BenefitsLink Retirement Plans Newsletter for December 2, 2010

[Official Guidance]
ERISA Section 4044 Mortality Rates for 2011 Valuation Dates
Excerpt: "These mortality tables are used to determine the present value of annuities in involuntary terminations and distress terminations of single-employer plans . . . ."
(Pension Benefit Guaranty Corporation)

[Guidance Overview]
Former YRC Worldwide Employees Denied Jury Trial in Stock-Drop Case
Excerpt: "[The District Judge] noted that all federal appellate courts have held that there is no right to a jury trial for ERISA claims. He also pointed out that courts have consistently characterized ERISA actions as akin to common law trust actions that are governed by common law trust principles."
(PLANSPONSOR.COM)

[Guidance Overview]
Regulation of Target-Date Funds: A Look Back and A Look Ahead
Reprinted with permission from Employee Benefit Plan Review, December 2010. Excerpt: "This column provides a brief background on target-date funds, surveys regulatory interest in target-date funds over the past few years, summarizes expected new regulatory initiatives and closes with suggestions for plan fiduciaries with target-date funds."
(Winston & Strawn LLP)

[Guidance Overview]
Amendments to IRA Documents Not Required for Now (PDF)
3 pages. Excerpt: "In a twist from the typical IRS approach to amendment requirements for tax-qualified retirement plan documents, Rev. Proc. 2010-48 establishes a new rule providing that IRA agreements do not need to be amended for various law changes since 2002 for IRA sponsors to take advantage of such law changes."
(Kelly, Hannaford & Battles P.A.)

Senate Committee Hearing: Is Stronger Management and Oversight Needed for the Pension Benefit Guaranty Corporation?
The target page provides links to a video and to download testimony.
(U.S. Senate Committee on Health, Education, Labor and Pensions)

Certain Well-Intended PBGC Policies and Actions Can Actually Threaten Business Viability and Increase PBGC Liability, According to Hearing Testimony
Excerpt: "As an example, [it was] noted that the PBGC recently proposed regulations regarding various corporate transactions, including the shutdown of operations. These proposed regulations would reverse longstanding PBGC written policy and would impose potentially enormous liabilities with respect to routine transactions that involve no layoffs or shutdowns and pose no threat to the PBGC."
(PLANSPONSOR.COM)

Statement of PBGC Director to the Senate Committee on Health, Education, Labor, & Pensions (Dec. 1, 2010)
Excerpt: "Today, I would like to describe and discuss how PBGC performs the complex tasks that ERISA has given the agency: Trying to preserve pension plans, Stepping in to pay benefits when plans fail, Working to recover what is owed those plans, and Maintaining high standards of stewardship and accountability. Of course, PBGC also works with Congress and the Administration to implement and improve pension laws."
(Pension Benefit Guaranty Corporation)

Testimony of U.S. Government Accountability Office at Senate Committee Hearing on PBGC (PDF)
22 pages. Given before the Senate Committee on Health, Education, Labor, and Pensions, December 1, 2010. Excerpt: "GAO has designated PBGC and the pension insurance programs it administers as 'high risk' areas in need of urgent attention and transformation to address economy, efficiency, or effectiveness changes."
(U.S. Government Accountability Office)

81% of Employees 18 or Older Will Not Be Able to Afford to Retire by the Age of 65
Excerpt: "According to results of the firm's 'Fall 2010 401(k) Retirement Readiness Study,' the average participant, relying on their 401(k) as a primary retirement vehicle, will not be able to retire until the age of 73."
(PLANSPONSOR.COM)

Retirement Industry Reps Blast Fiscal Commission Report
Excerpt: "According to a statement from Brian H. Graff [of The American Society of Pension Professionals & Actuaries], the commission's recommendations include reducing the defined contribution limit by more than half. Further, Graff said, tax free contribution limits would be cut from the current limit of $49,000 to a new cap of $20,000 or 20% of pay. If adopted by Congress, Graff warned that the plan would effectively eliminate employer sponsored profit-sharing plans, shifting responsibility for retirement savings to workers."
(PLANSPONSOR.COM)

Retirement Plan Loan Programs Typically Positioned As Participant Opportunity to Borrow from Themselves and to Pay Themselves Back with Interest
Excerpt: "[T]aking money from the plan, however temporarily, runs counter to the basic premise of tax-deferred savings. Every day the money is not in the plan, the participant loses ground in saving for retirement. [These pages] are my attempt to outline the considerations in a manner directed TO participants."
(PLANSPONSOR.COM)

The Role of IRAs in U.S. Households' Saving for Retirement, 2010 (PDF)
26 pages. Excerpt: "Four out of 10 U.S. households owned IRAs in 2010. More than three-quarters of IRA-owning households also had employer-sponsored retirement plan accumulations or had defined benefit plan coverage. All told, 70 percent of all U.S. households had retirement plans through work or IRAs."
(Investment Company Institute)

