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Retirement Plans Newsletter

August 2, 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.
sales@datair.com or call 1-888-328-2474

[Guidance Overview]
Schedule C: A New Era in Annual Reporting (PDF)
4 pages. Excerpt: "The DOL expanded Schedule C disclosure as the first of a series of three 'fee disclosure' regulations intended to improve transparency and to provide plan fiduciaries and plan participants better information on which to base their decisions regarding the selection of service providers and the services they render."
(American Society of Pension Professionals & Actuaries via PrimeTRUST Advisors)

[Guidance Overview]
Service Provider Fee Disclosure Under ERISA § 408(b)(2) (PDF)
3 pages. Excerpt: "This Regulatory Brief will provide an overview of the new regulation, including a review of the impacted parties, the information to be disclosed, and Vanguard's approach to compliance."
(The Vanguard Group, Inc.)

California Pension 'Fix' Bill Would Codify 'Spiking,' Critics Say
Excerpt: "As momentum builds to curb inflated public employee pensions in Contra Costa and other counties, a Sacramento bill aimed at stopping the practice would make the problem worse, critics say. The bills' authors say the bill would rightfully leave to union negotiations most decisions about how to curb end-of-career increases in pensions."
(San Jose Mercury News)

Dodd-Frank Wall Street Reform and Consumer Protection Act Orders Study to Determine Whether Stable-Value Products Are Swaps (PDF)
2 pages. Excerpt: "Historically, a 'swap' has been a type of derivative instrument that involves a privately negotiated contract between two parties to exchange cash flows at specified intervals during the life of the agreement. However, the Dodd-Frank Act defines 'swap' very broadly to include almost any agreement where the value is determined by reference to an underlying asset."
(Prudential Retirement)

PBGC Holding $197 Million in Unclaimed Pensions
Excerpt: "For the more than 36,000 people still missing, individual benefits range from $1 up to $676,436 and average about $6,550."
(Wolters Kluwer)

Common Mistakes in Preparing Plan Committee Minutes
Excerpt: "In our experience, committees frequently fail to treat the preparation of minutes of their meetings with the importance they deserve. Listed . . . are a number of the items that should -- and a few that should not -- be included in committee minutes."
(Reish & Reicher)

When to Second Guess Your Target-Date Fund
Excerpt: "Target-date fund investments could lull an investor into a false sense of safety and security. This hands-off approach to investing encourages buying and holding for long-term success but it also opens the door to complacency. With your retirement investments on auto-pilot, you might not notice future changes such as a new investment strategy or an introduction of new fees."
(U.S. News & World Report)

How to Start a Cash Balance Pension Plan
Excerpt: "Contributions to the plan must be funded by the due date of your tax return including extensions and no later than eight and a half months after the year ends. That means you have until September 15, 2011 to fund the plan to get the deduction for 2010, assuming you've filed for a tax extension."
(Mansueto Ventures LLC)

Exchange-Traded Funds Not Popular for 401(k) Plans
Excerpt: "Investment advisers like ETFs for a bunch of reasons: They carry lower fees than most mutual funds, offer tax advantages and can trade like stocks. What's more, an ETF price war broke out among big financial firms this spring -- driving expenses and commissions even lower. So why aren't advisers, many of whom consult to corporate retirement plans, pushing to include ETFs in 401(k) portfolios?"
(The Wall Street Journal)

IRS to Issue Guidance for PRA Funding Relief Elections
Excerpt: "In Notice 2010-55, the tax agency said the anticipated guidance could deal with topics such as: calculation of the alternative amortization schedules permitted under PRA (and the effect on funding balances); the rules relating to installment acceleration amounts under section 430(c)(7); the procedures for making the election to use an alternative amortization schedule; and the notice requirements of section 430(c)(2)(D)(vi)."
(PLANSPONSOR.com)

Preliminary DROP Findings Show 'Substantial' Toll on Philadelphia's Pension Fund
Excerpt: "The Nutter administration's study of the deferred retirement option plan has been a well-kept secret in advance of its expected release . . ., with one remarkable exception: A Boston College coauthor of the study presented his preliminary findings to an academic conference six months ago."
(The Philadelphia Inquirer)

Some Retirement Plans Are Replacing Mutual Funds with Lower-Cost 'Collective Trusts'
Excerpt: "These alternatives are instruments from banks that are known as collective investment trusts or collective trust funds. They typically have lower expenses than funds, making them attractive to plan overseers and cost-conscious investors, who can see their returns enhanced."
(The Wall Street Journal)

Five Aspects of Financial Reform That Could Affect You
Excerpt: "The full impact of the law may not be felt for years, given the creation of a number of new government entities that need to be established and staffed. Conservative estimates indicate that regulators have been tasked with conducting nearly 100 studies and writing more than 350 new rules implementing the changes."
(The Vanguard Group, Inc.)

