in Congress but only a select few are summarized on this chart. This selection represents our best judgment on the likelihood of enactment and the relevance of the issue for employers." (Towers Perrin)



Using 401(k) Funds for a Business Startup
Excerpt: "The procedure typically involves the creation of a C Corporation by the business owner, then the setup of a retirement plan for its employees, followed by the rollover of the new business owner-employee's 401(k) funds into this new plan, and ultimately the exchange of corporate stock for the funds in the plan. Hence, the acronym ROBS: roll-overs as business startups." (WebCPA.com)



Tulsa, Oklahoma, Public Schools' Early Retirement Plan
Excerpt: "One reason employees . . . say they're not enthusiastic about the plan- health insurance. [It is not being provided.] In addition to offering administrators and support staff the early retirement option, TPS also plans to offer teachers of retirement age a $5,000 stipend. The only difference with this plan, teachers would actually have to work until June." (Newport Television LLC)



The Research Contributions of the Center for Retirement Research at Boston College (PDF)
Excerpt: "This article reviews the CRR's research contributions over its 10-year history and their implications for Social Security and retirement income policy in three major areas: (1) Social Security's long-term financing shortfall, (2) the adequacy of retirement incomes, and (3) labor force participation at older ages as a means to improve retirement income security." (U.S. Social Security Administration)



The Retirement Research Consortium: Past, Present, and Future (PDF)
7 pages. Excerpt: "A series of articles in this issue of the Bulletin commemorate the research and policy accomplishments of the three centers of the RRC. Each of the following three articles, one by each center of the RRC, highlight that particular center's contributions to research and policymaking on Social Security and retirement. In this introductory article, we provide an overview of the RRC from SSA's perspective, a brief history of its development, a discussion of the aims of the consortium, and some thoughts on its future." (U.S. Social Security Administration)



IRS Form 5500 Audit Project Finds Low Bonding Coverage Problem
Excerpt: "When the Internal Revenue Service (IRS) put about 50 Form 5500 filings to the test recently, the plans filing the annual reports flunked on one major issue - buying enough fiduciary bond coverage for their fiduciaries and administrators. The IRS said in a Web site posting that plans generally are required under Title I Section 412 of the Employee Retirement Income Security Act (ERISA) to carry the fiduciary bond insurance equal to at least 10% of the dollar value of their plan's trust." (PLANSPONSOR.com)



Employers' Biggest Worker Retirement Fear Is the 'Knowledge Drain'
Excerpt: "A new MetLife study finds employers fear the effect losing retiring workers will have on the company's effectiveness - often termed a 'knowledge drain.' A news release about the MetLife Emerging Retirement Model Study said when employers were asked which of two retirement-related issues - delayed retirement or the knowledge drain - are of greatest concern, 74% said they are primarily concerned about experiencing a knowledge drain as older workers retire." (PLANSPONSOR.com)



[Opinion]
Defined Benefit Plans: The Real Deal with a Unique Ability to Provide Retirement Security and Are Economically Efficient

Excerpt: "At the Pension Benefit Guaranty Corporation's 35th anniversary celebration in Washington, D.C., NIRS presented key research findings that make the case for expanding and strengthening defined benefit pension plans. The findings were reviewed at the National Press Club where NIRS executive director Beth Almeida served as a panelist on 'The Future of Defined Benefit Pension Plans: A PBGC Policy Forum.'" (National Institute on Retirement Security)



[Opinion]
No Course Correction Planned for New Jersey State Pension Funding

Excerpt: "Nobody in the highest-taxed state in the nation can afford the cost of these pensions so New Jersey politicians, because they can*, are simply not presenting anywhere near the full bill. No change here. What will change is that the pension fund, valued at $66.7 billion as of 10/31/09 and needing to pay an estimated $7 billion a year, and rising, to retirees will be bankrupt without massive infusions of cash or real benefit cuts. Neither are on the horizon and it's still full speed ahead into the abyss . . . ." (nj.com)





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Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Employee Benefit Plan Sponsors & Fiduciaries Urged to Review Bonding, Credentials of Staff & Service Providers Under ERISA

Excerpt: "ERISA generally prohibits individuals convicted of certain crimes from serving, and prohibits plan sponsors, fiduciaries or others from knowingly hiring, retaining, employing or otherwise allowing these convicted individuals during or for the 13-year period after the later of the conviction or the end of imprisonment, to serve as . . . ." (Solutions Law Press HR & Benefits Update)


[Guidance Overview]
Year-End Update on Executive Compensation (PDF)

