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Retirement Plans Newsletter

May 7, 2010

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DB Administration, Discrimination Testing and Proposal software with Multiple Plan and Cash Balance Plan handling. PPAí06 Pension Funding.
* Funding Target and Target Normal Cost with 3-rate segments
* 404(o) Cushion; 430 minimum and 404(o) maximum contributions
* Funding Target Attainment Percentages (FTAPs)
Schedule SB reports and links to our 5500/PBGC System, and our FAS 158 and Termination Calculation reporting systems. or call 1-888-328-2474

[Official Guidance]
Investor Bulletin from EBSA and SEC on Target Date Retirement Funds (PDF)
Excerpt: "In summary, before investing in a target date fund: Consider your investment style. . . . Look at the fund's prospectus to see where the fund will invest your money. . . . Understand how the investments will change over time. . . . Take into account when you will access the money in the fund."
(U.S. Employee Benefits Security Administration)

[Guidance Overview]
Filing an Amended or Late Return under EFAST2
Excerpt: "What filing options are available to file an amended or late Form 5500 for a pre-2008 plan year? There is only one option available for plan years beginning before January 1, 2008. The plan administrator must file any amended or late filed return electronically under EFAST2."
(SunGard Relius)

[Guidance Overview]
Court Gives Baxter International 404(c) Protection in Stock-Drop Suit
Excerpt: "U.S. District Judge Joan B. Gottschall . . . ruled that Baxter did not violate its Employee Retirement Income Security Act (ERISA) fiduciary duties by keeping company stock in the plan as its share price dropped over word the company was unable to meet its expected earnings goals. Gottschall found that Baxter qualified for 404(c) safe harbor protection because the plan met the requirements set out in that ERISA section, including . . . ."

PBGC Holds Firm on Rejection of 2009 Premium Filings
Excerpt: "Responding to concerns raised by the American Benefits Council, PBGC Acting Director Vincent Snowbarger asserted the filing instructions were clear and 'it is appropriate to enforce these requirements, particularly when they are challenged only after-the-fact.' While PBGC may waive some penalties, affected plans could still owe higher premiums, so ABC and others continue to press for relief."
(Mercer LLC)

DOL to Address Target-Date Funds with Compliance Checklist and Enhanced Disclosures
Excerpt: "The Department of Labor (DOL) plans to publish a compliance checklist this spring to assist sponsors of 401(k)-type plans in evaluating and selecting target-date funds (TDFs) as investment options, according to a fact sheet issued with the agency's semiannual regulatory agenda."
(Mercer LLC)

The Savings Sweepstakes: Inspiring More Low and Middle-Income Americans to Save
Excerpt: "A lottery? At a credit union? Bingo! No, this wasn't some maverick banker's update on 1950s toaster giveaways. It's part of a grassroots campaign based on the research of Peter Tufano of the Harvard Business School and a Boston-based nonprofit he chairs, the Doorways to Dreams Fund (D2D)."
(Retirement Income Journal)

PBGC Semiannual Regulatory Agenda Addresses Cash Balance Plans, Missing Participant Program
Excerpt: "The items slated for Long-Term Actions include the following: Assessment of and relief from information penalties. A proposed rule to amend PBGC's regulation on Payment of Premiums (29 CFR part 4007). A proposed amendment to the PBGC's benefit valuation and asset allocation regulations."
(Wolters Kluwer)

No Safe Harbor in Fiduciary Breach Case, According to DOL
Excerpt: "Secretary of Labor Hilda L. Solis has warned a federal appellate court that protections for plan participants could be harmed if it does not overturn a lower court ruling giving a directed trustee safe harbor protection against wrongdoing allegations."