Judge Pares Fraud Case Involving a Political Consultant and Alleging Corruption in the State Pension Fund
Excerpt: "Prosecutors in the state attorney general's office said that [Hank] Morris and others had schemed to turn New York's $122 billion pension fund into a criminal enterprise. Their efforts netted them tens of millions of dollars in kickbacks from firms investing the fund's money, the indictment said."
(The New York Times; free registration required)

The Once-Maligned Annuity Is Bringing in a Bigger Share of Advisors' Revenues
Excerpt: "Media reports are increasingly highlighting the benefits of annuities, particularly their ability to help Americans convert retirement savings into guaranteed streams of income."
(Financial Planning)

Work and Retirement Patterns for the G.I. Generation, Silent Generation, and Early Boomers
Excerpt: "This study comparing retirement patterns over the past 30 years finds that older adults are now working longer and taking more complex routes out of the labor force."
(Urban Institute)

[Opinion]
The Social Security 'Problem' Can Be Solved
Excerpt: "Fact is, there is no Social Security crisis. The system isn't broke. There's financial trouble down the road but it's manageable. Yet the title of the House Ways & Means subcommittee on Social Security hearing on July 15 got to the essence of the matter: Social Security at 75 Years: More Necessary Now Than Ever."
(Bloomberg Businessweek)

[Opinion]
American Benefits Council Recommendations to IRS for 2010-2011 Guidance Priority List (PDF)
2 pages. Excerpt: "Most notably, we are anxious to see the pending final regulations on cash balance and pension equity plans as well as proposed regulations defining a market rate of return for hybrid plans. These regulations implement legislation enacted as part of the Pension Protection Act of 2006, which was enacted nearly four years ago."
(American Benefits Council)

[Opinion]
PPA Anniversary Hits Unimagined Retirement Landscape
Excerpt: "Looking back to 2006, the retirement communications of the PPA era have taken on a museum-like quality. The images of the content from that time often show carefree baby boomers strolling on the beach or smiling as they imagine retirements within their grasp. Today, the lucky boomers are the ones who are still working."
(PLANSPONSOR.com)

[Opinion]
Social Security's Finances Stable in the Short Term, but Most Experts Agree Program Needs to Be Bolstered for the Long Term
Excerpt: "[E]ven if it's not clear yet what, if anything, will be done to Social Security and when, we thought it would be useful to look at a worst-case possibility -- to assume that benefits will not continue to be as generous. This is especially important as pensions continue to fade away."
(The New York Times; free registration required)




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Benefits in General; Executive Compensation

[Official Guidance]
EBSA Solicits Nominations for Advisory Council on Employee Welfare and Pension Benefit Plans (PDF)
Excerpt: "The terms of five members of the Council expire on November 14, 2010. The groups or fields they represent are as follows: (1) Employee organizations (representing an organization whose members are participants in a multiemployer plan); (2) employers (representing employers maintaining or contributing to multiemployer plans); (3) accounting; (4) insurance; and (5) the general public."
(U.S. Employee Benefits Security Administration)

[Guidance Overview]
The Corporate Governance and Executive Compensation Provisions in the Dodd-Frank Act -- What to Do Now (PDF)
Pages 93-103 of 103 pages. Excerpt: "The Act requires the SEC to issue more than 90 rules and 15 studies, many of them relating to corporate governance and executive compensation. In some cases there is no deadline set for when the SEC must issue rules, while in other cases the SEC must adopt rules not later than a certain number of days or months after enactment of the legislation."
(Arnold & Porter LLP)

Transitioning Former Employees Into Contingent Workers
Excerpt: "To realize all potential benefits of this transition, employers must ensure that they continue to comply with applicable employment, labor, and tax laws, and that they properly classify their workforce. This article outlines the issues that employers should consider when transitioning to a contingent workforce[.]"
(Staffing Industry Analysts)

Benefits/Compensation Costs up Slightly in 2nd Quarter
Excerpt: "Wages and salaries (which make up about 70% of compensation costs) increased 0.4% while benefits (which make up the remaining 30% of compensation) increased 0.6%, according to a BLS news release."
(PLANSPONSOR.com)

Employers Get Creative with Incentives When Money Is Tight
Excerpt: "Employers are paying for business coaching and college tuition, training staff, subsidizing meals and extending family leave to ensure high productivity and strengthen themselves for post-recession expansion."
(North Jersey Media Group)


Webcasts and Conferences

Market Trends in Welfare Benefits
in Georgia on August 19, 2010
presented by WEB (Worldwide Employee Benefit Network) Atlanta Chapter


Press Releases

U.S. Labor Department Withdraws Proposed Rule on Definition of a Welfare Benefit Plan
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)


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