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Retirement Plans Newsletter

March 24, 2010

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[Guidance Overview]
Are You Ready for Schedule C? (PDF)
3 pages. Excerpt: "For reporting on Schedule C, plan sponsors will need to (1) identify each recipient of $5,000 or more in direct or indirect compensation, and the total direct compensation received by such recipient during the year; and (2) list the amount of indirect compensation paid to such provider or state that the provider received eligible indirect compensation ('EIC'). The plans sponsor will also have to identify the relationship of any such service provider to the plan sponsor, a participating employer or to any other person who is a party in interest as defined under ERISA."
(Altman & Cronin Benefit Consultants, LLC)

[Guidance Overview]
Appeals Court Voids Pension Plan Amendment Due to Procedural Flaw
Excerpt: "Failure to follow a pension plan's written procedures invalidates an amendment, even without a showing of bad faith, the US Court of Appeals for the DC Circuit has ruled (Overby v. National Association of Letter Carriers). The court voided the sponsor's effort to redefine 'surviving spouse' because the amendment wasn't submitted to the fund's actuaries for a cost review, as required by plan terms. Though ERISA is silent as to how much detail plans must include in their amendment procedures, sponsors must follow whatever specific steps are laid out in plan documents, the court found."
(Mercer LLC)

Unionized State Workers Protest Michigan Governor's Retirement Proposal
Excerpt: "Unionized state employees rallied Tuesday on the state Capitol lawn to protest Gov. Jennifer Granholm's retirement proposal and a reduction of the state work force they say will endanger public safety. The UAW 6000, which represents more than 20,000 employees, organized the rally, which was attended by more than 100 workers and officials from several unions. Most of the venom was aimed at Granholm's plan to coax 7,000 employees with 30 years of experience to retire by offering a modest pension sweetener and proposing to cut off dental and vision coverage for those who stay."
(The Detroit News)

Public Pension Funds With Less Than Conservative Asset Allocations
Excerpt: "When it comes to pension funds, most people hope their future retirement income will be managed in a conservative way. These 25 funds top the list of state funds with a 'risky' investment strategy, meaning the lion's share of investments are not in fixed income or cash holdings."
(National Public Radio)

When They're Sixty-Four: Peer Effects and the Timing of Retirement
Excerpt: "This paper examines the effect of peers on an individual's likelihood of retirement using data from the Los Angeles Unified School District. We show that two large pension reforms differentially impacted the financial incentives for retirement within and across schools."
(Social Science Research Network)

Use of Fiduciary Benchmarks' Retirement Readiness Index Could Lead to a Fiduciary Briar Patch
Excerpt: "A recent news article ('Perceptions of Retirement Preparation,') focused on differences in Americans' expected preparations for retirement as presented by a recent for-profit start-up firm, Fiduciary Benchmarks, and the nonprofit Employee Benefit Research Institute (EBRI). This blog expands on several of the excellent points raised in that article."
(Employee Benefit Research Institute)

Behavioral Economics Helps Explain the Reality of Participant Behavior (PDF)
12 pages. Excerpt: "[B]ehavioral finance provides an explanation for irrational participant behavior. By better understanding the heuristics, or mental biases, people are prone to when making decisions, plan sponsors will be better able to structure an effective plan and communication strategy."
(Arnerich Massena & Associates, Inc.)

Fresno County, California, Retirement Plan Deemed 'Unsustainable'
Excerpt: "After reviewing the Fresno County Employees' Retirement Plan, the grand jury called it 'unsustainable' in a report released this morning and found that the bonds taken out to support it represented 66.6% of the county's total debt in December 2009. The report found that since March 1998, the county's retirement fund has had to borrow nearly $567.4 million in bonds and that the total amount that will be paid at maturity will be more than $1 billion dollars."
(The Business Journal)

The Defined Benefit Plan's Many Problems
Excerpt: "DB plans were instituted by people who had the best intentions for helping employees experience a wonderful life during their retirement years. Moreover, the removal of retirement planning burdens from the employee's responsibility and placing them upon the employer is also a significant advantage of the DB plan structure. However, upon examination, it becomes obvious that valuation errors associated with the estimation of pension liabilities poses an unavoidable problem. In addition, the accounting provisions associated with booking net pension liabilities on the balance sheet of a company, instead of booking both the pension asset and pension liability, raises many additional issues that fly in the face of prudent corporate governance."
(San Francisco Chronicle)

Retirement Industry Should Get Ready for Fee Disclosure Regulations
Excerpt: "The U.S. Department of Labor hopes to have its revisions to the service provider fee disclosure regulations out by May, according to an official from the Employee Benefits Security Administration (EBSA). . . . Speaking last week . . ., Michael Davis, deputy assistant secretary of the EBSA said the Department has worked on new regulations under the Employee Retirement Income Security Act section 408(b)(2), which will pertain to what information must be provided to plan sponsors about fees from service providers, including advisers."

