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Retirement Plans
Newsletter
May 8, 2006
Today's sponsor: InvestLink
(Click on company name or banner to learn more.)
InvestLink offers "Best in Class" administration and record keeping software on an Application Services Platform (ASP) for 401(k), Profit Sharing and all other Defined Contribution plans. The product was designed by administrators for administrators. This ASP platform requires no hardware investment for clients. It provides secure, disaster recovery, web-based services all at one bundled price. Additionally, InvestLink converts your old data on to our new platform at NO cost to you, with NO installation for the standard platform. Training and support included in the bundled price. Also, if you are a distributor contact us and learn more about working with us to distribute your investment products. For a free demo and pricing, contact tim@invlink.com or call Tim Slavin-CEO at 1-888-507-LINK.
(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)
Special Edition: Employee Plans News, May 5, 2006, Covers Rev. Proc. 2006-27 (PDF)
2 pages. Excerpt: "On May 5, EP issued the long-anticipated update, Rev. Proc. 2006-27, which revises EP's popular EPCRS, the comprehensive system of correction programs for sponsors of retirement plans that have failed to meet one or more requirements of the Internal Revenue Code. This new revenue procedure expands not only the types of failures that can be corrected under EPCRS but also the allowable correction methods." (U.S. Internal Revenue Service)
Rev. Proc. 2006-27: Restated Employee Plans Compliance Resolution System (PDF)
116 pages. Excerpt: "This revenue procedure updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of § 401(a), 403(a), 403(b), 408(k), or 408(p) of the Internal Revenue Code ... but that have not met these requirements for a period of time.... This revenue procedure modifies and supersedes Rev. Proc. 2003-44 ... The modifications to Rev. Proc. 2003-44 that are reflected in this revenue procedure include: ..." (Internal Revenue Service)
IRS Web Site on Correcting Plan Errors
Excerpt: "The components of [the Employee Plans Compliance Resolution System (EPCRS)] include the Self-Correction Program (SCP), the Voluntary Correction Program (VCP) and the Audit Closing Agreement Program (Audit CAP)." (U.S. Internal Revenue Service)
IRS Alert Guidelines, Explanations & Plan Deficiency Paragraphs
Excerpt: "Listed [on the target page] are Employee Plans Alert Guidelines (Worksheets), Explanations and Plan Deficiency Paragraphs (Checksheets). These forms and documents are tools used by Employee Plans Specia.lists during their review of retirement plans. These forms and documents are available to plan sponsors to use before submitting a determination letter application to the Service." (U.S. Internal Revenue Service)
Overview: Long-Awaited Rev. Proc. 2006-27
Excerpt: "It is interesting to note that the Table of Fees For Nonamenders ... has finally been made official in this new Rev. Proc. (See Section 14.04 of the Rev. Proc. at pgs. 54-55.) The table has to do with the compliance fees imposed by IRS on plan sponsors where a plan is submitted for a determination letter, and the IRS identifies-during the determination letter application process--that the plan was not properly amended for certain changes in the law." (Attorney B. Janell Grenier via BenefitsBlog.com)
A Clearer Picture of 401(k) Plan Fees Is Helping More Plan Providers Drive Down Costs.
