August 14, 2006

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DOL Grapples with Pension Fund Selections Required under Reform Bill's Auto Enrollment Feature
Excerpt: "Automatic enrollment requires an appropriate default investment, the holding spot for new retirement savings for workers who simply let the boss build their savings. That's where the Department of Labor comes in." (MarketWatch.com via Human Resource Executive Online; one-time registration required)

Faster Vesting, Automatic Enrollment Highlight Defined Contribution Provisions of New Pension Act (PDF)
5 pages. Excerpt: "Beginning in 2007, all employer contributions must vest completely after three years of service, or must vest at the rate of 20% per year beginning not later than the second year. This is the same vesting schedule that currently applies to matching contributions." (Seyfarth Shaw LLP)

Overview: Pension Protection Act of 2006 -- Investments, Insurance and Services (PDF)
15 pages. Excerpt: "The Pension Protection Act of 2006 includes a number of significant provisions that will change the way products and services are offered in the employee plan marketplace, particularly with respect to investments and investment services." (Sutherland Asbill & Brennan LLP)

Investment Management/ERISA DC Fiduciary Advice Provisions of the Pension Protection Act (PDF)
7 pages. Excerpt: "This Alert is intended to provide a roadmap through the investment advice provisions and some preliminary observations about their practical effect. Conclusions and interpretations will continue to evolve as the industry gains experience with these provisions." (Kirkpatrick & Lockhart Nicholson Graham LLP)

Overview: Pension Protection Act of 2006 Includes Defined Contribution Plan Changes
Excerpt: "Even though much has been made of the effects of this legislation on defined benefit plans, [here Perkins Coie highlights] a few of the major provisions that will affect defined contribution plans . . . ." (Perkins Coie)

Pamela Yip: Pension Legislation Puts the Workers in Control
Excerpt: "The pension bill that President Bush is expected to sign into law soon represents the most sweeping changes to the country's pension laws in more than 30 years. What does it mean to you? Basically, it's another step toward putting more responsibility on you to save for your retirement, rather than government and corporations taking care of you in your old age." (The Dallas Morning News: one-time registration required)

Overview of Major Provisions of Pension Protection Act of 2006
Excerpt: "The pension reform portion of the final bill addresses pension funding, participant education, hybrid plans, reporting and disclosure, plan terminations, and numerous other pension and employee benefit rules. This legislation reflects more than a year of often frequent acrimonious negotiations. The final provisions are complex, representing the first comprehensive pension legislation in more than 30 years." (CCH Pension and Benefits)

Overview: IRA Provisions Included in Pension Protection Act
Excerpt: "Although Congress designed the bill to reform the defined benefit retirement plan system and prevent taxpayer bailouts of under-funded pensions, this legislation also includes a host of significant changes affecting IRAs with various effective dates, some beginning in 2006. This article will summarize those changes." (Wolters Kluwer Financial Services)

Editorial: The Pension 'Reform' Piñata
Excerpt: "While voters may imagine that 'pension reform' involves doing something to stop the disappearance of traditional pension plans, it means no such thing. Healthy companies are increasingly curtailing their pensions, having concluded that they are not needed to attract or retain suitable employees. There is probably little Congress could do to stop the trend, even if it wanted to." (The New York Times; one-time registration required)

Senate Resolution Highlights the Benefits of Saving for Retirement
Excerpt: "Senators Gordon Smith (R-OR) and Kent Conrad (D-ND) recently introduced the resolution (S. Res. 550), which establishes National Save for Retirement Week, an event created to elevate public knowledge about retirement savings and to encourage employees to save in their employer-sponsored plans. The event is slated for Oct. 22-28 this year." (ICMA-RC)

Sprint Settles $29M Suit with Plan Participants Claiming Fiduciary Breach
Excerpt: "[US District Judge John Lungstrum, of the US District Court for the District of Kansas] gave his nod to a settlement by Sprint Nextel Corp. to shell out $25 million to more than 85,000 employees who had money in the company's 401(k) retirement plan since 1998." (PLANSPONSOR.com; one-time registration required)

New Analysis Cites Impact of FASB Proposal on Pension Plan Sponsors' Balance Sheets
Excerpt: "The Towers Perrin white paper updates an earlier analysis on the impact of the FASB proposal on the balance sheets of the Fortune 100 companies that sponsor defined benefit (DB) plans by reflecting year-end 2005 data, and comments on how that impact has changed during the first half of 2006." (Towers Perrin)

