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Retirement Plans Newsletter

June 17, 2010

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DB Administration, Discrimination Testing and Proposal software with Multiple Plan and Cash Balance Plan handling. PPA’06 Pension Funding.
* Funding Target and Target Normal Cost with 3-rate segments
* 404(o) Cushion; 430 minimum and 404(o) maximum contributions
* Funding Target Attainment Percentages (FTAPs)
Schedule SB reports and links to our 5500/PBGC System, and our FAS 158 and Termination Calculation reporting systems. or call 1-888-328-2474

[Official Guidance]
Text of PBGC Technical Update 10-2: Variable Rate Premiums; Alternative Premium Funding Target Elections; Box 5 Relief
Excerpt: "[Technical Update 10-2] makes relief available to plans that intended to elect to use the alternative premium funding target to calculate the variable rate premium but did not check the appropriate box on the comprehensive premium filing, if certain conditions are met. The Technical Update sets forth the scope of the relief and the process for obtaining it."
(Pension Benefit Guaranty Corporation)

[Guidance Overview]
DOL Final Regulations Clarifying Rights and Obligations on Obtaining Benefits Under Qualified Domestic Relations Orders (PDF)
2 pages. Excerpt: "The regulations clarify that a DRO that otherwise meets the qualification requirements will not fail to be treated as a QDRO solely because the DRO is issued after, or revises, another DRO or QDRO."
(Drinker Biddle & Reath LLP)

GASB Reaffirms in General the Use of Expected Long-Term Return on Investments As Basis for Valuing Public Pension Plan Liabilities
Excerpt: "The continued use of the traditional valuation method would apply to plans so long as the assets available for benefits are projected to be sufficient to cover future benefits."
(Pensions & Investments)

Senate Committee Hearing Titled: The Retirement Challenge: Making Savings Last a Lifetime, June 16, 2010
The target page provides links to Statements of Committee Members, the panel, and those Submitted for the Record.
(U.S. Senate Special Committee on Aging)

Special Committee on Aging Holds Hearing on Lifetime Income Options in Retirement Plans
Excerpt: "A . . . news release said the intent of the hearing was to take a close look at the decisions plan participants must make in a defined contribution world to ensure they can have a secure retirement."

A Little More Respect for Annuities in Retirement Plans, Guaranteed Lifetime Income
Excerpt: "President Obama's Middle Class Task Force called earlier this year for wider availability of annuities and other forms of guaranteed lifetime income. Annuities reduce the risk 'that retirees will outlive their savings or that their retirees' living standards will be eroded by investment losses or inflation,' the task force observed."

The 2010 Higher Education Retirement Confidence Survey (PDF)
10 pages. Excerpt: "College and university workers appear to be doing a better job of planning and saving for retirement -- 95 percent have saved for their retirement and among these, 94 percent are currently saving. In contrast, 60 percent of US workers are currently saving for retirement."
(TIAA-CREF Institute)

2009 Public Pension Finance Symposium
This monograph contains papers from the Symposium on a range of views on the measurement of pension liabilities and risk management issues related to public sector pension plans. The papers and comments presented in this monograph showcase many of the differing views with regard to measuring public pension plan liabilities.
(Society of Actuaries)

Investment Company Institute Statement for Senate Special Committee on Aging Hearing, 'The Retirement Challenge: Making Savings Last a Lifetime'
Excerpt: "The various products and services that are designed to provide lifetime income involve tradeoffs and participants themselves have different needs and circumstances. In addition, most retirees already hold most of their lifetime wealth in annuity-equivalent form. No single retirement income solution is suitable for all or even most Americans who are deciding how to take distributions from their defined contribution plan accounts or IRAs."
(Investment Company Institute)

Testimony of Employee Benefits Security Administration Before Senate Special Committee on Aging on Lifetime Income Options
Excerpt: "Traditional defined benefit plans with lifetime income distribution options have historically been more effective at achieving the goal of lifetime income in retirement than plans that distribute benefits as lump sums. For this reason, it is important for us to identify the most important elements, such as pooling of longevity risk, that make these retirement plans more effective in providing retirement income and determine whether those elements can be embedded within 401(k)-type plans."
(U.S. Employee Benefits Security Administration)

Social Security Reform: Changes to the Benefit Formula and Taxation of Benefits, June 2010 Update (PDF)
8 pages. Excerpt: "To protect the program's solvency, policymakers have been considering various reform options including raising the age at which unreduced benefits are paid, reducing benefit payments, and increasing tax income. . . . [T]his issue brief focuses on two possible options for reform: changing the benefit formulas for workers or spouses and changing the federal income tax treatment of Social Security benefits."
(American Academy of Actuaries)

The Resurgence of Collective Investment Trusts (PDF)
3 pages. Excerpt: "Offered to both defined benefit and defined contribution plans, collective trusts today are vying to compete with mutual funds and other pooled investment vehicles as a mainstream product in the retirement plan marketplace."
(Portfolio Media, Inc. via Sutherland Asbill & Brennan LLP)

Is 401k a Brand Wasteland? (PDF)
2 pages. Excerpt: "The 401(k) industry is full of 'brand overspray' from other financial services and industry businesses, and those 401(k) providers definitely have room for improvement. That's one of the conclusions presented in Cogent Research's inaugural Retirement Planscape study of 401(k) plan sponsors. The only brands that stand out above the rest by Cogent's measure . . . are two retail mutual fund titans, Fidelity and Vanguard."
(InvestmentWires, Inc. via Cogent Research)

SEC Releases Target-Date Fund Disclosure Proposal
Excerpt: "The Securities and Exchange Commission . . . unanimously approved proposed rule amendments to enhance the information provided to target-date fund investors. An SEC news release said the rule changes would enable investors to better assess the anticipated investment glide path and risk profile of a target-date fund by, for example, requiring graphic depictions of asset allocations in fund advertisements."