Court Moves Forward Stock Drop Claims against Missouri Company
Excerpt: "A federal court has ruled that participants in the 401(k) plan sponsored by MEMC Electronic Material can move forward with their Employee Retirement Income Security Act fiduciary breach claims. U.S. District Judge Henry Edward Autrey of the U.S. District Court for the Eastern District of Missouri said at this stage in the proceedings specific facts are not necessary, and the plaintiffs need only set forth allegations and notify defendants that they challenge the defendants' prudence and loyalty. According to Autrey, the issue is not whether the plaintiffs will ultimately prevail, but whether they are entitled to present evidence in support of the claim."

New Missouri Bill Requires Terrorism Divestment in Pension Funds
Excerpt: "A former treasurer for the state of Missouri is working with a state lawmaker to push a measure that would prohibit state pension systems from investments in companies tied to terrorism."

FASB May Require Expanded Disclosures About Multiemployer Pension, Retiree Health Plans by Year-End
Excerpt: "A new FASB project announced March 17 could require employers that participate in multiemployer pension or retiree medical plans to disclose more information about these plans in their financial statements. Currently, only the amount contributed to such plans is disclosed. Financial statement users want more information about the employer's exposure to higher contributions or withdrawal liability payments, given the decline in funded status experienced by many multiemployer plans in the financial crisis. FASB plans a second quarter exposure draft with the final standard effective by year-end."
(Mercer LLC)

Kansas and Nebraska, Alike in Many Ways, But with Wildly Different Pension Systems
Excerpt: "'Nebraska has had this tradition of consistently looking at the plans -- trying to take action as needed -- instead of waiting and kicking the can down the road until it's a full-blown crisis,' he says. It's more than a tradition -- it's state law. Unlike their colleagues in Kansas, Nebraska lawmakers are required to keep the pension funds flush. . . . Another difference is that Nebraska's pension fund is much smaller; there are fewer workers to cover. Most of them are on a 401(k)-type system, with the state more than matching worker contributions."
(Morning Edition via National Public Radio)

Congress to Consider YRC Worldwide Inc. Pension Relief
Excerpt: "Sen. Bob Casey of Pennsylvania said he would introduce a bill intended to protect the pension payments of retirees of failed businesses while assisting companies such as YRC, whose pension liabilities include non-YRC retirees. Multi-employer pension plans such as the Teamsters' Central States Pension Fund have become severely underfunded in recent years as more unionized companies have liquidated. That has left fewer employers to pay into the funds, which continue to provide benefits to the retirees of the failed companies."
(The Kansas City Star)

New Jersey Governor Signs Pension Cuts Into Law
Excerpt: "A package of public-employee pension and benefit cuts expected to save hundreds of millions of dollars in the coming fiscal year and billions over a longer period was signed into law by Gov. Christie yesterday, 35 minutes after winning final legislative approval."

PBGC Regulations May Affect Credit and Other Agreements
Excerpt: "Late in 2009, the Pension Benefit Guaranty Corporation (PBGC) issued proposed regulations that will, if adopted, significantly accelerate the requirement to notify the PBGC when many 'reportable events' occur or are about to occur with respect to a defined benefit plan. When finalized these rules will create new or accelerated reporting obligations for employers with defined benefit plans. They may also change the rights and obligations of both employers and lenders under credit agreements."
(Dorsey & Whitney LLP)

Target-Date Funds: A Wonder Drug for Participants or a Pandora's Box for All Concerned (PDF)
13 pages. Excerpt: "The purpose of this paper is to demonstrate why it is in the best interest of 401(k) sponsors, participants, and the fiduciaries themselves for the latter to carefully reexamine their processes for choosing and then monitoring the behavior and use of target date funds (or any other QDIA and/or advice provider). Further, if fiduciaries think it is wise not to do anything until Congress or the DOL takes a course of action, they may be: setting the stage for their participants to incur disastrous outcomes; subjecting themselves and their sponsors to time consuming litigation that could easily run into the millions or tens of millions of dollars."
(Richard D. Glass via Investment Horizons)

Company Plan Comparisons - Not a Service to Participants, or Anyone Else for That Matter
Excerpt: "Those who would judge a particular company's plan design need to understand that the choice to sponsor a plan is voluntary, and plan design is based on a collection of factors, not the least of which is to keep the organization financially viable. It's great to collect and share information. It's wrong to make judgments."
(Profit Sharing / 401k Council of America)

