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Retirement Plans Newsletter

June 2, 2010

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[Guidance Overview]
Court Rules AT&T Justified in Pension Portability Denial
Excerpt: "A federal judge has ruled that AT&T was within its rights to refuse 'porting' rights to a worker who wanted pension credit for 16 years he worked for Paradyne Corp."

The Senator Who Wants to Save Your Retirement
Excerpt: "As chairman of the Senate's Special Committee on Aging, [Herb] Kohl has become Congress's go-to leader on retirement issues. While his better-known colleagues mud-wrestle over regulating derivatives, Kohl is quietly building bipartisan support for changes that govern how we finance our golden years. 'He wants to make sure that people who do care about retirement security are protected,' says Bob Corker of Tennessee, the ranking Republican senator on Kohl's committee."

FTC Extends Enforcement Deadline for Identity Theft Red Flags Rule
Excerpt: "At the request of several Members of Congress, the Federal Trade Commission is further delaying enforcement of the 'Red Flags' Rule through December 31, 2010, while Congress considers legislation that would affect the scope of entities covered by the Rule. Today's announcement and the release of an Enforcement Policy Statement do not affect other federal agencies' enforcement of the original November 1, 2008 deadline for institutions subject to their oversight to be in compliance."
(Federal Trade Commission)

Yale/Harvard Study Reveals Disturbing 401k Fee Paradox
Excerpt: "If the DOL requires the 401k plan fiduciary to ignore a fund's investment performance, but the SEC still requires funds to disclose that performance, which will 401k investors choose? More importantly, who's left holding the liability bag?"
(Fiduciary News)

DOL Should Not Regulate Generally Accepted Investment Theories, Employer Groups Say
Excerpt: "Rather than explicitly or implicitly endorsing a particular theory or methodology, ASPPA, the Council of Independent 401(k) Recordkeepers (CIKR) and the National Association of Independent Retirement Plan Advisors (NAIRPA) would instead like to encourage the DOL to continue to hold up a set of core fiduciary values."
(Wolters Kluwer)

Waiver Sought for IRA Funds Used for Small Business
Excerpt: "A bill introduced last month would waive the 10% penalty on early distributions from retirement plans if the funds were used for small-business investments. Called the Small Business Investment Penalty Relief Act of 2010 . . . ."
(Investment News; free registration required)

Full Committee Hearing: Building a Secure Future for Multiemployer Pension Plans
Testimony of each witness is available to download on the target page: Phyllis C. Borzi, Assistant Secretary of Labor, Employee Benefits Security Administration; Charles A. Jeszeck, Acting Director, Education, Workforce, and Income Security, U.S. Government Accountability Office; Randy DeFrehn, Executive Director, Coordinating Committee for Multiemployer Plans; John McGowan, Professor of Accounting, St. Louis University; Norman Stein, Douglas Arant Professor of Law, University of Alabama School of Law.
(U.S. Senate Committee on Health, Education, Labor and Pensions)

Mercer's Annual Retirement Benchmarking Survey Report, 2010
Excerpt: "For the first time, this report is being presented in an interactive electronic flipbook that puts the details - for all the companies in the S&P 1500 - right at your fingertips. This report provides a comprehensive review of retirement plan benchmark data from a broad range of perspectives and financial effects."
(Mercer LLC)

House Fee Disclosure Proposal Could Clash with Labor Dept.'s Own Fee-Disclosure Revisions
Excerpt: "Though the aim of the House bill may be similar to that of the DOL, the legislative language spells out exactly how providers are supposed to meet disclosure requirements. Since the final rule from the DOL hasn't been issued yet, the requirements in the legislation could be different from what the Labor Department had expected to publish . . . ."
(Investment News; free registration required)

Investment Beliefs that Matter: New Insights into the Value Drivers of Pension Funds
Excerpt: "A direct relationship between the observed investment beliefs held by pension funds and performance measures is tested using an international sample of pension funds. Investment beliefs address strategic choices in the investment philosophy and process that affect the future performance of the fund. Data from over 600 funds between 1992 and 2006 show that the debates in the pension fund industry address the relevant issues: active management, alternative and new, innovative strategies."
(Social Science Research Network)

Are State Public Pensions Sustainable? Why the Federal Government Should Worry About State Pension Liabilities
Excerpt: "This paper analyzes the flow of state pension benefit payments relative to asset levels and contributions. Assuming future state contributions fund the full present value of new benefits, many state systems will run out of money in 10-20 years if some attempt is not made to improve the funding of liabilities that have already been accrued. The expected shortfalls raise the possibility that the federal government will be faced with a decision . . . ."
(Social Science Research Network)

Obama Administration Proposing That Employees Without Access to 401(k)s Be Automatically Enrolled in an IRA
Excerpt: "Two bills on this issue are expected to be reintroduced in Congress that would require businesses that are at least two years old and have 10 or more workers to automatically enroll employees in an IRA. Employees would have a chance to opt out."
(Treasury & Risk)

