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Retirement Plans Newsletter

March 22, 2010

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The Internal Revenue Service (IRS) issued 403(b) regulations, which became effective in January 2009, replacing regulations that were more than 40 years old. Most 403(b) plans need to comply with new plan document requirements, changes to coverage and non-discrimination testing rules, and limitations to transfers and exchanges. Look to SunGard for 403(b) solutions. For more information, read more about our solutions or call 1-800-326-7235, ext.1100.
Sponsored by SunGard

[Guidance Overview]
What Happens If a Defined Contribution Preapproved Plan Misses the April 30, 2010 Deadline to Restate?
Excerpt: "The IRS's Employee Plans Compliance Resolution System (EPCRS) Rev. Proc. 2008-50 contains the appropriate correction method for remedying a non-amender failure. Plan sponsors can voluntarily correct these failures under the Voluntary Fiduciary Correction Program (VCP). Such corrections will require a VCP filing."
(McKay Hochman Co.)

[Guidance Overview]
HIRE Act Provision of Tax Breaks for Hiring Unemployed Workers
Excerpt: "Key HIRE Act Tax Benefits: A 6.2 % payroll tax incentive for employers who hire unemployed workers this year (after Feb. 2, 2010, and before Jan. 1, 2011). A $1,000 general business tax credit for each worker retained by the employer for at least one year."
(McGuireWoods LLP)

[Guidance Overview]
What the HIRE Act Means to Employers
Excerpt: "The first step to evaluating the Act and deciding whether to pursue hiring under the Act, is to designate someone to coordinate a review of the law and assemble a team including representatives of HR, benefits, payroll and corporate tax to consider its obligations and benefits."
(Littler Mendelson P.C.)

[Guidance Overview]
FBAR Guidance from the IRS and Treasury (PDF)
4 pages. Excerpt: "Significantly, the proposed regulations would effectively eliminate the FBAR filing requirement for governmental pension, retirement and welfare funds and their employees, qualified retirement plan participants, owners and beneficiaries of traditional or Roth IRAs, public universities, individuals employed by registered investment advisors advising registered mutual funds, and certain tax-exempt investors."
(Buck Consultants)

[Guidance Overview]
IRS HEART Changes for Employers (PDF)
Excerpt: "The Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) provided tax breaks and incentives for military personnel and affected how employers treat the wages and benefits of employees on military leave. In Notice 2010-15, the IRS addresses various HEART provisions, including those affecting differential wage payments, survivor and disability retirement benefits and certain plan distributions."
(Buck Consultants)

[Guidance Overview]
Court Dismisses Most Claims in State Street Stock Suit
Excerpt: "A federal court has dismissed most claims against State Street Corporation and its retirement plan fiduciaries regarding the offering of company stock as an investment in its Employee Stock Ownership Plan."

[Guidance Overview]
Court Finds 45-Day Timing for Lump-Sum Payments Reasonable
Excerpt: "The U.S. District Court for the District of Columbia has ruled that U.S. Airways policy to pay retired pilots lump-sum benefits 45 days after retirement was reasonable and it does not owe the pilots interest for the 45-day period."

[Guidance Overview]
Medtronic Prevails in Company Stock Suit
Excerpt: "A federal court has ruled that Medtronic Inc. did not breach its fiduciary duties by continuing to offer company stock as a retirement plan investment during a period when its stock price dropped considerably. The U.S. District Court for the District of Minnesota found the plan participants who brought the suit were unable to overcome the presumption of prudence that applies to retirement plans that invest in employer stock."

