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Retirement Plans Newsletter
December 29, 2009 
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ERPA Exam Registration Deadline Approaching!
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[Official Guidance]
Text of IRS Announcement 2010-3: Automatic Approval of Changes in Funding Method for Takeover Plans and Changes in Pension Valuation Software (PDF)
4 pages. Excerpt: "This announcement provides, for plan years beginning on or after January 1, 2009, automatic approval for certain changes in funding method with respect to single-employer defined benefit plans that result either from a change in the valuation software used to determine the liabilities for such plans or from a change in the enrolled actuary and the business organization providing actuarial services to the plan. This guidance is being provided in response to numerous requests from actuaries and plan sponsors, many of whom are continuing to modify their valuation software in order to implement the changes to the funding rules made by [PPA '06], [WRERA '08], and guidance regarding these legislative changes." (Internal Revenue Service)
[Guidance Overview]
State Courts Have Jurisdiction to Determine Whether a Domestic Relations Order Is Qualified
Excerpt: "EBIA Comment: As noted in our earlier article, we find the court's view -- that state and federal courts have concurrent jurisdiction over challenges to a plan administrator's QDRO determination -- compelling and consistent with the many published cases on this issue. The court acknowledged that the DOL reached a different conclusion in its publication explaining QDROs, but refused to defer to the DOL's interpretation, noting that the publication was not an official regulatory interpretation and that, in any event, the jurisdiction issue was a pure question of law on which no deference to the DOL was necessary." (Employee Benefits Institute of America)
[Guidance Overview]
DOL Affirmation of Application of ERISA's Mutual Fund Exclusions to Typical 'Target Date' and 'Lifecycle' Fund Arrangements
Excerpt: "EBIA Comment: The DOL's conclusion in this advisory opinion is not altogether surprising given the language of the mutual fund exclusions and the long history of fund of funds arrangements. (In its opinion, the DOL noted that such investment arrangements existed at the time ERISA was enacted.) But the explicit affirmation of the exclusions to lifestyle funds will be welcomed by those who operate such funds. Plans, registered investment companies, and investment advisors should be mindful, however, about the limits of those exclusions." (Employee Benefits Institute of America)
[Guidance Overview]
No Mention of Pension in Prenup Doesn't Entitle Wife to Benefits
Excerpt: "A Florida appeals court has found that an ex-spouse was not being deceitful when he failed to list a pension account in a prenuptial agreement." (PLANSPONSOR.com)
Older Women: Pushed into Retirement by the Baby Boomers?
Excerpt: "Older women's patterns of labor supply over the past forty years have differed markedly from those of younger women. Their labor force participation declined sharply during a period of rapid increase for younger women, and then increased significantly while younger women's plateaued and even declined. But there has been an apparent correspondence between the pattern of retirement among women aged 55-69, and the proportion of workers aged 25-34 working part-year and/or part-time." (Social Science Research Network)
Older Men: Pushed into Retirement by the Baby Boomers?
