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Retirement Plans Newsletter

May 19, 2010

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Comprehensive and concise training is crucial to efficient use of time. If you are adding staff or if your current staff needs a refresher, SunGard’s 3-day Fundamentals seminar provides the best of both worlds: a firm grounding in the general rules for defined contribution plans, plus an introduction to the special 401(k) rules. Get no-nonsense answers to basic retirement plan questions that practitioners regularly face, and be prepared for 2010 and beyond. For more information, read more about our solutions or call 1-800-326-7235, ext. 1100.
Sponsored by SunGard

[Official Guidance]
Text of Spring 2010 Edition of IRS 'Retirement News for Employers' (PDF)
14 pages. Excerpt: "The edition contains the following articles: . . . Upcoming 5500 Filing Deadline . . . Fixing Common Plan Mistakes: Improper Forfeiture Suspense Accounts . . . IRS Employee Plans Videos -- Helping Small Business Owners and Employees . . . New Profit Sharing Publication . . . Who Can Represent a Plan Sponsor During an Employee Plans Examination? . . . IRS Summer Phone Forums . . . Employee Plans Published Guidance . . . ."
(Internal Revenue Service)

[Official Guidance]
Text of Final IRS Regs on Diversification Requirements for DC Plans Holding Publicly Traded Employer Securities (PDF)
8 pages. Excerpt: "The final regulations are effective and applicable for plan years beginning on or after January 1, 2011. For the period after the statutory effective date and before the regulatory effective date set forth in the preceding sentence, a plan must comply with section 401(a)(35). During this period, a plan is permitted to rely on Notice 2006-107, the proposed regulations, or these final regulations for purposes of satisfying the requirements of section 401(a)(35)."
(Internal Revenue Service)

[Guidance Overview]
401(k) Fee Litigation as of May 2010
The target page has links to the 37-page outline and the 51-page chart.
(Groom Law Group)

[Guidance Overview]
Prenuptial Agreements and Waiver of Retirement Rights
Excerpt: "In Strong v. Dubin, 2010 N.Y. Slip. Op. 04121 (1st Dept. 2010), the Appellate Division, First Department, overturned the prior case law, including its own decisions, and held that a waiver of retirement rights included in a prenuptial agreement is valid and does not violate ERISA."
(Rochester Family Lawyer)

CalPERS Demands $600 Million More from California Amid Deficit
Excerpt: "The increase is needed, CalPERS managers have said, after a 24 percent drop in the fund's value in the past fiscal year. To help close the budget gap, Governor Arnold Schwarzenegger has proposed ending welfare programs and most day-care subsidies. He has said pension raises in 1999 by Democrats cost too much and has demanded lawmakers retract them."
(Bloomberg L.P.)

Do 401(k) Plans Need to Offer More Bond Funds?
Excerpt: "In his recently published paper Deficits, the Fed, and rising interest rates: Implications and considerations for bond investors, Davis indicated that having a bond allocation that reflects the overall fixed income market is crucial to reducing volatility in portfolios. 'A key lesson of the global financial crisis has been that implementing too narrow or surgical a bond allocation . . . involves important trade-offs that may expose investors to unintended yield curve or credit risk while potentially depriving them of a higher or less volatile future income stream,' . . . ."
(The Vanguard Group, Inc.)

403(b)s Embracing 401(k) Standards
Excerpt: "Principal Financial Group sponsored Chicago-based Profit Sharing/401(k) Council of America's (PSCA) recently released survey of the 403(b) world. The '2010 403(b) Plan Survey' showed that 57% of plan sponsors made changes to their 403(b) plans because of new regulations. That is a higher percentage than the 41% that said they planned to make changes when the same survey was conducted in 2008."
(Investment Advisor)

