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Retirement Plans Newsletter

February 11, 2010

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[Guidance Overview]
Segregating After-Tax Dollars from a Qualified Plan Distribution
Excerpt: "[T]he IRS produced Notice 2009-68 in September 2009. This notice provides sample language that plan fiduciaries can rely upon as a Safe Harbor to fulfill this notice requirement. Buried in this routine notice is one little section that seems to rewrite the actual tax code, without the assistance of Congress: 'If you do a direct rollover of only a portion of the amount paid from the Plan and a portion is paid to you, each of the payments will include an allocable portion of the aftertax contributions. . . .'"

[Guidance Overview]
401(k) Fiduciary Risk Management: Making Decisions Based upon Knowledge (PDF)
Excerpt: "The good news . . . is that fiduciaries do not have to guarantee an outcome. Rather, ERISA §404(a)(1)(B) requires that they must act 'with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.'"
(Richard D. Glass via Investment Horizons)

[Guidance Overview]
Third Circuit Rules That an Amendment to a Welfare Plan Violates ERISA's Anti-Cutback Rule Due to Effect on Pension Plan
Excerpt: "According to the Court, the Anti-Cutback rule states: 'The accrued benefit of a participant under a [pension] plan may not be decreased by an amendment of the plan'. To violate the Anti-Cutback rule, a pension plan must be amended, and the amendment must decrease an accrued benefit. The lump sum payment lost due to the Disputed Amendment is an accrued benefit. The Disputed Amendment amended a welfare benefit plan, which is not subject to the Anti-Cutback Rule. However, the Disputed Amendment constructively amended the pension plan. This obtains because the Disputed Amendment added a condition to the receipt of an accrued benefit under the pension plan."
(Stanley D. Baum of Fellheimer & Eichen LLP)

Contra Costa County, California, Board May Alter Pension Formula
Excerpt: "A divided Contra Costa County pension board Wednesday took a small step toward controlling runaway retirement benefits, deciding to consider changing guidelines for new employees. The move came as the board has been considering advice from counsel Harvey Leiderman over whether its inclusion of pay received at retirement and other items in computing final salaries violates state law. The board may change the policy for new workers while it decides whether it should consider it a vested right for current employees and retirees."
(Contra Costa Times)

Florida's West Coast Cities and Counties Starting Pension Cost Discussion
Excerpt: "[City of Sarasota] officials say the worst recession in decades is forcing them to make tough choices -- and pension reductions for 625 not-yet-retired city employees could be one of them. Dozens of police plan to pack a City Hall meeting today to register their disapproval, the first salvo in what will likely be a months-long public debate over benefits they were promised."

Disaster-Proofing the DC Plan
Excerpt: "Commentary: With many of the fires of 2008-2009 extinguished or at least under control, plan sponsors are now asking: What are the next ticking time bombs to avoid? Or to put it another way: How can we disaster-proof our plans against the next financial upheaval -- whatever that may be? Here are some approaches under consideration."
(Workforce Management; free registration required)

New 6% American Savings Rate to Funnel $800B to Investments Annually
Excerpt: "The financial crisis has made a permanent impression on American consumers, who are likely to save 6% or more of their income over the next decade, translating to as much as $800 billion stashed away each year, according to a new study by Allianz Group. Along with this mentality, investors will be looking for guaranteed and safe savings solutions."
(Money Management Executive via On Wall Street)

Pension Funding Relief Included in Senate Democratic Jobs Bill
Excerpt: "We are pleased to report that the Senate Democrat's version of the job stimulus bill -- the 'Hiring Incentives to Restore Employment Act' -- includes provisions related to funding relief. Specifically, this bill would provide the following relief for funding requirements related to defined benefit plans for single employers (sections 701-703 of the bill): Plan sponsors may elect one of two amortization schedules (note the bill does not include a more generous amortization schedule for 'on-going' plans) . . . ."
(The ERISA Industry Committee)

Employee Plans Compliance Resolution System Issues Arising from 403(b) 'Disqualification'
Excerpt: "[In a conversation with Kathy Elliott, (a CPA specializing in 403(b) audits)] we went into more detail on my blog on 403(b) plan disqualification. In talking about what now seems to be the obvious, Kathy pointed out the absurdity of 'disqualifying' an entire 403(b) plan: the employer suffers little direct tax sanction, and the burden of the employer's errors are borne by the employees. There is no 'stick' to the 'carrot and stick' combination that makes 401k plans work, according to Kathy."
(Robert J. Toth, Jr.)

New Jersey Pension Reform Starting with Really Bad Numbers
Excerpt: "In this multi-part series I will look at the proposed legislation in detail starting with some of the assumptions in that 2006 report that make their proposals suspect. Quoting from the Executive Summary: 'New Jersey's retirement systems have an $18 billion unfunded liability. . . . The State's health care benefits unfunded liability is estimated to exceed $20 billion.' Both assumptions are wildly off, even using 'official' phonied-up numbers. The unfunded pension liability was reported as $34.4 billion on June 30, 2008 and that number should rise to at least $50 billion when the June 30, 2009 reports are released. Using honest assumptions I get a deficit of $133 billion."

The Peril of Public Pension Funds
Excerpt: "One of the mildly surprising things about the Stuyvesant Town debacle is the kinds of investors the deal attracted. What were entities like CalPers and the Church of England doing plowing their money in along with real estate moguls . . . ? The answer is 'looking for alpha'. Underfunded pension funds have been looking for extra return in order to make up the holes . . . and the problem is worst among public pension funds, because until recently, their accounting wasn't very good, so politicians were fond of making unfunded promises in lieu of wages."
(The Atlantic Monthly Group)

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

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Guidance Overview]
New Rules Effective in 2010 for Employee Stock Purchase Plans
Excerpt: "If the employer arranges for shares purchased under the ESPP to be transferred to a brokerage account established for the participants, the transfer of the legal title of the shares directly to a broker or financial institution is treated as a transfer that triggers the reporting obligations. However, if the employer issues stock certificates to participants upon the exercise of ESPP options, or if shares are registered in the participants' name and the employer holds those shares for participants in book entry form, then the initial transfer of shares does not occur until the participant's subsequent legal transfer of title."
(Sherman & Howard L.L.C.)

Milliman's Monthly Benefit News and Developments, February 2010 (PDF)
2 pages. The newsletter provides a summary of the previous month's legislative, regulatory, and judicial information on employee benefits and upcoming key dates.

Podcast: Survey Looks at Diversity of Offerings, Education Issues for Stock Ownership Plans
Excerpt: "What role do stock plan benefits play in total rewards for non-executive employees? Ellen Lodwick of Mercer's Information Research Center reports findings from a recent survey of 200 very large public companies that reveals motivations for adopting stock plans, the types of plans commonly adopted, and how well employers are doing when it comes to educating employees about plan benefits and features."
(HRadio via Mercer LLC)

Webcasts and Conferences

Defined Contribution Plan Compliance and Governance
in Virginia on February 25, 2010
presented by Capital Chapter - ISCEBS

Health Care Reform - What It Means To You
in Pennsylvania on February 25, 2010
presented by International Society of Certified Employee Benefits Specialists

Press Releases

Sixth Annual Employee Benefits Writing Competition
American College of Employee Benefits Counsel

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in MI

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