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Retirement Plans Newsletter

November 17, 2010

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[Official Guidance]
Fact Sheet: Retirement Security Initiatives under the U.S. Employee Benefits Security Administration
Excerpt: "The [EBSA] is committed to safeguarding employee contributions to 401(k) plans and health care plans by investigating situations in which employers improperly delay forwarding employee contributions to the appropriate funding vehicle or simply convert the contributions to other non-plan uses. Either or both scenarios may occur when the employer is having financial problems and turns to the plan as a source of financing."
(U.S. Department of Labor)

[Official Guidance]
DOL Fact Sheet: Contributory Plans Criminal Project
Excerpt: "EBSA Enforcement Efforts: To date, under the [Contributory Plans Criminal Project], EBSA has: Initiated 191 investigations; Referred 97 investigations to prosecutors; Obtained 20 indictments with 7 guilty pleas; Restored assets of $385,447."
(U.S. Department of Labor)

[Official Guidance]
Ten Warning Signs That Your 401(k) Contributions Are Being Misused
Excerpt: "An anti-fraud campaign by the Department of Labor uncovered a small fraction of employers who abused employee contributions by either using the money for corporate purposes or holding on to the money too long. Here are 10 warning signs that your pension contributions are being misused."
(U.S. Department of Labor)

[Guidance Overview]
Proposed Regulation on ERISA Definition of Fiduciary
Excerpt: "The preparation of general reports or statements to reflect the value of plan investments will not create fiduciary status unless the report 'involves assets for which there is not a generally recognized market and serves as a basis on which a plan may make distributions to plan participants and beneficiaries' (hard-to-value assets)."
(McKay Hochman Co., Inc.)

[Guidance Overview]
Roth IRA Ordering Rules for Distributions
Excerpt: "There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA."
(McKay Hochman Co., Inc.)

[Guidance Overview]
Forfeitures as Qualified Nonelective Contributions
Excerpt: "As a general rule, forfeitures consist mostly of contributions allocated to terminated participants that are subject to a vesting schedule. Many plans use forfeitures to offset employer contributions."
(McKay Hochman Co., Inc.)

[Guidance Overview]
Participant Disclosure Rules Under ERISA 404(a)
Excerpt: "The final rule is the long-awaited follow up to a proposed rule published in 2008, and is the third of a three-part DOL disclosure thrust. The rule becomes effective for plan years beginning on or after November 1, 2011."
(McKay Hochman Co., Inc.)

[Guidance Overview]
Treasury Issues Final and Proposed Regulations on Hybrid Plans (PDF)
11 pages. Excerpt: "The regulations define a statutory hybrid plan as a plan with a statutory hybrid benefit formula. The regulations then divide that category into (a) plans with lump sum-based benefit formulas (generally the formulas under cash balance plans and PEPs) and (b) plans with formulas with an effect similar to lump sum-based benefit formulas (generally variable annuities)."
(Buck Consultants)

[Guidance Overview]
DOL Completes Three-Pronged Approach to Requiring More Disclosure and Transparency of Fees and Other Expenses Related to Retirement Plan Administration and Investment
Excerpt: "Both plan and investment information must be provided to each eligible participant, whether or not actively participating, and to each beneficiary, including an alternate payee under a divorce order, who actually has a plan account."
(Warner Norcross & Judd LLP)

DOL Announces Nationwide Enforcement Actions to Protect Millions of Dollars in Worker Retirement and Health Benefits
Excerpt: "In the criminal arena, EBSA works with U.S. attorneys as well as state and local law enforcement agencies nationwide to bring criminal cases under ERISA that protect the contributions of American workers. The Contributory Plans Criminal Project is the agency's first criminal national enforcement project targeting persons who commit fraud and abuse against participants and beneficiaries of contributory employee benefit plans, including 401(k)s, and contributory health plans."
(U.S. Department of Labor)

DOL Says Some Business Owners Are Pilfering Employee Contributions to 401(k) and Health Benefits Accounts
Excerpt: "On [November 16], the department filed civil lawsuits against 24 companies and business owners alleged to have kept money withheld from paychecks that was meant for retirement or health accounts. The companies range in size, from fewer than 10 workers to more than 100 and the largest case involves more than $6 mil.lion in worker contributions."
(Gray Television, Inc.)

Big Firms Want Mandatory Retirement Plans, According to Study
Excerpt: "Plan sponsors also endorsed the idea of automatic increases in contributions each year until workers were setting aside more than 10% percent of their salaries toward requirement, according to the study by Northern Trust, Chicago."
(National Underwriter Life & Health)

PBGC Chief Says 38 Companies Decided Not to Terminate Plans This Year
Excerpt: "Despite concerns that the recent recession would trigger a flood of failed corporate pension plans, the Pension Benefit Guaranty Corp. took over fewer than 1% of the 27,500 plans that it backstops in its last fiscal year, according to its most recent annual report released Monday."
(The Wall Street Journal)

Federal Retirement Thrift Investment Board to Revisit More Aggressive Default Funds for TSP Participants
Excerpt: "The board that oversees the Thrift Savings Plan soon could revisit the idea of making life-cycle funds the default investment for participants who don't specify where they want their money invested."
(Government Executive)

'Fiduciary News' Trending Topics for ERISA Plan Sponsors: Week Ending 11/12/10
Excerpt: "[Fiduciary News provides] a quick synopsis of the major news events and trends impacting ERISA plan sponsors, 401k fiduciaries and those in the business of supporting these fine folks."
(Fiduciary News)

Arizona Public Pension Systems Becoming a Soaring Burden
Excerpt: "Even as local governments and the state are slashing budgets, Arizonans are propping up public-pension systems that allow civil servants to retire in their 50s, receive annuities that can exceed $100,000 a year, and collect pensions while staying on the same job . . . ."
(The Arizona Republic)