State's Retirement Fund Planners Base Projections on Higher Market Returns than Some Experts Predict
Excerpt: "The stakes are huge -- especially for California, which has more than $350 billion in retirement funds covering teachers and other public employees. Falling short of the nearly 8% return that state money managers project for those funds could create deficits of tens of billions of dollars." (Los Angeles Times; one-time registration required)

Comment Received by PBGC on the Proposed Rule Regarding Proposed Mortality Tables (PDF)
1 page. (Pension Benefit Guaranty Corporation)

Overview: Decision in the IBM Cash Balance Litigation
Excerpt: "In light of the Seventh Circuit's decision in Cooper vs. IBM, [CCA Strategies reviews] the age discrimination challenge to cash balance plans and how other courts have ruled. [They] also discuss where cash balance litigation may be headed next." (CCA Strategies LLC)

Overview: Court of Appeals Rules in Favor of Cash Balance Plans
Excerpt: "This favorable cash balance plan decision from the Seventh Circuit coincides well with the recent passage by Congress of the Pension Protection Act, which also contains favorable provisions validating the legitimacy of hybrid plans -- cash balance and pension equity plans -- on a prospective basis." (Hewitt Associates)

Overview: Federal Appeals Court Reverses IBM Pension Decision, Resuscitates Cash Balance Plans (PDF)
2 pages. Excerpt: "[I]n a mere 12-page ruling the appeals court restored reason to the cash balance universe by concluding that a difference in interest credits is attributable simply to the time value of money. 'Treating the time value of money as a form of discrimination is not sensible,' the court wrote, adding that the trial court had allowed the case to jump 'off the rails.'" (Lockton Benefit Group)

Setting Up for Retirement -- The Taxes and Retirement Income Balance
Excerpt: "It's not what you make, it's what you keep. That's an especially important maxim for baby boomers who will retire on tax-deferred savings. More than $10 trillion sits in tax-deferred accounts like 401(k)s and IRAs, and once retirees start pulling that money out, they may not be happy to learn they have to pay income tax on almost all of it." (Reuters via The Washington Post; one-time registration required)

Comments Received by PBGC on Proposed Rule on Liability Pursuant to Section 4062(e) of ERISA (PDF)
16 pages. (Pension Benefit Guaranty Corporation)

American Benefits Council Testimony before ERISA Advisory Council on Plan Assets (PDF)
7 pages. Statement of L. Randolph Hood, CFA, Prudential Financial on behalf of the American Benefits Council before the Advisory Council on Employee Welfare and Pension Benefit Plans Working Group on Plan Asset Rules, Exemptions and Cross-Trading on August 11, 2006 (American Benefits Council)

Retirement Systems Monograph from 2006 Re-Envisioning Retirement in the 21st Century Symposium
Excerpt: "This monograph consists of twelve papers presented at the 2006 Re Envisioning Retirement in the 21st Century Symposium held May 3-4, in Washington, DC. The papers included were submitted in response to a call for papers motivated by the SOA's interest in new visions for retirement income plans in the 21st century. The papers represent a consideration of retirement issues from a broad range of stakeholders." (Society of Actuaries)

Latest Developments in Superannuation in Australia
Excerpt: "These relate to the undeducted contributions cap and to the removal of the payment rules for people aged over 65 and are discussed in detail in [this] edition of Watson Wyatt's regular publication on superannuation issues, 'Super Update'." (Watson Wyatt Worldwide)

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Links to Items on Executive Comp, Benefits in General

Langbein Article on Judicial Review of Benefit Denials under ERISA -- Abstract and Link
Excerpt: "John Langbein (Yale) has posted on SSRN his forthcoming piece in the Northwestern University Law Review: Trust Law as Regulatory Law: The Unum/Provident Scandal and Judicial Review of Benefit Denials under ERISA." (Workplace Prof Blog)

Overview: New Antidilution Stock Plan Amendment May Be Required under Statement 123R (PDF)
1 page. Excerpt: "These antidilution provisions either permit or require companies to preserve the value of outstanding equity awards if an equity restructuring occurs. In practice, this most often is accomplished by making equitable adjustments that maintain the outstanding awards' 'intrinsic value' and ratio of exercise price (if any) to market price at the time of the transaction." (Frederic W. Cook & Co., Inc.)