FBAR Filing Relief Sought for Benefit Plans' Foreign Financial Accounts
Excerpt: "US benefit trusts should be exempted from foreign bank account reporting (FBAR) rules because of the extensive oversight by other regulators, the ERISA Industry Committee asserts in comments . . . . If no exemption is granted, the trade group seeks clearer rules about which parties associated with a trust must file and urges FinCEN to avoid duplication by requiring just one report for each foreign account."
(Mercer LLC)

Retirement Annuity and Employment-Based Pension Income, Among Individuals Age 50 and Over for 2008 (PDF)
Pages 12-18 of 20 pages. Excerpt: "The likelihood of receiving an annuity and/or pension income increases with age, until the oldest age group (those age 80 and over), where data show a lower percentage receiving annuity and/or pension income . . . . However, since 1975, the percentage of individuals age 80 and over receiving annuity and/or pension income has been increasing, from 17.7 percent in 1975 to 37.3 percent in 2008."
(Employee Benefit Research Institute)

Total Individual Account Retirement Plan Assets, by Demographics, 2007, With Market Adjustments to March 2010 (PDF)
Pages 2-11 of 20 pages. Excerpt: "This article examines the distribution of total assets held in individual account retirement plans (401(k)-type plans, IRAs, and Keogh plans) across various demographic characteristics of American families, based on the latest data from the Federal Reserve's Survey of Consumer Finances."
(Employee Benefit Research Institute)

401(k) Accounts Are Not Retirement Plans
22 pages. Excerpt: "The failure of 401(k) accounts as a primary retirement vehicle can be attributed to three fundamental and incontestable shortcomings. 1. When saving for retirement becomes optional, the average American grossly under-saves or simply opts out altogether. 2. Defined contribution accounts compel average Americans, who are untrained and inexperienced in managing stocks, to become expert portfolio managers. 3. The 401(k) structure in its current form encourages financial failure."
(Florida Public Pension Trustee s Association)

401k Critics Just Don't Get It
Excerpt: "Instead of celebrating the fact that 401(k) participants have successfully survived the recent financial turmoil, the April 30th ['USA Today'] 401(k) article and others like it and academic studies everywhere continue to portray darkly our most successful wealth accumulation program for America's middle class."
(David Wray via Profit Sharing / 401k Council of America)

Pension Rights Center Comments on Proposed Rule on Investment Advice (PDF)
4 pages. Excerpt: "The Pension Rights Center continues to believe that the 2006 legislation authorizing conflicted investment advice was an error. The legislation was based, in part, on the dubious assumption that conflicted investment advice (provided by the vendors of investment products to plan participants) is either free or at least far less expensive than independent investment advice. Under this view, it was more likely that participants would have access to investment advice than if it had to come from independent parties."
(Pension Rights Center)

Towers Watson Response to Request for Information Regarding Lifetime Income Options for Participants and Beneficiaries in Retirement Plans (PDF)
7 pages. Excerpt: "Rather than mandating that plan sponsors disclose the income stream that can be provided from an account balance, Towers Watson supports testing these disclosures in a proof-of-concept experiment. The DOL and Treasury could seek a number of plan sponsors to serve as volunteers. Volunteers would test different assumption sets and methods, as well as different forms of presenting the information (possibly including replacement ratios and various draw-down solutions in addition to life annuities), and would receive protection from liability for their participation."
(Towers Watson)

ASPPA Comments on Extension of IRS Determination Letter Program for Pre-approved Defined Contribution Plans
4 pages. Excerpt: "ASPPA recommends that the IRS continue to allow plans to apply for determination letters using Form 5307 beyond April 30, 2010, in the circumstances described herein. This is not a request to extend the time to restate pre-approved defined contribution plans to comply with EGTRRA."
(American Society of Pension Professionals & Actuaries)

California's Pension Predicament
Excerpt: "In California, . . . the state constitution's explicit pension protections and some ensuing court cases have been interpreted by many to protect the rights of public employees to an entitlement to receive the same benefits their entire lifetime. With that legal precedent, it becomes virtually impossible to reduce incumbents' benefits prospectively or to change the retirement ages for incumbent employees."

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 now!

