Courts and IRS Weigh in on Mandatory Conversion of Terminated Participants' ESOP Accounts (PDF)
5 pages. Excerpt: "Plan sponsors of employee stock ownership plans (ESOPs) that have been submitted for a favorable determination letter know that the IRS is carefully reviewing plan provisions that provide for the mandatory conversion of a terminated participant's ESOP account balance from employer securities to cash. Recent case law and IRS analysis provide a hopeful resolution that should allow ESOPs to retain this right, providing that newly articulated requirements are met."
(Morgan, Lewis & Bockius LLP)
Updated DOL Guidance for Certain 403(b) Plans (PDF)
2 pages. Excerpt: "This Client Action Bulletin discusses the Department of Labor's updated guidance for sponsors of 403(b) plans, including annual Form 5500 filings for ERISA-covered arrangements and the 'safe harbor' regulation for non-ERISA arrangements."
Final Rule Issued on Participant-Requested Multiemployer Plan Documents (PDF)
3 pages. Excerpt: "This Multiemployer Alert details the Department of Labor's final rule on the statutory requirement that multiemployer retirement plan administrators must provide copies of actuarial and financial documents after receiving a request from plan participants and others. There is also information on DOL's final rule on civil penalties for certain multiemployer plan funding failure."
Final Regulations Issued on PPA Disclosure Requirements for Multiemployer Plans
Excerpt: "The Employee Benefits Security Administration (EBSA) has issued final regulations on the obligation of multiemployer plan administrators to disclose certain actuarial and financial information to participants and others. The proposed rules reflect the disclosure requirements mandated by the Pension Protection Act of 2006 (PPA; P.L 109-280), embodied in ERISA §101(k). The final regulations are substantially the same as proposed rules issued in 2007."
Proposed DOL Rules Allowing for Personalized Investment Advice Under 401(k)s and IRAs
Excerpt: "The Department of Labor's Employee Benefits Security Administration (EBSA) has issued proposed regulations implementing provisions of the Pension Protection Act of 2006 (PPA; P.L. 109-280) that authorize fiduciary advisers to provide individualized investment advice to participants and beneficiaries in individual account plans, such as 401(k) plans, and beneficiaries of IRAs."
Section 403(b) Arrangements Meet ERISA
Excerpt: "The Department of Labor has issued Field Assistance Bulletin (FAB) 2010-01 clarifying the extent to which pre-2009 contracts no longer receiving employer contributions under a tax-sheltered annuity Section 403(b) arrangement may be omitted from ERISA plan reporting, and when Section 403(b) arrangements are exempt from ERISA under the Department's 'safe harbor' regulation. The results are some 'do' and 'do not' rules for tax-exempt employers who want to minimize or claim exemption from ERISA reporting."
(Sonnenschein Nath & Rosenthal LLP)
U.S. Senate Passes Pension Funding Relief
Excerpt: "The U.S. Senate has passed S.Amdt. 3430, which would allow defined benefit pension plan sponsors to spread out funding their shortfalls. An announcement from the office of Senator Benjamin L. Cardin (D-Maryland) who co-authored the amendment with Senator Johnny Isakson (R-Georgia), said that under the main provision of the amendment, employers would be allowed to choose from repaying their pension shortfall over nine years, with only interest on the shortfall owed in the first two years, or repaying over 15 years."
U.S. Senate Approves Pension Funding Relief
Excerpt: "The American Workers, State and Business Relief Act of 2010, passed by a 62-36 vote, includes a provision to allow DB plans to stretch out amortization periods for investment losses for two of the years between 2008 and 2011, either over a period of up to 15 years or over a nine-year period. Current law requires plans to amortize their investment losses over seven years."
(Pensions & Investments)
2010 Wilshire Report on State Retirement Systems: Funding Levels and Asset Allocation (PDF)
20 pages. Excerpt: "This is Wilshire Consulting's fifteenth report on the financial condition of state-sponsored defined benefit retirement systems and is based upon data gathered from the most recent financial and actuarial reports provided by 125 retirement systems sponsored by the 50 states and the District of Columbia. Appendix A lists the 125 retirement systems included in this year's study."
Should You Convert a Traditional IRA Into a Roth IRA?
