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January 7, 2011 Health & Welfare Plans Newsletter  |  Advertise  |  Unsubscribe

[Official Guidance]
Internal Revenue Bulletin No. 2011-1, Jan. 3, 2011, Includes 2011 Revenue Procedures for Employee Plans (PDF) – 260 pages. Excerpt: "These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations." (U.S. Internal Revenue Service)

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[Guidance Overview]
IRS Provides Refresher on Second Plan Loans – Excerpt: "The IRS posits the following example: The plan participant, P, asks for a second plan loan. P's vested account balance is $80,000. Eight months ago he borrowed $27,000, and still owes $18,000 on that loan. A few points. First, P could take a second loan only if the plan's terms allow it. Second, the maximum amount that P may now borrow, without being taxed, is determined under Section 72(p)(2)(A) of the Internal Revenue Code. Using the example, under that Section, P will be taxed unless the new loan, plus the outstanding balance of all other plan loans, does not exceed the lesser of . . . ." (Stanley D. Baum)

[Guidance Overview]
Charitable Gifts from IRAs Are Ideal Means to Make Donations – Excerpt: "For tax and financial advisors of donors 70 1/2 or older, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 signed in December allows donors to tap their Individual Retirement Account to make qualified charitable distributions through January 31, 2011." (AccountingWEB)

[Guidance Overview]
New IRS Requirements for 5500 Preparers Regarding PTINs – Excerpt: "The Notice says that virtually all tax forms are returns, but includes a list of forms which are not returns. The 5500 series returns (5500, 5500-EZ, 5500-SF, 5558), 1099 forms (including 1099-R and 1099-MISC), W-2 forms, and determination letter forms (5300, 5307, 5310, 8717) are not considered 'returns' for the PTIN requirements. That means a practitioner can prepare Form 5500 or Form 1099-R without having a PTIN." (SunGard Relius)

[Guidance Overview]
FASB Revises Its Position on Reporting of Participant Loans from Defined Contribution Plans (PDF) – 2 pages. Excerpt: "According to FASB's new position, the financial statements of defined contribution plans should classify participant loans as notes receivable, measured as the outstanding principal amount plus accrued but unpaid interest. This change affects any defined contribution plan that offers participant loans." (Prudential Retirement)

[Guidance Overview]
Optional Pension Income Tax Withholding Rule Lapsed December 31 – Excerpt: "Pension administrators should discontinue optional income tax withholding procedures at 2010 year-end, when the Making Work Pay credit expires. Some administrators adopted the procedures in 2009, concerned that IRS withholding tables could lead to underwithholding of federal income tax on periodic pension payments, which weren't eligible for the credit." (Mercer LLC)

[Guidance Overview]
The Liquidity Shortfall Contribution: An Important Problem in an Obscure Rule (PDF) – 4 pages. Excerpt: "[I]n order to ensure benefit payments, tax code Section 430(j) (previously Section 412) contains a liquidity shortfall contribution requirement. The liquidity shortfall is supposed to be measured at the end of every quarter, and if there is a shortfall, a contribution must be made within 15 days to make it up. However, there are numerous problems with the liquidity shortfall contribution." (The Bureau of National Affairs, Inc. via Alston & Bird LLP)

[Guidance Overview]
Pension Plans May Face Higher 2011 PBGC Variable Premiums Due to Low Interest Rates – Excerpt: "The PBGC VRP is equal to .009 multiplied by the unfunded vested liability for a plan year. So, if a plan has an unfunded vested liability of $1M, then their variable rate premium would be $9,000 = .009 x $1,000,000. A calendar year plan would usually calculate its vested benefit liability based on December 2010 PBGC interest rates, so those are the rates we want to focus on." (Van Iwaarden Associates)

2010 in Review: ERISA Individual Prohibited Transaction Exemptions (PDF) – 4 pages. Excerpt: "DOL published 34 individual prohibited transaction exemptions (PTEs) in 2010 -- exactly the same number as in 2009. As usual, exemptions for the sale of assets (particularly illiquid or underperforming assets) by a plan to a party in interest continued to be most prevalent . . . . These PTEs are summarized in the chart [on the target page]." (Sutherland Asbill & Brennan LLP)

The Tibble v. Edison International Case Highlights the Perils of Revenue Sharing – Excerpt: "I thought it might be of interest to go into some detail in describing the plan governance involved in running a large retirement plan such as the Edison 401(k) plan. That would include the various fiduciary entities comprising Edison's decision-making structure and how they rely on internal staff and outside advisors." (Morningstar Advisor Magazine)

PBGC Releases 2011 Premium Filing Information – Excerpt: "The per-participant flat-rate premium for plan years beginning in 2011 is $35.00 for single-employer plans and $9.00 for multiemployer plans (both unchanged from plan year 2010)." (International Foundation of Employee Benefit Plans)

Designing Outcome-Oriented Defined Contribution Plans (PDF) – 24 pages. Subtitle: Maximizing Absolute and Risk-Adjusted Returns for a New Normal Economy. (PIMCO)

U.S. Inquiry Said to Focus on California Pension Fund – Excerpt: "The fund, the California Public Employees' Retirement System, known as Calpers, lost about a quarter of its total investment portfolio during the financial crisis, leaving the state responsible for replacing billions of dollars each year and contributing to its huge deficit. The question is whether California adequately disclosed in the preceding years how risky the pension investments were and how much money it might need to cover any shortfall." (The New York Times; one-time registration required)

