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Retirement Plans Newsletter

March 17, 2010

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SunGard offers Spring 2010 Workshops to help you prepare for:
  • Form 5500/EFAST2 – because of EFAST2, Form 5500 amendments may dominate 2010 filings. This workshop shows how to file automatically and how to avoid filing the same Form 5500 twice.
  • 401(k) Plan - prototype and volume submitter restatements and emerging opportunities for growing Roth accounts make 2010 a challenging year. This workshop can help prepare you for these changes.
For more information, read more about our solutions or call 1-800-326-7235, ext. 1100.
Sponsored by SunGard

Senate OKs Pension Funding Relief, Ease Pay-Related Restrictions
Excerpt: "The Senate has passed pension funding relief as part of a bill to extend expired tax provisions, unemployment aid and health care assistance for the jobless. The funding relief would provide more time to amortize financial crisis losses but would increase contributions if sponsors hand out 'excessive' pay or have 'extraordinary dividends and redemptions' for the year. Senators agreed to cap additional contributions so sponsors are no worse off than if they hadn't elected relief."
(Mercer LLC)

PBGC Prepares Series of Videos for Delphi Pension Plan Participants
Topics include 'Introduction to the Pension Benefit Guaranty Corporation', 'Your Delphi Plan Benefit', 'Legal Limits on Benefits PBGC Can Pay', 'A Sample Benefit Calculation.'
(Pension Benefit Guaranty Corporation)

Visteon Corp. Will Keep Pension Plans
Excerpt: "[I]n a new plan filed late Monday, Visteon said it would retain its pension plans, 'reflecting the company's improved operating and financial performance, as well as recovering industry and market conditions.' PBGC had opposed the effort by Visteon to cancel its pensions."
(The Detroit News)

New Federal Flow of Funds Data Sheds Light on Pension Investments
Excerpt: "A look at these data reveals some interesting trends. In 2009, the stock market rebound helped the investment performance of all types of plans. But state and local pension plans did better than their private sector counterparts, posting gains of 16%, as compared with gains of 13% for private sector DB plans."
(National Institute on Retirement Security)

Public Pension Plan Investment Return Assumptions (PDF)
3 pages. Excerpt: "The issue of the investment return assumption used by public pension plans has been the focus recently of increasing attention. This brief explains the role this assumption plays in pension finance, how it is developed, and compares this assumption with public funds' actual experience."
(National Association of State Retirement Administrators)

Insurers Push Annuities As a Way to Protect Investors from Wild Financial Markets, But Products Can Be Pricey and Expose Investors to Inflation
Excerpt: "Over the past two years, investors have been taken for a wild ride. Annuities offer a way off the roller coaster. That, at least, is the marketing message of the insurance companies that offer an increasing array of annuity products. Independent financial advisers, however, warn that annuities are anything but a simple answer for investors in retirement."

Could the PPA Have Hurt Corporate Pensions' Recovery?
Excerpt: "A new analysis suggest that passage of the Pension Protection Act in 2006 led corporate plan sponsors to turn away from equities during the economic downturn and therefore not reap the benefits of the subsequent market recovery."

Internal Revenue Service Includes 'Abusive Retirement Plans' in Its 2010 'Dirty Dozen' List of Tax Scams
Excerpt: "The IRS says it is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions."

Long-Term Public Pension Plan Returns Beat Assumptions, According to Report
Excerpt: "A recent review of empirical data by the National Association of State Retirement Administrators (NASRA) finds that since 1985 - a period that has included three economic recessions and four years when median public pension fund investment returns were negative - public pension funds have exceeded their assumed rates of investment return."

Lawmakers to Unveil Leave Investment Bill for Thrift Savings Plan
Excerpt: "Lawmakers plan to introduce a bipartisan bill this week that would allow federal employees to invest the cash value of their unused annual leave in their Thrift Savings Plan accounts, retirement program staff said on Monday."

