Retirement Plans Newsletter

February 9, 2010

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Hewitt Associates Survey Reports More Companies Plan to Increase Efforts to Help Employees Save Sufficient Retirement Funds
Excerpt: "As a result, 80% of companies that suspended or reduced their company match in 2009 are planning to restore it in 2010, the poll found. In addition, employers continue to emphasize auto 401(k) plan features. Some 46% of employers that do not already offer automatic rebalancing said they are very or somewhat likely to add it in 2010, and nearly four in ten (38%) indicated they are very or somewhat likely to add automatic contribution escalation."

The Use and Impact of Advice Among Near-Retirees
Excerpt: "Receiving advice does not automatically translate into implementing the advice. Among higher education near-retirees who have consulted with a financial advisor within the past two years, 17% report always implementing the recommendations of their advisor(s), while 31% only implement the advice some of the time if ever. A likely reason for non-implementation among some is trust; advice received is viewed as always being independent and objective by only 25% of those who typically do not implement an advisor's recommendations."
(TIAA-CREF Institute)

Using the Asset-Salary Ratio As a Guide to Creating a Secure Retirement
Excerpt: "Similar to the full-funding ratio of a defined benefit plan, the [Asset-Salary Ratio] provides an easily understandable measure for a participant to gauge whether she is 'on-track' for accumulating sufficient retirement wealth. Applying this measure to a sample of TIAA-CREF participants, we find that, on average, participants had assets consistent with at least a 70 percent income replacement ratio; with this result holding across different ages, genders, and tenures."
(TIAA-CREF Institute)

Most 403(b) Sponsors Kept Match During the Downturn
Excerpt: "Nearly three-fourths (73.4%) of 403(b) plan sponsors said in a recent poll that they did not change their employer match during the 2008-2009 plan year -- and that seems to have shored up participation as well. A news release said the poll, from the Profit Sharing/401k Council of America (PSCA), also found that 43% of plan sponsors surveyed say they increased employee education because of the economic conditions. Another 17% added investment advice for employees."

Program Materials from WISER's Annual Retirement Security Symposium Now Available
WISER's annual retirement security conference materials on 'Pulling It All Together: What Government, Employers, and Individuals Can Do to Strengthen Women's Retirement Security,' held December 3, 2009.

Bank of America Merrill Lynch Finds Retirement Participants Boosting Savings
Excerpt: "401(k) participants took positive savings actions within their retirement savings plans in Q4 and throughout 2009, according to the latest quarterly '401(k) Contribution Activities Scorecard' report from Bank of America Merrill Lynch."

Former Alaskan State Workers Get Last Chance for Retirement Plan
Excerpt: "Attention ex-government workers: You've got one last chance to get back into the state's old -- and much more generous -- retirement system. A deadline of June 30 is approaching for tens of thousands of former state, municipal and school district workers who cashed out their retirement accounts under the famed Tier 1 system, as well as the two retirement plans that followed."
(The Anchorage Daily News)

Lengthening Life Spans Affect Retirees' Savings Plans
Excerpt: "U.S. life expectancy reached nearly 78 years in 2007 . . . and has been increasing each year, according to the Centers for Disease Control and Prevention. 'More than half of babies born in rich nations today will live to 100 years if current life expectancy trends continue,' . . . . 'And we are not only living longer than before, but those extra years are spent with less disability and fewer limitations on daily life than in the past.' That means we'll need more money to enjoy those years. The challenge is getting people to understand the importance of planning for longevity, say experts."
(The Dallas Morning News)

Plan to Create Longevity-Risk Market May Succeed, Moody's Says
Excerpt: "The Life & Longevity Markets Association, comprising a group of insurers and banks, may succeed in creating a market for products that pass on the risk of people living into old age, Moody's Investors Service said. The group, founded last week by Axa SA, Deutsche Bank AG, JPMorgan Chase & Co., Legal & General Group Plc, Pension Corp., Prudential Plc, Royal Bank of Scotland Group Plc and Swiss Reinsurance Co., aims to create a secondary market in so-called longevity swaps and other derivatives whose values are tied to life expectancy."

Report by Towers Watson that Compared Differences in Investment Results Between 401(k) Plans and Defined Benefit Plans
Excerpt: "[W]hen you look at the full Towers Watson analysis, the result is more nuanced. Over the [time period] it has been conducting this analysis, Towers Watson noted that DB plans do better (on a relative basis to 401(k)s) when the markets are bearish -- and yet, 401(k) results, with all their faults and shortcomings, tend to fare better (at least at a plan average) when the bulls are in charge."

Plan Financial Consulting Live Online Courses Developed by the CFFP

The American Society of Pension Professionals & Actuaries (ASPPA) and the College for Financial Planning (the College) have joined forces to offer advanced qualified retirement plan education to financial professionals. Beginning in March, the College will offer instructor-led courses online that lead to ASPPA’s Qualified Plan Financial Consultant (QPFC) credential. Students will be able to sit for the QPFC exams and upon successful completion, apply for the QPFC credential with ASPPA!