Notes on Using the Hidden Asset or the Contribution Asset to Compile the Actuarial Balance for Pay-as-You-Go Pension Systems
Excerpt: "The aim of this paper is twofold: to determine the connection between the 'contribution asset' and the 'hidden asset' and to discover whether using either of them to compile the actuarial balance in Swedish-type pay-as-you-go pension systems will provide a reliable solvency indicator. We develop an overlapping generations model and apply it to the defined benefit pay-as-you-go system, although it would be just as valid for NDC systems."
(Social Science Research Network)

Models of the Actuarial Balance of the Pay-As-You-Go Pension System: A Review and Some Policy Recommendations
Excerpt: "This paper reviews the two main methods used by government Social Security departments to draw up the so-called actuarial balance of the pay-as-you-go pension system, focusing especially on results, methodology and actuarial issues. The specific models studied are those in the United States, Japan and Sweden, and their main differences and similarities are highlighted."
(Social Science Research Network)

Stable Value at Risk: It's the Unintended Consequences
Excerpt: "PSCA is asking its members to help deliver the message that the Senate provisions in sections 731(h) and 764(h) of the Senate version of HR 4173, the financial services reform package, are harmful to plan participants. We are asking specifically that they tell members of Congress that . . . ."
(Profit Sharing / 401k Council of America)

Target Date Funds Can Automate Decision-Making But The Formula Must Be Rigorous; Assets Should Be In International Index Funds, Not Junk Bonds
Excerpt: "In the same fashion that automatic enrollment and automatic escalation gets passive employees to contribute to their accounts and raise their contribution rates--albeit insufficiently--target-date funds are essentially 'automatic asset allocation shifters.'"
(Retirement Solutions LLC)

American Benefits Council's Follow Up Letter Regarding Interpretive Issue Under Notice 2009-68 Partial Rollovers (PDF)
7 pages. Excerpt: "Thank you for taking the time to meet with the American Benefits Council (Council) and other interested stakeholders to discuss the tax treatment of a partial rollover to an IRA from a plan that includes amounts attributable to after-tax employee contributions."
(American Benefits Council)

Measuring the Impact of 401(k) Fee Disclosures
Excerpt: "By one estimate, fees could plunge $700 million per year as plans bargain harder, buy services - la carte, and replace mutual funds with less-expensive institutional funds and separate accounts. Benefits officers might be swamped with employees incensed at 401(k) charges. And recordkeepers could find themselves having to frantically rewrite computer programs."

Public Officials Who Run Pension Plans Should Update Their Rule Books
Excerpt: "The apparent conflicts of interest--and media coverage of them--are shining a spotlight on the little-known world of pension governance. The attention may be unwelcome, but it has led to a call for sweeping reforms in the way public pension plans are run. The national professional associations have now looked at this issue, and a new gold standard for governance practices has emerged."

'According to the Survey:' The Significance of Details
Excerpt: "It is clear that the 403(b) market is shifting and evolving. It is very important to understand the characteristics of the population of plans surveyed when considering results as they are not created equal and may be facing significantly different challenges when factoring in elements such as ERISA vs. Non-ERISA, multiple vendor vs. exclusive vendor and centralized compliance platforms with active plan sponsors. "
(Robert J. Toth, Jr)

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Executive Compensation; Benefits in General

House Benefits Bill Passes without COBRA, with Pension-Funding Relief and 401(k) Plans Fee Disclosure
Excerpt: "Among the 401(k) provisions in the bill, which passed 215-204, is a requirement that 401(k) service providers break down their fees into three categories: plan administration and recordkeeping fees, investment management fees and all other fees. Additionally, plan sponsors must list all fees subtracted from a worker's account on quarterly statements."
(Employee Benefit Adviser; free registration required)

Employers Hiring Fewer Full-Time Workers, More Contractors
Excerpt: "Many of the jobs employers are adding are temporary or contract positions, rather than traditional full-time jobs with benefits. With unemployment remaining near 10%, employers have their pick of workers willing to accept less secure positions."

Employee Ownership Update for June 1, 2010
NCEO Executive Director Corey Rosen discusses the following: The NCEO has released the 2010 version of its Employee Ownership 100, the 100 largest ESOP and other employee-owned U.S. companies. A new study of worker coops in France finds these companies are as productive as or possibly more productive overall than conventional firms in most industries. The Conservative-Liberal coalition in Britain has endorsed the expansion of employee ownership. The VEOC conference is on June 9.
(National Center for Employee Ownership)

Webcasts and Conferences

Early Retiree Reinsurance Program: Information You Need Now to Apply
Nationwide on June 10, 2010
presented by International Foundation of Employee Benefit Plans

Employee Benefits Conference: Dawn of a New Decade
in Minnesota on June 16, 2010
presented by Employers Association, Inc.

Fee Disclosure Under Final DOL 401(b)(2) Regs
Nationwide on July 15, 2010
presented by National Institute of Pension Administrators

Optimizing Processes in the TPA Environment
Nationwide on August 10, 2010
presented by National Institute of Pension Administrators

Press Releases

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Pension Consultant
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in OH

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for ADP Retirement Services
in CA, MA, MN, MO, NY, PA, TX, WA

Principal - Health & Welfare
for Buck Consultants
in CA

Plan Sponsor Marketing Specialist
for Financial Engines
in MA

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