New Pension Act Forbids Funding Deferred Compensation When Pension Plans Are At Risk (PDF)
1 page. Excerpt: "The Pension Protection Act of 2006 . . . amends Internal Revenue Code Section 409A to prohibit a public company from funding any deferred compensation arrangement for certain key executives and directors while its qualified pension plan is at risk, including making deposits into a rabbi trust or other arrangement that is subject to the claims of creditors." (Seyfarth Shaw LLP)

No Pension Worries -- At Least for Executives
Excerpt: "The pension bill [links] the retirement payouts of executives and their employees. Companies must fully fund their corporate pensions, for example, before they contribute to separate plans for executives . . . . That sounds like a good requirement, but Jan Jacobson of the American Benefits Council says it could have an unintended consequence. 'Companies may decide to freeze their pensions so they won't be limited in what they can do with their executives' . . . ." (Star Telegram.com; one-time registration required)

Overview: SEC Approves New Executive Compensation Disclosure Rules
Excerpt: "Companies will want to carefully review the SEC regulations when they are issued and assess how the new rules will affect their future disclosures. Clearly, most companies will need to disclose more information than in the past, particularly with regard to pensions, deferred compensation and perquisites -- as well as corporate practices involving the granting of stock options and the establishment of exercise prices for those grants." (Towers Perrin)

Companies Are Not Waiting to Alter Executive Compensation Practices
Excerpt: "Although the new proxy disclosure rules for executive compensation are not scheduled to go into effect until next year, many companies are not waiting. They're already making changes in their compensation arrangements in areas that could potentially be affected by the Securities and Exchange Commission (SEC) rules, which were formally adopted July 26." (Towers Perrin)

Federal Pay: Myth and Realities
Excerpt: "Federal workers receive generous health benefits during work and retirement, a pension plan with inflation protection, a retirement savings plan with generous matching contributions, large disability benefits, and union protections. They often have generous holiday and vacation schedules, flexible hours, training options, incentive awards, flexible spending accounts, and a more relaxed pace of work than private-sector workers." (The Washington Post; one-time registration required)

Backdating Options: What You Should Know (PDF)
2 pages. Excerpt: "Looking forward, it is critically important that compensation committees avoid being unwitting enablers of further abuses by taking proactive steps to ensure integrity in the system. Failure to do so may further taint stock options as a viable incentive tool, result in additional destruction of shareholder value, increase the likelihood of governmental and/or shareholder regulation of executive compensation, and possibly result in financial and other penalties . . . ." (Workspan via Frederic W. Cook & Co., Inc.)

Employees Have Money on Their Minds, at Least When It Comes to Workplace Surveys
Excerpt: "A news release from HR Solutions Inc. said its recent analysis of recurring themes in employee surveys showed workers most often pegged richer salaries as the area in which they most wanted to see a change." (PLANSPONSOR.com; one-time registration required)

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Newly Posted Events

Safe Harbor 401(k) Plans - Design and Administration
in Washington on September 14, 2006
presented by SunGard Corbel

Safe Harbor 401(k) Plans - Design and Administration
in Ohio on September 13, 2006
presented by SunGard Corbel

Safe Harbor 401(k) Plans - Design and Administration
in Colorado on September 14, 2006
presented by SunGard Corbel

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Newly Posted Press Releases

Retirement Plan Outsourcing Survey And Report
(McHenry Group, The)

Pension Preservation Network Launches Interactive Website to Unite and Help American Workers and Retirees Protect Their Promised Pensions
(Pension Preservation Network (PPN))

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Newly Posted or Renewed Job Openings


Sr. Benefits Manager
for Microsoft
in WA

Senior Plan Administrator
for RSM McGladrey Retirement Resources
in MD

Associate Director, Retirement Plans
for SONY BMG Music Entertainment
in NY

Plan Administrator
for Defined Contribution Retirement Plans - Relius Admin, Web and STP
in TX

Investment Advisory, Education and Enrollment Services Manager
for American Pensions Inc.
in SC

Annual Plan Reporting Administrator
for Vanguard
in PA

Consultant
for The Newport Group
in WI

Call Center/Client Relationship Representative
for Swerdlin & Company
in GA

Senior Retirement Plan Consultant
for Invesmart, Inc.
in TX

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Handy Links:

• View Today's Active Message Threads
• Using the Web for Employee Benefits Research (hypertext article)
• Employee Benefits Library

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