Collective Investment Trusts Being Offered As Investment for 401(k) Plans
Excerpt: "Similar to mutual funds, CITs pool money from participants and invest in stocks, bonds and other alternatives. A major appeal is that they do so at a much lower cost. Companies with thousands of employees in their retirement plans are catching on and adding CITs at an increasing pace. Apple, Dell and Exxon Mobil are just a few that offer this cheaper option."
(AP via The New York Times; free registration required)

A Win for Wall Street in the Fiduciary Battle
Excerpt: "The financial-reform package introduced last week by Senate Banking Committee Chairman Christopher Dodd, D-Conn., dropped an earlier provision that would have imposed a fiduciary duty on anyone offering advice on investments, dealing a blow to those who support the standard."
(Investment News; free registration required)

Stewardship Education Sets Foundation for 401(k) Committees
Excerpt: "For many, a position on the 401(k) committee will be their first and only time to serve as a fiduciary. Committees usually include members from finance and human resources who are familiar with ERISA. However, others may not be well informed. Three actions that help: Stewardship education; Signed fiduciary letters; Investment policy document."

IRS Information on Payroll Tax Incentive Under HIRE Act
Excerpt: "Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time, according to the Internal Revenue Service (IRS) in Information Release IR-2010-33. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law on March 18."
(International Foundation of Employee Benefit Plans)

Proposed Benefits Cuts in New Jersey Closer to Approval
Excerpt: "A New Jersey Assembly panel has approved proposed cuts for pension and health benefits of public workers. The Assembly Appropriations Committee approved the legislation that would roll back pension benefits for government workers and teachers, and make public employees at all levels pay 1.5% of their salaries toward health benefits, matching what state workers contribute . . . . The proposals would roll back a 9% pension increase approved in 2001, require new part-time workers to receive 401(k)-like plans rather than defined benefit plans, and raise the threshold to qualify for a taxpayer-funded pension to $5,000 in annual government pay, up from $1,500."

Pennsylvania Legislature Tries to Clean Up Pension Funding Mess It Helped to Create
Excerpt: "Legislation has been introduced that would alter the manner in which retirement plans are offered to future state and public school employees. In order to try to reduce the financial obligation the state and its school districts assume regarding a defined benefit plan, legislation has been introduced that would provide future state and public school employees with a defined contribution plan."
(The Daily American)

Virginia Retirement System Will Be Asking for Higher Contribution Rates in the Next Biennium
Excerpt: "Part of the problem lies in how Virginia's retirement program is structured. Before 1983 state employees paid 5% of their salary into the retirement plan. That year, also in the midst of a recession, the General Assembly decided to pick up the contribution in lieu of raises. 'It seemed like a novel and clever way to reward public employees,' Schultze told the Virginian-Pilot in a December interview. 'Now, we find ourselves sort of alone in that approach.' How much so? Virginia is one of only eight states that require no employee contribution to the retirement plan."
(Virginia Gazette)

HSBC Streamlines Pensions as It Moves Employees into Single Plan
Excerpt: "HSBC Bank USA is freezing its older, long-standing pension plan and moving all of its 11,000 employees onto a single retirement plan that has been in effect for about a decade as it seeks to simplify and align its benefits programs nationwide. The U. S. subsidiary of London- based HSBC Holdings Plc recently told all employees that, as of early 2011, its older, 'legacy' pension plan will no longer accrue new benefits."
(The Buffalo News)

Partial Pension Fix Set in Illinois
Excerpt: "Under the plan, which passed 109-0, incoming legislators and judges would have to wait until they are 67 to draw full pension benefits. Now, they can draw full benefits as young as 55 years old. The plan would base their pensions on 60 percent of their final salaries rather than the current 85 percent."
(Chicago Sun-Times)

Do You Have Enough to Retire? Do the Math
Excerpt: "So how do you go about working out the answer? There's a simple five-step approach. [First,] Find the target."
(The Wall Street Journal)

Fidelity to Level Fees for DC Plan Advisers
Excerpt: "Under pressure from financial advisers who want to act as fiduciaries in 401(k) plans, Fidelity Investments plans to institute level 12(b)-1 mutual fund fees paid to advisers who sell the firm's plans."
(Investment News; free registration required)

Target-Date Fund Adoption by DC Plans in 2009
Excerpt: "The percentage of Vanguard defined contribution (DC) plans offering target-date funds increased from 13% of plans in 2004 to 75% in 2009. Target-date funds are rapidly replacing risk-based life-cycle funds in plan investment menus and are the predominant choice for plans offering a qualified default investment alternative (QDIA). As this increased use reshapes investment patterns, a new research note from Vanguard Center for Retirement Research explores what this trend can mean for plans and participants."
(The Vanguard Group, Inc.)