4 pages. Excerpt: "In anticipation of the 2010 proxy season, companies should review all of their executive pay practices to determine whether any could be deemed problematic, and whether such arrangements should be eliminated or modified to address potential criticism." (Portfolio Media, publisher of Law360 via McGuireWoods LLP)


[Guidance Overview]
Broadcom Options Backdating Defendants Cleared by Federal Judge

Excerpt: "A federal judge has cleared two former executives of an Irvine, California-based telecommunications firm of charges related to backdating stock options. The Wall Street Journal reported that U.S. District Judge Cormac Carney threw out criminal fraud charges against Henry Nicholas III, the co-founder of Broadcom, and William Ruehle, the company's former chief financial officer." (PLANSPONSOR.com)


Washington, D.C. Council Passes Same-S.ex Marriage Bill
Excerpt: "The bill, which could be signed by the mayor as early as tonight, must go to Congress for a review period of 30 legislative days before it becomes law." (The Washington Times)


From COBRA to GINA, 2009 Held Many Challenges for Employers
Excerpt: "For many benefit managers, the economic downturn resulted in a domino effect of events this year. Perhaps the single biggest benefits event came early, when Congress enacted the American Recovery and Reinvestment Act of 2009, which provided a 65 percent subsidy to laid-off workers who purchased COBRA coverage from their employers. Then in March, ongoing financial market woes threatened the solvency of defined-benefit plans while deterring many employees from continuing to invest in their 401(k) plans." (Workforce Management; free registration required)


Towers Perrin U.S. Legislative Tracking Charts: Human Resources, Updated December 11, 2009 (PDF)
11 pages. Excerpt: "Thousands of bills are introduced in Congress but only a select few are summarized on this chart. This selection represents our best judgment on the likelihood of enactment and the relevance of the issue for employers." (Towers Perrin)


Top Ten Things to Do in 2010 to Minimize the Risk of Employment-Related Litigation
Excerpt: "And, finally, remember that employees who feel they are treated fairly and with respect are less likely to bring claims against their employers." (Pepper Hamilton LLP)


ISCEBS's 2010 Symposium Call for Presentations (PDF)
1 page. Excerpt: "The International Society is soliciting topic and speaker suggestions for the 2010 ISCEBS Symposium, October 3-6 in Charlotte. Society members and other industry professionals are invited to submit a proposal. The Society is particularly interested in benefit and compensation topics that adhere to the following guidelines. Our experienced audience is interested in key industry topics, leading-edge issues and techniques, strategic viewpoints and emerging trends." (International Society of Certified Employee Benefit Specialists)


2009 National Financial Capability Study
Excerpt: "The National Financial Capability Study established a baseline measure of the ability of Americans to manage their money, benchmarking four key indicators of financial capability and evaluating how these indicators vary with underlying demographic, behavioral, attitudinal and financial literacy characteristics." (FINRA Investor Education Foundation)


Employee Ownership Update for December 15, 2009
NCEO Executive Director Corey Rosen discusses the following: John Logue, the founder and director of the Ohio Employee Ownership Center, has passed away. In other news, the NCEO has released a survey on corporate governance in ESOP companies that looks at boards, trustee selection and practices, voting rights, and other issues. (National Center for Employee Ownership)



Webcasts and Conferences

"EFAST2: A New Decade of Plan Reporting" Web Seminar
Nationwide on January 19, 2010
presented by SunGard Relius

"Schedule C: C is for Confusion" Web Seminar
Nationwide on January 21, 2010
presented by SunGard Relius

Employee Compensation: What to Expect in 2010 from Regulatory and Design Perspectives
Nationwide on January 13, 2010
presented by Buck Consultants, an ACS Company

Form 5500 for Health and Welfare Plans: Are You Ready for Mandatory Electronic Filing?
Nationwide on January 28, 2010
presented by EBIA / Thomson Reuters

(Click to post your webcast or conference)

Press Releases

U.S. Labor Department Sues Manchester, Conn., Company and President to Recover Misused Assets of Employee 401(k) Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

U.S. Department of Labor Sues Defunct Arlington, Virginia, Company to Protect Participants of Abandoned Retirement Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

U.S. Labor Department Obtains Court Judgment Ordering Fiduciary of 401(k) of Defunct Westborough, Mass., Company to Properly Administer the Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Federal Court Grants U.S. Labor Department Default Judgment Requiring Atlanta Company and President to Repay Nearly $100,000 to 401(k) Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

(Click to post your press release)

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