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Retirement Plans Newsletter

April 8, 2010

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[Guidance Overview]
2010 ERISA Guide to Reporting & Disclosure
Excerpt: "The Guide is useful in: Identifying forms to be filed and distributed annually; Developing controls for compliance, including an internal calendar for reporting and disclosure; Determining and coordinating reporting and disclosure items for actuaries, attorneys and accountants to prepare; Identifying special reporting and disclosure requirements for plan installation, amendment, termination, etc.; Evaluating administrative considerations in establishing a new or supplemental plan; Advising on responsibility for compliance with the reporting and disclosure rules."

[Guidance Overview]
IRS's Finalized HIRE Act Employee Affidavit (PDF)
2 pages. Excerpt: "On April 7, 2010, the IRS released its finalized version of Form W-11, Hiring Incentives to Restore Employment (HIRE) ActEmployee Affidavit. The release of this form affidavit allows employers to confirm that a newly hired employee is a qualified employee under the HIRE Act. This form affidavit may be accessed at:"
(Seyfarth Shaw LLP)

[Guidance Overview]
Tax Benefits in Hiring Incentives to Restore Employment Act of 2010
Excerpt: "This article briefly and broadly summarizes the tax benefits in the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act), which was signed on March 18. The HIRE Act has two main benefits: it exempts employers from the employer's share of Social Security employment taxes on wages paid in 2010 to newly hired unemployed workers; it provides employers with a tax credit of up to $1,000 for retaining newly hired, unemployed workers."
(Pepper Hamilton LLP)

[Guidance Overview]
Investment Advice Prohibited Transaction Exemption: Proposed Regulations
Excerpt: "The comment period is open until May 5, 2010. The DOL has already received and considered comments on the bulk of the language in the re-released proposed regulations since, for the most part, the re-released regulations are identical to the Bush 2008 proposed regulations. Therefore, it is unlikely that much will change in the final regulations on those aspects of the regulations. Whether some of the issues pertaining to investment advice that are raising concern survive after the comment period is an open question that will have to await the issuance of the final regulations."
(Miller & Chevalier Chartered)

[Guidance Overview]
April 30 Deadline Approaches for Restatement of IRS Pre-Approved Plans
Excerpt: "The IRS requires that employers using pre-approved defined contribution plans adopt restated plan terms by April 30, 2010. The restated terms must comply with various requirements enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001 and other plan qualification requirements found in the IRS's 2004 Cumulative List of Changes in Plan Qualification Requirements (the 2004 Cumulative List), published in Notice 2004-84. Vendors sponsoring such pre-approved plans (Plan Sponsors) generally should have sent the required restatement documents to all adopting employers by this time."
(McGuireWoods LLP)

[Guidance Overview]
Increased Medicare Taxes Imposed Under Health Reform Law Will Not Be Assessed on Plan Distributions
Excerpt: "Provisions of the recently enacted health reform legislation (The Patient Protection and Affordable Care Act (P.L. 111-148)) that would impose additional Medicare payroll taxes on individual earned income and net investment income over $200,000 ($250,000 for joint filers) will not apply to elective contributions or to amounts earned on investments in 401(k) and other qualified plans."
(Wolters Kluwer)

[Guidance Overview]
IRS Tips to Help Speed Processing of Form 5307 Applications
Excerpt: "The deadline to submit determination letter applications for employers who adopted an EGTRRA-approved defined contribution Master or Prototype (M&P) or Volume Submitter (VS) plan is April 30, 2010. Adopting employers must use Form 5307 (Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans (Rev. March 2008))."
(Wolters Kluwer)

[Guidance Overview]
Confusion Regarding Partial Rollovers of After-Tax Contributions
Excerpt: "Whether the IRS will take steps to address the inconsistency between the general administrative practice and its newly clarified position is not certain. The IRS seems to have affirmed its newly clarified position in the recently released Spring 2010 Employee Plans News."
(Deloitte via

