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Retirement Plans Newsletter

August 13, 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

[Guidance Overview]
Take Care When Calculating Pensions
Excerpt: "In Bloemker v. Laborers' Local 265 Pension Fund, the U.S. Court of Appeals for the Sixth Circuit, which covers Michigan and several other Midwest states, recently ruled that 'equitable estoppel' claims may now be made against a pension benefit plan. So what is equitable estoppel? Essentially, equitable estoppel allows a court to bind a party to its intentional misrepresentations when another party unknowingly relies on those misrepresentations and is injured by that reliance."
(Warner Norcross & Judd LLP)

[Guidance Overview]
Interim Final DOL Regulations Requiring New Fee Disclosures by Pension Plan Service Providers
Excerpt: "The Interim Final Regulations also continue the existing rule (without revision) that no contract or arrangement is 'reasonable' if it does not permit termination by the plan without penalty to the plan on reasonably short notice under the circumstances to prevent the plan from becoming locked into an arrangement that has become disadvantageous."
(Proskauer Rose LLP)

[Guidance Overview]
Equitable Reformation of Plan Permitted As § 502(a)(3) Relief
Excerpt: "In the typical ERISA case, the scope of relief under § 502(a)(3) poses a challenge for plan claimants. In Young v. Verizon, however, the plan sought relief under (a)(3) to avoid paying benefits according to a benefit formula that it contended contained an error."
(Roy Harmon via Health Plan Law)

[Guidance Overview]
New Regulation, Effective July 16, 2011, for Both New and Existing Arrangements Between a 'Covered Plan' and a 'Covered Service Provider'
Excerpt: "The regulation states: 'No contract or arrangement for services between a 'covered plan' and a 'covered service provider,' nor any extension or renewal, is reasonable within the meaning of section 408(b)(2)' unless certain disclosures are made to the responsible plan fiduciary."
(Reish & Reicher)

[Guidance Overview]
Court OKs $16.5M Caterpillar 401(k) Fee Settlement
Excerpt: "According to the order, the agreement calls for the employer not to include retail mutual fund shares as core investment options in the plans, to increase employee communications about 401(k) investment options and their associated fees, and for an independent fiduciary to monitor the plans during a two-year settlement period."

California State Worker Contracts Modifying Pension Benefits Get Assembly OK
Excerpt: "The Assembly voted 61-4 Thursday to ratify contracts with three state employee bargaining units that include some modifications to pension benefits - agreements that the Schwarzenegger administration worked out with the affected unions."
(The Sacramento Bee)

As Industry Takes Sides in SEC 12b-1 Debate, Will 401k Plan Sponsors Benefit?
Excerpt: "Joe Gordon, Managing Member at Gordon Asset Management, LLC, feels '12(b)1 fees are a notion that has outlived its usefulness. Fund companies do not need to charge these to distribute shares and collect assets. But, if the fees were fully disclosed, transparent, and flashing like a red light, then buyers would not be so easily duped.'"
(Fiduciary News)

New PBGC Head Urged to Address Inspector General Findings Regarding UAL Plan Termination
Excerpt: "Rep. George Miller (D-CA) . . . called on . . . the new director of the PBGC to immediately address serious concerns raised by the Agency's inspector general that an auditing contractor hired by the PBGC in relation to the termination of United Airlines' . . . pension plan terminations failed to exercise due diligence and that the PBGC failed to properly oversee the contractor."
(Wolters Kluwer)

How America Saves 2010: A Report on Vanguard 2009 DC Plan Data (PDF)
Excerpt: "This report . . . . found that many participants in 2009 experienced higher account balances, traded minimally in response to market volatility, increasingly diversified their assets through automatic investment programs, and protected their retirement nest egg when they left their employer."
(The Vanguard Group, Inc.)

How to Reduce Your ERISA Risks, and the Role of Fiduciary Liability Insurance (PDF)
32 pages. This white paper discusses the responsibilities of ERISA fiduciaries, the types of litigation that may be brought against them, and practical suggestions on plan design and administration.
(Chubb Group of Insurance Companies)

PBGC Assumes Responsibility for Seven Pension Plans of the Chicago Sun-Times
Excerpt: "The PBGC said it took action because the company sold substantially all of its assets in bankrup.tcy proceedings and the buyer did not assume the plans."

