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March 23, 2010

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[Official Guidance]
Text of IRS 'Employee Plans News' -- Spring 2010 Edition (PDF)
14 pages. Articles include 'DOs and DON'Ts for Form 5307 Applications', 'What Can and Can't Be Rolled Over to a Roth IRA', 'The Taxable Portion of Your Rollover to a Roth IRA', 'Distribute Excess Deferrals', 'Fix-It Guides -- Common Problems, Real Solutions!', Future Requirements for Tax Return Preparers', 'Multiemployer Funding Issues' and 'Calendar of EP Benefits Conferences."
(Internal Revenue Service)

[Guidance Overview]
Schedule C Line 2: Reporting Other Indirect Compensation
Excerpt: "This update will focus on the reporting requirements on line 2 of Schedule C for other indirect compensation (OIC). OIC is indirect compensation for which at least one of the following is true: The compensation is not EIC, or The plan administrator does not have the required disclosures, or The plan chooses not to use the alternative reporting system for EIC. A plan can report all indirect compensation as OIC, and disregard the EIC rules altogether if the plan chooses."
(SunGard Relius)

Income Guarantees in Defined Contribution Plans (PDF)
8 pages. Excerpt: "The [article] outlines key ERISA and tax code considerations involved in an employer considering to purchase annuities with § 401(k) assets, It does not delve into a whole host of rules that need to be considered when developing or distributing these products, including certain security laws (which exist concurrently with ERISA), as well as other regulatory scheme involving the likes of FINRA, OFAC and others. [Reproduced with permission from Tax Management Memorandum, Vol. 51, No. 6, 03/15/2010. Copyright 2010 by The Bureau of National Affairs, Inc.]"
(Robert J. Toth, Jr.)

Transcript and Video: March 2010 Legal and Regulatory Update: Investment Advice
Excerpt: "The Department of Labor (DOL) has reproposed new regulations on participant advice. In this webcast, Gene Paranczak, senior consultant and ERISA attorney in Vanguard Strategic Retirement Consulting, examines the proposed regulations, which focus on advice given by advisors on their proprietary or affiliated investment products. He also addresses the regulations' extensive discussion of 'generally accepted investment theories.'"
(The Vanguard Group, Inc.)

Project Update: Disclosures About an Employer's Participation in a Multiemployer Plan
Excerpt: "The objective of this project is to enhance the disclosure requirements of an employer's participation in a multiemployer plan under FASB Accounting Standards Codification Subtopic 715-80 (originally issued as FASB Statements No. 87, Employer's Accounting for Pensions, No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and No. 132 (revised 2003), Employers' Disclosures about Pensions and Other Postretirement Benefits."
(Financial Accounting Standards Board)

The Impact of Automatic Enrollment in 401(k) Plans 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 autoenrollment from 225 large 401(k) plan sponsors and found that the average change was positive under auto-enrollment in each of the following three categories: The first-tier match rate. The effective match rate. The average total employer contribution rate."
(Employee Benefit Research Institute)

The Next Big Issue? Social Security
Excerpt: "While its looming problems are not of the scale of those afflicting Medicare, it now stands as the likeliest source of the sort of large savings needed to bring projected annual deficits to sustainable levels, many budget analysts agree. And, they say, packaging future reductions in the retirement program that Democrats zealously defend with tax increases that Republicans typically oppose would have the makings of a grand compromise to shrink the debt."
(The New York Times; free registration required)

New Jersey Assembly Puts Hold on Bill to Ban Part-Time Workers' Pension
Excerpt: "New Jersey's Assembly postponed voting on a measure to exclude part-time workers from the state's $67.3 billion pension system, according to Assembly members Nellie Pou, John Burzichelli and Reed Gusciora. The vote will be delayed until at least May, Pou said. Democratic lawmakers are concerned that a provision in the bill that would also allow future full-time workers to forgo enrolling in the pension system will lead workers to opt out and harm the fund's viability . . . ."
(BusinessWeek)