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]
IRS Explanation of Rule Limiting Qualified Tuition Reductions to Education Below the Graduate Level
Excerpt: "EBIA Comment: Although this letter cannot be relied on as precedent, it offers a helpful and succinct summary of the criteria that determine when courses qualify for nontaxable tuition discounts under Code Section 117(d). The discussion of joint-degree programs is particularly interesting in light of the growing interest in these programs. Educational organizations that are frustrated by their inability to use the qualified tuition reduction rules for graduate-level education unfortunately will have few alternatives. Code Section 132(l) generally prevents them from providing courses as nontaxable fringe benefits under Code Section 132 (e.g., as no-additional-cost services or as qualified employee discounts)."
(Employee Benefits Institute of America)

[Guidance Overview]
One-Time Severance Payment Was Not Subject to ERISA, According to Court
Excerpt: "EBIA Comment: The 'ongoing administrative program' standard for determining whether a severance benefit is subject to ERISA is easier to state than to apply. The simplicity of the arrangement in this case appears to have made the trial court's determination easy. However, small variations in the facts can affect the outcome, so employers should tread carefully in this area."
(Employee Benefits Institute of America)

[Guidance Overview]
IRS Update of Amount of Excludable or Deductible Foreign Housing Expenses for 2009 and 2010
Excerpt: "The [IRS] has published adjusted limitations on the housing expense tables for purposes of Code Sec. 911(c)(2)(A). The guidance provides adjusted limitations on housing expenses for 2010, includes a table that identifies locations within countries with high housing costs relative to housing costs in the U.S., and provides an adjusted limitation on housing expenses for qualified individuals with housing expenses in one or more high-cost locations in 2008. Outside the high-cost areas, the annual limitation is $27,450."

[Guidance Overview]
Ninth Circuit Holds 'Off-the-Clock Activities' and 'Commute Time' May Be Compensable
Excerpt: "The district court granted summary judgment in favor of the employer, holding that the time was not compensable under either Federal or California law. The Ninth Circuit disagreed and vacated the judgment, explaining that the end-of-day activities may be compensable under the Employee Commuter Flexibility Act (ECFA), and the commute time may be compensable under California law."
(Deloitte via

[Guidance Overview]
Ninth Circuit Reverses Course in New Xilinx Opinion, Grants Significant Victory to Taxpayer
Excerpt: "A three-judge panel of the Ninth Circuit Court of Appeals by a 2-1 vote has affirmed the opinion of the Tax Court in Xilinx, Inc. v. Commissioner that employee-stock-option (ESO) expenses should not be taken into account in the context of cost-sharing arrangements. The decision, which effectively reverses a prior withdrawn opinion by the same three-judge panel, stands as a reaffirmation of the arm's-length standard and another example of transfer-pricing litigation being decided on the basis of evidence of actual arm's-length dealings rather than economic theories."
(Miller & Chevalier Chartered)

Financial Consumer Protection Agency in Senate Bill Could Regulate Retirement Plan Service Providers
Excerpt: "A revised financial regulatory reform bill from Senate Banking Committee Chairman Chris Dodd, D-CT, would create a new consumer protection agency that could have some jurisdiction over retirement and benefit plan service providers. Department of Labor (DOL) and IRS authority over retirement plans would remain untouched, but the new agency could regulate services provided to employer-sponsored plans if requested to do so jointly by DOL and IRS."
(Mercer LLC)

Webcasts and Conferences

Chicago Advanced Pension Conference
in Illinois on August 30, 2010
presented by SunGard Relius

Health Care Reform Nears the Finish Line
Nationwide on March 30, 2010
presented by Buck Consultants

Health Care Reform: What Employers Need to Know Webinar
Nationwide on March 29, 2010
presented by Ballard Spahr LLP

March Smartcast: New Health Care Reform Law with Craig J. Davidson, CEBS
Nationwide on March 25, 2010
presented by FutureOffice Network

The Brave New World of 403(b) Plans: Issue Spotting for the Future
Nationwide on April 20, 2010
presented by Seyfarth Shaw LLP

Press Releases

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Newly Posted Employee Benefits Jobs

401k Guide Reporter
for Guidant Financial Group, Inc
in WA

Retirement Plan Coordinator
for Benefits Administrators, LLC
in KY

Defined Benefits Client Manager
for Prudential
in CT

Benefit Education Specialist - Remote - Upper Peninsula of Michigan
for Municipal Employees' Retirement System of Michigan
in MI

Defined Contribution/401(k) Administrator
for Associates in Excellence
in CA

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