[Guidance Overview]
New FAQs on EFAST2 Filing System
Excerpt: "The Department of Labor clarified some technical aspects of the new EFAST2 Filing System regarding time deadlines, filing for years before 2009, and online registration. New Questions 4a, 16a and 35a are now added to the Department's Frequently Asked Questions (FAQs) on the EFAST2 Filing System, which can be found on the DOL web site at:"
(Deloitte via

AT&T Requests Discrimination Claims on Pensions Be Dismissed
Excerpt: "AT&T has asked a US judge to dismiss claims that it discriminated against older workers when it converted its defined benefit pension scheme to a 'cash balance' arrangement in 1997. According to legal documents, lawyers representing the telecoms giant are seeking to have the age discrimination claim - which is seeking US$2.3bn in damages for 24,000 current and former employees - thrown out."
(Global Pensions)

Optimal Portfolio Choice over the Life Cycle with Social Security
Excerpt: "This paper examines how households should optimally allocate their portfolio choices between risky stocks and risk-free bonds over their lifetime. Traditional lifecycle models in previous work suggest that the allocation toward stocks should start high (near 100%) early in life and decline over a person's age as human capital depreciates. These models also suggest that, with homothetic utility, the allocation should be roughly independent of a household's permanent income. The actual empirical evidence, however, indicates more of a 'hump' shape allocation over the lifecycle; the lifetime poor also hold a smaller percentage of their portfolio in stocks relative to higher income groups. Households, therefore, appear to be making considerable 'mistakes' in their portfolio allocation."
(Pension Research Council; registration required to download working papers)

Troubled Labor Unions Look to Federal Government for Help on Pensions
Excerpt: "Senator Bob Casey, Pennsylvania Democrat, introduced the Create Jobs & Save Benefits Act of 2010 to address the funding problems faced by union-administered multi-employer pension plans. Multi-employer pension plans have to cover the benefits of members, even if their companies are defunct. Currently the costs are shared among the companies that remain in the pool, but Casey's bill proposes offloading them to the Pension Benefit Guarantee Corporation (PBGC), a federal corporation, which backs the pensions of 44 million workers, more than 75 percent of which are nonunion."
(The Daily Caller)

EBSA Enforcement Results Data Posted to the Web
Excerpt: "The Employee Benefits Security Administration (EBSA) is one of a number of Department of Labor (DOL) agencies participating in a new Web site aimed at making a variety of enforcement data publicly available."

IRS Form for Claiming HIRE Tax Exemption Available
Excerpt: "The Internal Revenue Service has released a new form that will help employers claim the special payroll tax exemption that applies to many newly-hired workers during 2010, created by the Hiring Incentives to Restore Employment (HIRE) Act. An IRS announcement said Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now posted on, along with answers to frequently-asked questions about the payroll tax exemption and the related new hire retention credit."

CalPERS Disputes Doomsday Scenario
Excerpt: "Reacting to a Stanford University study that found the state's public retirement plans face a shortfall of a half trillion dollars, California Public Employees Retirement System spokesman Brad Pacheco said Tuesday the study was based on outdated data. Pacheco said the policy brief by the Stanford Institute for Economic Policy Research also relies on methodologies out of sync with government accounting rules and actuarial standards of practice. "
(Whittier Daily News)

Employer Retirement Plans Comparison Chart for Small Businesses: 2010 Plan Year
Excerpt: "This chart provides a comparison of the features and benefits that apply to retirement plans that can be sponsored/adopted by small business owners. Focus [is on the areas that are important to] the business owner, so as to help ensure that the plan that is chosen is the plan that is most suitable for the business. [Updated to reflect finalized DOL regulations for depositing salary deferral contributions.]"

Adoption and Filing Deadlines for Preapproved Defined Benefit Plans Announced
Excerpt: "IRS has set adoption and filing deadlines for master-and-prototype and volume-submitter defined benefit (DB) plans (Announcement 2010-20). Sponsors of preapproved DB plans soon will receive opinion and advisory letters on their plan documents as restated for EGTRRA and other changes. Adopting employers must sign the preapproved DB plan documents during the roughly two-year period ending April 30, 2012, and may opt to apply for individual determination letters starting May 1, 2010. For preapproved defined contribution plans, employers face an April 30, 2010, adoption deadline."
(Mercer LLC)

