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Retirement Plans Newsletter

August 4, 2010

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[Official Guidance]
Text of Proposed SEC Regs on 12b-1 Fees (Mutual Fund Distribution Fees) (PDF)
77 pages. Excerpt: "The [SEC] is proposing a new rule and rule amendments that would replace Rule 12b-1 under the Investment Company Act, the rule that has permitted registered open-end management investment companies . . . to use fund assets to pay for the cost of promoting sales of fund shares. The new rule and amendments would continue to allow funds to bear promotional costs within certain limits, and would also preserve the ability of funds to provide investors with alternatives for paying sales charges (e.g., at the time of purchase, at the time of redemption, or through a continuing fee charged to fund assets). Unlike the current Rule 12b-1 framework, the proposed rules would limit the cumulative sales charges each investor pays, no matter how they are imposed. To help investors make better informed choices when selecting a fund that imposes sales charges, the Commission is also proposing to require clearer disclosure about all sales charges in fund prospectuses, annual and semiannual reports to shareholders, and in investor confirmation statements."
(U.S. Securities and Exchange Commission)

[Guidance Overview]
IRS Provides Instructive Primer on Serving Notices of Levy on Retirement Plans
Excerpt: "A recently issued Chief Counsel Advice memorandum explains the proper way for the IRS to serve notice of levy on a retirement plan. It explains that there are two kinds of levy that can be served on retirement or pension accounts, and the form of notice depends on whether or not the participant is currently 'entitled to income.'"
(Deloitte via

[Guidance Overview]
Plan Administrators May Be Estopped from Correcting Pension Benefit Calculations
Excerpt: "The Sixth Circuit has joined a growing number of U.S. circuit courts which, in certain circumstances, will prevent an ERISA pension plan administrator from correcting an inaccurate benefit calculation. Where the inaccurate benefit is represented in writing and extraordinary circumstances exist in which the equities strongly favor the participant, the Sixth Circuit now recognizes equitable estoppel by which a plan administrator can be prevented from correcting a previously calculated benefit amount notwithstanding the terms of the plan."
(Deloitte via

[Guidance Overview]
New Disclosure Rules for 401(k) Fees Go Into Effect Next Year
Excerpt: "Beginning July 16, 2011, service providers that are paid $1,000 or more from a retirement account must document the direct and indirect compensation they receive in connection with the services they provide."

[Guidance Overview]
IRS Addresses Time-Sensitive Aspects of Electing Alternative Amortization Schedules
Excerpt: "The Notice does not answer many of the key questions relating to the relief, including how to make an election to take advantage of the alternative shortfall amortization schedules. But it does respond to one question that apparently has come up regarding whether filing a Form 5500 for a plan year will preclude the plan sponsor from electing relief for that year."
(Deloitte via

Los Angeles, California, Council Orders New Pension Cost Studies
Excerpt: "Costs for the Los Angeles City Employees Retirement System, Los Angeles Fire and Police Pensions and the Department of Water and Power Retirement Plan have already increased nearly sixfold in the last decade, rising from $199 million in 2001-02 to $1.1 billion this year . . . ."
(Los Angeles Newspaper group)

Immediate Annuities Fit Well in Retirement Income Plans
Excerpt: "A fixed immediate annuity is a contract with an insurance company. Policyholders invest a lump sum in return for insurance company-guaranteed income, generally monthly, for as long as they live."
(Financial Advisor Magazine)

Update on DOL Regulations on Fee Disclosure as of August 3, 2010
Excerpt: "The regs are being issued in two parts: First part concerns the obligations of service providers to the fiduciaries; Second part is the obligation of the fiduciaries to the beneficiaries; First part out now, Second part in a few months and they are pending at the White House Office of Management and Budget."
(National Association of Government Defined Contribution Administrators)

Pension Participation and Uncovered Workers
This issue brief explores the participation issue.
(Center for Retirement Research at Boston College)

Active versus Passive Investment Management (PDF)
15 pages. This white paper evaluates active investing relative to passive investing from a broad perspective, identifying the reasons why active management provides an opportunity for investors to take advantage of the insight, knowledge, and skill of investment professionals and, in most cases, to better meet their investment objectives.
(Arnerich Massena & Associates, Inc.)

Los Angeles, California, Pensions May Consume a Third of City's General Fund by 2015
Excerpt: "All three [city pension] systems have seen the cost of benefits increase between 2001 and 2009. City officials attribute those increases to various factors: the collapsing economy, which caused investment losses in the three city pension funds; growth of the city workforce; longer life spans of retired city workers; and a 2001 ballot measure that gave police officers and firefighters more generous retirement benefits."
(Los Angeles Times)

Teacher Pensions Could Use Some Modernization
Excerpt: "In addition to their financial woes, public-sector defined benefit retirement plans have a number of structural elements that negatively affect the teaching work force, according to a report by non-profit think tank Education Sector."

Auto-IRA May not Help as Many Workers as Government Hopes
Excerpt: "Estimates by researchers for the Center for Retirement Research at Boston College indicate that if predictions are made only using data on the workers who currently have access to a plan, the policy effects would be greatly overestimated. If matched 401(k)-type plans were provided to all full-time employees, 75% of individuals would participate; however, controlling for selection, the predicted participation rate drops to 58%."

Stressed States Forcing Workers to Retire Later
Excerpt: "Lawmakers in at least 10 states have voted this year to require many new government employees to work longer before retiring with a full pension, or have increased penalties for early retirement. A similar proposal is pending in California. Mississippi, already among the states requiring more years of service for a pension, is weighing the additional step of increasing its retirement age."
(The Wall Street Journal)

Illinois Lawmakers to Probe Local Government Pension Practices
Excerpt: "Two Illinois lawmakers on Monday called for hearings to look into local government pension practices after learning how officials with the Park District of Highland Park intentionally used large bonuses to hike the pension of a district executive by more than $50,000."
(Chicago Tribune)

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

Health Insurance for Terminating Executives
Excerpt: "In addition to effectively eliminating executive-only supplemental plans, this may very well shut down the fairly common practice of providing post-severance health benefits (beyond COBRA) to terminating executives."
(Ford & Harrison LLP)

Webcasts and Conferences

ESOP Company Case Studies - Employee Involvement and Communication
Nationwide on December 14, 2010
presented by National Center for Employee Ownership

Press Releases

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