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Retirement Plans Newsletter

October 6, 2010

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[Guidance Overview]
Roth Conversions Within 401(k) Plans
Excerpt: "Notably, not all non-Roth amounts may be converted. Only non-Roth amounts that can be distributed from the plan at the time of conversion can be converted."
(K&L Gates LLP)

[Guidance Overview]
Decision Stands that Nestle Purina Cannot Deduct Distribution Dividends
Excerpt: "The U.S. Supreme Court has turned away a request by Nestle Purina Petcare Co. to review an 8th U.S. Circuit Court of Appeals decision that the company cannot deduct from its taxes cash distribution dividends paid when it redeemed stock held in an employee stock ownership plan."

[Guidance Overview]
State Street Stock Drop Suit Filed by General Motors' 401(k) Participants Gets Tossed
Excerpt: "[The District Judge] decided that State Street did not cause losses to the plaintiffs' accounts because the employees still had control over their investment selections."

[Guidance Overview]
Hardship Withdrawals and Plan Loans: Necessary Evils? (PDF)
Pages 1-2 of 6 pages. Excerpt: "[The] government allows plan sponsors to include hardship withdrawal and loan provisions in their plans. . . . To avoid taxes and penalties, [loans are preferable]."
(Swerdlin & Company)

[Guidance Overview]
Roth Within Plan Conversion
Excerpt: "In-plan conversion is permitted only where the plan document contains, or is amended to provide, a designated Roth elective deferral feature. Thus, the conversion ability is available only in plans that may offer designated Roth accounts, specifically 401(k)s, 403(b)s and (starting next year) governmental 457(b) plans. A plan sponsor cannot add the designated Roth account feature solely to allow for designated Roth rollover conversions."
(McKay Hochman Co.)

[Guidance Overview]
408(b)(2) Definition of Compensation for Disclosure Purposes
Excerpt: "The regulation defines five categories of compensation to be disclosed. Direct compensation; Indirect compensation; Compensation among related parties; Compensation for termination of the arrangement; and, Recordkeeping services."
(McKay Hochman Co.)

Preretiree Attitudes Toward Risk
Excerpt: "The second brief in our Retirement Attitudes series shows that even in a somewhat brighter economic climate, employees continue to be wary about their long-term retirement prospects. As a result, they are postponing their retirement, spending less, saving more and are more willing to pay for guaranteed benefits in the future."
(Towers Watson)

Financial Literacy, Schooling, and Wealth Accumulation
Excerpt: "Estimated impacts are substantial enough to suggest that investments in financial literacy could have large positive payoffs."
(The Pension Research Council; registration required to download papers)

Keeping Your Defined Benefit Plan Strategy Simple
Excerpt: "The KISS strategy for DB plans that we have outlined here is intended specifically for smaller family-owned, not-for-profit, and professional businesses, where it's likely to prove useful and effective."
(Employee Benefit News; free registration required)

401k Plan Sponsor & Participant Primer: The Risk-Return Tradeoff
Excerpt: "[T]he notions of 'risk' and 'return' - the fundamental elements of Modern Portfolio Theory - will remain a common sense cornerstone to any prevailing investment theory. Of the two, the average person understands the latter a lot better. The 'return' represents the amount of money made (or lost) on a particular investment (not including what you originally paid for the investment)."
(Fiduciary News)

Government Workers' Pensions No Longer Sacred
Excerpt: "Faced with deep budget deficits and overextended pension plans, state and local leaders are increasingly looking to trim the lucrative retirement benefits that have long been associated with government employment."
(The Washington Post; free registration required)

San Diego City Council Votes to Contribute More to Their Own Pension Plans
Excerpt: "The city subsidy for council members is particularly generous. The council voted to eliminate that subsidy, and pay almost 9 percent of their salaries into their pension funds."
(KPBS Public Broadcasting)

Workers Willing to Pay More for Guaranteed Retirement Benefits
Excerpt: "A Towers Watson survey found that a majority of workers (56%) would be willing to pay a higher amount from their paycheck to ensure a guaranteed retirement benefit. In addition, 54% of workers polled said they would be willing to pay a higher amount from their paycheck to ensure access to health care benefits if they retire before they are eligible for Medicare."

Being Financially Stretched Number One Reason Workers Not Saving
Excerpt: "The Transamerica Center for Retirement Studies' 11th Annual Retirement Survey finds, most working Americans continue to prioritize paying off debt and covering basic living expenses over saving for retirement. Almost two in five working Americans are saving less than before the recession."