Excerpt: "A small but growing band of employers is fueling a rebellion against long-opaque cost structures in the 401(k) plan market. Working with pension consultants to ferret out esoteric expenses, these plan sponsors are dissecting fee arrangements. Where the assets at stake are big enough to provide negotiating leverage, the sponsors are squeezing vendors for more-attractive deals." (CFO Magazine)
Roth 401(k) Has Significant Retirement and Estate Planning Opportunities for Business Owners/HCEs
Excerpt: "This article highlights retirement and estate planning opportunities that the Roth option affords to high net worth business owners and/or highly compensated employees who typically are: Prohibited from contributing to Roth IRAs due to the extent of their adjusted gross income; Desirous of maximizing retirement benefits; More likely than most not to outlive their pensions; and Empowered to add the Roth feature to their new or existing plan." (ERISA Expertise LLC)
Opinion: Fiduciary Focus: Non-Fiduciary Investment Consultants
Excerpt: "Most fiduciaries of 401(k) plans have a service provider that in some way gives assistance to them concerning plan investment options. Such providers include brokerage firms, insurance companies, banks, trust companies, mutual fund families, financial planning firms, and other entities offering their investment services." (W. Scott Simon via Morningstar)
Finding 401(k) Plan Fees May Take Research
Excerpt: "[I]nformation about your plan can sometimes be gleaned from federal Form 5500, in which employers must disclose certain fees and commissions paid to 401(k) brokers and plan providers. You can request the form from your employer or view it at no charge at www.free erisa.com, a Web site run by a benefits consulting firm." (The Los Angeles Times via MyrtleBeachOnline.com)
Actuaries' Letter to Bush Administration Protesting DOE Decision to Cease Support for DB Plans (PDF)
1 page. Excerpt: "[W]e are very disturbed to learn that the Department of Energy will no longer reimburse contractors for defined benefit costs related to employees hired in the future. This will force contractors to phase out their defined benefit plans and rely exclusively on 401(k)-type arrangements for new employees. This is totally inconsistent with a coherent national retirement security policy." (College of Pension Actuaries)
Opinion: Bush Administration Forces Federal Contractors to Negotiate Worse Benefits
Excerpt: "Here is how the Bush Administration celebrated Worker Memorial Day last Friday: instead of joining in a moment of silence for workers killed on the job, the administration issued a new directive announcing that the Department of Energy (DOE) would no longer reimburse health benefits for employees of its private contractors unless those benefits are 'market based.'" (Economic Policy Institute)
Washington State Starts to Address Public Employee Pension Deficit
Excerpt: "Over time, the state pension system built up IOUs of more than $4 billion, and legislators and governors made things worse by adding benefits and financing pensions on the cheap. Payments were actually skipped in the last two state budgets, despite a legal commitment to pay off the staggering debt by 2024. But finally the Legislature has tiptoed up to the problem." (AP via Seattle Post-Intelligencer)
Opinion: Keeping Employers Responsible for Their (and Only Their) Pension Promises (PDF)
3 pages. Excerpt: "The American Academy of Actuaries' Pension Committee ... offers the following discussion of possible means by which responsible employers who sponsor defined benefit plans, their employees, and the PBGC may avoid further harm." (American Academy of Actuaries)
New Jersey Teacher Pensions Underfunded by $13B
Excerpt: "New Jersey's retirement fund for teachers stands nearly 69% underfunded, with $29.6 billion in funds at the end of last fiscal year, according to a recent accounting report." (PLANSPONSOR.com: one-time registration required)
Another Small Correction to Final Reg on Disclosure of Relative Values of Optional Forms of Benefit (PDF)
Excerpt: "Section 1.417(a)(3)-1(c)(5)(ii)(B) is amended by removing the language 'Similarly, a participant is entitled' and adding the language 'Similarly, if a participant is entitled'." (Internal Revenue Service)
Higher Education Early Withdrawal Exception Only Applies to IRAs, Says Tax Court
Excerpt: "A participant in a qualified plan for public employees of Texas failed to convince the US Tax Court that she should not pay the 10% early withdrawal penalty on a distribution she obtained to pay for her husband's higher education expenses." (PLANSPONSOR.com: one-time registration required)
PowerPoint Presentation: Independent Fiduciaries of ERISA Governed Plans
24 slides. This presentation, made before the American Bar Association during the May 2006 Symposia, discusses using independent fiduciaries for ERISA governed plans. (ERISA-Fiduciary.com)
Commentary: Will Your Plan Participants be Able to Retire?
Excerpt: "We do not think that plan sponsors realize the important demographic differences that exist within their participant populations. If a plan sponsor is to minimize their fiduciary risk, it is essential to manage the education and advice provided to different demographic employee segments." (Carl J. Colombo via 401khelpcenter.com)
Alaska Senate Passes Revised Pension Bill Without One-Year Delay
Excerpt: "The Alaska Senate on Sunday passed a 34-page bill designed to clean up technical problems in last year's legislation that created a new pension plan for government workers and teachers." (Anchorage Daily News)
South Carolina High Court Orders Return of Contributions to Reemployed Retirees
Excerpt: "The South Carolina Supreme Court ruled unanimously that the state wrongly forced thousands of retirees in a retention incentive program to pay contributions toward their pensions." (PLANSPONSOR.com: one-time registration required)
Traditional Pension Plans Are Disappearing. So, Why Are They Expanding Among Small Firms?