The '10-70' Plan Could Fix the New Jersey Budget Mess
Excerpt: "'The [public] workers are already way overpaid and they want 7 percent more. Forget the contract. This is a financial emergency and the contract must be renegotiated. And while we are doing that, let's renegotiate the 62-year-old retirement age. 'Here's our idea which we call the '10-70' plan. Have all 76,200 government employees take a 10 percent cut in wages and raise the retirement age to 70. That will just about solve the entire problem, while preserving the 1,300 jobs that are due to be eliminated and it restores state aid to education.'"
(Catamaran Media Company, LLC)

New Bill Could Increase PBGC's Liability
Excerpt: "Legislation that would require the PBGC to subsidize the pension benefits of participants of companies that drop out of multiemployer pension plans was announced today by Sen. Bob Casey, D-Pa."
(Pensions & Investments)

Unfunded Pension Liabilities by State Presented As a Percentage of State Gross Domestic Product
Excerpt: "The chart . . . shows funding levels by state. The bad news is that there is no state whose pensions are fully funded on a market valuation basis. The best-funded states are Nebraska and Delaware, where unfunded pensions liabilities equal only 11 and 12 percent of GDP, respectively."
(American Enterprise Institute)

Jobs with the Best Retirement Benefits
Excerpt: "One way to enjoy a more secure retirement is to pick a job that comes with generous retirement benefits. The amounts vary considerably. Private firms spend an average of 92 cents an hour on retirement benefits, according to recently released Bureau of Labor Statistics data. Employer 401(k) and pension contributions range from $4.22 an hour in the utilities industry to just 9 cents an hour for food service workers."
(U.S. News & World Report)

[Opinion]
Public Pension Red Flags Reminiscent of Madoff
Excerpt: "The red flags I'm talking about include a lack of simple checks and balances. It was bad enough that Madoff's firm itself kept custody over investor assets. Worse still, a close affiliate handled its brokerage transactions while an unknown little accounting firm supposedly kept watch over the money management operation."
(Forbes.com LLC)

[Opinion]
Collective Investment Trusts in 401(k)s: The Good, the Bad and the Ugly
Excerpt: "As luck would have it, I was personally involved in creating CITs in the early 1990s specifically to market to 401k plans. As usual, be careful about elixirs marketed as cure-alls. CITs, like any other investment products, have good, bad and ugly characteristics. I'll share my experiences with you here . . . ."
(Pandamensional Solutions, Inc.)

[Opinion]
Perceptions, and Reports, of Retirement Preparedness Vary Wildly
Excerpt: "As 77 million (give or take a million) baby boomers head toward retirement, more and more financial firms are shifting their focus to the 'distribution' withdrawal stage of an investor's life as opposed to his/her asset accumulation savings stage. The race is on to come with a formula, process, or products that can ease boomers' twin worries about retirement: 1) Will I be able to afford the lifestyle I want? and 2) How can I be sure I don't run out of money?"
(FOX News Network, LLC.)




Valued by every practitioner and recommended for every ERPA candidate, The ERISA Outline Book, 2010 Edition by Sal L. Tripodi, J.D., L.L.M. offers six volumes of vital information on everything you need to know. Highlights include: IRS guidance on the waiver of 2009 required minimum distribution; automatic enrollment guidance from the IRS and Treasury; guidance on discontinuing safe harbor nonelective contributions; EFAST2 electronic filing system and DOL guidance; reporting guidance for 403(b) plans, guidance on deferrals from paid time off plans, court cases on scrivener's errors, and over 100 new rulings, guidances and regulations affecting retirement plans.

Order your copy of The ERISA Outline Book, 2010 Edition today! Visit www.asppa.org/eob now!

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Official Guidance]
Text of IRS Notice 2010-27: Adjusted Limits for Section 911 Foreign Earned Income and Housing Exclusions (PDF)
Notice 2010-27 provides adjusted limitations on housing expenses for tax year 2010 for purposes of the foreign earned income and housing exclusion, section 911 of the Internal Revenue Code. These increases reflect areas with higher housing costs, relative to housing costs in the United States. Generally, this guidance is issued annually.
(Internal Revenue Service)

