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Retirement Plans Newsletter

May 21, 2010

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[Official Guidance]
Text of Special Issue of IRS 'Employee Plans News' Announcing 401(k) Questionnaire Project (PDF)
Excerpt: "Failure to respond or provide complete information will result in further action or examination of the plan."
(Internal Revenue Service)

[Guidance Overview]
Federal District Court Dismisses 401(k) Excessive Fee Litigation
Excerpt: "In dismissing the claims, the court held that the service provider defendants were not relevant ERISA fiduciaries of the plan because they did not possess relevant fiduciary authority such that they could be liable under ERISA for any alleged breaches of duty. Specifically, the court held that the service providers did not have discretionary authority with respect to administration of the plan where the plan sponsor retained sole authority to determine what investment options were offered to the plan."
(Goodwin Procter LLP)

[Guidance Overview]
Employer Not Required to Do Hardship Withdrawal Disclosure
Excerpt: "The Bank of America Corp. (BofA) was under no obligation to provide detailed disclosures about its 401(k) plan hardship withdrawals. U.S. District Judge Rebecca R. Pallmeyer of the U.S. District Court for the Northern District of Illinois said Section 102 of the Employee Retirement Income Security Act (ERISA) carries no mandate for plans to explicitly set out the conditions under which participants can take a hardship withdrawal."

Candidates for Pennsylvania Governor Give Solutions for State Pension Crisis
Excerpt: "[Five c]andidates competing for the gubernatorial nomination in today's primary election outline their plans for dealing with the pension funding crisis."
(Reading Eagle Company)

Is It Game-Over for the Fiduciary Standard This Year? Advocates Say, Maybe Not
Excerpt: "The financial reform bill passed on a 60-40 vote late in the day on May 20th. The Menendez-Akaka amendment, which would have made broker-dealers and insurance agents who provide investment advice act in the best interests of their customers, never came up for a vote. . . . What was included in the bill . . . was an amendment that calls for the [SEC] to study the all-in-one fiduciary standard issue and propose to Congress changes in the law designed to address any gaps or overlaps in the way broker-dealers and advisors are regulated, and to determine if those gaps are harmful to investors."

The Social Security Fix-It Book (PDF)
28 pages. Excerpt: "A review of the program, its financing problem, and the leading proposals for eliminating the shortfall. Everything the earnest but overburdened citizen needs to know. Cheerfully narrated and handsomely presented in 28 pages.'
(Center for Retirement Research at Boston College)

International Accounting Standards Board Proposes Substantial Changes in Disclosures for Employers Contributing to Multiemployer Plans
Excerpt: "Looking even further down the road, all U.S. employers contributing to multiemployer plans might be interested because it is possible that these changes in international accounting standards foretell future changes in U.S. standards for domestic employers."
(The Segal Group, Inc.)

1,200 Sponsors of 401(k) Plans Will Receive Compliance Questionnaires from the IRS
Excerpt: "For those fortunate employers that do not receive a questionnaire package, this is an opportunity to use the questionnaire to review their 401(k) plans and to determine their level of compliance with the issues that the IRS deems to be important. The agency invariably will issue interim and/or final reports summarizing the responses to the questionnaire, and sponsors will be able to compare those findings to their own plans."
(McGuireWoods LLP)

IRS's Final Regs on Diversification Requirements for Company Stock
Excerpt: "The IRS said the regulations will affect administrators of, employers maintaining, participants in, and beneficiaries of defined contribution plans that are invested in employer securities, and will be effective May 19, when the regulations are published in the Federal Register. The regulations apply for plan years beginning on or after January 1, 2011."