How Pension Plans Are Impacting the Economy and What Employers Can Do About It
Excerpt: "Now faced with inadequate savings, rising health care costs and a decade of poor stock market returns, baby boomers are delaying retirement. The current situation will ultimately drive up payroll and benefit costs and curtail productivity unless private sector employers change course and get involved."
(Smart Business Network Inc.)

Borrowing from Yourself: The Determinants of 401(k) Loan Patterns (PDF)
33 pages. Excerpt: "We model factors that rationally would induce people to borrow from their pension plans, and we explain why people do not often use 401(k) loans to replace their more expensive credit card debt."
(University of Michigan Retirement Research Center)

Financial Knowledge and Financial Literacy at the Household Level (PDF)
52 pages. Excerpt: "This paper uses data from the Health and Retirement Study to explore the mechanism that underlies the robust relation found in the literature between cognitive ability, and in particular numeracy, and wealth, income constant."
(University of Michigan Retirement Research Center)

Excessive Pensions in the City of San Diego (PDF)
22 pages. Excerpt: "Some pensioners can draw four retirement allowances at the same time"
(Carl DeMaio for City Council 2012)

7 Deadly Sins Every ERISA Fiduciary Must Avoid: The 3rd Deadly Sin - 'Bond Insecurity'
Excerpt: "Sloth (in the investment world) - bonds (The easy way out of making a tough decision by succumbing to what has been considered 'the safest path.')"
(Fiduciary News)

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Benefits in General; Executive Compensation

[Guidance Overview]
Last Chance to Possibly Avoid 409A Penalties
Excerpt: "We are pleased to report that the IRS is offering relief from certain 409A penalties if companies make corrections on or before December 31, 2010. If you qualify and the corrections are properly and timely made, the IRS will treat your program as having been in compliance on January 1, 2009 (the first day after the original documentary compliance deadline), and generally no penalties will apply."
(McKenna Long & Aldridge LLP)

[Guidance Overview]
Increased Reporting Penalties and Cell Phone Relief in the Small Business Jobs and Credit Act of 2010 (PDF)
3 pages. Excerpt: "The Act includes two important provisions that are worth highlighting for employers and their payroll and account payable departments: (1) increased reporting penalties for informational returns, and (2) removed cell phone from 'listed property.'"
(Groom Law Group)

Audio: Survey Examines Company Car Policies Around the World
Excerpt: "[T]he value of company-provided cars as a retention tool [is explained and findings from Mercer's annual survey of car policies among employers in 76 countries is reviewed]."
(Mercer LLC)

American Academy of Actuaries' Comments Regarding Proposed Revisions of Accounting for Pensions and Other Postretirement Benefits (PDF)
3 pages. Excerpt: "The Joint Committee on Retiree Health and the Pension Accounting Committee jointly submitted comments to the NAIC regarding the exposure draft of SSAP 92 . . . and proposed revisions to SSAP 89 (pensions)"
(American Academy of Actuaries)

Employment, Labor and Benefit Law Trends for Navigating the New Decade (PDF)
64 pages. Excerpt: "Understanding trends and anticipating change will be essential. To help meet this challenge Littler offers ten employment and labor law trends for the second decade."
(Littler Mendelson P.C.)

Webcasts and Conferences

"ERISA Workshop" - Denver
in Colorado on November 3, 2010
presented by SunGard Relius

"ERISA Workshop" - Nashville
in Tennessee on November 3, 2010
presented by SunGard Relius

"ERISA Workshop" - Syracuse
in New York on November 2, 2010
presented by SunGard Relius

Complimentary Update - Form 1099-R Penalty Changes
Nationwide on October 5, 2010
presented by Convergent Retirement Plan Solutions, LLC

Press Releases

Newly Posted Employee Benefits Jobs

Regional Pension Consultant - Southeast
for Retirement Alliance, Inc.
in AL, AR, FL, GA, LA, MS, OK, TX

Operations Section Manager
for WilmingtonTrust Company
in AZ

Mutual Fund Services Section Manager
for WilmingtonTrust Company
in AZ

Conversion Consultant
for Summit Retirement Plan Services, Inc.
in OH

Benefits Analyst
for Marathon Oil Company
in OH

Pension Administrator
for Cornerstone Group

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