August 21, 2006

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Today's sponsor: ASPPA ? Working for America's Retirement?

(Click on company name or banner to learn more.)

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Text of Notice 2006-75: Weighted Average Interest Rate Modification (PDF)
2 pages. Excerpt: "[S]ection 301 of PPA '06 makes certain changes to the minimum funding rules that apply to ... plan years [earlier than 2008]. . . . This notice provides the composite corporate bond rates from December, 2005 through July, 2006, and the resulting corporate bond weighted averages for plan years beginning in the months from January, 2006 through August, 2006." (Internal Revenue Service)

Retirement News for Employers, Summer 2006 Edition (PDF)
16 pages. This edition contains articles on the following: Pension Protection Act of 2006; Waiver of the 60-Day Rollover Period; New User Fee Schedule for 2006; President Signs HERO Act; A Virtual Small Business Tax Workshop DVD; The Fix Is In: Common Plan Mistakes; Product Profile - Designated Roth Accounts under a 401(k) or 403(b) Plan Publication; and, the 'Timing is Everything' Flyer. (Internal Revenue Service)

Case May Cheer Firms with Own Stock in 401(k)s
Excerpt: "The number of class-action lawsuits filed by employees accusing their employers of encouraging them to make what turned out to be bad investment decisions has steadily increased. But a recent court decision regarding one of these cases may mean good news for employers." (Workforce Management; one-time registration required)

401(k) Fees Are Still Exorbitant, According to John F. Wasik
Excerpt: "Administrators are able to pass along their fees to you because they can legally hide them in expense ratios, and their compensation isn't disclosed in the 5500 form that employers must file with the U.S. Labor Department." (Bloomberg News)

Get Smarter About Your Retirement: Look at Your 401(k) Plan and Fund Costs
Excerpt: "The professionals who managed your pension fund used to ensure you'd be ready for retirement. That was their job. At many companies, pensions are no longer a promise, which means you might need to do the work of a professional retirement fund manager yourself." (AP via The Washington Post; one-time registration required)

Tax Break Is Extended to All 401(k) Heirs -- Including G.ay Partners
Excerpt: "A little-noticed provision in a pension law signed . . . by President Bush will for the first time allow anyone to inherit a 401(k) nest egg without immediately paying taxes on the windfall, a benefit that in the past was reserved for spouses." (Los Angeles Times; one-time registration required)

PPA Might Facilitate Provision of Investment Advice to Employees
Excerpt: "[A]bout half of all 401(k) plans still don't offer any advice, according to the Profit Sharing/401(k) Council of America -- in part because some employers have been uncertain about all their risks and responsibilities if the advice given turns out to be faulty. Many of those concerns may be alleviated now that President Bush has signed into law the Pension Protection Act of 2006." (The New York Times; one-time registration required)

Overview: New Pension Law Rules on Providing Investment Advice to 401(k) Plan Participants (PDF)
3 pages. Excerpt: "[The Investment Advice Exemption] serves two main purposes. First, it permits employers to arrange for investment advice to be provided to their plan participants while shielding the employers from liability for the investment advice that is actually provided[.] Second, it permits financial service firms who provide this investment advice to plan participants to market their own investment funds to plan participants without violating ERISA." (Paul, Hastings, Janofsky & Walker LLP)

On Making Enrollment in a 401(k) Plan Automatic
Excerpt: "The law allows companies to enroll employees in a 401(k) plan automatically unless they choose to opt out. Auto enrollment uses the human tendency toward procrastination, inertia or avoidance to the employee's advantage. 'They have to make the choice that they don't want to save,' said Jeffrey R. Carney, president of Fidelity Retirement Services, the nation's largest provider of 401(k) plans." (The New York Times; one-time registration required)

Corrected Link: New Pension Law Changes Fiduciary Rules in ERISA and Tax Code (PDF)
Excerpt: "The most significant change to the fiduciary rules in the Act is in the method of calculating the '25% test' to determine if an entity holds 'plan assets.' Under the revised test, governmental plans, foreign plans and certain church plans do not count against the '25% test.'" (Katten Muchin Rosenman LLP)

