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Retirement Plans Newsletter

May 25, 2010

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[Official Guidance]
Text of the IRS Employee Plans FY 2010 Work Plan (PDF)
Excerpt: "The FY 2010 EP Work Plan includes seven operating priorities which address EP's mission in FY 2010 of protecting retirement plan assets and the benefits of plan participants. The integral focus of the EP Work Plan is to foster and promote plan sponsors compliance with the applicable Internal Revenue Code provisions. While the Determination, Voluntary Compliance and Technical Activities programs are designed to assist plan sponsors compliance with the Internal Revenue Code (IRC), EP Examinations and the EP Compliance Units ensure compliance through their enforcement actions."
(U.S. Internal Revenue Service)

[Official Guidance]
Disaster Relief Announcement 10-05 Relating to PBGC Deadlines in Response to Severe Storms and Flooding in Mississippi
Excerpt: "Pension Benefit Guaranty Corporation ('PBGC') is waiving certain penalties and extending certain deadlines in response to the severe storms and flooding that occurred beginning April 23, 2010, in Mississippi."
(Pension Benefit Guaranty Corporation)

[Official Guidance]
Disaster Relief Announcement 10-06 Relating to PBGC Deadlines in Response to Severe Storms, Tornadoes, Straight-Line Winds and Flooding in Alabama
Excerpt: "Pension Benefit Guaranty Corporation ('PBGC') is waiving certain penalties and extending certain deadlines in response to the severe storms, tornadoes, straight-line winds and flooding that occurred beginning April 24, 2010, in Alabama."
(Pension Benefit Guaranty Corporation)

[Official Guidance]
Disaster Relief Announcement 10-07 Relating to PBGC Deadlines in Response to Severe Storms, Flooding, Straight-Line Winds and Tornadoes in Tennessee
Excerpt: "Pension Benefit Guaranty Corporation ('PBGC') is waiving certain penalties and extending certain deadlines in response to the severe storms, flooding, straight-line winds and tornadoes that occurred beginning April 30, 2010, in Tennessee."
(Pension Benefit Guaranty Corporation)

[Official Guidance]
Disaster Relief Announcement 10-08 Relating to PBGC Deadlines in Response to Severe Storms, Flooding, Mudslides and Tornadoes in Kentucky
Excerpt: "Pension Benefit Guaranty Corporation ('PBGC') is waiving certain penalties and extending certain deadlines in response to the severe storms, flooding, mudslides and tornadoes that occurred beginning May 1, 2010, in Kentucky."
(Pension Benefit Guaranty Corporation)

[Official Guidance]
Disaster Relief Announcement 10-09 Relating to PBGC Deadlines in Response to Severe Storms, Flooding and Tornadoes in Mississippi
Excerpt: "Pension Benefit Guaranty Corporation ('PBGC') is waiving certain penalties and extending certain deadlines in response to the severe storms, flooding and tornadoes that occurred beginning May 1, 2010, in Mississippi."
(Pension Benefit Guaranty Corporation)

[Guidance Overview]
IRS Final Regulations on Diversification Requirements for Publicly Traded Employer Securities
Excerpt: "EBIA Comment: Most of the changes made by the final regulations were in response to comments on the proposed rule. In addition to the changes discussed, the final regulations contain clarifications for ESOPs and a special transition rule for leveraged ESOPs. The preamble to the final regulations also noted that guidance will be issued for ESOPs that require amendments to comply with the diversification rule and clarified the rule on short-term trading restrictions."
(Employee Benefits Institute of America)

[Guidance Overview]
DOL's New E-Signature Option for Filing Form 5500 Electronically
Excerpt: "For plan administrators, the new e-signature option may present a tradeoff between convenience and potential privacy concerns. While some plan administrators will welcome not having to obtain electronic credentials, others may be leery of having their manual signatures displayed on the Internet."
(Employee Benefits Institute of America)

