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Retirement Plans Newsletter

February 19, 2010

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  • FAS 132/158: Audit Letter, Worksheets, Schedules or call (888) 324-2474

[Guidance Overview]
Eighth Circuit Denies Deduction for Company Cash Payments Used to Redeem ESOP Stock and Pay Out Participants
Excerpt: "In Nestle Purina Petcare Co. v. Commissioner of Internal Revenue, No. 09-1381 (8th Cir. 2010), the Nestle Purina Petcare Company, known as 'Ralston' during the relevant years, had established an employee stock ownership plan (an 'ESOP'). A trust held the ESOP's assets, which consisted primarily of Ralston preferred stock. When a participant left Ralston, the participant was required to direct the ESOP to convert the value of the preferred stock allocated to his or her ESOP account into cash, shares of Ralston common stock, or a combination of both."
(Stanley D. Baum of Fellheimer & Eichen LLP)

Recovery in Target Date Funds? (PDF)
4 pages. Excerpt: "The evidence clearly supports our contention that target date fund managers should stick to their core mandate, prudently managing participant assets during the accumulation phase, and give up the unsupportable claim that they must manage to participant death. That claim is becoming increasingly transparent as a thinly disguised justification for trying to hold on to participant assets."
(Target Date Analytics LLC)

401(k) Plans: What's So Great About Rollovers? Not the Fees
Excerpt: "One sometimes overlooked part of this decision is that once a 401(k) account balance is rolled into an IRA, the IRA owner most likely will pay retail-level fees for investments, such as mutual funds. If the client left the money in the former employer's 401(k) plan, he might pay very low fees or no fees at all."
(Tax Management Inc.)

'Life-Swapping': The Case for and Against Longevity Swaps: Could U.S. Pension Plans Reduce Risk?
Excerpt: "The idea is that market participants could make opposing bets on how long people will live. This would allow insurance companies and pension funds to hedge their risks of beneficiaries living too long. They would either pay an up-front premium, or a stream of payments when people die prematurely. This would enable life insurance companies to reduce their mortality risk of people dying too soon -- while annuity insurers and pension funds could take the opposite position and receive compensation if people outlive their actuarial assumptions."

States Tackling Public Employee Retirement Benefits in 2010
Excerpt: "[New] Jersey appears headed towards changing its state employee retirement system this year to bring down costs. At least 16 other states besides New Jersey are considering similar changes that could mean lower benefits, higher retirement ages, freezes in cost-of-living adjustments and increased employee contributions."
(The Pew Charitable Trusts)

What to Expect from Your 403(b) Program's Auditor
Excerpt: "It all boils down to questions and answers, data requested and data provided. The auditors will ask a lot of questions, request a lot of plan information and then carefully examine your answers and the information you provided. It pays to be prepared!"
(ERISA diagnostics, Inc.)

States Face $1 Trillion Pension Funding Gap, According to Report from Pew Center on the States
Excerpt: "The report says almost all state pension plans are underfunded. Two states -- Illinois and Kansas -- have set aside less than 60 percent of the money they'll need to pay benefits. Six others are underfunded by a third or more."
(Morning Edition via National Public Radio)

Five Ways to Solve the $1 Trillion Gap in Under-Funded State Retirement Systems
Excerpt: "A train wreck waiting to happen. That's the only way to describe the mess that state pension systems are in right now, according to a report published today by the Pew Center on the States. According to Pew, there's a $1 trillion gap between the $3.35 trillion in pension, health care and other retirement benefits states promised their current and retired workers as of fiscal year 2008 and the $2.35 trillion they have on hand to pay them."
(MarketWatch, Inc.)