Generations Will Feel Pension Act Differently
Excerpt: "Experts who have studied the 900-page legislation say that different age groups benefit in different ways. For example, they say the new law is designed to spur younger workers to save more so they will have something to retire on. For these employees, the law provides incentives to save earlier and more often, and in sounder ways. Meanwhile, middle-aged and older workers will gain more from efforts to stabilize traditional defined-benefit plans." (The Washington Post; one-time registration required)

Overview: New Pension Law Significantly Modifies ERISA's Fiduciary Responsibility Provisions (PDF)
5 pages. Excerpt: "[T]he new law contains several changes in the ERISA fiduciary responsibility and prohibited transaction provisions that will have an impact on the management of pension plan assets." (Paul, Hastings, Janofsky & Walker LLP)

Overview: Impact of Pension Protection Act of 2006 on Individual Retirement Accounts (PDF)
3 pages. Excerpt: "IRA sponsors, custodians and trustees will need to update their IRA disclosure statements to reflect these new rules. In addition, pending anticipated future guidance from the Internal Revenue Service, IRA trust and custodial agreements may need to be revised (regardless of whether those agreements take the form of the model Internal Revenue Service trust and custodial agreements or prototype agreements)." (Kirkpatrick & Lockhart Nicholson Graham LLP)

The Future of Cash Balance Retirement Plans after Cooper v. IBM and the PPA
Excerpt: "Because cash balance plans are defined benefit plans, overfunded pension plans can be converted to cash balance arrangements without triggering near confiscatory excise taxes, and because they have the look and feel of a defined contribution profit sharing or money purchase plan, they are easy to communicate to employees." (Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.)

Many Provisions of the Pension Protection Act of 2006 Effective Upon Enactment on August 17, 2006
Excerpt: "The Act requires plan amendments relating to the Act to be made by the last day of the first plan year beginning on or after January 1, 2009." (Kilpatrick Stockton LLP)

Key Provisions of the Pension Protection Act of 2006
Excerpt: "The AICPA Employee Benefit Plan Audit Quality Center has prepared this summary of the Pension Protection Act of 2006 to assist members in obtaining a general understanding of key provisions in the Act relating to financial, reporting and other matters that are highlighted in this summary." (AICPA Employee Benefit Plan Audit Quality Center)

The Pension Protection Act of 2006 -- Summary and Outline of Provisions in Order of Effective Dates (PDF)
7 pages. (Transamerica Center for Retirement Studies)

Opinion: Invest the Social Security Trust Fund Surpluses?
Excerpt: "The options can be simply stated: Option A: Repair Social Security to serve as a safety net (insurance plan), or Option B: Convert Social Security to become in whole or in part an investment plan (mutual fund). As explained [in the target page], Option A is simpler and less costly in terms of transition costs than Option B." (The Washington Times)

IRS Composite Corporate Bond Rate Table Updated for August 2006
Corporate Bond Weighted Average Interest Rate = 5.78 for August 2006 (Internal Revenue Service)

Freddie Mac Reaches ERISA Class-Action Settlement
Excerpt: "Government-sponsored enterprise Freddie Mac has agreed to pay $4.65 million to settle an class-action lawsuit stemming from its falling stock price in the wake of a multi-billion dollar accounting scandal. The lawsuit was filed under the Employee Retirement Income Security Act." (BankNet 360)

New York City Has Many Ways to Track Pension Funds
Excerpt: "New York City's five pension plans look fully funded at all times, no matter what happens in the financial markets, because of the way the city's chief actuary, Robert C. North, calculates each year's contributions." (The New York Times; one-time registration required)

CalSTRS Will Take Steps to Address Funding Issues (PDF)
Pages 1, 11 of 12. Excerpt: "The latest actuarial valuation of the Defined Benefit Program shows that the program has 86 percent of the long-term funds needed to pay benefits due to current members." (California State Teachers' Retirement System)