Taxpayers Could Be on the Hook for $165 Billion If Bill to Bail Out Private Union Pension Funds Makes It Through Congress
Excerpt: "The bill, which would put the Pension Benefit Guarantee Corporation behind struggling pensions for union workers, is being introduced by Senator Bob Casey, (D-Pa.), who says it will save jobs and help people."
(FOX News Network, LLC)

Disclosure of Participation in Multiemployer Pension Plans on Financial Statements
Excerpt: "The FASB board had directed the staff to begin drafting a proposed Accounting Standards Update. The staff expects to issue the proposed Update in the second quarter of 2010 and a final Update early in the fourth quarter of 2010. This will leave little time for employers to transition to the new rules when they are finalized. Therefore, an employer that participates in one or more multiemployer plans should start to gather the multiemployer plan information it may need to disclose on its 2010 year-end financial statements."
(Dorsey & Whitney LLP)

A New Social Security 'Notch' for People Born in 1947?
Excerpt: "Social Security's formula for granting COLAs, interacting with a spike in inflation during 2008, could reduce benefits for individuals born in 1947 by around 2.6 percent relative to the average benefits received by the 1930-1946 birth cohorts, costing a typical couple over $12,000 over the course of their retirement."
(Center for Retirement Research at Boston College)

Small Percentage of Private and Governmental DB Plan Participants Were in Frozen Plans in March 2009
Excerpt: "One-fifth of private industry workers and nearly four-fifths (79%) of state and local government workers participated in a defined benefit (DB) plan in March 2009, according to the U.S. Bureau of Labor Statistics (BLS). The BLS noted that, of these workers, 19% of private industry workers and 10% of the government workers were participants of frozen DB plans."
(Wolters Kluwer)

More 403(b) Plan Guidance in the Pipeline, Say IRS Officials
Excerpt: "The IRS is preparing guidance on termination of 403(b) plans and prototype 403(b) plans, Service officials said during an April 30, 2010 teleconference. The additional guidance reflects questions from plan sponsors and employers after issuance of final regulations."
(Wolters Kluwer)

Are Target-Date Funds Designed to Hit the Target? (PDF)
Excerpt: "Target date funds can be an effective investment tool when used properly. The problem is they are often offered by plan sponsors because they are approved by the DOL as a Qualified Default Investment Alternative (QDIA). Plan fiduciaries need to be aware of the various issues involved with offering all investment choices, including target date funds. A closer examination of some of the issues associated with target date funds will assist plan sponsors and fiduciaries in determining whether their 401(k) plans should offer target date funds, how they select these funds, and how they should educate their participants on these funds."
(Drinker Biddle & Reath LLP)

Steps States Are Taking to Rein in Pension Costs
Excerpt: "Cash-hungry states are taking steps to put the brake on pension costs, although legal constraints often prevent them from taking away benefits they have already granted to current workers and retirees."

Did You Know the IRS Publishes Transcripts of Many of Its Online Phone Forums for EB Practitioners?
Some of the previous phone forums include links to audio recordings and a copy of the 'handout' in addition to a transcript! Three cheers for the folks at IRS Employee Plans.
(Internal Revenue Service)

No Immediate Benefits Due in Wake of Aborted Pension Plan Termination
Excerpt: "An employer that rescinded it pension plan termination reasonably denied employees' claims for immediate annuities, a federal court in Illinois has ruled (Carter v. Pension Plan of A. Finkl & Sons). After adopting a termination amendment and soliciting payment elections, the employer realized assets might be insufficient to meet liabilities -- and thus withdrew the termination (with PBGC and IRS approval) before paying benefits."
(Mercer LLC)

Senate OKs Financial Bill with Swap Restrictions
Excerpt: "The Senate has approved legislation (S 3217) to impose fiduciary duties on swap dealers who provide advice to retirement plans or enter into swap transactions with plans. Plan sponsor groups had hoped to convince senators to modify the language, which could prevent defined contribution plans from being able to offer stable-value funds and end pension plans' ability to use swaps to hedge investment risk."
(Mercer LLC)