Evaluating Whether Your Target-Date Fund Measures Up
Excerpt: "So how does a plan sponsor get a deeper look into their target-date fund's structure and -- more importantly -- evaluate the structure on behalf of participants? One of the key variables that plan sponsors should consider is whether the target-date fund's glide path is managed 'to' or 'through' retirement. The asset allocation of target-date funds that are managed 'to' become fixed at retirement age, with no further shift out of equities occurring in retirement."
(Workforce Management; free registration required)

New Jersey Pension Reform Bills Approved by Senate Committee
Excerpt: "The bills are described by legislators as an attempt to return the pension and benefits system to its original goal of ensuring the retirements of rank-and-file public employees and constitutionally require government to meet its annual pension obligations."

On Plan Fees, Wal-Mart and the Costs of Bad Publicity
Excerpt: "Ouch. Here's a story [at iStockAnalyst] bashing Wal-Mart for having very high plan fees in its 401(k) plan, and wanting to know why in the world it doesn't negotiate lower fees when it has some ten billion dollars in assets to use as leverage. I am sure the plaintiffs' class action bar has the same question. A quick cross reference to BrightScope, by the way, bears out the allegation. [The target page has a link to] the original Forbes story on the issue."
(Stephen Rosenberg of The McCormack Firm, LLC)

The ASPPA 401(k) Summit | March 14 – 16, 2010 | Orlando World Center Marriott Resort

The ASPPA 401(k) SUMMIT is bigger and better than ever in 2010! Expect 140 exciting exhibits in the hall, dozens of top-notch workshop sessions like "Plan Designs for the Age of Obama," and the presentation of the prestigious Morningstar-ASPPA 401(k) Advisor Leadership Award. The SUMMIT offers 14 hours of ASPPA Continuing Education (CE) credit and is designed to comply with various CE programs, including ERPA CPE.
For more information and to register, click here: The ASPPA 401(k) SUMMIT.

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Guidance Overview]
Book Excerpt: Contingent Workers & Employee Benefits (PDF)
57 pages. Excerpt: "This chapter discusses how the courts have dealt with the Code and ERISA in ascertaining: whether and under what circumstances contingent workers have been found eligible to participate in a service recipient's benefit plans; and whether a service recipient is in fact the actual employer in cases where the contingent worker was employed by a [Professional Employer Organization]."
(Daniel N. Janich, Esq. of Greensfelder law firm; from BNA's book, 'ERISA Litigation,' copyright 2008)

Survey Finds That Employer-Provided Benefits Vary with Earnings (PDF)
4 pages. Excerpt: "The Bureau of Labor Statistics National Compensation Survey: Employee Benefits in the United States, March 2009, shows that workers in low-paid jobs have lower access to employer-provided benefits, when compared with access availability for workers in high-paid jobs. This issue of Program Perspectives -- the first featuring 2009 data -- examines this difference between low-wage and high-wage earners for several individual benefits."
(U.S. Bureau of Labor Statistics)

Michigan Warns Jobless About End of Federal Unemployment Extension
Excerpt: "The state's unemployment insurance agency sent letters to an estimated half-million Michiganians receiving jobless pay, warning that federally funded benefit extensions may not be renewed. 'The federally funded Emergency Unemployment Compensation is set to expire on Feb. 28, 2010,' said Stephen Geskey, director of Michigan's Unemployment Insurance Agency. 'If Congress does not pass legislation to extend the deadline for this and other federally funded benefits, then thousands of unemployed Michigan workers will begin to exhaust their benefits starting in March.'"
(The Detroit News)

Webcasts and Conferences

2010 IBJ Healthiest Employers Awards Conference
in Indiana on August 24, 2010
presented by Indianapolis Business Journal

HIPAA and Other Health Benefits Laws: Compliance Assistance Seminar
in New Hampshire on August 10, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Spring Seminar - Surviving and Thriving in Tough Times
in California on March 23, 2010
presented by Western Pension & Benefits Conference - Los Angeles Chapter

Workshop on the HIPAA Privacy Rule's De-Identification Standard
in District of Columbia on March 8, 2010
presented by U.S. Department of Health & Human Services

Press Releases

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Corporate Benefits Analyst
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Assistant Vice President – ERISA Advisory Programs
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in NJ

Training Specialist
for New York Life Retirement Plan Services
in MA

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