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Retirement Plans Newsletter

February 25, 2010

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[Guidance Overview]
Final QDRO Regulation Expected Soon from DOL
Excerpt: "The U.S. Department of Labor (DOL) plans to publish a final regulation in April clarifying the rights and obligations of parties seeking to obtain benefits under a qualified domestic relations order (QDRO). Specifically, the rule will clarify that a domestic relations order (DRO) otherwise meeting the requirements to be a QDRO shall not fail to be treated as a QDRO solely because the order is issued after, or revises, another DRO or QDRO, or because of the time at which it is issued."
(Thompson Publishing Group Inc.)

[Guidance Overview]
New ERISA Reporting Requirements for Private Investment Fund Sponsors (PDF)
2 pages. Excerpt: "Private investment fund sponsors that intend to have ERISA-subject plan investors in future funds, if the compensation paid and received will qualify for the alternate reporting method, should consider adding explicit disclosure to their offering documents stating that the compensation-related disclosures are intended to qualify for the alternate reporting method. Private investment fund sponsors with existing funds with ERISA-subject plan investors may encounter requests from such investors to provide compensation-related information. It may be sufficient to point to the relevant pages in an offering document (and provide language that states that the disclosure is intended to satisfy the alternate reporting method) to satisfy such requests."
(Orrick, Herrington & Sutcliffe)

[Guidance Overview]
Advisor Background Checks Required by ERISA
Excerpt: "Given the importance of a background check, sponsors should use all credible means at their disposal to check an advisor's background, including credentialing organizations, FINRA, the SEC, NASAA, NAIC, state securities and insurance departments, the Better Business Bureau, vendors who offer background checks and the internet. The level of risk should play a role in determining the depth of the advisor's background check. Risk assessment is important because the risk varies with the advisor's role, i.e., advising the fiduciary, custodial, independent recommendations & monitoring, discretionary investment manager, named fiduciary, etc."
(Center for Due Diligence)

[Guidance Overview]
Pension Funding Relief in 2009 Was Gift with Strings Attached (PDF)
1 page. Excerpt: "In 2009, relief came from several sources: Congress corrected the asset smoothing options that were incorporated in the original PPA. Sponsors also obtained relief from the requirement to freeze their plans in the event that funding levels were to fall below 60%. Congress allowed plan sponsors who were not subject to additional funding charges prior to PPA to reduce payments on the underfunding. Instead of funding toward 100% of the plan's target liability, plans could fund to 92% in 2008 and 94% in 2009. The IRS issued final regulations on the PPA in October 2009. These regulations allowed plan sponsors to choose higher discount rates for measuring liabilities in 2008 and 2009, but then revert to more conservative rates for 2010, without seeking IRS guidance."
(Cammack LaRhette Consulting)

Bernie's Employees Angry That Money Deducted from Their 401(k) Accounts Paid Cost of Terminating Bankrupt Company's Plan
Excerpt: "West Hartford's Hooker and Holcombe, a benefits consultant that now runs the plan, deducted 6 percent of the savings of every employee, current and former, who still has money in an account. For the last five years, the company contribution to the plan was in Bernie's stock, now worthless in bankrup.tcy. So nearly all of the deduction is from contributions from employees' salaries over the years."
(Hartford Courant)

Recording of January 27, 2010, Webinar, 'New SPARK Institute Best Practices for 403(b) Plans'
Best practices for information sharing.
(The SPARK Institute)

How to Avoid a Pension Crisis: A Question of Intelligent System Design
Excerpt: "Conventional pension systems suffer from a design defect, which makes them financially unsustainable, and a source of inefficiency for the economy as a whole. The article outlines a second-best policy which includes a public pension system made up of two parallel schemes, a Bismarckian one allowing individuals to qualify for a pension by working and paying contributions in the usual way, and an unconventional one allowing them to qualify for a pension by having children, and investing time and money in their upbringing."
(CESifo Economic Studies via Social Science Research Network)

Social Security and the Boomers' Retirement
Excerpt: "Social Security's surplus is now expected to last until 2037 . . . . In addition, the nonpartisan Congressional Budget Office reported in September that the program will be operating at a deficit in 2010 and 2011 -- the Congressional Budget Office sees costs exceeding tax revenues by $10 billion this year and by $9 billion next year. The onslaught of ominous data carries with it a flood of dire media reports. . . . 'Alarmists who claim that Social Security won't be around when today's young workers retire misunderstand or misrepresent the . . . projections,' Kathy Ruffing, of the Center for Budget and Policy Priorities, told CNBC."
(On Wall Street)

