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Retirement Plans Newsletter

July 9, 2010

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Build your credibility and earn the privilege of representing clients before the IRS. This is your last chance to assure your slot in the 2010 summer ERPA exam window which runs from July 7 - August 31. Take advantage of the extended ERPA exam registration deadline by registering by July 19. For more details and registration, visit today!
Sponsored by AIRE, LLC

[Guidance Overview]
Deadline Approaching for U.S.-Qualified Plans with Puerto Rico Participants under IRS Revenue Ruling 2008-40
Excerpt: "In [the Ruling], the IRS offered tax relief for transfers of assets and liabilities for Puerto Rican participants from the U.S. plan to a plan qualified under Puerto Rico law with a related Puerto Rico trust."
(Towers Watson)

[Guidance Overview]
GASB Preliminary Views on Proposed Changes to Pension Accounting Standards for Public Sector Employers
Excerpt: "[One implication, for example, is that] the proposed change in how investment earnings are recognized will create less expense volatility in some situations and greater expense volatility in others."
(The Segal Group, Inc.)

[Guidance Overview]
HIRE Act Social Security Exemption Available on Forms 941 for Second Quarter of 2010
Excerpt: "The Social Security tax exemption applies to all 'qualified employees' hired after February 3, 2010 and before January 1, 2011, and applies to the employer-half of Social Security taxes paid from March 19, 2010 through December 31, 2010."
(Miller & Chevalier Chartered)

[Guidance Overview]
IRS 401(k) Compliance Check Questionnaire Goes Beyond Just the Facts
Excerpt: "Most of the questions request factual information regarding the sponsor's 401(k) plan. Some questions, however, require information regarding the existence of other plans, including the number of the sponsor's nonqualified deferred compensation arrangements, which could involve certain compensation arrangements that are imbedded in various employment contracts."
(Miller & Chevalier Chartered)

California Governor Wants Public Pension Changes
Excerpt: "At a minimum, the governor said he wants legislators to roll back current pension terms to those that existed before 1999 legislation created more generous rules."
(The Sacramento Bee)

States May Face Pension Pressure as New GASB Rules Widen Gaps
Excerpt: "The proposed accounting revisions, which are subject to comment through October, come as states are reporting widening pension liabilities following declines in asset values in the year through June 2009. Wilshire Associates, based in Santa Monica, California, has estimated the median investment loss at 17 percent that year."
(Bloomberg Businessweek)

IRS Advisory Committee Recommends Changes to Determination Letter Process
Excerpt: "IRS Director of EP Rulings and Agreements Andy Zuckerman said that EP wants to improve the interim amendment process, will expand its education and outreach for government plans, and is implementing changes to the processing of 403(b) plans, among other changes."
(Wolters Kluwer)

California Local Governments Push to Cut Pension Benefits
Excerpt: "[A]t least four pension-related local initiatives appear headed to the ballot this November, including one in San Francisco that would require workers to pay more into their retirement systems."
(The Sacramento Bee)

Website: Pension Padding in New York State
Excerpt: "In July 2010, NYSAG released its Preliminary Report, Pension Padding: We All Pay the Price . . . . This website is intended to inform public employers, who have a fiduciary duty to utilize taxpayer dollars in the most efficient manner and to avoid waste."
(New York State Office of the Attorney General)

Threatened Cutbacks to State's Early Retirement Plan Prompts Many to Sign Up
Excerpt: "The DROP program is intended to encourage people to retire early and make way for younger, less expensive workers. It allows most public employees to effectively retire and begin collecting retirement checks that go into a separate account that draws interest and a cost-of-living allowance. People can keep working and earning a salary for up to five years."
(St. Petersburg Times)

SEC Proposes New Rules to Make Target-Date Mutual Funds More Transparent
Excerpt: "Under the SEC's proposed rule changes, marketing materials for a target-date fund would have to specifically disclose the asset allocation mix, and this information would have to appear with the fund's name the first time that name is used."
(The Washington Post; free registration required)

Chapter 9 Doesn't Work the Same As Chapters '7 and 11' and Won't Solve the Pension-Benefit Crisis
Excerpt: "First of all, a city or county does not go out of business. Most public employers have taxing authority, and governments are chartered to operate perpetually."

