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Retirement Plans Newsletter

April 19, 2010

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Meet some of the biggest pension and welfare benefit celebrities at the Western Benefits Conference! Get the latest on what's going on in the world of pension and welfare benefits from industry experts and IRS officials live in person! The Western Benefits Conference takes place June 18-20 in Los Angeles, CA and is a joint program by the Western Pension & Benefits Conference (WP&BC) and the American Society of Pension Professionals & Actuaries (ASPPA).

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Sponsored by WP&BC and ASPPA

[Guidance Overview]
Supreme Court's Standard for Determining Whether a Mutual Fund Investment Advisor Received Excessive Fees
Excerpt: "EBIA Comment: While this is not an ERISA fiduciary breach case, the Court's analysis may have implications for excessive fee cases brought under ERISA, particularly by 401(k) plan participants. As the case law addressing investment fees evolves under ERISA, it's possible that courts will look to the standard adopted by the Supreme Court under the Act -- notably, a difficult standard for plan participants to overcome."
(Employee Benefits Institute of America)

[Guidance Overview]
New Proposed Rules Regarding Individualized Investment Advice Within Participant-Directed Individual Account Plans
Excerpt: "The proposed rules allow two methods for fiduciary advisers to provide advice under 'eligible investment advice arrangements': By use of a computer model that meets specific requirements and provides unbiased advice. The program will need to be certified in advance by an independent investment expert. Fee leveling: Compensation or commissions earned by a fiduciary adviser may not vary based on the investments selected by a participant."
(McKay Hochman Co., Inc.)

[Guidance Overview]
Retirement Plan Expenses and Cost Cutting
Excerpt: "ERISA allows employers to pay certain plan expenses with plan assets. Both the IRS and DOL have issued guidance on this subject. Employers should use caution when considering charging expenses to assets, however, because not all types of expenses can be paid from plan assets. The manner in which expenses are paid is also subject to certain restrictions."
(McKay Hochman Co., Inc.)

[Guidance Overview]
Chart on Exceptions to 10% Early Distribution Penalty
The chart presents a comparison of qualified plan and traditional IRA exceptions to the 10% penalty on distributions prior to age 59 1/2.
(McKay Hochman Co., Inc.)

[Guidance Overview]
Inherited IRA Not Exempt from Debtors' Bankrup.tcy Estate, According to Court
Excerpt: "Debtors could not claim an exemption for an inherited IRA from their bankrup.tcy estate because inherited IRAs do not contain retirement funds as required under Bankrup.tcy Code Sec. 522(d)(12), a U. S. Bankrup.tcy Court for the Eastern District of Texas has ruled in In re Chilton."
(Wolters Kluwer)

[Guidance Overview]
2009 Court Decision on 401(k) Fees Warrants a New Rationale
Excerpt: "In its 2009 decision in Hecker v. Deere & Co., the 7th Circuit U.S. Court of Appeals reaffirmed the lower court's dismissal of the plaintiff's complaint and ruled that 401(k) fiduciaries are not in breach of their responsibilities if they include funds with excessive fees in the investment menu and that fiduciaries are not bound to explain to participants the elements of those fees, specifically 'revenue-sharing.' This decision concerns many adherents of fiduciary best practices, and others have already drawn attention to its many flaws. However, now that the 8th Circuit U.S. Court of Appeals has remanded similar issues for re-hearing by the lower court in 2009's Braden v. Wal-Mart, a further look at the Deere decision is warranted."
(Employee Benefit News; free registration required)

[Guidance Overview]
HIRE Payroll Tax Exemption Guidance
Excerpt: "The IRS issued a set of Frequently Asked Questions and a new Form W-11 to enable employers to implement the OASDI tax holiday they are now provided for hiring a qualified individual under the Hiring Incentives to Restore Employment (HIRE) Act (P.L. 111-147)."
(Deloitte via

Pension Funding Relief Delay May Harm Private Plans
Excerpt: "Many private pension plans are nervously awaiting Congressional action to give them more breathing room to adequately fund their plans. The Senate passed a relief version; the House has not. A House measure, however, may include provisions forcing employers to submit to increased government oversight of their compensation and some other financial practices. The Senate-passed bill did not include such measures and the odds of their being approved in that chamber are minuscule."
(U.S. News & World Report)

DOL's Website of Form 5500 and Other Enforcement Data
Excerpt: "EBIA Comment: The website produces EBSA reports that can be downloaded into a spreadsheet with headings for plan name, plan administrator, state and zip code, plan EIN, plan number and year, case type (deficient, late, or non-filer), closing reason (e.g., closed after correspondence or closed after referral to administrative law judge), closing date, and penalty amount."
(Employee Benefits Institute of America)

Target-Date Fund Investing: Shattering the Myths (PDF)
Excerpt: "Given the role of target-date strategies as a building block in retirement investing, the attention focused on the funds is unsurprising. In this paper, we offer our views on some of the top issues being debated about TDFs. We address some common critiques of TDFs that arose from the market downturn as four myths, and contrast those myths with reality."
(The Vanguard Group, Inc.)

