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Retirement Plans Newsletter

October 22, 2010

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[Official Guidance]
Text of Proposed Rule: Definition of the Term 'Fiduciary' (PDF)
16 pages. Excerpt: "This document contains a proposed rule under [ERISA] that, upon adoption, would protect beneficiaries of pension plans and individual retirement accounts by more broadly defining the circumstances under which a person is considered to be a 'fiduciary' by reason of giving investment advice to an employee benefit plan or a plan's participants."
(U.S. Employee Benefits Security Administration)

[Guidance Overview]
DOL Broadens Fiduciary Net with New Definition
Excerpt: "The proposed rule was unveiled [Thursday afternoon] by the Department of Labor (DOL), which noted that its adoption 'would protect beneficiaries of pension plans and individual retirement accounts by more broadly defining the circumstances under which a person is considered to be a 'fiduciary' by reason of giving investment advice to an employee benefit plan or a plan's participants.'"

EBSA Answers Questions on Proposed Fiduciary Definition Change
Excerpt: "[Fred] Wong, senior employee benefits law specialist, and author of the proposed regulation, said it is not designed to treat as a fiduciary a target-date fund investment manager for selecting underlying funds. Wong also noted that the proposal will not only affect employer-sponsored arrangements, but also IRAs since it extends to the Department of Labor's authority under Section 4975 prohibited transaction rules."

Former EBSA Secretary Raises Questions on Fiduciary Definition Change
Excerpt: "Calling the proposal a 'bull-in-a-china-shop' approach, Bradford P. Campbell, now an attorney with Schiff Hardin LLP, told PLANSPONSOR: 'The undisclosed conflicts DOL cites as justification for the proposal already are prohibited by the new 408(b)(2) regulation. It seems premature to turn a sweeping new class of service providers into ERISA fiduciaries when the new disclosure rules addressing the root of the problem haven't even had a chance to go into effect yet.'"

Labor Department Seeks Changes for Pension Plan Advisers
Excerpt: "[U]nder the Labor Department's new proposal, certain advisers would be considered fiduciaries even if they don't provide regular advice. In addition, the new rule would specifically include appraisals under the type of investment advice that could trigger fiduciary status. The aim is to try to prevent faulty valuations of employer securities, for instance."
(Dow Jones & Company, Inc. via NASDAQ)

[Guidance Overview]
Deadline for Amending Qualified Retirement Plans is Approaching
Excerpt: "To remain tax qualified under the Internal Revenue Code, plans must be amended to provide that the survivors of a participant who dies while performing qualified military service are entitled to any benefits (other than benefit accruals) that they would have received had the participant returned to work the day before his or her death."
(Michael S. Melbinger via Winston & Strawn LLP)

[Guidance Overview]
In-Plan Roth Conversions Allowed Under 401(k) and 403(b) Plans (PDF)
Excerpt: "Only amounts otherwise eligible for distribution from a defined contribution plan may be converted or rolled over to a Roth account within the plan."
(Drinker Biddle & Reath LLP)

[Guidance Overview]
Summary of Final Rule on Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans
Excerpt: "The DOL simultaneously amended the section 404(c) regulations to remove provisions made redundant by the new rule. The Department also clarified that section 404(c) does not provide any relief from the section 404(a) requirements concerning the selection and monitoring of a designated investment alternative."
(Profit Sharing / 401k Council of America)

[Guidance Overview]
Employer in Stock Drop Case Gets 2nd Chance
Excerpt: "A federal judge in Missouri has reversed himself and given a St. Peters, Missouri-based silicon wafer manufacturer another chance to argue that a stock-drop lawsuit against it should be thrown out."

PLANSPONSOR's 2010 Consultant Survey Includes Information Submitted by 69 Retirement Plan Consulting Firms
Excerpt: "Take a look at this year's compilation of 'Top 10s' in a variety of categories as well as individual listings for customer demographics by plan type and size, types and number of searches conducted on behalf of clients, as well as specific product/service areas of expertise highlighted by the firm."

