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Retirement Plans Newsletter

February 24, 2010

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[Guidance Overview]
April 30, 2010, Deadline for Employers to Adopt Restated Prototype Plan Documents (PDF)
4 pages. Excerpt: "April 30, 2010, is the deadline for employers with pre-approved defined contribution Master & Prototype plans or Volume Submitter plans . . . to adopt an EGTRRA-approved plan document. Failure to meet this deadline will result in significant adverse tax consequences to the retirement plan and to the plan's participants."
(Alston & Bird)

[Guidance Overview]
Form 5500 Relief for Pre-2009 403(b) Contracts Explained
Excerpt: "An employer need not include financial information for a pre-2009 contract on Form 5500 (including a Schedule H or I) and need not count a participant whose sole plan investments are pre-2009 contracts and who is not currently eligible to defer."
(SunGard Relius)

[Guidance Overview]
Amending Retiree Medical Plan to Provide Benefits only to Participants Who Elect Monthly Pension Payments Violates Anti-Cutback Rule
Excerpt: "The Third Circuit recently ruled that a welfare plan amendment which added, as a condition of receiving retiree medical benefits under the plan, the requirement that the participant must elect monthly payments rather than a single lump sum payment under the pension plan, was a constructive amendment of the pension plan which violated the anti-cutback provisions of ERISA § 204(g). Battoni, et al. . . . (3rd Cir. 2/5/2010)."
(Deloitte via

Supreme Court Declines to Review Cash Balance Age Rulings
Excerpt: "The Supreme Court on Feb. 22 declined to review, and thus let stand, lower-court rulings that a cash balance plan that defined 'normal' retirement age as completion of five years of service is legal. Last year, in a unanimous decision, a three-judge panel of the 7th U.S. Circuit Court of Appeals in Chicago affirmed a lower court's ruling that the cash balance plan established in 2002 by Exelon Corp., Chicago, is legal."
(Pensions & Investments)

Investment Committee Best Practices: Avoiding the Seven Deadly Sins
Excerpt: "Key behavioral factors can hinder effective investment committee decision-making and may prevent a group from achieving its goals. In this webcast, Catherine Gordon, principal and head of Vanguard Institutional Advisory Services, discusses: Investment committee best practices. The seven deadly sins and how to avoid them. Results of Vanguard's 2009 research survey, Investment committee decision-maker study."
(The Vanguard Group, Inc.)

Eliminate Wasteful Practices and Make Your Defined Benefit Plan Sustainable (PDF)
6 pages. Excerpt: "Green DB means a DB plan that is sustainable for the employer. After all, a plan that is eventually closed or frozen doesn't make sense for anyone. A green plan minimizes cost and risk by focusing the value of the plan where it is most useful. It has stable and predictable costs, drastically reducing the potential for surprise cost increases."
(The Vanguard Group, Inc.)

Preliminary Approval in Trust Company Settlement of California Class Action
Excerpt: "On January 22, 2010, The United States District Court for the Northern District of California granted preliminary approval for a partial settlement of $15 million in a class action on behalf of participants in and beneficiaries of the Employee Stock Ownership Plan ('ESOP') of K-M Industries Holding Co., Inc. . . . . The case, Fernandez et al. v. K-M Industries Holding Co., Inc. et al., Case No. C 06-07339 (CW), is pending in U.S. district court in Oakland, CA."
(Lewis, Feinberg, Lee, Renaker and Jackson PC)

Colorado Governor Signs PERA Pension Plan Changes Into Law
Excerpt: "[Colorado] is the first state to impact the benefits of existing retirees, many of whom lobbied for current and future public employees to shoulder the cuts contained in SB1. Others complained that the state is breaking a contract with them, and pointed to a Colorado attorney general's ruling from 2004 that said benefits cannot be cut to workers who are already retired under the plan. Lawmakers countered that reductions in the cost-of-living raises PERA pensioners have come to expect do not amount to a reduction in benefits."
(The Pueblo Chieftain)

Make the Best of a Bad 401(k)
Excerpt: "[T]he truth is, many 401(k) plans have serious design flaws, from awful investment choices to missing company matches to outrageously steep fees. 'About one-third of 401(k) plans tend to be really bad, another third are questionable, while the top third are acceptable to varying degrees,' says Matthew Hutcheson, an independent 401(k) fiduciary in Portland, Ore."
(Cable News Network)

Registered Investment Advisers Say $1M in Retirement Savings Is Not Enough
Excerpt: "While $1 million is frequently referenced by Americans as a standard level of retirement savings for average families, a new survey finds most registered investment advisers do not agree. A Scottrade press release said its survey found 71% of RIAs do not believe $1 million is enough for the average American family to retire on. Most believe families need to be saving double, and in some cases more than triple, this amount for retirement, depending on age."

