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Retirement Plans Newsletter

July 12, 2010

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Long-awaited fee disclosure and participant disclosure regulations should be released soon. Stay current, attend this important conference. Our agenda will reflect the latest updates, including: designing fee agreements, DB and cash balance plans, Schedule C, EFAST2, document issues, plan correction, and more. Plus, "Ask the Experts" workshop, concurrent sessions, and over 900 minutes of CE credits. Register by July 26 and save $150.

[Guidance Overview]
IRS Employee Plans News, Special Edition, July 2010
This edition provides links to more information on the following issues: 1. New Form 8955-SSA; 2. Notice 2010-48; 3. User Fees to Increase February 1, 2011; 4. Help Wanted: TE/GE Seeks Candidates for Senior Tax Law Specialist Positions.
(U.S. Internal Revenue Service)

[Guidance Overview]
SEC's Pay-to-Play Rule Under Investment Advisers Act (PDF)
Excerpt: "On July 1, the U.S. Securities and Exchange Commission . . . adopted new Rule 206(4)-5 (the Rule) under the Investment Advisers Act . . . aimed at curtailing pay-to-play practices by investment advisers that seek to manage assets of state and local governments."
(Morgan, Lewis & Bockius LLP)

[Guidance Overview]
GASB's Preliminary Views on Pension Accounting and Financial Reporting by Employers (PDF)
8 pages. Excerpt: "The proposed changes may play a significant role in shaping state and local government pensions and other postemployment benefits for decades."
(Gabriel Roeder Smith & Company)

[Guidance Overview]
Supreme Court Rules That Divorce Decree Could Not Overcome the Express Terms of a Plan Document
Excerpt: "Under ERISA, the plan administrator is obligated to act 'in accordance with the documents and instruments governing the plan' insofar as such documents and instruments are consistent with the provisions of Title I and Title IV of ERISA."
(Passion for Subro!)

Income in Retirement: Common Investment Strategies (PDF)
12 pages. Excerpt: "This paper describes several basic strategies for generating and managing income in retirement. We review some common approaches, including income investing, total-return-based spending, and the use of insurance-based products such as income annuities."
(The Vanguard Group, Inc.)

Social Security Benefits Formula: A Practical Primer
Excerpt: "Despite the broad and deep reliance on Social Security benefits, very few of the hundreds of millions of current and future beneficiaries understand how the program works. This article presents through a hypothetical couple some of the basic concepts of the Social Security benefits formula."
(Social Science Research Network)

Retirement in a Life Cycle Model of Labor Supply with Home Production
Excerpt: "We analyze the forces that can generate retirement in different versions of standard life cycle models of labor supply."
(University of Michigan Retirement Research Center)

Retirement Requires More Preparation Nowadays
Excerpt: "'What most people don't appreciate is that the future is likely to bring a unique confluence of events that will challenge us for many years: de-leveraging, deflation, high unemployment, severe deficits on the local, state and federal levels,' . . . ."
(The Dallas Morning News)

Safe Harbor 401(k) Cross-Tested Plan Design Issues
Excerpt: " A safe harbor 401(k) cross-tested plan combines two of the most attractive defined contribution plan designs. The plan design provides (1) enhanced disparity; (2) flexibility; and (3) catch-up contribution potential."
(SunGard Relius)

Facing Shortfalls, Some States Combine Guaranteed Plans with 401(k)-Like Options
Excerpt: "These hybrid plans are a cost-cutting measure for states seeking to pare back the guaranteed-retirement payments considered a bedrock benefit for government workers."
(The Wall Street Journal)

On the Growing Movement for Pension Reform in California
Excerpt: "[A proposed San Francisco] ballot measure would increase all city workers' contributions (which range from nothing to 7.5 percent) to a baseline of 9 percent. Police and fire employees, who now contribute 7.5 percent (new hires, 9 percent), would contribute 10 percent."
(San Francisco Chronicle)

Labor Department Focusing on Retirement Plan Administrators
Excerpt: "The enforcement arm of the Labor Department is investigating administrators of corporate retirement plans -- including some that are registered investment advisers -- to determine the kinds of fees that they receive from mutual funds and whether they are disclosing the fees to plan sponsors."
(Investment News; free registration required)