Excerpt: "The United States has experienced over the past forty years an apparent correspondence between the pattern of retirement among men aged 55-69, and the proportion of workers aged 25-34 working part-year and/or part-time. The latter was an effect of overcrowding among the baby boomers as they moved through the labor market. The former is hypothesized here to be a function of the increasing difficulty older men experienced in obtaining 'bridge jobs' (part-year and/or part-time) between career and retirement." (Social Science Research Network)
Integrating Retirement Models
Excerpt: "In contrast to some recent studies, the findings suggest the flow of wives into the labor force in the last few decades has probably reduced the amount of husbands' work. The model also provides plausible responses to various policies. For example, we find that any effort to promote opportunities for partial retirement as a means to increase overall work is likely to be unsuccessful as any induced decline in full retirements is offset by a decrease in full-time work. [Note: An online appendix is available for this publication.]" (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
Making Promises You Can Keep: Building Pensions for the Future (PDF)
6 pages. Excerpt: "Looking at the experiences of many companies through the crisis, it may be time for companies to promise less but, at the same time, do more to ensure that they can meet the promises they do make. If we look at the impact of the financial crisis on company pensions around the world, we can draw some useful conclusions for corporate pension plans of the future." (AEGON Global Pensions)
Fiduciaries of Participant‑Directed Plans Have a Duty to Remove Investments Prudently
Excerpt: "The threshold question is whether a fiduciary's duty to remove investments applies to individual investments or whether the decisions are judged on the basis of the investments in the aggregate." (PLANSPONSOR.com)
Now Might Be the Time for Plan Sponsors to Consider Idea of Offering Their Employees a Self-Directed Brokerage Account Window
Excerpt: "When participant investors have total control over where their 401(k) assets go, they cannot blame their sponsors if the returns keep sliding -- or so the argument goes. In fact, by offering an SDB account, some say sponsors can enhance their immunity to fiduciary responsibility, allegations of mismanagement, and law suits." (PLANSPONSOR.com)
Insights for Employers from the 2008 Charles Schwab Rethinking Retirement Survey (PDF)
16 pages. Excerpt: "Key insights from Rethinking Retirement suggest practical steps for employers." (Charles Schwab)
Analysis Suggests Participants Don't Understand Value of Annuities
Excerpt: "'Collectively, these findings suggest that retirees value incremental life annuity payments at less than their expected present value, either because they do not know how to accurately value life annuities or because they have strong demand for large lump sum payouts,' the researchers wrote in a working paper for the National Bureau of Economic Research (NBER)." (PLANSPONSOR.com)
Employers Acting More Aggressively to Reduce Pension Plan Risk, According to Survey
Excerpt: "In response to soaring liabilities and record-low funding levels, most U.S. companies are taking active steps to reduce their overall pension risk by changing the way they fund, invest and design their defined benefit plans." (Employee Benefit News; free registration required)
New Jersey Lawmaker Seeks to Bar Nongovernment Workers from Enrolling in State Pension System
Excerpt: "Assemblyman Paul Moriarty's bill would restrict eligibility to the Public Employees Retirement System by keeping lobbyists and others out. Currently, employees of some 17 private groups are eligible for state pensions. . . . Nongovernment workers already in the system -- who also have been contributing a small percentage toward their pensions -- would be allowed to remain." (ABC News)
[Opinion]
Are 401(k)s Finally Recovering?
Excerpt: "Two recent studies indicate that most defined-contribution-plan participants have the same or higher balances in their accounts now, than before the stock market began to tank. Such reports should be taken with a grain of salt, however, say experts, who also advise HR leaders to continue educating employees on the importance of prudence and diversification -- in good times and bad." (Human Resource Executive Online)
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DC/401(k) Administration Software from DATAIR
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Executive Compensation; Benefits in General
[Guidance Overview]Reporting of Stock and Option Awards in the Summary Compensation and Other Tables under SEC's New Executive Compensation Disclosure and Governance Rules
Excerpt: "The SEC considered several specific changes in connection with the reporting of stock and option awards in the Summary Compensation Table ('SCT'), Director Compensation Table ('DCT') and the Grants of Plan-Based Awards Table." (Michael Melbinger via Winston & Strawn LLP)
Former Comverse Executives to Pay $62M to Settle Suits on Alleged Stock Option Backdating
Excerpt: "Former executives of Comverse Technology Inc. will pay $62 million to partially fund a class action settlement stemming from alleged stock option backdating. Most of the money will come from the voicemail software maker's former CEO, who fled the country to avoid prosecution in the backdating scheme." (The Washington Post; free registration required)
Qwest to Cut Retirees' Pension Death Benefits, Worth $220 Million
Excerpt: "As many as 27,000 retirees are eligible for the death benefit, which pays beneficiaries an amount equivalent to the retiree's last annual salary with the company. Qwest couldn't say how many are actually in line to receive the payout." (The Denver Post)
Webcasts and Conferences
ERPA-Special Enrollment Examination Registration DeadlineNationwide on January 5, 2010
presented by AIRE, LLC (American Institute of Retirement Education)
(Click to post your webcast or conference)
Newly Posted Employee Benefits Jobs
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in MI
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for Benefits Integrity
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for McCamish Systems - An Infosys Company
in GA
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for R.J.L. Pension Services, Inc.
in FL
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