Study Finds Pension Plan Sponsors More Focused on Liabilities
Excerpt: "According to MetLife's second annual U.S. Pension Risk Behavior Index Study, a survey of 166 corporate plan sponsors from among the 1,000 largest U.S. defined benefit (DB) pension plans, plan sponsors are now taking a much broader view of the 18 investment, liability and business risks to which their plans are exposed."

2nd Annual MetLife U.S. Pension Risk Behavior Index
Excerpt: "This year's study measures the risk management attitudes and aptitude among corporate decision makers, and examines the year-over-year changes in the ways they think about and manage pension plan risks. Against the backdrop of one of the most volatile market environments in recent memory, study results show that DB pension risk management priorities have changed quite dramatically over the period of 12 months."
(Metropolitan Life Insurance Company)

Variable Annuities Proved to Be Good Investments Over the Last Decade As Stocks Faltered
Excerpt: "Critics have long considered variable annuities pricey investments with expensive riders and high commissions. Low-cost mutual funds have been touted as a better alternative. But after the stock market damage of the last decade -- the average U.S. equity mutual fund rose 1.7% in the last 10 years -- those who bought variable annuities several years ago are looking like investment pros, especially if they bought their annuities at a time when the insurance industry was offering sweeter deals than it is now."
(Investment News; free registration required)

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]
IRS Information Letters Address Qualified Nonpersonal Use Vehicles
Excerpt: "EBIA Comment: Since the inquiries were not submitted under the process for requesting formal rulings, these information letters provide only general information. Nevertheless, they put some meat on the bones when it comes to interpreting the scope of the exception for qualified nonpersonal use vehicles. As both letters illustrate, the exception is narrow, and in most cases an employee's personal use of an employer-provided vehicle will be includible in income."
(Employee Benefits Institute of America)

TARP Rules for Financial Institutions Trigger Broader Risk Assessment of Compensation Policies
Posted with the permission of the North Carolina Banking Institute journal, published at the University of North Carolina School of Law. Excerpt: "The world of executive compensation will never be the same for financial institutions after 2009. In fact, due to the crisis in the world's financial markets in 2009, the world of executive compensation most likely will never be the same for any publicly traded corporation."
(Winston & Strawn LLP)

RiskMetrics Group Addresses New SEC Pay and Governance Disclosures
Excerpt: "To address the SEC's new pay and corporate governance disclosure rules, proxy adviser RiskMetrics Group (RMG) has published frequently asked questions (FAQs) on changes related to (i) potential risks created by compensation programs; (ii) compensation consultant fees; and (iii) director qualifications, diversity policies, board leadership and risk oversight."
(Mercer LLC)

DOL's Brief to U.S. Supreme Court As Amicus Curiae in Conkright v. Paul J. Frommert
Filed in November 2009 and newly posted to the web. Excerpt: "1. Whether, in this case under Section 502(a)(1)(B) of [ERISA], the court of appeals correctly held that plan administrators were not entitled to deference to their second interpretation of the plan when the court had found that their prior interpretation of the same plan terms was arbitrary and capricious and violated ERISA. 2. Whether the court of appeals correctly upheld the district court's choice of remedy under an abuse-of-discretion standard."
(U.S. Department of Labor)

West Virginia County School Boards File Suit over OPEB Funding
Excerpt: "A lawsuit has been filed on behalf of 50 of West Virginia's 55 county boards of education regarding the reporting and funding of Other Post Employment Benefits (OPEB). A report on news station WBOY's Web site said the boards argue in the suit that they should not be obligated to contribute more to the West Virginia Retiree Health Benefit Trust Fund than the amount of funding they receive from the state to take care of those OPEB costs."

Cost Benefit Analysis on Proposed Regulations Requires a Long View
Excerpt: "Most of us do not want to be burdened by more rules. However, new guidance needs to be evaluated through a cost-benefit analysis over the long term. The message to both the DOL and fiduciaries is that they need to focus more on the long-term issues for improving retirement benefits and less on short-term cost -- so long as the long-term value is there."

Webcasts and Conferences

"409A Forgiveness: Round 2" Web Seminar - Date Change
Nationwide on March 4, 2010
presented by SunGard Relius

New Regulations Require Immediate Attention From 403(b) Plan Sponsors
Nationwide on March 10, 2010
presented by RSM McGladrey, Inc.

Press Releases

Texas Business Owner Sued by U.S. Department of Labor Over Misuse of 401(k) Contributions and Loan Repayments
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

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