The Independent 401(k): A Retirement Vehicle for Sole Proprietors
Excerpt: "[Choose an Independent 401(k) (also known as an Independent 401(k) or solo-401(k)) over the SEP IRA . . . . if you are a sole proprietor and you want to maximize retirement contributions with the lowest cost and highest flexibility . . . ."
(San Francisco Chronicle)

Plan Sponsors Find Low-Cost Investment Option in Collective Investment Trusts
Excerpt: "Chicago-based Morningstar currently tracks nearly 1,200 collective investment trusts (CITs) and found that 159 of them were introduced in 2009, the largest growth in 20 years. Overall, CITs account for $1.6 trillion of the $13.4 trillion total retirement market assets in 2009, Morningstar reports."
(Workforce Management; free registration required)

State Pension Plans in Crisis: Underfunded by $1 Trillion?
Excerpt: "According to the Manhattan Institute for Policy Research, pension plans for public school teachers, which comprise about half of states' total pension liabilities, were underfunded by $933 billion dollars in fiscal year 2008, almost three times the amount that the plans had reported."

Large Payouts Strain North Carolina State Pension System
Excerpt: "North Carolina's $68 billion pension system is in better shape than most. But state Treasurer Janet Cowell, whose office administers the fund for state and local governments, has notified the agencies that they must soon come up with $440 million to rebuild the fund after investment losses."
(The News & Observer Publishing Company)

A Brief History of Attacks on Social Security
Excerpt: "[T]his commentary is about ideology. It is to remind readers that the same attacks on Social Security have been going on -- in different guises -- for at least four decades."
(The Century Foundation)

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

[Guidance Overview]
2009 Plan Financial Statements Require New Plan Asset Disclosures
5 pages. Excerpt: "The new valuation provisions were required to be applied to all Employee Benefit Plan assets in the employer's financial statements and those same values should be consistently applied in the Employee Benefit Plan's financial statements. The new required disclosures were not required in employers' 2009 year-end Employee Benefit Plan asset disclosures. However, the 2009 Plan financial statements should reflect both the valuation techniques and the extensive disclosures required by the new standards."
(PricewaterhouseCoopers LLP)

[Guidance Overview]
IRS Rulings Clarify Tax Treatment of Registered Domestic Partners
Excerpt: "On May 28, 2010, the Internal Revenue Service released Private Letter Ruling 201021048 . . . addressing several issues related to the federal income and gift taxation of registered domestic partners in California. Under the Ruling, income of registered domestic partners is treated consistently with California state law, and thus is treated as community property for federal income tax purposes."
(Pillsbury Winthrop Shaw Pittman LLP)

[Guidance Overview]
Health Care Reform Act Creates New, Lower Compensation Deduction Cap for Health Insurers (PDF)
3 pages. Excerpt: "For tax years beginning in 2013, covered health insurers will be denied federal income tax deductions for compensation they pay to any director, officer, employee or other service provider in excess of $500,000 annually."
(McGuireWoods LLP)

The Legal Framework for States As Employers-of-Choice in Workplace Flexibility: A Case Study of Arizona and Michigan (PDF)
27 pages. Excerpt: "In conclusion, both Arizona and Michigan have the potential to bolster their status as states as employers-of-choice. Both states have achieved a flexible workplace with strong executive leadership throughout the state workforce's management levels, and the support and use of flexible work arrangements, time off, and career flexibility to address emerging problems and changing demographics."
(Twiga Foundation)

Allocation Restrictions Triggered by a Section 1042 Sale to an ESOP
In Nancy Dittmer's latest column on the NCEO Web site, she completes her discussion of Internal Revenue Code Section 409(n) with the third and final installment of 'Allocation Restrictions Triggered by a Section 1042 Sale to an ESOP."
(National Center for Employee Ownership)

Webcasts and Conferences

Form 5500-SF: The Simplified Alternative to Form 5500
Nationwide on July 13, 2010
presented by SunGard Relius

HIPAA and Other Health Benefits Laws: Compliance Assistance Seminar
in Illinois on June 22, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Schedule C: C is for Confusion
Nationwide on June 17, 2010
presented by SunGard Relius

Schedule C: C is for Confusion
Nationwide on June 24, 2010
presented by SunGard Relius

The New form 5500-EZ: At Last!
Nationwide on June 29, 2010
presented by SunGard Relius

Voluntary Fiduciary Correction Program Workshop
in Maryland on July 13, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Press Releases

CalPERS Committee Approves State Pension Contribution Increase
CalPERS (California Public Employees' Retirement System)

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