[Guidance Overview]
VEBA Barred from Allocating Investment Income to Payment of Benefits to Avoid Tax on Unrelated Business Income
Excerpt: "A voluntary employees' beneficiary association (VEBAs) may not allocate investment income to the payment of member benefits in order to avoid the limit on 'exempt function' income, and thus avoid the tax on unrelated business income, the U.S. Court of Appeals for the Federal Circuit (CA-FC) has ruled in CNG Transmission Management VEBA v. United States."
(Wolters Kluwer)

Stock Options: Project Delay Results in Vesting, to Company's Chagrin
Excerpt: "It's hard to predict the future. Which makes it especially hard to describe the future in a legal document. One company's inability to anticipate the degree to which a project might be scaled back has apparently allowed an executive to vest in more options than the company intended. This was the result in Lewitton v. ITA Software, Inc., 585 F.3d 377 (7th Cir. 2009)."
(Utz, Miller & Eickman, LLC)

New SEC Staff Guidance Addresses Nonequity Award and Consultant Fee Disclosure
Excerpt: "The latest proxy disclosure guidance from SEC staff includes new Compliance & Disclosure Interpretations (C&DIs 119.25 and 119.26) addressing how to handle voluntarily forfeited nonequity incentive plan awards and discretionary bonuses. Another new C&DI (133.12) clarifies what 'additional services' may trigger consultant fee disclosure."
(Mercer LLC)

Employment and Training Administration Clarifies Effect of HEART Act on FUTA Provisions
Excerpt: "The U.S. Employment and Training Administration (ETA) has issued a letter clarifying the application of the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act) to the provisions of the Federal Unemployment Tax Act (FUTA), specifically for certain foreign subsidiaries of U.S. companies under contract with the U.S. government. Since the HEART Act amended federal law to cover services performed outside the U.S. for FICA, but did not amend FUTA, differences now exist between FICA and FUTA for coverage of these services."
(International Foundation of Employee Benefit Plans)

The Hiring Incentives to Restore Employment Act Boosts Workforce, Increases Compliance Issues
Excerpt: "'The intent of the HIRE Act by Congress and the administration is to reinvigorate the workforce. While these measures will certainly be welcome by employers, staying compliant in this complex and quickly changing business environment can be a burden for companies of all sizes,' says Gary Butler, CEO of ADP, an outsourced HR, payroll and benefits administration services provider."
(Employee Benefit News; free registration required)

[Opinion]
Follow-Up on Top-Hat Plans Blog
Excerpt: "After my Blog last week on 'Review the Coverage of Your Top-Hat Plan, Before Someone Else Does . . .,' several readers [asked] for a list of some of the relevant cases - which I sent them. It is a long list. However, if you want to get up to speed quickly by reading just one case, I suggest Fishman v. Zurich American Insurance Company, 539 F.Supp. 2d 1036 (N.D.IL 2008). Maybe I am biased, but I think that one of the best and most recent summaries of the case law in this area is from the courthouse down the street us."
(Michael Melbinger via Winston & Strawn LLP)


Webcasts and Conferences

"401(k) Plan Workshop: Current Issues and New Developments" - Boston
in Massachusetts on April 22, 2010
presented by SunGard Relius

"401(k) Plan Workshop: Current Issues and New Developments" - New York
in New York on April 23, 2010
presented by SunGard Relius

"Form 5500/EFAST2 Workshop" - Boston
in Massachusetts on April 21, 2010
presented by SunGard Relius

"Form 5500/EFAST2 Workshop" - Indianapolis
in Indiana on April 21, 2010
presented by SunGard Relius

"Form 5500/EFAST2 Workshop" - Madison
in Wisconsin on April 22, 2010
presented by SunGard Relius

"Form 5500/EFAST2 Workshop" - New York
in New York on April 22, 2010
presented by SunGard Relius

After Health Reform: Reduce Costs and Simplify Open and Ongoing Enrollment (No-cost Webinar)
Nationwide on April 8, 2010
presented by Benefit Software Inc.

COBRA Provisions in ARRA and HIPAA Compliance Webcast
Nationwide on March 24, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)


Press Releases

ASPPA Commends Move to Protect Retirement Income from Medicare Tax
American Society of Pension Professionals & Actuaries (ASPPA)

Pension Solutions, Inc. Is Certified To Industry Best Practices
Centre for Fiduciary Excellence (CEFEX)


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