Financial Experts Remain Concerned About DOL's Proposed Investment Advice Rules for Retirement Plans
Excerpt: "In particular, many are troubled by the provisions that relate to providing online financial advice to employees. 'We are concerned that EBSA's statements in connection with computer-based advice models will have unintended negative spillover consequences for retirement-investment fiduciaries, plan sponsors and participants,' writes Larry H. Goldbrum, general counsel of the Society of Professional Asset-Managers and Record Keepers . . . ."
(Human Resource Executive Online)

Three Critical Fiduciary Duties Every ERISA Plan Sponsor Must Know
Excerpt: "[T]he following three trustee duties especially apply to ERISA fiduciaries: Duty of Loyalty - The fiduciary must not engage in acts of self-dealing. This is perhaps the most fundamental duty. Duty to Keep Property Separate and Maintain Adequate Records - Client property must be segregated from the property of the fiduciary and adequate records must be kept. Duty of Prudent Investment - The fiduciary who manages investments has a duty to comply with the prudent investor rule unless otherwise agreed to with the client."
(Fiduciary News)

IRS Issues Final Regs on Diversification Requirements for Company Stock
Excerpt: "The IRS said a plan does not fail to meet the requirements if it allows individuals to divest employer securities and reinvest the proceeds at periodic, reasonable opportunities occurring no less frequently than quarterly. A plan is not permitted to impose restrictions or conditions with respect to the investment of employer securities that are not imposed on the investment of other assets of the plan, other than restrictions or conditions imposed to comply with securities laws."
(PLANSPONSOR.com)

IRS Releases Revised Payroll Tax Form for Eligible Employers to Use to Claim Special Payroll Tax Exemption
Excerpt: "[Form] 941, Employer's QUARTERLY Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, will be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return. The form and instructions are now available for download on IRS.gov."
(PLANSPONSOR.com)

The Boomer's Guide to Getting the Most Out of Social Security
Excerpt: "As tens of millions of Boomers enter those years in which we qualify for Social Security, it becomes increasingly important to understand how the program works, if for no other reason than to determine when you should apply in order to receive the greatest financial benefit."
(ConsumerAffairs.com Inc.)

Market Wreckage May Give Insurers Entree to 401(k)s
Excerpt: "Workers are more attracted to options that guarantee retirement income after the stock market roller coaster of the past few years, said Christine Benz, director of personal finance for mutual fund researcher Morningstar Inc. 'We see it across the investment universe - investors forsaking growth for stability and that sure thing,' she said. 'I think it's a pretty easy sell for financial services providers right now.'"
(Business First of Columbus via bizjournals.com; free registration required)

San Francisco Ballot Measure on Pension Changes Key to Budget Deficit
Excerpt: "City voters next month will be asked to change pension rules by shifting more of the funding burden onto city workers and away from the government treasury to save taxpayers between $300 million and $500 million cumulatively over the next 25 years, according to an analysis by the city controller. 'Pension cost increases are one of the prime drivers of the city's budget deficit,' . . . ."
(San Francisco Chronicle)

Ex-Business Owner to Repay Pension Plan
Excerpt: "The U.S. Department of Labor obtained a default judgement against Buffalo attorney Thomas Barnes, indicted last year by a federal grand jury on charges that he embezzled $69,000 from the 401K plan of now-defunct Franbuilt Inc. of Lockport."
(Business First of Buffalo via bizjournals.com; free registration required)

Federal Court Turns Down Kraft Foods' Court Costs Request in 401(k) Lawsuit
Excerpt: "U.S. Magistrate Judge Sidney I. Schenkier of the U.S. District Court for the Northern District of Illinois issued the ruling after Kraft asked for the money to cover court reporter and copying charges."
(PLANSPONSOR.com)

Minnesota Governor Signs Public Pension Overhaul
Excerpt: "The overhaul calls for higher contributions from government employees and cities, counties and the state and suspends or trims benefit increases for retirees. It is projected to save $2.1 billion in pension obligations over five years."
(Star Tribune)

