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Retirement Plans Newsletter

July 15, 2010

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[Official Guidance]
Text of Interim Final 408(b)(2) Regs on Disclosure of Investment Fees (PDF)
154 pages; as filed with the Office of the Federal Register. To become effective on July 16, 2011 (i.e., next year). Scheduled for publication in the Federal Register tomorrow (July 16). Excerpt: "This document contains an interim final regulation under [ERISA] requiring that certain service providers to employee pension benefit plans disclose information to assist plan fiduciaries in assessing the reasonableness of contracts or arrangements, including the reasonableness of the service providers' compensation and potential conflicts of interest that may affect the service providers' performance. These disclosure requirements are established as part of a statutory exemption from ERISA's prohibited transaction provisions. This regulation will affect employee pension benefit plan sponsors and fiduciaries and certain service providers to such plans."
(U.S. Employee Benefits Security Administration)

[Guidance Overview]
DOL Issues New Rules on Fee Disclosure
Excerpt: "According to the document released this morning by the Employee Benefits Security Administration . . ., the interim final rule is effective on July 16, 2011. However, EBSA is encouraging comments on the interim final rule during a 45-day comment period following publication of the rule."

[Guidance Overview]
EFAST2 Filing and Troubleshooting
Excerpt: "The plan accountant prepares the plan audit and saves it in PDF format. The accountant then transmits the audit to the employer and the Form 5500 preparer with password protection to prevent any changes. If the preparer attaches the audit to the filing, will the DOL be able to process the filing?"
(SunGard Relius)

[Guidance Overview]
Court Rules on Retail vs. Institutional Share Fee Claims
Excerpt: "Even though the bulk of their claims were thrown out, 401(k) participants still won a key legal victory in a suit against their employer when a judge ruled the selection of three retail-class funds constituted a fiduciary breach."

Changes in the Assets and Liabilities of a Model Defined Benefit Plan (PDF)
2 pages. Excerpt: "This issue demonstrates that the combined effect of negative investment experience during the second quarter of 2010 and lower interest rates (causing liabilities to increase) resulted in a dramatic decrease in its funded ratio from 88 percent to 76 percent."
(The Segal Group, Inc.)

IRS Scrutiny of 401(k) Plans with Online Questionnaire
Excerpt: "If you received a questionnaire, we recommend responding to the questionnaire promptly. Although there is no fine for failing to complete the questionnaire, the IRS has indicated that failure to respond to the questionnaire or to provide complete information will result in further enforcement action which may include a formal examination of the 401(k) plan."
(Kilpatrick Stockton LLP)

How Much Should You Have in Equities Until Retirement?
Excerpt: "A new analysis shows that even those who pursue a more conservative investment strategy to avoid large losses at retirement -- with the intention of cashing out their assets soon after retiring to, say, buy an annuity -- might not do as well as those with a more aggressive strategy."
(American Association of Individual Investors)

Lack of Expertise, Fiduciary Fears Make Finding Pension Committee Members a Challenge
Excerpt: "Liability issues aside, effective management of a pension committee starts with a decision on how the committee should be structured. Larger plans often will separate administration and investments, and have separate committees for each function."
(Employee Benefit News; free registration required)

6 Steps for a Retirement Plan Review
Excerpt: "Updating your plan is a bit like double checking your answers on a math test. We know it helps, but most of us don't do it. Here is how to find out if your retirement investments are on track."
(U.S. News & World Report)

Racial, Ethnic, and Gender Differentials in Employer-Sponsored Pensions (PDF)
15 pages. Statement of Barbara A. Butrica and Richard W. Johnson, The Urban Institute, Before the ERISA Advisory Council, U.S. Department of Labor, June 30, 2010. Excerpt: "Differences in employment and earnings, pension offer and participation rates, contribution rates, investment behavior, and plan leakage all contribute to the wide racial, ethnic, and gender differentials in pension wealth observed among adults on the verge of retirement."
(Urban Institute)

American Benefits Council Comments to DOL/IRS on Form 5500 Filing Deadline Extension (PDF)
Excerpt: "The Council is writing to urge the Department of Labor and the Internal Revenue Service to extend the deadline for filing the Form 5500 and Form 5500-SF for the 2009 plan year until the later of (i) December 31, 2010 and (ii) 9-1/2 months after the end of the plan year."
(American Benefits Council)

The (Still) Missing Social Security Annual Report
Excerpt: "The Social Security's trustees' annual report is, by law, supposed to be published by April 1. This year, however, the trustees have postponed its release indefinitely."
(Cato Institute)

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

Benefits in General; Executive Compensation

[Guidance Overview]
Deduction Limit on Compensation Paid by Health Insurance Providers
Excerpt: "Although the Code already limited the deductibility of compensation paid to certain executive officers of publicly held companies in excess of $1,000,000, there are several key differences between the previous rules and the new limit . . ., as applicable to covered health insurance providers . . . ."
(Seyfarth Shaw LLP)

CFO Insights on Executive Compensation: Plan, Perform & Pay (PDF)
3 pages. Excerpt: "As a rule of thumb, the base salary constitutes 30% of total compensation, the annual incentive another 20%, the benefits about 10% and long-term incentives or the wealth creation portion of the compensation about 40%. Indeed, before the financial crisis, there was a lot of board attention to improving the relationship between pay and performance."
(Deloitte Development LLC via Financial Executives International)

ERISA's Statute of Limitations for Benefit Claims: Where To Begin?
Excerpt: "Plan designers have been able to alleviate somewhat the difficulties of defending dated claims by inserting shorter limitations periods into the plan documents. Courts have looked favorably on such provisions, provided that they are reasonable and communicated clearly. But these rules do not change the fact that, however short the limitations period is, the period ordinarily still will not begin to run until the administrative claim has been filed and denied."
(Bloomberg Finance L.P. via Proskauer Rose LLP)

Former Employees of New United Motor Manufacturing Co. Sued It and Toyota Motor Corp. Over Severance Packages
Excerpt: "They seek a revised severance agreement, restitution, lost compensation, other employee benefits and monetary damages in the suit filed in U.S. District Court in Oakland."
(San Jose Business Journal)

Webcasts and Conferences

"403(b) Plan Design Workshop" - August-September, in 7 Cities
Nationwide on August 12, 2010
presented by SunGard Relius

"Cross-Tested/Safe Harbor 401(k) Plan Design Workshop" - August - September, in 12 Cities
Nationwide on August 11, 2010
presented by SunGard Relius

Correcting Nonamenders: Restatement and Other Amendment Failures
Nationwide on July 27, 2010
presented by SunGard Relius

The Basics and More Workshop - Kansas City, Missouri
in Missouri on September 8, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

The Basics and More Workshop - St. Louis, Missouri
in Missouri on August 24, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Press Releases

ASPPA Supports DOL Fee Disclosure
American Society of Pension Professionals & Actuaries (ASPPA)

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