Comparing Spending Approaches in Retirement
Excerpt: "This paper evaluates the potential financial impact of eight retirement spending strategies -- three based on systematic drawdowns, three using annuities, and two hybrid approaches. To help investors make more informed choices, we simulated the possible outcomes of these strategies, focusing on metrics that real-world retirees care about -- such as cash flow and portfolio residual value."
(The Vanguard Group, Inc.)

Philadelphia City Council Tries to Ease Surge in Deferred Retirement Option Plan Applications
Excerpt: "DROP allows employees of retirement age who have worked for the city at least 10 years to collect a lump payment when they leave the city in exchange for accepting a lower pension payment during retirement. Council has hired its own actuary to evaluate the cost of DROP and plans to start debating over the program this fall."
(The Philadelphia Inquirer)

Employers Step It Up for 401(k) Participants
Excerpt: "[A table from a survey] shows nearly all employers have gone beyond financial education and now help participants with the allocation decision."
(Profit Sharing / 401k Council of America)

U.S. Ranks 10th in Global Pension Index
Excerpt: "The U.S. retirement income system ranks tenth in the Melbourne Mercer Global Pension Index, designed to objectively compare private and public sector pension systems of 14 countries across five continents."

Fees, Framing, and Financial Literacy in the Choice of Pension Manager
Excerpt: "A growing literature shows how consumers make mistakes in a variety of different settings pertinent to financial decision-making. Using data from a randomized experiment in Chile, we show how different ways of presenting pension management fees shape consumer choices, and how responses to pension fee information varies by level of financial literacy."
(The Pension Research Council; registration required to download papers)

At Least One Social Security Reform Plan Would Cut Benefits for High Earners
Excerpt: "A Republican plan to rein in the rising cost of Social Security would dramatically reduce retirement benefits for middle- and upper-income Americans, especially those now younger than 25, according to an analysis released Wednesday by the program's chief actuary."
(The Washington Post; free registration required)

U.S. Public Pensions Skimp on Risk Management Staffs, According to Survey
Excerpt: "The study of 58 pension funds with combined assets of almost $2 tril.lion, titled 'How Pension Funds Management Investment Risks: A Global Survey,' showed that when compared to funds globally, US public funds have the smallest staffs dedicated to risk management, even taking into account fund size."
(Asset International, Inc.)

Public Pensions in Context: The Real Story on the Challenges and Common Sense Solutions
Excerpt: "In recent months, public pensions have been in the headlines often. As states work to close budget gaps -- even as revenues lag -- pension costs will, and should, be part of the discussion. But, much of the media coverage has been seized by a cacophony of negative voices on pension funding."
(National Institute on Retirement Security)

Live Poor or Die: The New American Retirement
Excerpt: "Anyone who doubts this blunt truth should take a look at a few recent trends. Start with something called the Retirement Income Deficit."
(Mother Jones)

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Benefits in General; Executive Compensation

San Diego's Prop D. Could Force Study of Deferred Retirement Option Plan Benefit
Excerpt: "The city has long delayed a promised study on the economics of DROP. That would change under Proposition D on the Nov. 2 ballot, which requires completion of the study as one of 10 conditions that must be met before a half-cent sales tax increase can kick in for the next five years."
(The San Diego Union-Tribune, LLC)

Webcasts and Conferences

Advanced COBRA Compliance: Preventing, Catching, and Correcting Mistakes
Nationwide on November 18, 2010
presented by EBIA / Thomson Reuters

Press Releases

PBGC Pays Pensions at Denman Tire LLC
Pension Benefit Guaranty Corporation (PBGC)

US Department of Labor and AICPA Sponsor Website Highlighting Small Business Retirement Solutions
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

US Labor Department Proposes Rule Defining ‘Fiduciaries’ of Employee Benefit Plans
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

CAHI Releases Health Insurance Mandates in the States, 2010
Council for Affordable Health Insurance

Newly Posted Employee Benefits Jobs

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