Feds Get an Earful on 401(k) Proposal to Add an Annuity Option to the Retirement Plans
Excerpt: "The departments of Labor and Treasury requested input on the annuity issue as they pondered solutions to a serious problem that plagues current savings plans -- retirees running out of money. The government expected the usual responses from insurance and investment industry groups, but not hundreds of letters and e-mail from workers and retirees."
(msnbc.com)

[Opinion]
American Benefits Council Letter to House Regarding Pension Funding Relief (PDF)
2 pages. Excerpt: "We need your help to get funding relief enacted into law. It is critical that funding relief not be weighed down by controversial and unrelated issues that make it difficult to pass the legislation or that disproportionately increase burdens on employer sponsors of retirement plans. In addition, it is vital that funding relief be passed without onerous conditions or requirements that must be met as a condition of taking the relief."
(American Benefits Council)

[Opinion]
Reduce Target Date Risk Much Earlier, Says Research Firm
Excerpt: "[The Financial Research Corp.] suggested that target-date fund providers concentrate on reducing risk as the fund's maturity date nears by controlling price volatility and raising allocation to fixed income investments. The study revealed that many funds have been attempting to address inflation with Treasury inflation-protected securities and commodities exposure via exchange-traded funds or investments in commodity-linked companies."
(Investment News; free registration required)

[Opinion]
Why Public Pensions Will Not Be Able to Meet Future Obligations
Excerpt: "While some dispute this claim, public pensions will be hard pressed to meet future obligations to retirees. One key reason is that these funds assume a rate of return on their invested funds that is too high. In addition to that, the people who run the funds are beholden to politicians who don't want to face the fact they will either have to cut on spending to other constituents to meet pension obligations or - worse - to raise taxes."
(news.stanford.edu via Gerson Lehrman Group)

[Opinion]
The Federal Thrift Savings Plan: The Model for All 401(k) Plans
Excerpt: "I agree with Walter Updegrave of Money Magazine that this is the retirement plan that Uncle Sam has right. It is the simplicity of this plan that makes it particularly effective, because studies show the more choices that are offered, the less likely people are to choose. And the diversification of this plan protects investors from chasing the part of the stock market that has recently gone up."
(CBS Interactive Inc.)




ASPPA co-sponsors several regional conferences with the IRS to provide you opportunities to discuss employee benefits issues with colleagues, local, regional and national government representatives from IRS and the US Department of Labor, and private sector experts. The programs focus on exchanging information and educating attendees about current regulatory, legislative, administrative and actuarial topics.

Find out when we’re coming to your town here.

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Guidance Overview]
A Quick Review of Plan Amendments Required in 2010 (PDF)
Excerpt: "As we approach the midway point of 2010, plan sponsors should be aware of amendments that may be required to be made by the end of the year under the Pension Protection Act of 2006 (PPA), the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act), the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), and the Patient Protection and Affordable Care Act (PPACA)."
(Sutherland Asbill & Brennan LLP)

Work-Life Benefits Now Integral to Total Rewards Package
Excerpt: "The majority (59%) of respondents to the State of Total Rewards Integration survey include work-life (flexible work schedules, extra vacation and sabbaticals) in addition to compensation (base salary, incentives and guaranteed payments) and benefits (retirement and medical) in their definition of Total Rewards."
(PLANSPONSOR.com)

[Opinion]
A Response to 'It's Time to Deep-Six SERPs'
Excerpt: "I happen to think that a properly designed SERP at an employer with a qualified defined benefit pension plan still serves a valid purpose . . . . However, many corporation have eliminated, or are considering eliminating, their SERP plans. Among the other reasons are the appearance in the Proxy Statement and financial statements, the complexities of Section 409A, the financial cost, and the public/media perception of SERPs."
(Michael Melbinger via Winston & Strawn LLP)


Webcasts and Conferences

Properly Governing a Dynamic LDI Strategy
in Connecticut on May 21, 2010
presented by Investment Governance, Inc.