Organization Touts New Low-Cost Defined-Contribution Plan
Excerpt: "SPARK Institute has proposed the creation of a new low-cost defined-contribution retirement program for employers with fewer than 100 employees. Under the so-called Universal Small Employer Retirement Savings Program, all plans would use the same government-approved prototype plan documents to hold down costs, according to a summary of the proposal on SPARK's Web page,"
(Workforce Management; free registration required)

Hiring and Firing Investment Managers: How Does Your Committee Compare?
Excerpt: "Over the course of any given year, investment committees may meet with a host of investment managers and talk to even more. It's all part of one of their prime responsibilities -- finding, monitoring, and sometimes firing investment managers. Unfortunately, there is not much research exploring the factors that influence investment manager changes. That's why Vanguard Investment Counseling & Research conducted just such a survey, as part of a broader research agenda to better understand the dynamics of investment committee decision-making."
(The Vanguard Group, Inc.)

Rating Your 401(k) Plan
Excerpt: "401(k) accounts are typically among the largest assets held by middle- and upper-middle-income households in the United States. So naturally they draw a lot of attention -- in the marketplace, in the media, and in Washington. The government, for example, is proposing new rules on reporting fees and promoting impartiality in investment. Meanwhile, in the marketplace, a few start-up companies are looking to profit from the trend. One is BrightScope, which provides a rating of many 401(k) plans in the U.S. If your employer plan is rated 90 or above, it's stellar in their estimation. If it's rated 50 or less, it's not."
(The Vanguard Group, Inc.)

Optimal Retirement Benefit Guarantees
Excerpt: "Retirement benefit guarantees can ensure a minimum standard of living in retirement. I propose a framework to discuss the design of such guarantees. The model features a standard life-cycle setting, in which individual agents' choices can have negative external effects on public finances, whenever their retirement consumption drops below a minimum level. Within this framework, I derive two alternative forms of intervention that can efficiently deliver a minimum standard of living to retirees."
(National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)

Pension Rights Center Letter on Protecting Workers and Retirees When Marking Up Funding Relief Legislation (PDF)
3 pages. Excerpt: "When you mark up the pension provisions of the 'Small Business and Infrastructure Jobs Tax Act of 2010' in Committee tomorrow, we urge you to include measures that promote the continuation of defined benefit plans and that enhance protections for the employees and retirees who depend on these retirement plans to retire with adequate income. This letter addresses four potential legislative issues that are of vital concern to the retirement security of American workers, retirees, and their families . . . ."
(Pension Rights Center)

The Beer Napkin Annuity: An Answer to 'Pension Envy'?
Excerpt: "As many folks work to answer the IRS'/DOL's RFI, one thing is clearly coming out: there is a LOT of resistance to mandatory annuitzation of 401(k) account balances. I can't say that I really disagree with that resistance. Heck, I saved that money, didn't I? But what should we do to address the fact that account balances run out? We continue to hear of 'Pension Envy' against those fortunate few who are eligible for those steady, comforting monthly DB benefits."
(Robert J. Toth, Jr.)

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.

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Guidance Overview]
IRS Section 409A Notice Requires Review of Compensation Agreements That Condition Payments Upon Signing Releases
Excerpt: "Not all severance or employee payment plans are subject to Section 409A. If all payments under an agreement are made by March 15 of the calendar year following the year in which the right to the payment vests, then the payment is considered a 'short-term deferral' and exempt from Section 409A. For example, many separation agreements that are created at the time of separation with a prompt lump sum payout may not present a problem."
(Nixon Peabody LLP)

[Guidance Overview]
SEC Interpretive Guidance on Executive and Director Compensation Disclosure Rules (PDF)
8 pages. Excerpt: "The guidance has been updated several times over the years, with the most recent updates occurring during the first quarter of 2010. The guidance is in the form of questions and answers of general applicability to the disclosure rules, as well as interpretive responses regarding particular situations. The guidance replaces staff interpretations issued in previous years, and is drafted in a manner that facilitates periodic future updates. The interpretative guidance is briefly summarized [in the target document] with the most recent 2010 guidance presented in italics."
(Frederic W. Cook & Co., Inc.)