Under New SEC Rules, Placement Agents Won't Be Outlawed, But They Will Be Regulated.
Excerpt: "The new rules will curtail some of the shady practices that have transpired in the public pension world in the past, especially the practice of buying votes on pension boards through campaign contributions and gifts to fiduciaries."

Who's Really to Blame for Too Much Company Stock in 401(k)s?
Excerpt: "In 2010 there's just no excuse for not understanding and heeding the laws of diversification."
(CBS Interactive Inc.)

Small Plans Don't Always Have Small Problems
Excerpt: "This is an interesting small piece out of Reish and Reicher [see] highlighting the fact that smaller plans, with relatively small asset pools, face many of the same risks and problems that are faced by the large plan sponsors involved in the bold face cases that show up on a daily basis in the media."
(Stephen Rosenberg of The McCormack Firm, LLC)

ASPPA has partnered with the Institute for Pension Plan Management at Indiana University-Purdue University Fort Wayne (IPFW) to offer convenient webcourses leading to a number of credentials, including your QKA and QPA. Registration includes all 7 sessions for each webcourse. Register now for the July-December cycle!

Visit for info and pricing.

Sponsored by ASPPA

Executive Compensation; Benefits in General

[Guidance Overview]
IRS Changes Position on Application of Section 162(m) in Acquisition Context
Excerpt: "A relatively recent development in the IRS' interpretation of section 162(m) has received little attention, notwithstanding that it will often result in an additional deduction disallowance when a public company is acquired. The issue has to do with the application of section 162(m) to the year before a public company is acquired."
(Miller & Chevalier Chartered)

[Guidance Overview]
Accounting by Health Insurance Providers for New Compensation Deductibility Requirements
3 pages. Excerpt: "The new limitation is expected to be similar to the limitation placed on companies that received TARP funds, though the new limitation applies to all employees."
(PricewaterhouseCoopers LLP)

[Guidance Overview]
Federal Banking Agencies Issue Final Guidance on Incentive Compensation (PDF)
Excerpt: "The Final Guidance is substantially similar to the proposed guidance . . . issued by the Federal Reserve in October 2009, and establishes three general principles for incentive compensation arrangements."
(Arnold & Porter LLP)

Federal Judge Finds Law Barring Federal Government from Recognizing Same-S.ex Marriage Is Unconstitutional
Excerpt: "If the rulings find their way to the Supreme Court and are upheld there, they will put same-s.ex marriage within the constitutional realm of protection, just as interracial marriage has been for decades."
(The New York Times; free registration required)

Milliman's Monthly Benefit News and Developments, July 2010 (PDF)
2 pages. The newsletter provides a summary of the previous month's legislative, regulatory, and judicial information on employee benefits and upcoming key dates.

Fringe Benefits a 'Key Area' of Upcoming IRS Audits
Excerpt: "The IRS is on a mission to learn what issues are hiding in employers' records; thus, the [employment tax national research program] audits will prove to be more invasive than they would be if auditors had a specific target."
(Thompson Publishing Group Inc.)

Study Rekindles Debate Over Federal Pay and Benefits
Excerpt: "A right-leaning Washington think tank once again has added fuel to the debate over federal employee pay with a report asserting civil servants earn significantly higher salaries and more generous benefits than their private sector counterparts, while enjoying far greater job security."

Webcasts and Conferences

DOL Speaks: The 2010 Employee Benefits Conference
in Maryland on September 20, 2010
presented by ASPPA & DOL

Press Releases

U.S. Labor Department Obtains Judgment Restoring More Than $20,000 to Bedford, NH, 401(k) Retirement Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

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