Cross-Testing and 401(a)(4): The Who, What and Why of Allocation by Individual Classification
Nationwide on July 27, 2010
presented by Qualified Pension Consulting, Inc.

Cross-Testing and 401(a)(4): The Who, What and Why of Allocation by Individual Classification
Nationwide on July 30, 2010
presented by Qualified Pension Consulting, Inc.

ESOP Update Phone Forum - Free
Nationwide on June 24, 2010
presented by Internal Revenue Service (IRS)

Ethics for Retirement Plan Professionals
Nationwide on August 17, 2010
presented by Qualified Pension Consulting, Inc.

Ethics for Retirement Plan Professionals
Nationwide on August 20, 2010
presented by Qualified Pension Consulting, Inc.

Form 2848 vs. Form 8821 Retirement Plans Phone Forum - Free
Nationwide on June 1, 2010
presented by Internal Revenue Service (IRS)

From GUST to EGTRRA: A Redline Comparison of a 401(k) Basic Plan Document
Nationwide on June 29, 2010
presented by Qualified Pension Consulting, Inc.

From GUST to EGTRRA: A Redline Comparison of a 401(k) Basic Plan Document
Nationwide on July 2, 2010
presented by Qualified Pension Consulting, Inc.

Healthcare Reform Legislation – Insurance Market Reforms Audiocast
Nationwide on May 19, 2010
presented by Conference of Consulting Actuaries

Healthcare Reform Legislation – Other Perspectives
Nationwide on June 2, 2010
presented by Conference of Consulting Actuaries

HEART Act Amendments In-Depth and Due by December 31, 2010
Nationwide on August 24, 2010
presented by Qualified Pension Consulting, Inc.

HEART Act Amendments In-Depth and Due by December 31, 2010
Nationwide on August 27, 2010
presented by Qualified Pension Consulting, Inc.

How Much is Enough – Meeting the Meaningful Benefits Requirement of Treas. Reg. 1.401(a)(26)-3
Nationwide on September 14, 2010
presented by Qualified Pension Consulting, Inc.

How Much is Enough – Meeting the Meaningful Benefits Requirement of Treas. Reg. 1.401(a)(26)-3
Nationwide on September 17, 2010
presented by Qualified Pension Consulting, Inc.

Michelle, GINA, CHIPRA and MHPAEA – How These Four Acts Recently Amended Cafeteria Plans
Nationwide on June 1, 2010
presented by Qualified Pension Consulting, Inc.

Michelle, GINA, CHIPRA and MHPAEA – How These Four Acts Recently Amended Cafeteria Plans
Nationwide on June 4, 2010
presented by Qualified Pension Consulting, Inc.

Professionalism for Retirement Plan Professionals
Nationwide on August 17, 2010
presented by Qualified Pension Consulting, Inc.

Professionalism for Retirement Plan Professionals
Nationwide on August 20, 2010
presented by Qualified Pension Consulting, Inc.

Standardized or Non-Standardized – What to Think About When Choosing a Prototype
Nationwide on August 10, 2010
presented by Qualified Pension Consulting, Inc.

Standardized or Non-Standardized – What to Think About When Choosing a Prototype
Nationwide on August 13, 2010
presented by Qualified Pension Consulting, Inc.

The Basics of Vesting and Partial Terminations
Nationwide on September 28, 2010
presented by Qualified Pension Consulting, Inc.

The Basics of Vesting and Partial Terminations
Nationwide on October 1, 2010
presented by Qualified Pension Consulting, Inc.

They’re Back – the Re-Proposed Regs on Participant Investment Direction and Plan Fees
Nationwide on July 13, 2010
presented by Qualified Pension Consulting, Inc.

They’re Back – the Re-Proposed Regs on Participant Investment Direction and Plan Fees
Nationwide on July 16, 2010
presented by Qualified Pension Consulting, Inc.


Press Releases


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