Increased Longevity and the Annuity Solution: How Retirement Policy Reforms Can Reduce Longevity Risk (PDF)
11 pages. Excerpt: "This paper aims to highlight the important role of annuities in retirement planning and dispel some of the myths and misconceptions surrounding annuities. The recent financial crisis, during which many have experienced drastic drops in retirement accumulations and income, has jump-started the discussion about annuities as individuals look for safer, more secure investments. Policy makers, financial advisors and employers need to build on this momentum, move the discussion along, and place annuities at the forefront of the conversation on the future of retirement in America."

Baltimore, Maryland, Officials Ponder Public Pension Cost-Saving Changes
Excerpt: "Baltimore city officials are considering a host of changes to their underfunded police and fire pension system that could save more than $93 million. A Baltimore Sun news report said actuarial data from Mercer indicated the largest chunk of potential savings - some $64.5 million - would come from replacing a variable benefit with a fixed cost-of-living increase. Retirees currently receive a benefit that increases during good market years but does not decrease during poor years."

Knowledge, Power and Retirement Planning: The Limits of Planning
Excerpt: "Retirement income advisory processes should work like market prices rather than like central planning because, once we move beyond didactic examples, central planning cannot be smart enough or large enough or coercive enough to overcome the knowledge problem in the real world. 'Too big to fail' does not apply to retirement plans. Rather than making large and speculative gambles about the future, retirement income advisory processes should 'first build a floor'; they should build 'funded floors' and such measures should be reviewed at least annually."
(Research Magazine)

Is There a Way to Teach Short-View Employees to Think and Act Long-Term?
Excerpt: "Understanding the long-term benefit of short-term sacrifice is not innate, it must be learned. . . . Fortunately, 401(k) plans are helping employers get the job done, even if they don't know it. First, employers through their 401(k) education programs are interrupting their employees' short-term focus by confronting them with retirement realities. Second, the value of short-term sacrifice is verified and reinforced for employees who choose to participate in a 401(k) plan . . . ."
(Profit Sharing / 401k Council of America)

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 July 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).

For a program listing and to register, visit today!

Sponsored by WP&BC and ASPPA

Executive Compensation; Benefits in General

Executive Pay Passes 'Stress Test' During the Recession
Excerpt: "Towers Watson's analysis of 176 Fortune 500 companies' recent proxy filings shows that, over the past two years, executive pay programs at most companies have come through a difficult 'stress test' with flying colors as pay outcomes have reflected the significant downturn in the economy, as well as the initial phases of the recovery."
(Towers Watson)

States Face Hurdles in Cutting Worker Benefits
Excerpt: "[M]any states can only cut benefits for new hires and cannot take away benefits for current workers or retirees. That is partly because all but a dozen or so states let public unions negotiate contracts, said Joseph Slater, a professor at the University of Toledo College of Law. 'Once you've negotiated a contract, you're pretty much bound by the contract,' he said."
(Reuters via The New York Times; free registration required)

U.S. Supreme Court Sets New ERISA Attorneys' Fees Standard
Excerpt: "Justice Clarence Thomas, writing for the high court in Hardt v. Reliance Standard Life Insurance Co., ruled that the person only has to achieve 'some degree of success on the merits (of the case)' and not meet the higher standard of being a 'prevailing party' to be eligible for the attorneys' fees award at the court's discretion."

Webcasts and Conferences

"Fundamentals of 401(k) and Other Qualified Plans" - Minneapolis
in Minnesota on June 23, 2010
presented by SunGard Relius

CLE Program: Ethics for Benefits Professionals
in New York on June 17, 2010
presented by WEB (Worldwide Employee Benefits Network ), New York Chapter

The ABCs of Pension Law
in California on June 3, 2010
presented by Western Pension & Benefits Conference - Orange County Chapter

Press Releases

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