Some 75 Cities, Counties and Public Agencies in California Trying to Adjust Their Pension Systems
Excerpt: "As public ire rises over generous public employee pension systems, momentum for overhaul is rising as well."
(The Orange County Register)

Lawmakers Defend Social Security's Chief Actuary in Clash with S.S. Commissioner
Excerpt: "In interviews and in letters to the administration, lawmakers said they relied on the actuary, Stephen C. Goss, for objective analysis of proposals to change Social Security. And they made clear that he should not be reassigned or demoted as Congress prepared for a re-examination of the program . . . ."
(The New York Times; free registration required)

Newspaper Pension Plans Blocked from Delaying Reorganization
Excerpt: "A federal judge has rejected a move by employee pension plans at The Philadelphia Inquirer and the Philadelphia Daily News to delay the reorganization of the bankrupt media company."

Ex-Employee of Defunct Nebraska-Based Bank Files Stock Drop Case
Excerpt: "The complaint alleges that the plan fiduciaries should have known TierOne stock was an imprudent investment before federal regulators took over TierOne and sold its assets last month."

Seven Lessons for the U.S. from the Greek Fiscal Crisis
Excerpt: "The demographic crunch is here. The much-anticipated demographic crunch is here. The elements of this crunch are today well-known: aging populations; longer life expectancies; underfunded defined benefit pension plans, particularly in the public sector; traditional and now unrealistic retirement ages, both for public employees and for government transfer programs such as Social Security and Medicare. These long-term challenges are long-term no more."
(Oxford University Press, Inc.)

There Are Lots of Ways to Improve Retirement Security
Excerpt: "I believe that the operations of most 401(k) plans have room for improvement, but I also believe that both policymakers and pundits would benefit from an examination of the marketplace. Any one size fits all solution could have detrimental unintended consequences on small plans."

President's Deficit Commission Not Likely to Agree on Tax Increases, But May Recommend Social Security Reform
Excerpt: "One reform that could win bipartisan support would, over time, raise the Social Security retirement age to 70."
(The Wall Street Journal)

Florida's Public Pension Plan Will Need Creative Adjustment
Excerpt: "According to a report in the Sun Sentinel, Florida has passed the increased costs of the $110 billion retirement system on to taxpayers. And Florida remains one of only five states that don't require some contribution to the system from the workers themselves."
(Sun Sentinel)

Use a Social Security 'Holiday' As Stimulus to the Economy
Excerpt: "To stimulate the economy now with no long-term increase in government debt, Congress should therefore temporarily exempt a portion of wages from the Social Security taxes imposed on workers; at the same time, those exempted wages would not be credited in computing that worker's future retirement benefits."
(The New York Times; free registration required)

The ASPPA Annual Conference is attended by 1,600 of your colleagues, with more than 60 workshops and 80 vendor displays in the exhibit hall focusing on all areas of the retirement business. Attendees even get face time with representatives from every aspect of the retirement plan industry, including the IRS and DOL and Members of Congress and their staffs.
Sponsored by ASPPA

Benefits in General; Executive Compensation

[Guidance Overview]
Court Rulings that Federal Ban on Same-S.ex Marriage is Unconstitutional Raises Significant Implications for Employee Benefit Plans
Excerpt: "Assuming the [Department of Justice] is successful in obtaining a stay of the decisions, employers will need to closely follow the progress of the appeals of these cases (and separate DOMA litigation in California)."
(McDermott Will & Emery)

U.S. Corporations/HR Leaders Need to Prepare for New Federal Law That Requires Nonbinding Shareholders' Vote on Executive-Pay Packages
Excerpt: "Say-on-pay has gained impetus in a climate where the public wants to put brakes on executive compensation. Even without a law, some 80 U.S. companies have already adopted voluntary say-on-pay voting. In addition, about 240 financial institutions covered by the Troubled Asset Relief Program (TARP) of 2008 are required to have a vote."
(Human Resource Executive Online)

Hewitt Associates, Inc. to Merge with Aon Corporation
Excerpt: "This morning Aon Corporation and Hewitt Associates, Inc. announced that the boards of directors of both companies have approved a definitive agreement under which Hewitt will merge with a subsidiary of Aon."

Webcasts and Conferences

What You're Doing That is Making Your Retirement Plans Cost More
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