Pennsylvania House Passes Bill to Rescue State Pension Systems
Excerpt: "The so-called pension-reform bill would spread payments into the two pension systems over additional years, boost the retirement age for future employees, and give them the option of either contributing more to the plan or having their benefits trimmed."
(The Philadelphia Inquirer)

As Payouts Rise, New Tactics by PBGC
Excerpt: "Even though the government pension agency made sharply higher payments to retirees of bankrupt companies last year, it is using new legal tools to make hobbled companies carry more of the burden and protect itself."
(The New York Times; free registration required)

The Social Security Early Retirement Benefit as Safety Net (PDF)
19 pages. Excerpt: "We find that while the majority of early retirees would likely not qualify for disability benefits, approximately one in five have health characteristics similar to SSDI beneficiaries, and thus might not be able to replace losses in benefit income with labor income."
(University of Michigan Retirement Research Center)

Occupational Learning, Financial Knowledge, and the Accumulation of Retirement Wealth (PDF)
41 pages. Excerpt: "This study explores the relationship between general human capital investment, financial knowledge, occupational spillovers, and the accumulation of wealth in a primarily descriptive manner."
(University of Michigan Retirement Research Center)

Towers Watson Comments on PBGC's Proposed 4062(e) Regulation
Excerpt: "The proposal, provided under section 4062(e) of the Employee Retirement Income Security Act, primarily affects DB plan sponsors that relocate operations or downsize by closing a facility, liquidating assets, or selling or spinning off a subsidiary. [The target page provides a link to the full text of Towers Watson's comments to the PBGC along with other comments the PBGC received.]"
(Towers Watson)

ERIC Urges PBGC to Correct Deficiencies in Proposed Regulations on Reduction in Operations
Excerpt: "'ERIC is deeply concerned that the proposed regulation is inconsistent with the text and purpose of [section] 4062(e). The proposed regulation would expand the application of [section] 4062(e) to routine events that are far less significant than 'ceas[ing] operations at a facility in any location,'' says ERIC President Mark Ugoretz."
(The ERISA Industry Committee)

The Secret Sauce Behind Bloated State Pensions
Excerpt: "[N]o state does pension abuse like New Jersey, and no state is facing financial ruin from that abuse sooner than the Garden State. The state's unfunded pension debt per capita is the largest in the nation, and its pension fund is on target to be the first in the nation to run dry, in 2018."

Three Basic Ways to Save Social Security: Cut Benefits, Raise Revenue, or Do a Combination of the Two
Excerpt: "The bipartisan National Commission on Fiscal Responsibility and Reform, as part of a proposal to slash $3.8 tril.lion from the federal budget deficit, is taking the combo-and-then-some approach."

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Benefits in General; Executive Compensation

[Guidance Overview]
New Executive Compensation and Governance Requirements in Financial Reform Legislation
Originally published July 7, 2010; Updated November 12, 2010. Excerpt: "[Within the massive text of the Dodd-Frank Wall Street Reform and Consumer Protection Act] lurk new requirements that will impact executive compensation and corporate governance practices at most public companies, not just banks. This alert highlights these key executive compensation and governance changes, with updates on agency rule making through November 12, 2010."
(K&L Gates LLP)

[Guidance Overview]
Last Chance to Correct Penalty-Free: Section 409A, Notice 2010-6, and Transition Relief in 2010
Excerpt: "Although the Notice allow correction in subsequent years, the transition relief available in 2010 offers a chance to correct a number of such failures on a penalty-free basis."
(Dorsey & Whitney LLP)

[Guidance Overview]
Preparer Tax Identification Number Update
Excerpt: "As provided in the proposed regulations, to obtain a PTIN or other prescribed identifying number, a tax return preparer must be an attorney, certified public accountant, enrolled agent, or registered tax return preparer authorized to practice before the IRS under 31 U.S.C. 330 and Circular 230."
(McKay Hochman Co., Inc.)

FASB Defers Expected Effective Date for Project on Disclosures about an Employer's Participation in a Multiemployer Plan
1 page. Excerpt: "In light of the growing concern regarding the poor funding levels of many defined benefit multiemployer pension and other postretirement benefit plans, as well as the lack of information on commitments and risks provided by employers that participate in those plans, both [FASB] and [IASB] have issued separate exposure drafts that propose significant additional disclosure requirements for participating employers."
(PricewaterhouseCoopers LLP)

Obama Deficit Panel Gets Some Competition
Excerpt: "A bipartisan group will present a deficit-reduction plan on Wednesday that goes beyond the spending cuts and tax proposals from the chairmen of President Obama's fiscal commission. It also calls for a one-year holiday from Social Security payroll taxes to encourage hiring and for a national sales tax to reduce deficits."
(The New York Times; free registration required)

Webcasts and Conferences

401(k) Service Provider Compensation: Navigating the Required DOL and Schedule C Disclosures
Nationwide on December 14, 2010
presented by EBIA / Thomson Reuters

Press Releases

Newly Posted Employee Benefits Jobs

Education Consultant
for AXA Equitable
in NJ

Regional Director
for The Newport Group
in TX

Customer Service Representative for 401(k) Plans
for Houston based Employee Benefits Firm
in TX

Benefits Consultant
in CA

Relationship Manager II
for T. Rowe Price
in CA

Administration Manager/Senior Consultant
for Qualified Plan Consultants, LLC
in IA

Actuary - Part Time
for Prestigious mid-Long Island New York firm
in NY

Sales Support Specialist
for Northwestern Benefit Corporation of Georgia
in GA

Senior Account Analyst
for Freedom One Financial Group
in MI

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