Appendix to 'The Role of IRAs in U.S. Households' Saving for Retirement, 2010,' with Additional Data on IRA Ownership (PDF)
20 pages. Excerpt: "Forty-eight percent of households owning traditional IRAs in 2010 and making withdrawals in tax year 2009 calculated their withdrawal amount based on RMD, compared to 64 percent in tax year 2008."
(Investment Company Institute)

Funded Status of Fortune 1000 Defined Benefit Plans Improves; Changes Made to Assumptions and Asset Allocation
Excerpt: "Positive investment returns were realized by 96% of the companies in FYE 2009, with an average actual annual rate of return of 18.06%."
(Wolters Kluwer)

How Well Are Social Security Recipients Protected from Inflation?
Excerpt: "We show that Social Security benefits net of average out-of-pocket medical expenses have declined relative to a price index for non-medical goods by almost 20 percent for men, and almost 27 percent for women, in the 1918 birth cohort. We also explore the extent to which indexing Social Security benefits to the CPI-E, an experimental measure of inflation for the elderly, would change these results."
(National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)

Framing Effects and Expected Social Security Claiming Behavior
Excerpt: "This project shows that individual intentions with regard to Social Security claiming age are sensitive to the manner in which the early versus late claiming decision is framed."
(Pension Research Council; registration required to download papers)

What Do People Know About Social Security?
Excerpt: "To gain benchmark information about how much people know about Social Security and the public's attitudes toward the system overall, this project undertook two surveys in the Spring of 2010: a random-digit-dial telephone survey and an internet survey using the American Life Panel . . . . This report summarizes survey results as well as significant differences between population subgroups."
(Pension Research Council; registration required to download papers)

An Empirical Analysis of 401(k) Loan Defaults
Excerpt: "Many 401(k) pensions allow plan participants access to their pension saving before retirement via a plan loan. This paper investigates the determinants of defaults on such loans, using a rich dataset of over 100,000 participants who terminate employment with a plan loan outstanding."
(The Pension Research Council; registration required to download papers)

[Opinion]
Post-Election Retirement Plan Reform: It's Not So Simple As Switching to a 401(k)
Excerpt: "First, Congressional Republicans should push to legalize 401(k) for the public sector since they were the ones who outlawed them. Ever since the Reagan tax reforms of 1986, federal law prohibits state and local governments from offering 401(k) plans unless they were then in place already."
(Governing)

[Opinion]
For Pension Funds, a Smarter Application of the 'Risk-Free Discount Rate'
Excerpt: "[M]y latest work on pension reform and retirement plan redesign has convinced me that the financial economists have a valid point that should not be lost in the national effort to redesign these retirement plans on sustainable terms. Instead of focusing on the employer's side of the balance sheet and payroll stub, we should apply their logic to the calculation of employee contributions to these retirement plans."
(Governing)

[Opinion]
American Benefits Council Testimony at Hearing on PBGC: Is Stronger Management and Oversight Needed? (PDF)
4 pages. Testimony given December 1, 2010, before the U.S. Senate Committee on Health, Education, Labor and Pensions. Excerpt: "The core problem we see is that PBGC and the business community need to communicate more effectively about why employers are fleeing the defined benefit plan system, why they are freezing their plans, and how certain well-intended PBGC policies and actions can actually threaten business viability and increase PBGC liability."
(American Benefits Council)

Benefits in General; Executive Compensation

Survey Finds a Balance of Work and Personal Time during Holidays
Excerpt: "American workers plan to juggle work and play by staying connected to the office while they simultaneously celebrate the season, according to a holiday Omnibus survey from Adecco Staffing US."
(PLANSPONSOR.COM)

Present Law and Historical Overview of the Federal Tax System
74 pages. Excerpt: "The Senate Committee on Finance has scheduled a public hearing on December 2, 2010, on 'Tax Reform: Historical Trends in Income and Revenue.' This document . . . provides a summary of the Federal tax system, briefly describes its historical development over the period of time beginning in 1975, and provides an appendix of selected historical data on Federal tax rates, Federal tax receipts, components of adjusted gross income, and other features of the Federal tax system."
(U.S. Congress, The Joint Committee on Taxation)

Is the Reduction in Older Workers' Job Tenure a Cause for Concern?
Excerpt: "Using data from the Health and Retirement Study . . ., we analyze trends in voluntary, pressured, and forced quits and risk factors associated with each type of quit. We show that leaving one's age-50 job between ages 50 and 56 in any of the above circumstances more than doubles the likelihood that an individual will be working part-time at age 60, relative to a base case of working full-time."
(Center for Retirement Research at Boston College)

Report of the National Commission on Fiscal Responsibility and Reform (PDF)
66 pages. Excerpt: "In establishing this Commission, the President gave us a two-part mission: to bring the budget into primary balance (balance excluding interest costs) in 2015, and to meaningfully improve the long-run fiscal outlook. Our recommendations accomplish both of these goals, while keeping . . . core principles in mind . . . ."
(The White House)

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