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Official Guidance]
IRS Publishes Interim Report on Colleges and Universities Compliance Project; Useful Compensation Data (PDF)
79 pages. Part VI of the report contains charts showing the distribution of specific types of benefits provided to one or more of the organization's 6 highest-paid officers, directors, trustees or key employees, including life, disability, long-term care contributions; split-dollar life insurance; loans/credit extension (forgiveness of debt/interest); severance or change of control payments; personal use of organization vehicles; and expense reimbursement (non-accountable plan). Also shows participation in specific types of deferred compensation plans, and describes general compensation policies.
(Internal Revenue Service)

Bill to Expand Federal Workers' Telecommuting Options Falls Short in House
Excerpt: "Legislation that would give federal workers the option to work from home ran into a significant roadblock Thursday, failing to get the two-thirds majority in the House that would have expanded telework options across the government."
(The Washington Post; free registration required)

Department of Labor Regulatory Agenda Reflects Emphasis on Disclosure
Excerpt: "The Department of Labor's Spring 2010 Regulatory Agenda identifies three new proposed regulations that are being formulated: Improved Fee Disclosure for Welfare Plans, QDIA Target Date Disclosure, and Amendments to the Claims Procedure Regulation."
(Deloitte via

New NCEO Issue Brief on ESOP Distribution Policies
Until 2010, the IRS reviewed ESOP plan documents simply to assure that the maximum payout terms were specified. Now, however, the IRS wants to see the actual distribution policy, whether in the plan or as a separate document. This issue brief provides sample language and detailed commentary to help you create such a policy. (National Center for Employee Ownership

ERISA's Exhaustion of Administrative Remedies Requirement: An Effective Tool to Defeating Class Certification (PDF)
Pages 11-14 of 17 pages. Excerpt: "In reaching its conclusions, the Eighth Circuit made no distinction between the application of exhaustion requirements in individual and class claims. Insofar as class claims are predicated on an alleged systemic violation by the plan, one might question the need for developing an administrative record regarding the particular facts and circumstances of the named plaintiff's claim. Nevertheless, the Chorosevic decision confirms that, absent exhaustion of at least the named plaintiff's claim, there is no basis for proceeding with individual or class claims."
(Proskauer Rose LLP)

The Latest Uncertainty in Benefit Claim Litigation - The Proper Scope of Conflict Discovery After Glenn (PDF)
Pages 7-10 of 17 pages. Excerpt: "Proskauer's Perspective: We would not quibble with the notion that some limited discovery into conflict considerations may be warranted in some circumstances after Glenn. But we are concerned with how far some courts have gone. They seem to have forgotten that individual benefit claims are, in many respects, like administrative review proceedings and that, to treat them like full-blown federal court litigation for discovery purposes undercuts ERISA's goal of resolving such claims inexpensively and expeditiously."
(Proskauer Rose LLP)

Supreme Court Rules That 'Single Honest Mistake' Does Not Justify Stripping Administrator of Judicial Deference
Excerpt: "The ruling in Frommert hopefully will encourage the creation of ERISA plans by eliminating at least one deterrent: the specter of courts having the final say regarding how a plan should be administered and how benefits thereunder should be paid. We also hope that the decision will achieve the other results intended by the Court: reducing the complexity and costs of ERISA litigation, and protecting the statute's underlying principles of uniformity, predictability, and efficiency."
(Proskauer Rose LLP)

Webcasts and Conferences

DOL Update and COBRA Premium Subsidy Requirements: What Every Employer Should Know
in Massachusetts on May 19, 2010
presented by WEB Worldwide Employee Benefits Network MA Chapter

Helping Your Age 50+ Employees Retire Successfully
Nationwide on May 20, 2010
presented by TRI-AD

Teleconference: The New Form 5500 Schedule C Reporting Requirements - What Investment Fund Managers and Plan Service Providers Need to Know
Nationwide on May 12, 2010
presented by New York City Bar Association - Employee Benefits and Executive Compensation Committee

Press Releases

U.S. Labor Department and SEC Issue Guidance on Target Date Funds
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

ASPPA Urges House to Oppose Doggett Proposal
American Society of Pension Professionals & Actuaries (ASPPA)

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