San Diego Assemblyman Tries for Third Time to Get an Investigation of CalPERS
Excerpt: "Inspired by a recent audit that claimed to find intentional underfunding of San Diego's pension system, Assemblyman Keith Richman has asked the state attorney general for an opinion on whether the California Public Employees' Retirement System (CalPERS) has committed a similar violation." (PLANSPONSOR.com; one-time registration required)

New York City Gets Sobering Look at Its Public Employee Pensions
Excerpt: "[A] close inspection of city pension records shows that the funds committed to the plans may fall well short of the city's promises to hundreds of thousands of current and retired workers. They look fully funded chiefly because the city has been using an unusual pension calculation that does not comply with accepted government accounting rules." (The New York Times; one-time registration required)

The Far-Reaching Effects of Employment Discrimination on Retirement Plans
Excerpt: "Practitioners are accustomed to dealing with discrimination issues in the context of ERISA's requirements. Many professionals fail, however, to focus on other discrimination laws to which retirement plans are subject: the federal antidiscrimination laws." (Journal of Pension Benefits via Reish Luftman Reicher & Cohen)

Proposed Changes to EEOC Age Discrimination Regs Reflect Supreme's 'Reverse Discrimination' Decision
Excerpt: "The Supreme Court's decision has been the law since it was issued, despite the existence of the old regulations, so the proposed changes are somewhat in the nature of housekeeping, to bring the regulations into compliance with the Supreme Court's interpretation of the law." (Employee Benefits Institute of America Inc.)

Comment Letter Sent to SEC on the Proposed Distribution Plan for Columbia Funds (PDF)
7 pages. (The Spark Institute)

Puerto Rico Qualified Plans: Changes--Taxation of Distributions; Addition of Catch-Up Contributions
Excerpt: "The rules on the Puerto Rico income taxation of distributions from retirement plans qualified in P.R. have been significantly modified over the last few months. Many of these changes have been enacted in an effort to resolve the problems that have recently affected the P.R. government's finances and let to the temporary closing of several local agencies earlier this year. Also, catch-up contributions have been finally adopted in P.R. . . . ." (BNA Tax Management)

Text: Kirschbaum v. Reliant Energy, Inc. -- DOL Amicus Brief Filed August 16, 2006 (PDF)
22 pages. Excerpt: "The plaintiffs . . . allege . . . that the fiduciaries of their ERISA-covered 401(k) pension plan breached their fiduciary duties to the plan and to its participants by continuing to offer a company-stock fund as one of the investment options in the plan when they allegedly had inside information that the company's revenue and the price of its stock were artificially inflated as a result of misleading financial statements concerning energy trading practices." (U.S. Department of Labor)

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Links to Items on Executive Comp, Benefits in General

DOL Removes DC-Based Union in Fiduciary Breach Case
Excerpt: "Federal officials have announced that they have obtained a temporary federal court restraining order, removing a security guard union as fiduciary of its pension and health plans." (PLANSPONSOR.com; one-time registration required)

Web Site: DOJ Site Provides Information on Civilian Employment Rights of Armed Forces Volunteers
Excerpt: "The employees of the Department of Justice are proud to serve our nation's men and women in [the Armed Forces]. This site provides information on how the Department of Justice and . . . sister agencies can help you, and what you can do to protect your [civilian employment] rights under the law." (U.S. Department of Justice)

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Newly Posted or Renewed Job Openings


401(k) Client Relationship Manager
for The Douglas Group
in FL, IL, NJ, NY, PA

TPA Administrator
for Atlantic Pension Services Inc.
in PA

Retirement Plan Specialist
for McCamish Systems, LLC
in GA

Benefit Administrator
for Independent Benefit Services
in MD

Payment/Data Administrator
for Milliman, Inc.
in TX

Participant Communication Consultant
for Vanguard
in PA

DB Implementation Specialist
for Milliman, Inc.
in TX

Sr. Benefits Analyst for Corning Incorporated
for Corning Incorporated
in NY

Pension Administrator
for Benefit Strategies, Inc.
in CA

Health Management Advanced Actuary
for Hewitt Associates
in CT

401(k) Compliance Analyst
for AccuRecord, Inc.
in NY

Plan Document Specialist
for Louis Kravitz & Associates
in CA

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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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