Responsible Investing and Corporate Governance: Lessons Learned for Shareholders from the Crises of the Last Decade
Excerpt: "This paper focuses on what steps we believe could promote more effective corporate governance and provides recommendations as to what shareholders should do going forward to prevent future crises. Through engagement, careful monitoring and increased dialogue, shareholders should use their rights responsibly to hold boards of directors accountable. How investors respond to this challenge will be critical to the future growth of our economy, the success of our equity markets and increased returns for their beneficiaries."
(TIAA-CREF Institute)

The Case for Getting a Monthly Annuity
Excerpt: "Anyone with a lump sum -- a large amount of money -- can get an annuity. Insurance companies will gladly convert it into a stream of monthly payments for life. But a company-provided annuity offers more protections than the type you can buy from a private insurer."

Florida Legislature Wrestles with DROP
Excerpt: "Should the Florida Legislature drop DROP? And just why does the state let employees collect pension benefits while they continue working for five years -- or eight, if they're badly needed teachers? Those are only a couple of the interesting questions raised by a new report from the Office of Program Policy Analysis and Government Accountability, the Legislature's fiscal experts. OPPAGA doesn't recommend things, it just gives the House and Senate a reliable, nonpolitical assessment of their options."
(Tallahassee Democrat)

Reviews of the Way Public Pensions Measure Their ROI and Account for Liabilities Could Have Major Impact on State and Local Budgets
Excerpt: "Two unrelated studies in the public pension arena could create more budget-balancing challenges for public officials. One is an announcement by CalPERS, the behemoth California pension fund, that it is reviewing its investment-return assumptions. The other is the Governmental Accounting Standards Board's (GASB) review of pension accounting procedures. Both could affect the calculation of pension costs for state and local governments."

New Proposed Regulations Encourage Participant Advice Programs
Excerpt: "New advice regulations for defined contribution plan participants, recently proposed by the Department of Labor (DOL), confirm that investment providers may provide proprietary advice to plan participants as long as certain conditions are satisfied. The regulations are a welcome and workable addition to existing guidance, according to Vanguard Strategic Retirement Consulting (SRC)."
(The Vanguard Group, Inc.)

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Sponsored by ASPPA

Executive Compensation; Benefits in General

New Proposed Executive Compensation Corporate Governance Rules
Excerpt: "The Restoring American Financial Stability Act of 2010 was released by Senator Christopher Dodd (D-CT), Chairman of the Senate Banking Committee, on March 15, 2010 (the 'Financial Reform Bill'). In addition to the many financial services reform items contained in the proposed legislation, there are a number of provisions that would affect the corporate governance of executive compensation at public companies, including provisions that will be mandatory for companies to continue being listed on a national securities exchange such as the NYSE or NASDAQ."
(Pillsbury Winthrop Shaw Pittman LLP)

California Public Pension Funding Gap Widens as Liability Surge Raises Concerns
Excerpt: "As local lawmakers brace for yet another round of budget cuts to make up for chronic shortfalls trickling down from Sacramento, some are pointing to burgeoning public pension liabilities as a looming financial disaster. Over the past decade, California's unfunded public pension and health care liability has soared from zero to nearly $60 billion, and experts warn that unless costs are cut and policies change, that number could increase dramatically in coming years."
(San Bernardino Sun)

Employee Benefits Update, March 2010 (PDF)
The four-page newsletter presents select compliance deadlines and reminders; retirement plan developments; and, health and welfare plan developments, with comments from Reinhart.
(Reinhart Boerner Van Deuren s.c.)

Webcasts and Conferences

TRI-AD HealthSaver HSA Virtual Showcase
Nationwide on March 25, 2010
presented by TRI-AD

Press Releases

U.S. Labor Department Announces Updated Model Notices and Educational Material on Extension of COBRA Subsidy
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

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