Excerpt: "This brief considers the merits of making such a conversion. People are likely to benefit if they expect their income tax rates to rise after they retire. People who expect their tax rates to fall also may benefit if they want to defer withdrawing money from their IRAs longer than the rules for traditional IRAs permit. In addition, a conversion can appeal to savers who wish to boost their total IRA balances more than the restrictions on their annual contributions will allow."
(Center for Retirement Research at Boston College)
In-Plan Roth Conversions Under Tax Extenders Legislation
Excerpt: "An amendment to a pending Senate bill to extend expiring tax cuts (H.R. 4213) would allow Roth conversions in § 401(k), § 403(b) and eligible governmental § 457 deferred compensation plans that have Roth accounts. (Another amendment to the extenders bill would allow Roth accounts within § 457 plans, which are not provided for under existing law.)"
(Tax Management Inc.)
Eliminating Ethnic Inequities in 401(k) Plan Participation
Excerpt: "All eligible employees may have equal access to their employer's 401(k) plan, but participation is anything but equal. A study by Ariel Investments and Hewitt Associates, '401(k) Plans in Living Color: A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups,' confirms what individual client studies have shown for years - that ethnicity is the No. 1 predictor of 401(k) plan participation."
(Employee Benefit Adviser; free registration required)
The Business Case for a Defined Contribution Plan
Excerpt: "As employers around the world grapple with creating business advantage, they are reviewing all sources of cash - both revenue and cost cuts - and reassessing risks. In most places around the world, employers are also joining the shift away from defined benefit (DB) plans. In this context of change, they find themselves at a flash point that can lead to some fundamental questions: Why do we need a retirement plan? Assuming there is a compelling answer to that question, what type of plan best fits us as an organization? How do we measure our retirement plan's effectiveness?"
Employment-Related Risks to the Retirement Security of Older Workers (PDF)
14 pages. Excerpt: "This Policy Brief focuses on late career workers, between ages 50 and 67 -- an age group with direct exposure to risks in the areas just mentioned: earning, saving and wealth management. In particular this brief focuses on a locust of shock impacting all three risks, the event of involuntary retirement."
Fairy Tale Pension Projections: Assumptions About Return Rates and Risky Investments Foreshadow Big Problems
Excerpt: "Long-term investing is an ongoing challenge for state and local pension systems. Investment return rates are the major factor in deciding how much to set aside to meet future pension promises: The higher that rate is assumed to be, the less money must be contributed today. Government employers want to earn high returns on their investments, and that mandate to increase earnings can lead to many problems."
Weighing In on the 3(21) vs. 3(38) Fiduciary Debate
Excerpt: "When an employer hires an ERISA § 3(38) investment manager, they transfer responsibility/liability for the investment management process to that person. Since the buck now stops with the advisor, he or she pretty much calls the shots when it comes to investment decisions. The sponsor should recall, however, that they cannot completely eliminate liability. If they neglect to monitor and replace a 3(38) that is running amok, the employer can find themselves right back on the hook."
(Adam C. Pozek)
Enrollment is now open for ASPPA’s Live EA-2B review course in the Washington, DC area on April 9 -12, 2010. Instructor David B. Farber, MSPA, EA, ASA puts his more than 25 years of teaching experience to work in our well-reviewed EA preparatory and actuarial primer classes. Tuition includes practice problems and solutions, handy syllabi, suggested readings and other information regarding the EA exams. Classes are April 9 - 12, so don’t delay—enroll today!
For more information and to enroll, click here.
Executive Compensation; Benefits in General
Ninth Circuit Changes Mind, Holds That Commute Time May Be Compensable Under California Law
Excerpt: "On March 2, 2010, in Rutti v. Lojack Corp., the Ninth Circuit Court of Appeals reversed its prior ruling on this issue in the same case and expanded this exception -- holding that under California law an employer must compensate its employees for time spent commuting when the employee is driving a company-provided vehicle with restricted use."
(Seyfarth Shaw LLP)
Making Executive Compensation Mischief Tied to Pension Funding Relief
Excerpt: "[A]ny employer that accepts the extended amortization relief would be required to make a matching contribution to its pension plan for that year in an amount equal to the amount of compensation paid to any employees for the year over $1 million."
(Michael Melbinger via Winston & Strawn LLP)
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