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Retirement Plans Newsletter

August 9, 2010

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SunGardís expert Document Management Services (DMS) staff can work as your "invisible" back office resource. We offer all ongoing plan maintenance for an average cost of only $125 per plan, per year. This service includes all IRS required restatements and amendments, employer-requested amendments and annual notices (EACA, QACA, etc.). Let SunGard focus on managing your plan documents, so you can focus on growing your business. For more information, please read more or call Ellen Nasrallah at 800.326.7235, ext. 5968.

[Guidance Overview]
Most Plan Loans Now Exempt from Truth-in-Lending Act Disclosures
Excerpt: "On July 1, 2010, revised regulations issued by the Board of Governors of the Federal Reserve System became effective to exempt most plan loans from the Truth in Lending Act's (TILA) disclosure requirements."

[Guidance Overview]
SEC Proposes Reform of Mutual Fund Distribution Framework
Excerpt: "Under the proposals, any distribution related fee in excess of the marketing and service fee would be considered an asset-based sales charge and would be limited so that, over time, an investor would pay no more in asset-based sales charges than he/she would have paid if he/she had purchased a class of shares with a front-end sales load."
(Paul Hastings)

Proskauer Rose's ERISA Litigation Newsletter, August 2010
Excerpt: "[The Edison case, being the first 'excessive fees' case to go to judgment following a trial,] illustrates that it may be worthwhile for plan sponsors to consider structuring their plans so that the plan's administrative costs are borne by the plan, not the plan sponsor. Such a structure can lessen or eliminate claims of conflicts when revenue sharing is used to effectively lower a plan's administrative expenses."
(Proskauer Rose)

Taming the Whale Lurking in Pension Financing: Overly Optimistic Investment Return Assumptions
Excerpt: "To make the whale work out if earnings are 7% instead of 7.75%, contributions need to be increased from 24% to 30%, starting the first date of hiring. If earnings are 6%, contributions need to be a whopping 39% of salary cost."
(Pensions & Investments)

Auto-IRA Bill Introduced With Employer Mandates
Excerpt: "[The] Automatic IRA Act of 2010 (S. 3760) enables nearly all employees who work for a private business with more than 10 workers and whose employer does not already offer a retirement plan to contribute to retirement savings through payroll deductions."

Huge Battle Looms Over Public Pensions; Who Will (Who Should) Foot the Bill?
Excerpt: "There's a class war coming to the world of government pensions. The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide. The have-nots are taxpayers who don't have generous pensions."
(Mike "Mish" Shedlock)

Disclosing Retirement Plan Investment Fees
Excerpt: "HR leaders and plan fiduciaries should begin planning now for regulations that take effect next summer, which require more transparency from service providers of defined-contribution and defined-benefit plans. The unbundling of complex service fees may make it easier for HR leaders to determine whether the costs are reasonable."
(Human Resource Executive Online)

Employers Slow to Restore 401(k) Plan Matching Contributions
Excerpt: "Although roughly the same number of employers suspended or reduced their 401(k) plan matches during another weak economic period from 2000-2001, benefit consultants say the rate of match restoration is a bit slower this time around. As employers move to reinstate those contributions, some are altering the way they calculate them . . . ." (Workforce Management
(free registration required))

Assessing Asset Allocation
Excerpt: "This review article describes recent literature on asset allocation, covering both static and dynamic models. The article focuses on the bond/stock decision and on the implications of return predictability."
(National Bureau of Economic Research)

Extending Life Cycle Models of Optimal Portfolio Choice: Integrating Flexible Work, Endogenous Retirement, and Investment Decisions with Lifetime Payouts
Excerpt: "This paper derives optimal life cycle portfolio asset allocations as well as annuity purchases trajectories for a consumer who can select her hours of work and also her retirement age. . . . [I]ntroducing annuities leads to earlier retirement and higher participation by the elderly in financial markets."
(University of Michigan Retirement Research Center)

Social Security Jitters? Better Prepare Now
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."
(New York Times; free registration required)

Pension Rights Center Urges Change to 'Active Participant' Reporting by DC Plans on Form 5500 (PDF)
2 pages. Excerpt: "Simply having an account balance does not imply actively contributing. . . . An improved definition of 'active' participants will be of great benefit to policymakers, as well as to researchers, analysts, the media and consumer organizations such as ours."
(Pension Rights Center)

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Benefits in General; Executive Compensation

[Guidance Overview]
Milliman's Monthly Benefit News and Developments, August 2010 (PDF)
2 page summary of legislative and regulatory developments during July.

Who Should Pay for the Trillion-Dollar Pension Gap?
Excerpt: "[G]iven that we've promised at least $1 trillion more in retirement benefits to public employees than we have put aside to pay for them, who should pay to make up the difference? Should it be the employees themselves who pay, through cutbacks to annual cost-of-living adjustments for current retirees or tweaks to benefits that those still working will receive?"
(New York Times; free registration required)

Webcasts and Conferences

Taking the Mystery Out of Retirement Planning Workshop
in Massachusetts on August 23, 2010
presented by University of Massachusetts Boston

Workshop on DB Plan Funding Relief and Fee Disclosure Regulations
in California on August 19, 2010
presented by National Institute of Pension Administrators - San Francisco Bay Area Chapter

Press Releases

Administrator/Trustee of Retirement Trust is Arrested for Embezzling Approximately $260,000 From the Trust
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

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