Excerpt: "These plans -- which provide for a defined annual payout in retirement -- are especially attractive for high-earning baby boomers who have spent years funneling money back into their businesses at the expense of retirement savings." (Wall Street Journal Online; Free access for limited time period)
Treasury Official Criticizes Pension Bill Provisions Providing Targeted Benefits to Specific Firms
Excerpt: "Both the House and Senate pension reform bills (H.R. 2830) are laden with 'rifle shot' provisions that provide targeted benefits to one firm or class of firms and workers, Assistant Treasury Secretary Mark J. Warshawsky told the American Society of Pension Professionals and Actuaries (ASPPA) in Washington, D.C., on April 24, 2006. 'Put bluntly,' he said, 'these provisions have no place in a bill that should strengthen pension protections.'" (CCH Pension & Benefits)
Overview: Positive News About Defined Benefit Pension Plans
Excerpt: "H. C. Foster & Company's Retirement and Welfare Plans Newsletter believes there is positive news about defined benefit pension plans. Positive signs have emerged over the past few months for defined benefit pension plans at what may be the high point of the Section 401(k) fad, including: ...." (Cypen & Cypen)
Comments: Wobbly Third Leg -- Social Security at Risk
Excerpt: "A three legged stool is often used to describe retirement planning: private savings, pension benefits from employers and Social Security. The problem is that each leg is becoming increasingly wobbly." (Pension Risk Matters)
Editorial: Social Security Endures
Excerpt: "[President Bush's] main comment on the new [Trustees'] report is that the system is 'going broke.' He apparently still wants people to believe that their only options are ending up with nothing from the government in old age or relying on financial markets. That's a false choice and Americans recognized it as such when they rejected his push last year for private accounts." (The New York Times; one-time registration required)
Abstract: Pensions -- Corporate Finance and Capital Markets
Excerpt: "Because a significant portion of corporate financing is implicitly handled through pension vehicles, pensions are a quite important part of corporate finance and corporate financial policy. Yet many aspects of the interaction between pensions and corporate finance are imperfectly understood at both the theoretical and empirical level. This paper reviews the literature on the link between corporate pensions, corporate finance and capital markets." (Watson Wyatt Worldwide via Social Science Research Network)
IRS Weighted Average Interest Rate Table Updated for May 2006
Weighted average for May 2006: 4.82% (U.S. Internal Revenue Service)
Plan Sponsors Reluctant to Get Too Involved in a Total Retirement Outsourcing Contract
Excerpt: "Moving plan investments into a bundled solution appears to be a sticking point that inhibits the growth of DB and TRO bundling. Almost one-third of plan sponsors responded that they would be willing to bundle services to achieve incrementally lower costs." (PLANSPONSOR.com: one-time registration required)
Yawning Knowledge Gap on Retirement Income, According to Survey
Excerpt: "Misconceptions are widespread about how much is safe to withdraw from accumulated funds." (National Underwriter Life & Health; free one-time registration or paid subscription required)
Links to Items on Executive Comp, Benefits in General
Congress Seeks to Change Civil War Law for Veterans
Excerpt: "Soldiers who survived the Civil War often fared less well with dishonest lawyers who cheated them out of pension money. Congress is now trying to do something about the backlash, lasting 140 years, that has barred veterans from hiring attorneys to help them with benefit claims." (AP via The New York Times; one-time registration required)
Newly Posted Events
Managing your OPEBs under GASB 45
in California on May 24, 2006
presented by Nixon Peabody LLP
Medicare Part D
Nationwide on May 12, 2006
presented by West LegalEdcenter
The Basics of 5500s
in California on May 18, 2006
presented by No. Calif. Chapter of Certified Employee Benefits Specialists (ISCEBS)
Newly Posted Press Releases
PBGC Assumes Pension Plan Of Jernberg Industries Inc.
(Pension Benefit Guaranty Corporation (PBGC))
IRS Updates Voluntary Correction Program For Retirement Plan Professionals
(Internal Revenue Service (IRS))
Study Indicates Link Between Employee Turnover and Retirement Plan Participation Rates
(Charles W. Cammack Associates, Inc. (CWCA))
Newly Posted or Renewed Job Openings
Defined Benefit Client Account Manager
for New York Life Investment Management LLC
in MA
401(k) Administrator
for Creative Retirement Systems
in OH
Handy Links:
- View Today's Active Message Threads
- Using the Web for Employee Benefits Research (hypertext article)
- Employee Benefits Library
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