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March 19, 2010

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[Guidance Overview]
Choosing a Qualified Default Investment Alternative
Excerpt: "An institutional client sponsoring a large qualified 401(k) plan historically had a default option that consisted of a balanced fund structured as a mix of 74% stable value and 26% equity. This client wanted to qualify for fiduciary protection under the Pension Protection Act of 2006 (PPA). However, to qualify for this protection, the Plan's committee had to adopt the guidance put forth by the Pension Protection Act of 2006 (PPA)."

[Guidance Overview]
IRS Reminder to Employers of April 30 Filing Deadline for Adopting Pre-Approved Plans
Excerpt: "The IRS has reminded employers entitled to use the pre-approved plan six-year cycle of the April 30, 2010 deadline to adopt the final approved version of the defined contribution pre-approved plan and submit applications for determination letters, if applicable."
(Wolters Kluwer)

[Guidance Overview]
Schedule C of Form 5500: Eligible Indirect Compensation
Excerpt: "[Eligible indirect compensation] is indirect compensation (compensation paid for services to the plan by someone other than the plan or the employer) which falls in one of these categories: Fees or expense reimbursements charged to an investment fund and reflected in fund's value or return on investment; Finder's fees; 'Soft dollar' revenue; Brokerage commissions; Other transaction based fees for transactions involving the plan that weren't paid directly by the plan or sponsor."
(SunGard Relius)

San Diego County, California, Pension Fund Board OKs Outsourcing Plan
Excerpt: "Just months after outsourcing its top investment guru position, the county's retirement system board voted Thursday to seek a contractor to handle its remaining investment oversight needs. The action, billed as a first for any county in the state, would outsource the work of eight in-house investment staffers who select and monitor the money-management firms that invest the county's $7.3 billion pension fund."
(The San Diego Union-Tribune)

The Impact of 401(k) Plan Automatic Enrollment on Future Retirement Accumulations: A Simulation Study Based on Plan Design Modifications of Large Plan Sponsors (PDF)
24 pages. Excerpt: "This EBRI study analyzes plan-specific data of 1,000 large defined contribution plans for salaried employees from Benefit SpecSelect (Hewitt Associates LLC) in 2005 and 2009 to compare a subsample of plan sponsors that did not have auto-enrollment in 2005 but that had adopted it in 2009. Actual plan information on both actual auto-enrollment and actual match rate information were coded both before and after adoption of auto-enrollment from 225 large 401(k) plan sponsors and found that the average change was positive under auto-enrollment . . . ."
(Employee Benefit Research Institute)

Appleby's Retirement Plans Comparison Chart for Small Businesses: 2010 Plan Year (PDF)
4 pages. Excerpt: "This chart provides a high level comparison of the features and benefits of the plans that are included."
(Appleby Retirement Consulting)

Basic Information on 457 Plans
Excerpt: "[T]he Economic Growth and Tax Relief Reconciliation Act of 2001 substantially overhauled the major provisions of this plan, making it much more like 401(k) and 403(b) plans. However, this plan still differs substantially from its mainstream cousins in some respects. This article outlines the basic tenets of 457 plans and how they work."
( LLC)

Postal Regulatory Commission Moves Forward on Pension System Review
Excerpt: "The Postal Regulatory Commission said it will hire an actuarial consultant to review the pension-payment system used by the financially struggling US Postal Service. The USPS' Office of Inspector General released a report in January stating that the agency's current pension-funding system resulted in an overpayment of $75 billion from 1972 to 2009."
(Haymarket Media)

Toyota Sending $131 Million Pension Shortfall to Pension Benefit Guaranty Corp. As It Closes Plant in California
Excerpt: "Toyota is leaving a $131-million pension shortfall to the Pension Benefit Guaranty Corp. as it closes the New United Motor Manufacturing Inc. plant in Fremont, Calif., April 1, said Sergio Santos, president of UAW Local 2244. . . . The agency has taken legal action to gain control of the NUMMI pension plan. PBGC spokesman Gary Pastorius said the agency wants to talk to Toyota about alternatives to a takeover, 'but it just hasn't happened yet. We still have questions.'"
(Detroit Free Press)

New York Attorney General Seeks Probe of Public Retiree Payments
Excerpt: "Pension payments to retirees in two funds that are funded by the state's $129 billion Common Retirement Fund more than doubled to above $7.3 billion in 2009 from $3.5 billion in 1999, Democratic Attorney General Andrew Cuomo said in a statement. By working extra overtime before they retire, public workers can often increase their pension benefits. Cuomo, on a conference call, said that was a 'scam' that had gone on for decades."
(Reuters via The New York Times; free registration required)

The Hiring Incentives to Restore Employment Act (HIRE) Was Enacted Into Law Yesterday
Excerpt: "Under the Act employers who hire unemployed workers after February 3, 2010, and before January 1, 2011, may qualify for a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment, according to an Internal Revenue Service announcement. In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns."

