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Retirement Plans Newsletter

November 15, 2010

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[Official Guidance]
Text of PGBC Final Rule on Benefits Payable in Terminated Single-Employer Plans: Interest Assumptions for Paying Benefits (PDF)
2 pages. Excerpt: "This final rule amends Pension Benefit Guaranty Corporation's regulation on Benefits Payable in Terminated Single-Employer Plans to prescribe interest assumptions under the regulation for valuation dates in December 2010. Interest assumptions are also published on PBGC's Web site ('
(Pension Benefit Guaranty Corporation)

[Guidance Overview]
403(b) Plan Compliance Issues Illuminated As Plan Environment Is Being Overhauled
Excerpt: "Listed [in the target document] are the most common problems we have seen thus far. The astute plan adviser will anticipate and resolve these issues for his or her 403(b) plan."
(Employee Benefit News; free registration required)

[Guidance Overview]
Regulatory Brief on Participant Fee Disclosure (PDF)
4 pages. Excerpt: "[This overview of the regulation, including how it might impact service providers and sponsors, also provides an up to date guide] on two broad categories of information that must be disclosed: plan-related information and investment-related information.'
(The Vanguard Group, Inc.)

[Guidance Overview]
For 2011, No Change in IRS Dollar Limits, Social Security Wage Base, PBGC Premiums or PBGC Guarantee Limit
Excerpt: "This Bulletin reports indexed figures for 2011 that are of interest to sponsors of retirement plans."
(The Segal Group, Inc.)

[Guidance Overview]
Employer's Entire Withdrawal Liability Was Immediately Payable During Pendency of Arbitration
Excerpt: "The appellate court explained that, under ERISA §4219(c)(5), when there is a default, a plan sponsor may require the immediate payment of the outstanding amount of an employer's withdrawal liability."
(Wolters Kluwer)

IRS Will Contact Plans That Fail to Respond to 401(k) Compliance Questionnaire, Says Official
Excerpt: "[The official] reiterated that the 401(k) compliance questionnaire that was sent to 1,200 plan sponsors earlier this year is not an audit but, nonetheless, should be used by companies as an 'internal audit' to fix any problems."
(Wolters Kluwer)

Orange County, California, Studies Eliminating Taxpayer-Funded Pensions for Elected Officials
Excerpt: "[An Orange County Supervisor] talked his colleagues into forming an ad-hoc committee to explore the idea of moving elected officials away from defined-benefit retirement plans and toward 401(k)-style plans."
(Voice of OC (Orange County, California))

Nevada Public Employees Retirement System Board Adopts Higher Contribution Rates
Excerpt: "The Board was told the contribution rate for regular employees will have to increase by 2.25 percentage points to 23.75% in the coming two years, and the contribution rate for police and fire fighters will need to increase by 2.75 percentage points to 39.75%, according to the Nevada News Bureau. The 2011 Legislature will be asked to fund the state's increased retirement costs."

CalPERS Says it Won't Pay City of Bell, California, Pensions
Excerpt: "The California Public Employees' Retirement System . . . has announced that it will not pay pensions based on recent compensation set for a number of City of Bell positions, including those of the City's former Chief Administrative Officer, Assistant Chief Administrative Officer and Chief of Police."

401(k) Scorecard Shows Good News and Bad News
Excerpt: "The Bank of America Merrill Lynch '401(k) Contribution Activities Scorecard' for Q3 2010 found modest improvements in participants' saving behavior, but also record levels of loans and hardship withdrawals."

A Rebuilding Year for DC Plans?
Excerpt: "Just a year after a number of high-profile employers chose to suspend and/or eliminate their 401(k) matches, there was evidence of a modest restoration in the 2010 PLANSPONSOR Defined Contribution Survey."