Is a $1 Trillion Bailout Ahead for State Pension Funds?
Excerpt: "[I]n a new paper, Northwestern University economist Joshua Rauh says at least seven states are heading toward crushing crises -- of the magnitude that would require U.S. bailouts in the next decade -- from one cause: state pension liabilities."
(The Wall Street Journal)

Pension Funding Relief in Compromise Bill
Excerpt: "According to a summary of the bill included in a news release issued Thursday, the funding relief provisions would allow defined benefit plans to stretch out amortization periods for investment losses for two of the years between 2008 and 2011 and over a period of either 15 years or nine years, at the plan sponsor's discretion."
(Pensions & Investments)

1,423 Minneapolis Government Retirees Ordered to Pay Back $76M
Excerpt: "Two pension funds must collect $76 million in overpayments that went to retired Minneapolis police officers, firefighters and their survivors."
(Star Tribune)

Putnam to Disclose 401(k) Fees
Excerpt: "Putnam Investments will reveal all of the fees in the defined contribution plans it manages through a new sponsor Web site that launches next month."
(Employee Benefit News; free registration required)

Padded Pensions Add to New York City Fiscal Woes
Excerpt: "Despite a pension investigation by the New York attorney general, an audit concluding that some police officers in the city broke overtime rules to increase their payouts and the mayor's statements that future pensions should be based on regular pay, not overtime, these practices persist in Yonkers."
(The New York Times; free registration required)

Americans Not Prepared for Retirement, According to Study
Excerpt: "The newly released 'MetLife Retirement Readiness Index: Are Americans Prepared for the Transition?' indicates that pre-retirees haven't taken necessary steps to prepare for retirement. The study revealed that 52% of respondents are behind in their savings goals; 25% say they are significantly behind. Only 28% are confident they are on track or have reached their goals."

Pension Rights Center Letter Expressing Strong Support for Provisions in H.R. 4213 That Require Better Disclosure of 401(k) Fees (PDF)
1 page. Excerpt: "The bill's 401(k) fee disclosure provisions also ensure that employers, who are responsible for choosing service providers and monitoring ongoing investments in the plan, get detailed information about fees so they can compare and contrast different options offered to them on an apples-to-apples basis. The bill takes important first steps toward 'unbundling' so that employers can review separate charges for record-keeping, transaction-based charges, and investment management fees."
(Pension Rights Center)

American Benefits Council Urges Support for Pension 'Swaps' Amendment to Senate Financial Services Reform Legislation (PDF)
Excerpt: "On behalf of the American Benefits Council, I would like to express support for the amendment to title VII of S. 3217, the Wall Street Transparency and Accountability Act of 2010, being offered by Senators Harkin and Casey. The Council has been extremely concerned about the requirement that a swap dealer owes a fiduciary duty to a plan solely by reason of entering into a swap with the plan."
(American Benefits Council)

Different Critters: the Suitability Standard and the Fiduciary Standard
Excerpt: "The majority of the public does not understand the two different rules under which financial advisors operate. . . . More specifically, broker dealers, insurance salespersons or any other financial company representative operate under the 'Suitability Standard,' . . . . Registered Investment Advisors (RIA) or an ERISA appointed Fiduciary must operate under the 'Fiduciary Standard,' . . . ."

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Executive Compensation; Benefits in General

Study Finds Treating Workers Well at Lowest Rung of Corporate Ladder Improves the Bottom Line
Excerpt: "A new McGill Institute for Health and Social Policy study published by the Harvard Business Review rolls up conclusive findings that, no matter the size of your business, the way you treat employees at the bottom rung of the company ladder has an impact on your bottom line."
(Wall Street Horizon)

Federal Domestic Partner Benefits Could Cost $300M+
Excerpt: "That was the bottom line of a new Congressional Budget Office (CBO) study of the issue, according to In addition to $310 million in direct costs between 2010 and 2020, CBO calculates the 2009 Domestic Partnership Benefits and Obligations Act (SB 1102) would increase benefits-related discretionary spending by $394 million over the same period."

Webcasts and Conferences

Eleventh Annual ERISA Update Seminar
in Hawaii on November 16, 2010
presented by TRI Pension Services

Electronic 5500 Reporting (EFAST) and HRA Medicare Secondary Payer Reporting for HRAs
Nationwide on June 9, 2010
presented by Employers Council on Flexible Compensation (ECFC)

Press Releases

NIPA Honors Outstanding Volunteers at 2010 Annual Forum & Expo
National Institute of Pension Administrators

ERIC Urges Solution for PBGC “Box Check” Issue
ERIC (ERISA Industry Committee)

PIABA Supports the Fiduciary Duty Amendment to Reform Bill
Public Investors Arbitration Bar Association

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