Philadelphia City Council Passes Measure Modifying DROP Program
Excerpt: "City Council passed legislation yesterday that would prevent future elected officials from cashing in on the city's controversial Deferred Retirement Option Plan, or DROP. Council approved the bill, sponsored by Councilman Bill Green, unanimously. The bill does not apply to anyone currently in office but formalizes a September decree by the legislature requiring the city to cut politicians out of the program."

ERISA Advisory Council Meeting Scheduled for March 22, 2010
Excerpt: "The U.S. Department of Labor (DOL) announced the first 2010 meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans (ERISA Advisory Council). The purpose of the meeting is to introduce the council chair and vice chair, provide updates on DOL Employee Benefits Security Administration activities and determine topics for the advisory council to address in 2010."
(International Foundation of Employee Benefit Plans)

BORSAs and ERSOPs and ROBS: Financing Business Start-Ups
Excerpt: "These three acronyms all refer to an arrangement under which a prospective small business owner uses his rollover account to finance a start-up business. BORSA = Business Owner's Retirement Savings Account. ERSOP = Entrepreneur Rollover Stock Ownership Plan. ROBS = Rollover Business Start-ups. The first two acronyms were coined by private vendors who provide assistance to business owners with this type of transaction. The IRS came up with 'ROBS' and it is indicative of their perception of these types of arrangements."
(Spectrum Pension Consultants, Inc.)

Overview of Two Washington State University Retirement Incentive Plans
Excerpt: "Human Resource Services has provided a chart outlining aspects of the Voluntary Retirement Incentive Plan and the proposed Voluntary Early Retirement Incentive. The Voluntary Retirement Incentive Plan (VRIP) is currently being offered to participants in retirement plans that are administered by the Department of Retirement Systems. A similar proposed plan, the Voluntary Early Retirement Incentive (VERI), for participants in the WSU Retirement Plan (WSURP), will be considered . . . ."
(Washington State University)

New York Attorney General Launches 'Pension-Padding' Investigation
Excerpt: "Attorney General Andrew Cuomo announced today that he has launched a formal investigation into 'pension padding' by looking into 28 state agencies, authorities and local governments that have some of highest salary and pension payments in New York. Cuomo is probing whether the government entities have manipulated salary and overtime payments, leading to inflated pensions."
(The Journal News)

ASPPA Request for Transitional Relief for 501(c)(3) Organizations Offering 403(b) Savings Arrangements Inadvertently Subject to Coverage Under Title I of ERISA
7 pages. Excerpt: "On March 18, 2010, ASPPA and NTSAA filed comments with the DOL regarding the 'limited involvement' safe harbor exemption from Title I of ERISA for certain 403(b) arrangements offered by 501(c)(3) organizations. Relief was requested for arrangements which may now be subject to Title I as a result of the guidance provided by FAB 2010-01."
(American Society of Pension Professionals & Actuaries)

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]
FICA Tax on Severance Payments Questioned
Excerpt: "Certain severance benefits may not be subject to taxation under the Federal Insurance Contributions Act (FICA), according to a recent district court decision. In United States v. Quality Stores, Inc., No. 1:09-cv-44 (W.D. Mich. Feb. 23, 2010), a decision affirming a bankrup.tcy court decision, the U.S. District Court for the Western District of Michigan highlighted the historical uncertainty regarding whether certain severance payments made to employees are subject to taxation under FICA. In this episode, the court held that such payments were not subject to FICA, as they did not constitute 'wages.'"
(McGuireWoods LLP)

[Guidance Overview]
Independent Contractors Not Protected by ADEA When Terminated
Excerpt: "A company was not in violation of the Age Discrimination in Employment Act (ADEA) when it dismissed an independent contractor and replaced her with a younger employee, the Eighth Circuit Court of Appeals ruled in Ernster v. Luxco, Inc. (No. 09-1200). The issue in the case involved whether Barbara Ernster was an independent contractor or an employee, because the ADEA and the Iowa Civil Rights Act (ICRA) 'protects employees but not independent contractors.'"
(Wolters Kluwer)

[Guidance Overview]
Voluntary Correction Program for § 409A Documentary Failures (PDF)
6 pages. Excerpt: "IRS Notice 2010-6, 2010-3 I.R.B. 275 (January 5, 2010), allows taxpayers to voluntarily correct many documentary failures under Internal Revenue Code § 409A. Previously, voluntary 409A corrections were available only for operational failures under Notice 2008-113."
(Charles C. Shulman, Esq.)

Responsible Federal Contracting: Report from the Middle Class Task Force
Excerpt: "In its first annual report, the Middle Class Task Force says it will push for stronger standards from federal contractors to make sure they offer proper wages and benefits, and comply with labor laws. Just how that will shake out remains to be seen, but HR executives at companies that depend on federal contracts had better start paying attention."
(Human Resource Executive Online)

Webcasts and Conferences

Employee Benefits Law Section Seminar
in Georgia on April 15, 2010
presented by Employee Benefits Law Section, State Bar of Georgia

Press Releases

Austin Firm Expands Into 401k Market
Richard P. Slaughter Associates

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