"If you're a financial advisor engaged in the increasingly complex world of qualified plans, this partnership represents a significant opportunity to advance your career." ~Sheldon H. Smith, Esq, APM, President, ASPPA

For more information and to register, visit

Executive Compensation; Benefits in General

[Guidance Overview]
IRS Guidance on Miscellaneous HEART Act Changes (PDF)
4 pages. Excerpt: "Section 111 of the HEART Act adds section 45P to the IRC. IRC section 45P provides a small business employer a credit against its income tax liability if it makes differential wage payments to 'qualified employees' who are on active duty in the uniformed services for more than 30 days. The amount of the credit is 20% of the sum of the eligible differential wage payments made to qualified employees during the taxable year of the small business employer."
(Transamerica Center for Retirement Studies)

[Guidance Overview]
IRS Correction Program for 409A Plan Documents
Excerpt: "This new 409A guidance will be helpful to employers who may have overlooked certain deferred compensation arrangements that were not updated to comply with Section 409A by the December 31, 2008 deadline. But even if your plans have been previously reviewed for 409A compliance, you should not disregard this new guidance. The Notice provides clarifications regarding some common plan provisions that will be considered compliant with Section 409A requirements."
(Nixon Peabody LLP)

[Guidance Overview]
DOL FAQs on How Pharmacy Benefit Manager Compensation Is Reported for Form 5500 Schedule C Purposes
Excerpt: "EBIA Comment: It is interesting to see the DOL provide such specific guidance for PBMs. Those entities, and the plans they provide services to, will want to take note. But it is important to remember that Schedule C will not be required for an ERISA welfare plan unless it has a trust (or should have had a trust because Technical Release 92-01 does not apply). And in light of a growing number of cases addressing whether PBMs are ERISA fiduciaries, we find noteworthy the DOL's caveat that the guidance on rebates and discounts is for Schedule C purposes only and does not indicate the agency's view on other ERISA Title I provisions."
(Employee Benefits Institute of America)

Value of Golden Parachutes at America's 20 Largest Publicly-Traded Companies Decreased by Approximately 40% in Past Two Years
Excerpt: "A new study conducted by New York management consultant Alvarez & Marsal found the average value of change in control benefits provided to CEOs decreased to $22,987,661 in 2009 from $38,355,523 in 2007. Similarly, the average value provided to other non-executive officers fell to $7,975,671 in 2009 from $13,191,635 in 2007, according to a press release."

Are You Indemnified for a Fiduciary Breach Involving a Retirement or Health Plan?
Excerpt: "The beginning of the year is a good time to examine or assess your indemnification and insurance coverage. It is especially appropriate to focus on indemnification for a couple of reasons. First, it appears that the position recently taken by the Labor Department, and adopted by certain federal courts, has put into question the ability of plans, and arguably companies, to indemnify plan fiduciaries in instances where there has been an allegation of fiduciary breach."

New Jersey Cost-Cutting Measures Would Reduce Pensions and Health Benefits for Government Workers and Teachers
Excerpt: "The plans . . . would roll back pension benefits for government workers and teachers, and make public employees at all levels pay 1.5 percent of their salaries toward health benefits, matching what state workers contribute. Several steps would aim to crack down on perceived abuses. Most state workers would have to put in at least 35 hours a week to qualify for pension and health benefits. Those with multiple public jobs could choose just one for calculating retirement benefits."

Impact of FY 2011 Proposed Budget on HR and Employee Benefits
Excerpt: "The budget includes several proposals that affect human resources and employee benefits from an employer perspective, such as: 1) a proposed extension of the federal subsidy for COBRA benefits through December 31, 2010; 2) a legislative proposal that would introduce automatic individual retirement accounts (IRAs) for employers to offer employees; 3) retirement plan regulatory initiatives . . . ."
(Hewitt Associates)

CBO's Assessment of Policy Option to Reduce Employers' Payroll Taxes for Firms that Increase Their Payroll (PDF)
7 pages. Excerpt: "This letter [to the Honorable Robert P. Casey Jr.] responds to questions you posed about policy options to increase employment by reducing employers' payroll taxes for firms that increase their payroll. Last month, the Congressional Budget Office (CBO) released a report that addressed such options, as well as other possible approaches to achieving that goal. This letter reviews the analysis in that report and discusses how key design elements of such a policy would affect the resulting gains in employment."
(U.S. Congressional Budget Office)

IRS Compliance Audits on Employment Taxes Could Start This Month, According to Accounting Firm
Excerpt: "While the examinations may look at any reporting aspect of the return, Eisner says that the primary areas of focus are expected to be the following items: 1) worker classification (employee vs. independent contractor); 2) fringe benefits; 3) officer's compensation; 4) backup withholding; and 5) Form 1099 reporting."

New Edition of ESOPs and Corporate Governance
The NCEO has just released the third edition of its book ESOPs and Corporate Governance, which was written to help ESOP companies think through their governance issues. An important chapter details a survey on ESOP company governance practices. Other chapters address how to select trustees, legal obligations of trustees, best practices for boards (with an eye to concepts established by Sarbanes-Oxley), issues when employees are fiduciaries, and special legal considerations for ESOP companies.
(National Center for Employee Ownership)

Webcasts and Conferences

"409A Forgiveness: Round 2" Web Seminar
Nationwide on February 25, 2010
presented by SunGard Relius

"ADP/ACP Testing Techniques" - A Two-part Web Seminar
Nationwide on February 23, 2010
presented by SunGard Relius

2010 San Diego 401k/DC Evaluation Summit
in California on February 24, 2010
presented by Xponential Growth Solutions

Boston Mid-Sized Retirement & Pension Plan Management Conference
in Massachusetts on May 4, 2010
presented by University Conference Services

Press Releases

US Labor Department Publishes Employer Notices on Medicaid and CHIP Programs
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

ASPPA and CFFP Form Education Partnership
American Society of Pension Professionals & Actuaries (ASPPA)

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