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Retirement Plans Newsletter

July 16, 2010

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[Official Guidance]
Text of Interim Final 408(b)(2) Regs on Disclosure of Investment Fees (Federal Register Typeset Version) (PDF)
40 pages. To become effective on July 16, 2011 (i.e., next year). 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]
Summary of Major Changes in Interim Final Regs Regarding Reasonable Contract or Arrangement Under ERISA Section 408(b)(2) Fee Disclosure (PDF)
5 pages. Excerpt: "The disclosure requirements, which are established as part of a statutory exemption from ERISA's prohibited transaction provisions, are expected to be published in the Federal Register on July 16. Without the statutory exemption, all contracts or arrangements to provide services to retirement plans would be prohibited transactions."
(American Benefits Council)

[Guidance Overview]
Fact Sheet on Interim Final Regulations for Improved Retirement Plan Fee Disclosure
Excerpt: "The interim final regulation applies only to defined contribution and defined benefit pension plans and focuses on the disclosure of the direct and indirect compensation certain service providers receive."
(Investment News; free registration required)

[Guidance Overview]
DOL's Final Conditions for Financial Institutions to Serve as QPAMs to Their In-House Plans (PDF)
Excerpt: "In early July 2010, the Department of Labor (DOL) adopted amendments to the class exemption for qualified professional asset managers (QPAMs) to permit them to obtain exemptive relief for transactions for their in-house plans."
(Morgan, Lewis & Bockius LLP)

[Guidance Overview]
SEC and DOL Guidance on Target Date Funds (PDF)
4 pages. Excerpt: "Before getting into the specifics of the guidance, . . . this Bulletin describes the issues [as drawn from the description provided by the SEC staff in its June 16th proposal entitled 'Investment Company Advertising: Target Date Retirement Fund Names and Marketing'] posted at"
(Reish & Reicher)

[Guidance Overview]
Employer Violated 'Duty of Prudence' in Investment Option Choices, According to Federal Court
Excerpt: "'Defendants have not offered any credible explanation for why the retail share classes were selected instead of the institutional share classes,' . . . . 'In light of the fact that the institutional share classes offered the exact same investment at a lower fee, a prudent fiduciary acting in a like capacity would have invested in the institutional share classes.'"
(Business Insurance)

Financial Literacy: Implications for Retirement Security and the Financial Marketplace
Excerpt: "Leading academics, pension sponsors, and their advisors met recently to measure and remedy low levels of financial literacy in the United States and around the world at the 2010 Wharton Impact Conference sponsored by the Pension Research Council and the Boettner Center for Pensions and Retirement Research. Here we summarize the proceedings from this event . . . ."
(Pension Research Council; registration required to download working papers)

Target-Date Fund Use Over Time (PDF)
Pages 2-6 of 16 pages. Excerpt: "This study examines the persistence of use of TDFs among those who were using these funds in 2007. Therefore, the percentage of participants who remain in these plans is determined, as well as the percentage of participants who added TDFs among those not already using them in 2007."
(Employee Benefit Research Institute)

New State Workers in Missouri May Have to Contribute to Pensions under Proposed Legislation
Excerpt: "Currently, employees in the two affected systems -- the $7 billion Missouri State Employees' Retirement System and the $1.3 billion Missouri Department of Transportation and Patrol Employees' Retirement System, both in Jefferson City -- do not contribute to their retirement savings. The contribution comes entirely from the state."
(Pensions & Investments; registration may be required)

A 'Simple' 401(k) Plan or a Traditional Safe Harbor 401(k) Plan
Excerpt: "SIMPLE 401(k) plans are available only to employers with 100 or fewer employees who received at least $5,000 in compensation for the preceding year and that do not maintain another employer-sponsored retirement plan."
(Chang Ruthenberg & Long PC)

Summary Plan Description vs. The Plan: Consequences of Discrepancies
Excerpt: "Plan administrators are required to provide each participant with an SPD that summarizes important plan features in plain language. But just because the SPD provides only a summary of the plan does not mean that it is not a legally binding document."
(Chang Ruthenberg & Long PC)