SEC Clarification of Revised Equity Disclosure Rules
Excerpt: "Updated SEC guidance addresses equity award treatment under the recently revised executive pay disclosure rules. Issued March 1, new Compliance & Disclosure Interpretations (C&DIs) discuss how to report awards over which the compensation committee has 'negative discretion,' exercise of options with 'reload' features and valuation assumptions. SEC staff also have eliminated earlier C&DIs that no longer apply under the revised rules."
(Mercer LLC)

Work-Life Balance Series on NPR This Week
Excerpt: "NPR is running a series this week on work-life balance. Today's reports [at] focus on flexible work schedules and low-wage workers. Joan Williams, Director of the Center for WorkLife Law at U.C.-Hastings, is featured prominently."
(Workplace Prof Blog)

Website: Financial Literacy Center
Excerpt: "The mission of the Financial Literacy Center is to develop and test innovative programs to improve financial literacy and promote informed financial decision-making. With support from the Social Security Administration, the Center was established in October 2009 by the RAND Corporation, Dartmouth College, and the Wharton School of the University of Pennsylvania in order to develop educational tools and programs that help individuals prepare for their long-term financial stability."
(RAND Corporation)

DOL Participating in Open Government Initiative; Accepting Comments on Their Services Until March 19
Excerpt: "The Department of Labor (DOL), along with other agencies across the federal government, is gathering ideas from the public online to comply with the White House Open Government Initiative to increase transparency, participation, and collaboration. The DOL has developed an Open Government Plan. To learn more about this initiative, see their Web site at The DOL is asking for the public's input about how they can improve their services."
(International Foundation of Employee Benefit Plans)

Employment Status of Workers Ages 55 or Older, 1987--2008 (PDF)
Pages 2-7 of 16 pages. Excerpt: "A growing percentage of older Americans are in the labor force: The percentage of those ages 55 or older in the labor force increased from 29.4 percent in 1993 to 39.4 percent in 2008. For those ages 65-69, the percentage increased from 18.4 percent in 1985 to 30.7 percent in 2006. These trends mark a significant change in behavior for individuals in these age groups, and are likely driven by their need to obtain affordable employment-based health insurance and to accumulate retirement savings."
(Employee Benefit Research Institute)

Managing Through Fiscal Stress: Voluntary Benefits Expand Coverage Options (PDF)
4 pages. Excerpt: "Over the years, voluntary benefits have been called many things, including contributory benefits, supplemental benefits, employee-pay benefits, association benefits, employee buy-ups, work/life benefits and, more recently, worksite benefits. Through voluntary benefits offerings, employers have the potential to expand employees' access to benefits that supplement employer-sponsored benefits at a fair, employer-negotiated price. Although voluntary benefits are available through the worksite at group rates, they are usually entirely paid for by those employees who opt to participate."
(The Segal Group, Inc.)

Employee Ownership Update for March 16, 2010
NCEO Executive Director Corey Rosen discusses the following in the latest Employee Ownership Update: A recent court case and an IRS ruling support ESOP account segregation and rebalancing. A settlement has been reached between the former ESOP participants, the Department of Labor, and the defendants in the long-running Couturier case. The NCEO now has made available its list of companies with ESPPs and other broad-based equity plans.
(National Center for Employee Ownership)

Comments on Fortune Brands' Useful Supplemental Compensation Disclosure
Excerpt: "I noticed an interesting addition to the 2010 Proxy Statement disclosure . . . filed last week by Fortune Brands, Inc. . . . . Right below the footnotes for the Summary Compensation Table, the Company adds a chart labeled - 'Taxable Compensation Reported' - showing the actual W-2 compensation for each of the NEOs for 2007, 2008 and 2009. In some cases and years, but not all, the W-2 figures are less."
(Michael Melbinger via Winston & Strawn LLP)

As Federal Spending Has Increased, the Tax Rate Has Decreased and the Deficit Is Ballooning
Excerpt: "Congressional Republicans have shown little willingness to consider any tax increases, and Mr. Obama has shown no indication of breaking his $250,000-and-under pledge. We voters, meanwhile, tend to oppose government spending in general while supporting the government programs that the spending pays for."
(The New York Times; free registration required)

Webcasts and Conferences

Health Care Reform 2010: What Will It Mean For Employers?
in Michigan on April 13, 2010
presented by International Society of CEBS - West Michigan Chapter

Press Releases

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