Protecting the Household Incomes of Older Workers with Significant Health-Related Work Limitations in an Era of Fiscal Responsibility (PDF) – 2 pages. Excerpt: "In contrast to a benefit-preservation (or -expansion) approach, in this paper we explore a set of policy options that favor 'work support' -- options designed to encourage and help workers continue to work if they can, perhaps with reduced hours or at lower paying jobs. The work-support approach has several distinct merits relative to the benefit-preservation approach." (University of Michigan Retirement Research Center)

DOL's About-Face on Advancement of Fees for Fiduciary Issues (PDF) – 6 pages. Excerpt: "In Johnson v. Couturier, DOL urged the Court of Appeals for the Ninth Circuit to affirm the denial of advancement of defense costs to alleged fiduciaries. DOL's position and the Johnson ruling have created a new and uncertain legal landscape." (Groom Law Group)

Will 2011 Investment Markets Bail Out Public Pension Funds? – Excerpt: "I would urge pension trustees to take the advice I will follow for my own retirement portfolio: shift asset allocation much more heavily toward bonds as the expansion ages, to weather the next inevitable recessionary storm. The problem of course is that a more conservative portfolio mix will reduce investment returns and dampen the funding ratio if initiated prematurely. 'Tactical global asset allocation' must become the dominant topic in fiduciary circles by 2015, I believe." (Governing)

Re-Thinking Retirement 'Rights' for Public Employees: Vesting Should Not Apply to Future Service – Excerpt: "[In the public sector] many states have gone overboard with an ill-conceived concept: Once employees walk in the door, they are guaranteed their pension and other retirement benefits formulas for life." (Governing)

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Benefits in General; Executive Compensation

[Guidance Overview]
IRS Guidance on Code Section 162(m)(6) Limits on Deductible Compensation (PDF) – 4 pages. Excerpt: "The Notice clarifies that deductions for compensation paid after 2012 for services performed before 2013 are limited only if the employer is a covered health care provider at both times. The Notice also includes a de minimis rule that exempts a health care provider from being treated as covered if specified premiums (the definition differs before 2013 and after 2012) are less than 2% of gross revenues." (Buck Consultants)

Monthly Benefit News & Developments, January 2011 (PDF) – 2 pages. The newsletter provides a summary of the previous month's legislative, regulatory, and judicial information on employee benefits and upcoming key dates. (Milliman, Inc.)

Financial Literacy: What Works? How Could It Be More Effective? (PDF) – 31 pages. Excerpt: "This paper highlights the extent and effects of financial illiteracy among American households, reviews previous efforts to promote financial literacy, and discusses new directions for such initiatives." (The Brookings Institution)

Affordable Benefits More Attractive Than Salary, According to Survey – Excerpt: "Only 15% of full-time, employed workers are actively seeking a new job, but two-thirds (67%) reported that, although they are not actively looking, they would change jobs in 2011 for the right opportunity. And it's not necessarily a bigger paycheck that would woo them; 68% reported that affordable benefits are more important to them than salary." (PLANSPONSOR.COM)

Workplace Class Actions Rose in 2010; More of the Same Expected in 2011 – Excerpt: "The report found that the top ten settlements struck last year in the areas of wage and hour, ERISA, and governmental enforcement class actions combined to total $1.16 bil.lion--the largest one-year figure since Seyfarth Shaw began keeping track." (ALM Media Properties, LLC)

Seyfarth Shaw's Annual Workplace Class Action Litigation Report (PDF) – 17 pages. Excerpt: "The 664-page Report, the seventh annual edition, is the most comprehensive analysis of workplace-related class actions in the U.S. It examines 848 decisions rendered in 2010 against employers in state and federal courts, including private plaintiff and government enforcement actions." (Seyfarth Shaw LLP)

Press Releases

US Department Of Labor Publishes 2010 Form M-1 For Multiple Employer Welfare Arrangements U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

US Labor Department Sues Defunct Cranbury, NJ, Company to Protect 401(k) Plan Participants U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Seyfarth Shaw Publishes 2011 Workplace Class Action Litigation Report Seyfarth Shaw LLP

Vanguard Offers Pre-Retiree 401k Plan Participants Access to CFP's Vanguard

BridgeHealth Launches Early Indicators: Enables Employers and Health Plans to Forecast and Control Costs for Major Surgeries, Reduce Financial Risks BridgeHealth Medical

Wellness Workdays to Provide Stayhealthy Technology to Measure Wellness Program Success Stayhealthy, Inc.

EmblemHealth Among the First East Coast Health Plans to Receive Full URAC Comprehensive Wellness Accreditation EmblemHealth, Inc.

Funded Status of U.S. Pensions Rises to 84.3 Percent, According to BNY Mellon Asset Management BNY Mellon

Employee Benefits Jobs

Pension Analyst
for Milliman in TX

Pension Administration Services Supervisor
for Milliman in TX

Manager, Compliance Testing and Reporting
for Prudential in IA

Manager, Product Marketing
for Prudential in CT, NJ

Webcasts and Conferences

Assistant Secretary Of Labor Phyllis C. Borzi To Host Teleconference On Americaís Health Care Coverage
Nationwide on January 10, 2011 U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

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