American Academy of Actuaries Comments on Harmonization of Cost Accounting Standards with PPA (PDF)
8 pages. Excerpt: "While the [Cost Accounting Standard] Board may philosophically disagree with the use of settlement liabilities similar to those applied under PPA to determine government contracting pension costs for an ongoing plan, it is nevertheless congressionally mandated as the required funding approach for pension plans and is inextricably linked to CAS costs through the requirement that cost accounting standards harmonize with the PPA funding rules."
(American Academy of Actuaries)

Financial Reform Bill and the Fiduciary Standard for Brokers
Excerpt: "One pervasive myth is that all broker/dealer reps would be held to the fiduciary standard even if they do not give advice to investors, and that all broker/dealer functions would be under fiduciary rules. That is not the case."
(Investment Advisor)

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

Wall Street Reform Will Require Companies to Adopt a Specific Compensation Clawback Policy
Excerpt: "[The Act adds a new Section,] entitled 'Recovery of Erroneously Awarded Compensation Policy,' to the Securities Exchange Act of 1934. This new section requires the SEC to direct the national securities exchanges and associations to prohibit the listing of any security of an issuer that does not develop and implement a clawback policy."
(Michael Melbinger via Winston & Strawn LLP)

The Financial Reform Legislation's Impact on Executive Compensation
Excerpt: "The act requires a non-binding shareholder vote on executive compensation at least once every three years."
(McGuireWoods LLP)

The Accounting and Economics of Executive Stock Options: Assessing their Role in Executive Compensation (PDF)
3 pages. Excerpt: "[A recommendation for full value awards such as Restricted Stock Units . . . in lieu of ESOs might be made] because they would expose executives to the same profits and losses as shareholders. While it is easy to see the emotional appeal of such statements, they need to be re-examined based on economic principles and in-depth case studies of historical events."
(Buck Consultants)

Executive Compensation, Corporate Governance Provisions under the Dodd-Frank Act
Excerpt: "These provisions will dramatically affect public reporting companies and their relationships with shareholders. Many of the provisions are to be implemented by requiring the national securities exchanges and associations to modify listing standards to capture the requirements."
(Ballard Spahr LLP)

Flexible Work Arrangements May Hinder the Climb Up the Corporate Ladder
Excerpt: "Corporate America has been marching toward nontraditional work arrangements for some time -- last year alone, 21% of companies introduced flextime. Improved (and cheaper) technology is one big driver, and the recession has proven to be another. Options such as remote work, part-time, and customized schedules are 'a very inexpensive way to reward someone,' . . . ."

Illness-Related Work Absences During Flu Season (PDF)
4 pages. Excerpt: "The level of absence due to a worker's own illness, injury, or medical appointment was higher in the winter of 2007-08 than at any other period covered in this analysis, reaching a high of 3.3 million in February 2008."
(U.S. Bureau of Labor Statistics)

National Compensation Survey: Health and Retirement Plan Provisions in Private Industry in the United States, 2009 (PDF)
135 pages. Excerpt: "This bulletin of detailed health and retirement provisions will begin including basic health, defined benefit, and defined contribution tables each year. In addition, each year additional tables for a specific benefit will also be included. For example, this year additional defined contribution retirement tables in private industry are included."
(U.S. Bureau of Labor Statistics)

Employee Ownership Update for July 15, 2010
NCEO Executive Director Corey Rosen discusses the following: is a useful Web site that ranks defined contribution plans. People often ask how many U.S. companies fall into the 'sweet spot' for ESOPs, and there are many of them. The NCEO is cosponsoring the Ownership Thinking conference, to be held in the Denver area in September.
(National Center for Employee Ownership)

Webcasts and Conferences

"401(b) Plan Design Workshop" - Dallas
in Texas on August 13, 2010
presented by SunGard Relius

"403(b) Plan Design Workshop" - Atlanta
in Georgia on August 12, 2010
presented by SunGard Relius

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

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

Summer IRA and HSA Webinars
Nationwide on July 20, 2010
presented by Collin W. Fritz & Associates, Ltd.

Press Releases

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Newly Posted Employee Benefits Jobs

Associate Account Manager - Compliance Focus
for Cammack LaRhette Consulting
in NY

DC/401(k) Administrator
for Gelman Pension Consulting, Inc.
in NY

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