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Retirement Plans Newsletter

July 23, 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 Proposed SEC Reg Revising Rule 12b-1 (Fees Charged by Mutual Funds for Distribution Services) (PDF)
278 pages, as submitted for publication soon in the Federal Register. Excerpt from an SEC press release: '[T]he proposed changes would replace existing provisions, including Rule 12b-1, that allow mutual funds to use their assets to compensate securities professionals who sell shares of the fund. . . . The proposal would limit the amount of asset-based sales charges that individual investors pay. In particular, the proposal would restrict these 'ongoing sales charges' to the highest fee charged by the fund for shares that have no ongoing sales charge. For example, if one class of the fund charges a 4 percent front-end sales charge, another class could not charge more than 4 percent in total to investors over time. The fund would keep track of how long investors have been paying ongoing sales charges."
(U.S. Securities and Exchange Commission)

[Guidance Overview]
Deadline for Tax Relief for Transfers of Assets and Liabilities Approaching for U.S. Qualified Plans with Puerto Rico Participants
Excerpt: "In addition to the tax advantage to Puerto Rican participants, another benefit of the transfer -- especially for 401(k) plans -- is that the U.S.-qualified plan would no longer have to perform nondiscrimination testing on contributions for Puerto Rico residents under the sometimes difficult to reconcile rules in the U.S. and Puerto Rico tax codes."
(Towers Watson)

[Guidance Overview]
Penalties for Failure to Disclose Retirement Plan Fees
Excerpt: "Beginning July 16, 2011, a failure to disclose will result in prohibited transaction excise tax penalties of 15 percent of the fees, compounded for each year that the violation continues."
(Warner Norcross & Judd LLP)

[Guidance Overview]
ERISA 408(b)(2) Fee Disclosure Rules Issued
Excerpt: "The purpose of this regulation is to have the service provider give disclosure to the plan sponsor and fiduciary in order for them to fulfill their obligations to determine both the reasonableness of what is being paid and the potential conflicts of interest that may affect the performance of those services."
(McKay Hochman Co.)

[Guidance Overview]
Final Defined Benefit Funding Relief: Analysis on How This Legislation May Affect Different Plans (PDF)
Excerpt: "It's easier to discuss this issue by focusing on who is not affected by the new law. Generally the relief may not be significant if: Your plan is overfunded, i.e., you have no current ERISA funding obligation other than (perhaps) normal cost. You must comply with what we call 'funding regime two' - i.e., to avoid certain penalties (e.g., a restriction on the ability to pay lump sums), you must get funding above 60% or 80%."
(Aon Consulting)

[Guidance Overview]
Pension Funding Relief: Beware of the Excess Compensation Adjustment (PDF)
3 pages. Excerpt: "While there is some cash flow 'relief' for plan sponsors in the new law, some of the adjustments could have a more detrimental effect than many have realized. In this article, we focus on the adjustments to required contributions regarding excess compensation."
(Aon Consulting)

[Guidance Overview]
SEC Adopts 'Pay-to-Play' Rules for Investment Advisers (PDF)
8 pages. Excerpt: "On July 1, the Securities and Exchange Commission (SEC) voted unanimously to adopt a rule designed to curb 'pay-to-play' practices by investment advisers who seek to manage money for state and local governments."
(Thompson Hine LLP)

A Report on Vanguard 2009 Defined Contribution Plan Data (PDF)
84 pages. Excerpt: "Overall, aggregate savings statistics have weakened modestly during the recent market volatility, but there has been a marked increase in participation rates among lower-income, younger, and newly hired employees -- again attributable to automatic enrollment."
(The Vanguard Group, Inc.)

The ESOP as an Estate / Retirement Planning Tool
Excerpt: "Employee Stock Ownership Plans (ESOPs) are a more viable alternative than ever as a business succession technique, and one that should be seriously considered by every business owner contemplating retirement."
(Fox Rothschild LLP)

Stress Test Your Fiduciary Focus: Are You Following Best Practices?
Excerpt: "Plan fiduciaries have the following duties: Act for the exclusive purpose of providing benefits to participants and defraying reasonable expenses of administering the plan. Act with care, skill, prudence, and diligence. Diversify investments to avoid large losses. Follow the terms of the plan."
(The Vanguard Group, Inc.)

Value of Retirement Benefits See Double Digit Decline over Decade, According to Analysis
Excerpt: "The analysis found that, from 1998 to 2008, the value of total retirement benefits provided to new, salaried employees in the eight industries studied declined by 19%, from 7.88% to 6.36% of pay. Total retirement benefits include DB and DC plans, retiree medical and retiree life insurance plans, according to a press release."

Fact Sheet: Raising Social Security's Retirement Age (PDF)
2 pages. Excerpt: "[Raising the retirement age] would promote work at older ages, improve the system's solvency by shortening retirements and reducing lifetime benefits, and better target benefits to the oldest Americans. It could, however, create hardship for workers with health problems unless Congress improves the disability safety net."
(Urban Institute)

With Yields Low and Fees High, 'Safe' Funds Used in Deferred Compensation Plans May Eat Away at Principal.
Excerpt: "Human-resources directors and finance officers need to look into their 457 and 403b deferred compensation plans. They may be using bond funds and money market funds with fees so high that their participants will likely earn negative returns."

Basic Public Pension Concepts for Public Officials or Candidates for Office
Excerpt: "[T]he problem facing most candidates running for office this year is that the reforms announced so far are nothing more than a small down payment on the major long-term structural changes needed to achieve long-term sustainability in public retirement plans. This column will address some of the challenges confronting those running for office."

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Benefits in General; Executive Compensation

[Guidance Overview]
An Overview of the Application of the Bankrup.tcy Law to IRAs and ERISA Retirement Plans
Excerpt: "In Patterson v. Shumate, . . . the Supreme Court held that the anti-assignment provision of ERISA section 206(d) is an enforceable nonbankrup.tcy law which results in the plan benefit being excluded from the bankrup.tcy estate of the plan participant."
(McKay Hochman Co.)

New Thinking on Executive Compensation: Pay CEOs with Debt
Excerpt: "Recovering US insurance giant AIG recently announced that 80% of their executives' bonuses will depend on the price of their firm's bonds and only 20% will depend on the price of their equity. This column argues that such moves will better align CEO fortunes with those of all investors - both shareholders and bondholders - and help prevent future financial crises."

Majority of Employers Offer Telecommuting, According to Survey
Excerpt: "Of those companies, two-thirds have offered telecommuting for three years or more."

Webcasts and Conferences

EFAST2: Amendments, Late Filings and Short Plan Years
Nationwide on August 19, 2010
presented by SunGard Relius

Press Releases

Parnassus Funds Added to CPI Retirement Platform
CPI Qualified Plan Consultants, Inc.

Securian Launches Facebook Page
Securian Financial Group

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