MetLife's 2010 Stable Value Study
Excerpt: "[The study of Defined Contribution plan sponsors and stable value fund providers] gauges perceptions of, and insights into, the current stable value product landscape. Areas of focus include: How plan sponsors access stable value offerings; How aware plan sponsors and stable value fund providers are about book value guarantee features; Current perceptions about the importance and value of various guarantee provisions and wrap contract features; Communication between plan sponsors and stable value fund providers."
(Metropolitan Life Insurance Company)

Court Lets Pension Plan Reduce Lump Sum Distribution Despite IRS Anti-Cutback Regulations
Excerpt: "Merely reducing a pension plan's lump sum, without eliminating it, does not violate ERISA's anticutback rules, a federal court in Washington, DC has ruled (Clark v. Feder, Semo & Bard). The court held a law firm's underfunded plan (exempt from ERISA Title IV) could offer a choice on plan termination between an unreduced annuity at retirement age or an immediate lump sum reduced pro rata to match plan assets. IRS regulations -- which protect optional forms from a reduction in value -- go beyond what Congress intended, the court said. Whether the decision will influence other courts is unclear."
(Mercer LLC)

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Executive Compensation; Benefits in General

[Guidance Overview]
Quality Stores Puts FICA Refund Opportunity for Severance Pay Back on the Table
Excerpt: "Quality Stores presents an opportunity to claim refunds for FICA taxes previously paid as well as for reevaluating tax positions going forward. Employers who have made severance payments to employees in calendar year 2006 or later may wish to file protective claims for refund of the employer's and the employees' portion of the FICA tax, based on the rationale of Quality Stores. The deadline for filing a claim for refund with respect to payments made in 2006 is April 15, 2010, so taxpayers must move quickly if they want to take advantage of this opportunity."
(Jones Day)

[Guidance Overview]
IRS Sheds Light on FICA Refund Interest Rates
Excerpt: "The IRS has accepted the position that medical residents were not subject to FICA tax for periods ending before April 1, 2005, the date new FICA Regulations became effective. A recently released IRS Chief Counsel Memorandum outlines the law and analysis that is used in determining the interest rate to apply to such FICA tax refunds."
(Deloitte via

Income of the Aged Chartbook, 2008
Excerpt: "This publication covers the population aged 65 or older. The unit of analysis here, with the exception of measures of poverty and family income of persons, is the aged unit, which is a married couple living together or a person who does not live with a spouse."
(U.S. Social Security Administration)

Obama Administration Won't Say How it Will Pay for Federal Same-S.ex Benefits
Excerpt: "The Obama administration is not ready to tell Congress what cost-cutting measures it will take to pay for extending federal employee benefits to same-s.ex couples. The legislation that provides health care, long-term care, family and medical leave and federal retirement benefit passed the Senate Homeland Security and Government Affairs Committee and is awaiting approval on the Senate floor."

Webcasts and Conferences

"401(k) Plan Workshop: Current Issues and New Developments" - Atlanta
in Georgia on May 7, 2010
presented by SunGard Relius

"401(k) Plan Workshop: Current Issues and New Developments" - Chicago
in Illinois on May 7, 2010
presented by SunGard Relius

"401(k) Plan Workshop: Current Issues and New Developments" - Cincinnati
in Ohio on May 5, 2010
presented by SunGard Relius

"Form 5500/EFAST2 Workshop" - Atlanta
in Georgia on May 6, 2010
presented by SunGard Relius

"Form 5500/EFAST2 Workshop" - Chicago
in Illinois on May 6, 2010
presented by SunGard Relius

"Form 5500/EFAST2 Workshop" - Cincinnati
in Ohio on May 4, 2010
presented by SunGard Relius

Health Care Reform: What Employers Need to Know Now!
Nationwide on April 29, 2010
presented by ABA Joint Committee on Employee Benefits

Recent Decisions of the Federal Courts
in California on April 20, 2010
presented by Western Pension & Benefits Conference, San Diego Chapter

Press Releases

ASPPA Urges House To Pass Pension Funding Relief
ASPPA (American Society of Pension Professionals & Actuaries)

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