Can the Illinois Public Pension Catastrophe Be Stopped?
Excerpt: "Public pension systems in Illinois have long served as vehicles for the government to borrow money out of the view of taxpayers. In place of even higher public employee salaries, politicians have made unfunded pension promises extending far beyond their own terms in office. These debts are coming due, placing a massive burden on state and local budgets."
(Chicago Tribune)

Read This If Considering Moving to a Prototype Plan
Excerpt: "When prototype plans are used with proper legal oversight, they may be adequate for simple plans. But, often they are unable to accommodate more complex plans because legal limits apply to the changes that can be made to them. These documents also present increased compliance risks that don't arise with documents drafted by a plan's attorney, such as volume submitter or individually-designed retirement plans."
(Warner Norcross & Judd LLP)

401(k) Recordkeeper Consolidation Is Coming
Excerpt: "Price pressure is on 401(k) recordkeepers as a result of commoditized services, the government's focus on fees, and a slowdown in turnover among plan sponsors. With margins already thin, consolidation is inevitable - witness the sale of CitiStreet to ING and the acquisition of Hewitt by Aon."
(Employee Benefit News; free registration required)

California Governor Calls for a State Budget That Cuts Spending and Does Not Raise Taxes
Arnold Schwarzenegger, governor of California. Excerpt: "We must also reform California's pension system for government employees, whose costs to taxpayers for just one of our major pension funds have skyrocketed from $150 million a year a decade ago to almost $4 billion this year. Private-sector workers already struggle to pay for their own retirement. Now they are being forced to pay more and more for the government workers' retirement, at the very time their own retirement accounts have declined. What is worse, in five years those pension costs will grow to well over $10 billion per year, and keep growing from there."
(Los Angeles Times)

Valued by every practitioner and recommended for every ERPA candidate, The ERISA Outline Book, 2010 Edition by Sal L. Tripodi, J.D., L.L.M. offers six volumes of vital information on everything you need to know. Highlights include: IRS guidance on the waiver of 2009 required minimum distribution; automatic enrollment guidance from the IRS and Treasury; guidance on discontinuing safe harbor nonelective contributions; EFAST2 electronic filing system and DOL guidance; reporting guidance for 403(b) plans, guidance on deferrals from paid time off plans, court cases on scrivener's errors, and over 100 new rulings, guidances and regulations affecting retirement plans.

Order your copy of The ERISA Outline Book, 2010 Edition today! Visit now!

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Benefits in General; Executive Compensation

[Guidance Overview]
Shareholder Approval of Golden Parachute Compensation under Dodd-Frank
Excerpt: "This shareholder vote will not be binding on the company or the company's Board and, according to the statute, may not be construed as (1) overruling their decision, (2) creating or implying any addition or change to their fiduciary duties, or (3) restricting or limiting shareholders' ability to make proposals for inclusion in proxy materials related to executive compensation."
(Michael Melbinger via Winston & Strawn LLP)

Low-Cost, High-Impact Employee Benefits
Excerpt: "No matter how loyal, hard-working, or committed your employees may be, it's hard for them not to feel discouraged or unappreciated when their paychecks shrink. But money isn't the only motivator. Consider creative ways to show appreciation and boost team morale without hurting the bottom line."

Employee Benefits in a Multigenerational Workplace
Excerpt: "Whether your technology company employs members spanning four generations, or even just two generations, this article suggests employee benefits that should be considered to best align your company's productivity goals with the needs and attitudes of its multigenerational workers."
(Epstein Becker & Green, P.C.)

San Francisco Labor Unions Sue to Stop Pension Ballot Measure
Excerpt: "San Francisco's largest city labor unions have filed a lawsuit asking a judge to strip a measure from the November ballot that calls for city employees pay more into the retirement system and to pick up more of the health care costs for their dependents."

Employer Funding a Big Influence on Voluntary Benefits Selection
Excerpt: "In a nationwide survey of more than 2,800 employees, respondents rated the 'Likelihood of Using in the Near Future' as the most important factor influencing their benefits choices, followed by 'Financial Protection Provided.'"

Should Companies Grant Nonqualified Stock Options or Incentive Stock Options to Their Employees?
The writer generally recommends that private companies issue NQOs rather than ISOs for a variety of reasons and explains why.
(Davis Wright Tremaine LLP)

What Effect Will Defense of Marriage Act Cases Have on Benefit Plans?
Excerpt: "Although numerous federal laws are affected by the definition of a spouse, of particular note are those statutes affecting surviving spousal benefits, spousal consent requirements, qualified domestic relations orders, COBRA, flexible spending accounts, and taxation of medical benefits. Under Gill, a plan would be required to recognize the rights granted to a spouse under the relevant statutes."
(Tax Management Inc.)

Press Releases

John Hancock Retirement Plan Services Hires Two Regional VPs
John Hancock Retirement Plan Services

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