Distributional Effects of Raising the Social Security Payroll Tax (PDF)
6 pages. Excerpt: "This policy brief analyzes the lifetime tax effects of two options for addressing the Social Security system's long-range solvency by raising the Social Security payroll tax rate."
(U.S. Social Security Administration)

Is GM's Pension a Ticking Time Bomb for Taxpayers?
Excerpt: "Here are the chief questions raised by the potential pension crisis: Could taxpayers really be on the hook for UAW pensions? Yes. GM could face a funding crisis in 2013 or 2014 when, under the current projections, the automaker will be required to make more than $12 billion in contributions to its pension funds to keep them solvent, according to the GAO analysis."
(Time Inc.)

Reinstatement of 401(k) Plan Matches Will Be Slow
Excerpt: "Although survey results are mixed, many employers that cut back on 401(k) matches indicate they plan to resume them this year. But those reductions may have had unintended consequences on employee retirement savings in which the workers reduced their own deferrals. Regardless of whether a company resumes its plan match, HR leaders can still take steps to encourage employees to plan better for retirement."
(Human Resource Executive Online)

SEC Charges Quadrangle for Alleged Kickback Scheme Involving NY Pension Fund
Excerpt: "The Securities and Exchange Commission has charged Quadrangle Group LLC and one of its affiliated entities for participating in a widespread kickback scheme to obtain investments from New York's largest pension fund. The SEC alleges that Quadrangle Group LLC and Quadrangle GP Investors II, L.P. secured a $100 million investment from the New York State Common Retirement Fund, but only after a then-executive at Quadrangle arranged for an affiliate to distribute the DVD of a low-budget film that former New York State Deputy Comptroller David Loglisci and his brothers had produced, according to a press release."

Employees Identify Potential Retirement Plan Offering Improvements
Excerpt: "A survey from ING U.S. Retirement Services shows that those in a workplace plan are more confident, informed, and proactive when it comes to their savings. More than eight out of ten respondents (84%) who had a workplace plan said they take an active role in managing their retirement savings and investments, compared to only about half (53%) without any type of retirement savings vehicle."

New York State Attorney General Settles Five Pension Probes
Excerpt: "New York state Attorney General Andrew Cuomo announced Thursday that his office has reached settlement agreements with two investment firms and three unlicensed brokers as part of Cuomo's ongoing public pension fund probe. According to a Cuomo news release, Quadrangle Group LLC will pay $7 million; GKM Newport Generation Capital Services, LLC (GKM) will pay the equivalent of $1.6 million; political consulting firm Global Strategy Group (Global), Jon Silvan, CEO, will pay $2 million; California lobbying firm Platinum Advisors (Platinum) will pay $500,000; and unlicensed placement agent Kevin McCabe will pay $715,000. Along with the nearly $12 million that will be repaid to New York State, the parties will comply with the Attorney General's Public Pension Fund Reform Code of Conduct."

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Executive Compensation; Benefits in General

How to Nudge Workers Toward Desired Path in Health Care and Lifestyle Choices and Retirement Savings
Excerpt: "Some innovative employers have found that 'behavioral economics,' a longstanding consumer marketing strategy, can be used in managing and communicating benefits to 'nudge' employees to save for retirement, be better health care consumers and adopt healthier lifestyles."
(Business Insurance)

Recent Developments in Employee Benefits and Executive Compensation, April 2010
The newsletter describes recent developments on DOL's Proposal for Rules Effecting 401(k) Plan Investment Advice, Deadline to Adopt Restated Retirement Plan Documents, DOL's Final Regulations Governing Requirement that Multiemployer Pension Plans Furnish Information Upon Request, and the New Self-Reporting Requirements and Taxes for Failure to Satisfy COBRA and Other Federal Group Health Plan Mandates.
(Blank Rome LLP)

Broadening Your Employee Benefits Portfolio with Elective Benefits (PDF)
5 pages. Excerpt: "Employers are taking a fresh look at incorporating elective benefits strategies as an option when core benefits are being reduced in the current economic climate. This is leading to an array of new elective benefit programs. Today's landscape includes offerings to fill gaps in health care coverage linked directly to an employer's plan, or new features that encourage healthy lifestyles. Employers are likely to incorporate these plans since the value of the benefit has increased and the need for choice is more evident."
(Aon Consulting)

Employee Benefits Still Top Cost Concern for CFOs
Excerpt: "A national survey of U.S. CFOs and senior comptrollers conducted by Grant Thornton LLP found their number one cost concern (still) is the cost of employee benefits. In terms of pricing pressure, 68% are most concerned about the price of employee benefits. Six months ago, 77% of CFOs surveyed cited this as their number one concern . . . ."

Webcasts and Conferences

Form 5500 Software - A Review and Update
Nationwide on April 20, 2010
presented by

Form 5500 Software - A Review and Update
Nationwide on April 28, 2010
presented by

Form 5500 Software - A Review and Update
Nationwide on May 13, 2010
presented by

Tax Aspects of Health Care Reform: What You Need to Know Now About the Patient Protection Act Webcast
Nationwide on April 23, 2010
presented by CCH, a Wolters Kluwer business

Press Releases

Statement of Assistant Secretary Phyllis C. Borzi on Extension of COBRA Subsidy Eligibility to May 31, 2010
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

The No-Brainer Benefit
Accor Services North America

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