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Retirement Plans Newsletter

June 14, 2010

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[Guidance Overview]
DOL Final Regulations on Timing and Order of Domestic Relations Orders
Excerpt: "These final regulations, like the interim version, don't deviate from the narrow Congressional directive under which they were created. But it is useful to have the DOL clarify that the general principles -- not the specific examples -- are what matter."
(Employee Benefits Institute of America)

CalSTRS Supports Two Reform Measures That Limit Controversial Pension Practices
Excerpt: "According to a press release, at its June 2010 board meeting last week, board members took a sponsor-if-amended position on SB 1425, a proposal that would control the practice of inflating retirement benefits, commonly known as 'spiking,' as well as 'double-dipping,' in which retired public employees immediately return to work."

Non-Health Factors Could Drive Early Retirement
Excerpt: "Poor health is the top reason why workers decide to take early retirement, but factors such as high work pressure and low job satisfaction also play a role. That was the conclusion of a new study in the June Journal of Occupational and Environmental Medicine, the official publication of the American College of Occupational and Environmental Medicine (ACOEM)."

Court Moves Forward Claims of Defaulted Participant
Excerpt: "A federal court judge has refused to dismiss claims by a 401(k) participant that plan fiduciaries breached their duties when they transferred his accounts into a new default fund."

New York State Plan Makes Pension Fund Both Borrower and Lender
Excerpt: "Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund. And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund -- from the same pension fund."
(The New York Times; free registration required)

Cost of Adding More Employees to Defined Contribution Plans Has Slowed Use of Automatic-Enrollment Features, According to Study
Excerpt: "The AARP study's findings suggest that employers have noble intentions when it comes to adding the feature, with 74 percent of the respondents indicating they've added it to encourage employees to save more retirement."
(Human Resource Executive Online)

A Look Back at the Weird History of the ESOP
Excerpt: "Despite the fact that ESOPs rely for their justification on economic arguments rejected by mainstream economists, the tax subsidies . . . have left ESOPs a prominent feature, to this day, of the American retirement and tax system."
(Social Science Research Network)

Participation and Contributions in Tax- Deferred Retirement Accounts: Evidence from Social Security Records
Excerpt: "Social Security Administration W-2 records contain employee annual tax-deferred contributions for 1990-2003 and sufficient information to calculate tax-deferred contributions for 1984-1989. We use this information to compare tax-deferred contribution profiles of three cohorts . . . . "
(University of Michigan Retirement Research Center)

Replacing a 403(b) Program with a 401(k) Plan: Factors to Consider First
Excerpt: " A few things to consider and explore before heading down the path toward a 403(b) plan termination are: Have you identified all the contracts that the IRS considers 'issued as part of the employer plan. . . ."
(Robert J. Toth, Jr)

New York: Pension Plan or Ponzi Scheme?
Excerpt: "'. . . Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.'"
(MarketWatch, Inc.)

California Lawmakers Do More Harm Than Good on Pension Spiking Issue
Excerpt: "[The] so-called reform bill, AB1987 -- which the Assembly passed on June 3 by a vote of 75-0 and sent to the Senate -- is a convoluted piece of legislation that will keep attorneys busy deciphering it and lock in most of the abusive tactics. Rather than close the loopholes, the bill would strengthen them."
(Contra Costa Times)

Senate Moves to Keep 401(k) Fees Hidden
Excerpt: "At a time when most Americans' retirement security relies on their own savings -- largely through 401(k) plans -- it seems high time to stop 'vetting' and start disclosing how much we're paying to retirement plan providers."
(CBS Interactive Inc.)

June 17-18, 2010 Chicago, IL
This is the first conference designed by ERPAS for ERPAS! A one of a kind program developed from topic suggestions by current and potential ERPAs to provide practical solutions to the issues they face, the ERPA Conference offers up to 10.5 ASPPA, ERPA, JBEA and NIPA CPE credits, Ethics CPE credit, access to top speakers from the IRS, and networking with colleagues and fellow ERPAs.

For more details and registration, visit today!

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Guidance Overview]
For Code Section 409A Compliance, Time of Payment Is Also Key
Excerpt: "When the IRS released the Code Section 409A document compliance correction guidance . . . some unexpected nuances were revealed, including one that caught many practitioners off guard -- getting the timing of a release and payment of deferred compensation to work together."
(Nelson Mullins Riley & Scarborough LLP)

Judicial Interpretation Has Made Things Worse for Benefit Plan Participants Under ERISA Than Had the Statute Never Been Enacted
Excerpt: "Given that the Act's stated purpose was to protect benefit plan participant, this is a surprising conclusion to have to reach. Nonetheless the argument is strong, and is validated in part by the thousands of cases that have accumulated in which plan participants/plaintiffs have been forced to argue ERISA does not apply to their claims, as a precondition to salvaging those claims."
(Social Science Research Network)

Benefits Education Satisfaction Reduction, According to Survey
Excerpt: "A news release about the survey by Harris Interactive for Unum said 29% of the 1,106 working adults polled gave their benefits education high marks in 2009, down from 39% the year before."

Presidential Memorandum and OPM Final Rule Extend Certain Benefits to Same-S.ex Domestic Partners of Federal Employees
Excerpt: "As noted by OPM, a number of important federal benefits cannot be extended to domestic partners without legislative changes. (OPM has not yet finalized proposed regulations that would extend certain absence and leave benefits to include domestic partners (among other individuals).)"
(Employee Benefits Institute of America)

Webcasts and Conferences

It's Not Too Late! Automating Open Enrollment
Nationwide on June 24, 2010
presented by TRI-AD

Press Releases

Secretaries Solis and Sebelius to Hold Press Conference on Affordable Health Care
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

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in PA

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for Zenith Administrators
in WA

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in IN

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