The Future of Social Security: Solvency, Work, Adequacy, and Equity
Excerpt: "Social Security faces a $5.4 tril.lion shortfall over the next 75 years, but modest adjustments can halt that slide. Some argue that those adjustments should go beyond solvency, to improve the adequacy and equity of benefits, better protect vulnerable workers, and encourage work at older ages."
(Urban Institute)

Shining a Light on Murky 401(k) Fees
Excerpt: "The fees, which many funds both in and out of retirement plans levy on investors, range up to 1% of assets and take a bite directly out of returns. While they are included in fund expense ratios and disclosed in prospectuses, they can be used to cover a grab bag of costs, from advertising to compensating financial advisers."
(The Wall Street Journal)

In Face of New Volatility, Investors Will Flock to Active ETFs
Excerpt: "'In the next five years, the asset management industry will face the first fundamental change it has seen since the 1970s when ERISA was enacted,' said Don Putnam, chairman of . . . Grail Partners. Market instability, pressure on margins and consolidation will continue to roil the asset management industry, and in a desperate search for returns, investors will flock to actively managed ETFs."
(Financial Planning and SourceMedia, Inc.)

G.M. Retirees Weigh Buying Its Stock Again
Excerpt: "It is a decision being talked about at retiree clubs, union halls, and G.M. plants and offices across the country as the nation's biggest automaker prepares to become a public company again."
(The New York Times; free registration required)

Hidden 401(k) Plan Fees to Be Disclosed
Excerpt: "For decades, 401(k) plan fees were mostly invisible, even to employers who offered these retirement plans to their workers. In fact, a separate rule issued by the DOL last summer requires plan providers to disclose to plan sponsors all direct and indirect compensation related to 401(k) plans -- effective July 2011. And there are plenty of ways these plans can get dinged by fees, many of which get passed on to workers."
(Bankrate, Inc.)

New York State Pension Crisis Deserves House's Prompt Attention
Excerpt: "State House Speaker Keith McCall agreed last week to summon House members to return to work today, in particular to act on the pension legislation. The Senate has already approved the measure."
(Pocono Record)

Thoughts on the Debt-Reduction Commission: Social Security
Excerpt: "The Commission must be applauded for tackling what is perhaps America's most Sacred Cow; and yet, their proposals are anemic at best."
(Tully of Nolan Chart LLC)

A Highly Progressive Reform Plan for a Safer Social Security
Excerpt: "[I]t would be desirable to put the system on sounder financial footing. And that is precisely what the co-chairmen of President Obama's bipartisan commission on reducing the national debt have bravely proposed to do. It's too bad their proposal has been greeted with so much criticism, especially from progressives -- who really should look at it as an opportunity to fix Social Security without privatizing it."
(The New York Times; free registration required)

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Benefits in General; Executive Compensation

[Guidance Overview]
Executive Health Insurance: A Casualty of Health Care Reform
Excerpt: "[O]ne particular requirement with the potential to significantly affect some of the terms of health insurance previously provided to executive employees is effective for plan years beginning on or after September 23, 2010 (i.e., January 1, 2011 for a calendar year plan). The new requirement applies to insured health plans (but not to grandfathered insured health plans 1) and prohibits discrimination in favor of highly compensated individuals either as to eligibility to participate in the plan or as to benefits provided by the plan."
(Cooley LLP)

[Guidance Overview]
EEOC's Final Regulations on GINA's Employment Nondiscrimination Provisions Clarify Open Issues
Excerpt: "[T]he regulations elaborate on a wide range of issues for employers, including the exceptions for the receipt of genetic information in connection with the FMLA and other leaves of absence, for purposes of monitoring toxic substances in the workplace, and from publicly available sources."
(Employee Benefits Institute of America)

Pigs Fly as Washington Faces Up to Deficit
Excerpt: "Last week in Washington, beneath a flock of pigs flying south in a majestic V formation, the co- chairmen of President Barack Obama's deficit commission released a plan that actually could solve the nation's pending fiscal crisis."
(Bloomberg L.P.)

Senator Baucus to Introduce Bill to Repeal 1099 Reporting
Excerpt: "Senate Finance Committee Chairman Max Baucus, D-Mont., said Friday that he will introduce legislation to repeal a requirement that employers furnish 1099 statements if they do more than $600 in business with a corporate vendor."
(Business Insurance)

The Debt Commission's Free Ride for Boomers
Excerpt: "The U.S. debt reduction commission's initial proposal gives those free-spending Baby Boomers a virtual pass on financial sacrifice, writes columnist Chris Farrell[.]"
(Bloomberg Businessweek)

Press Releases

PBGC Helped Preserve Pensions For 360,000 In FY 2010
Pension Benefit Guaranty Corporation (PBGC)

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