Exchange Traded Funds Have Only Established a Small Beachhead So Far in the 401(k) Market
Excerpt: "While the ETF industry's long-term growth has been impressive -- assets have increased by about $100 billion every year since 2002 -- almost all of those assets are held in taxable accounts, and with ETF sponsors always hungry for more, they have been increasingly targeting the more than $3.6 trillion held in 401(k) retirement accounts as their next territory to conquer. So far, they haven't had much luck."
(Investment Advisor)

Ohio Pension Funds to Lead Class Action against AIG
Excerpt: "[U.S.] District Court Judge Deborah Batts of the U.S. District Court for the Southern District of New York ruled three Ohio state pension funds and shareholders across the country can proceed as a class. The Ohio Public Employees Retirement System, the Ohio State Teachers Retirement System, and the Ohio Police & Fire Pension Fund are the lead plaintiffs in the lawsuit. The lawsuit filed in 2004 is seeking damages for investors who bought AIG securities between October 28, 1999, and April 1, 2005."

More 401(k) Plan Sponsors Are Dissatisfied with Their Recordkeepers, According to Report
Excerpt: "Among sponsors of 401(k) plans, overall satisfaction with their recordkeepers is down 30% to 40% across all markets, according to 401kExchange. The firm's 2009 Provider Rating Report found that only 25% to 35% of plans rated their provider a 4 or a 5, compared with more than 70% in 2006. Driven in part by the collapse of the stock market, plan sponsors are getting savvier about service and have begun holding their recordkeeper to a higher standard, says 401kExchange's president, Fred Barstein."
(Employee Benefit Adviser; free registration required)

A Guide to Retirement Plan Fees & Expenses (PDF)
13 pages. Excerpt: "In this paper, we will discuss retirement plan fees and expenses to assist plan sponsors in achieving a greater understanding of their plan operations. Generally, retirement plan fees can be classified into three main categories, but the associated services can apply to multiple categories. For the purposes of this paper, we will categorize the fees and then detail the specific functions typically related to each expense."
(Multnomah Group / Trucker Huss)

Wisconsin State Pension System Called Too Generous
Excerpt: "One of the greatest remaining benefits for government workers in Wisconsin is under fire as being too expensive and unfair to taxpayers. In a report released Wednesday, the Wisconsin Policy Research Institute says public employees pay almost nothing toward their own retirement while enjoying pension benefits that far exceed the private sector."

Nation's $2.3 Trillion in Public Pensions Run by Dummies
Excerpt: "'If you polish nails or shampoo dogs in most states you have to be licensed, but there are no licensing or educational requirements whatsoever to manage a $100 million public fund,' . . . . 'It makes no sense.'"
( LLC)

The ASPPA 401(k) Summit | March 14 Ė 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]
Action May Be Required to Preserve Executive Compensation Deductions
Excerpt: "During the current proxy season, compensation committees of public companies will want to take into account the new position of the IRS regarding the deductibility of performance bonuses paid upon retirement or termination of employment. Committees should review their incentive pay plans to determine whether these plans need to be restructured to preserve the deductibility of performance-based bonuses before being put before shareholders."
(Pillsbury Winthrop Shaw Pittman LLP)

Employee Benefits Developments, February 2010
Excerpt: "A brief look at developments in Employee Benefits law from January and February 2010, including cases, rulings, and opinions."
(Hodgson Russ LLP)

2010 Top Five Total Rewards Priorities Survey
Excerpt: "The 16th annual 'Top Five Total Priority Rewards Priorities' survey, sponsored jointly by Deloitte Consulting LLP and the International Society of Certified Employee Benefit Specialists, clearly underscores the impact of the financial crisis at both the employer level and the employee level. Motivated by concerns related to financial and job security, employees are getting their financial houses in order while increasingly participating in wellness and disease management programs. Likewise, employers are stepping up emphasis on such programs in an effort to combat rising healthcare costs year after year."
(Deloitte Development LLC.)

SEC Delays Plan to Adopt International Accounting Standards
Excerpt: "The U.S. Securities and Exchange Commission is grappling with how to move to one set of high-quality, globally accepted accounting standards. Under the previous plan, the SEC would have allowed U.S. companies to use the international rules as early as 2014. But industry and investors told the SEC that U.S. companies would need about four to five years to implement the changes successfully, thus pushing the date out to 2015."
(Business Insurance)

The Truth About Recent Attacks on the Independent Contractor Classification
Excerpt: "[Many recent] articles note that misclassification deprives workers of rights and benefits enjoyed by employees, while also depriving governments of much needed tax revenues. However, these articles are largely biased and inaccurate, containing incorrect statements about the laws relating to independent contractors, misrepresenting the motivations of employers, and ignoring the role that workers themselves sometimes play in how they are classified."
(Littler Mendelson P.C.)

Press Releases

ACLI Responds To Administration's Proposed Annuity Tax
American Council of Life Insurers

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