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Newsletter
January 14, 2009
Here are the Web's best new links about compliance and cost
aspects of plan operation, design and policy.
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[Official Guidance]
Text of PBGC Technical Update 09-1: Reportable Events; Funding-Related Determinations for Threshold Test, Waivers, and Extensions; Effect of the Pension Protection Act of 2006; Guidance for 2009 Plan Years
Excerpt: "In general, this Technical Update provides that for purposes of the reportable events regulation, a plan's unfunded vested benefits (UVBs) and the value of its assets and vested benefits are determined for a plan year beginning in 2009 in the same manner as for premiums for the preceding plan year. It also provides options for applying the 'Form 1 extension' for plan years beginning in 2009." (Pension Benefit Guaranty Corporation)
[Guidance Overview]
Provisions in Worker, Retiree, and Employer Recovery Act Grant Additional Benefits for Railroad Workers' Ex-Spouses
Excerpt: "The first provision will ensure that individuals with a court-awarded share of their former spouse's railroad pension will be able to begin taking the Tier I (Social Security) and Tier II (traditional pension) benefits as soon as their former spouse becomes eligible to receive the benefits -- regardless of whether the former spouse actually retires. . . . [Another provision clarifies that ex-spouses whose former spouses] died before the PPA . . . can still apply for and receive railroad Tier II survivor benefits, provided they were awarded these benefits in their divorce court orders." (Pension Rights Center)
[Guidance Overview]
Update on Service Provider Disclosure Under ERISA Section 408(b)(2) (PDF)
Excerpt: "At this point, the final regulation may be released any day, or it may not be released until after the inauguration of President Obama, or it may not be released at all, at least in its present form. . . . So what happens now? Can service providers retain their current contract and disclosure practices which, depending on the services provided and the current practices of the provider, may not include many of the disclosures contemplated by the proposed regulation? Our answer is 'no' for three reasons: . . . ." (Reish Luftman Reicher & Cohen)
[Guidance Overview]
The Future of DB Plan Funding Under PPA, the Recovery Act and Relief Proposals
Excerpt: "The overlay of the dramatic decline in asset values of the last few months on the incipient tougher funding requirements of the Pension Protection Act of 2006 (PPA) has prompted widespread concern about the magnitude of the required contributions to single-employer defined benefit (DB) plans in 2009 and 2010. In this analysis, Watson Wyatt estimates contribution amounts using a comprehensive and realistic model of plan funding under four scenarios: PPA alone; the Worker, Retiree and Employer Recovery Act of 2008 (signed by the President on Dec. 23, 2008); and two other major relief proposals, individually and in combination. Our calculations are based on market conditions as of Dec. 31, 2008." (Watson Wyatt)
[Guidance Overview]
Congress Supplies Funding Relief for Pension Plans Under Worker, Retiree and Employer Recovery Act of 2008 (PDF)
Excerpt: "The investment losses suffered by many pension plans in 2008 caused their asset values to tumble below -- in some cases, well below -- target funding levels. As a result, sponsors clamored for temporary relief from the onerous PPA rules that would otherwise apply to them. The WRERA answers those cries in several respects, although not adequately in the minds of many plan sponsors. The changes made by the WRERA include the following:" (Lockton Benefit Group)
[Guidance Overview]
Final Penalty Procedures for Failures to Provide Automatic Contribution Arrangement Notices
Excerpt: "EBIA Comment: The DOL's decision to omit from the preamble, without explanation, its earlier statement that a notice must be given before a participant's date of eligibility as well as annually raises the question of whether the DOL still believes that a pre-eligibility notice is required by the statute. That question may be moot, though, if as stated in the preamble the ERISA Section 514(e)(3) notice really is required only for arrangements that use the QDIA rules (which clearly do require a notice prior to eligibility and which require the QDIA notice to include considerable information about how contributions are made). Hopefully, the DOL will provide additional guidance on this issue as well as on the question of whether limiting application of the notice penalty to arrangements 'described in' the QDIA regulations will allow plans to avoid notice penalties by showing that they failed to satisfy some aspect of the QDIA rules." (Employee Benefits Institute of America)
San Jose Pension Costs Soar With Added Benefits
Excerpt: "As San Jose police battle for enhanced retirement benefits they say are crucial to recruitment and retention, a series of earlier sweeteners has helped push the city's pension costs for officers and firefighters up 167 percent since 2000." (San Jose Mercury News)
Pension Plan Deficits Hit Record $409 Billion for S&P 1500 Companies
Excerpt: "After an aggregate funding surplus of $60 billion at 2007 year-end, pension plans now face an estimated aggregate deficit of $409 billion. The study also predicts that pension expense will rise from $10 billion in 2008 to an estimated $70 billion in 2009." (Mercer)
EBRI Studies Lump-Sum Distributions at Job Change
Excerpt: "Workers' future financial adequacy in retirement can be profoundly affected by whether their lump-sum distributions at job change are cashed out or retained in another savings vehicle. This is particularly the case for younger workers and those with large balances. This article uses 2006 data (the latest available) from the Census Bureau's Survey of Income and Program Participation (SIPP) to analyze the decisions made by workers at job change when they receive a lump-sum payment from an employment-based retirement plan." (Employee Benefit Research Institute (EBRI))
Pension Assumptions Hitting The Wall
Excerpt: "With extremely low or negative interest rates and everyone from consumers to banks trying to shed debt and assets at the same time, what seemed like reasonable projections for a mixed portfolio of stocks, bonds and other assets are now substantially too high." (James Saft)
To Prevent 'Double Dipping' of Pay and Retirement Benefits, Phoenix Restricts Rehiring of Retired City Workers
Excerpt: "Retired Phoenix city employees may no longer be rehired to perform their previous duties, according to a policy authorized . . . this week." (azcentral.com)
San Jose Officials Urge Greater Pension Oversight
Excerpt: "San Jose City Council members Tuesday said they were alarmed by recent losses to the city's employee pension funds and urged adding more financial expertise to the funds' boards of trustees." (Santa Cruz Sentinel)
PBGC Stakes Claim in Bankrup.tcy Case
Excerpt: "The Pension Benefit Guaranty Corp., a federal agency that insures private pensions, identified itself as a creditor in the liquidation of Bernard Madoff's firm, suggesting it is preparing for bankruptcies by companies in the wake of an alleged $50 billion Ponzi scheme." (The Wall Street Journal)
Remaking Social Security from the Ground Up (PDF)
7 pages. Excerpt: "We asked four pension actuaries, knowing what they know today, to redesign Social Security from scratch. Here's what they came up with." (Contingencies)
Fiduciary Rules for Non-ERISA Plans
Excerpt: "In the past two columns, we've addressed the fiduciary requirements and certain safeguards for ERISA 403(b) plans. This column focuses on the same issue for non-ERISA plans, that is, public education plans or plans of tax-exempt entities in which there are no employer contributions and no employer 'control.' First, we need to dispel a couple of myths about the fiduciary issue for non-ERISA plans . . . ." (PLANSPONSOR.com; free registration required)
9th Circuit Finds QDRO Valid for 30-year Quasi-Marriage
Excerpt: "The 9th U.S. Circuit Court of Appeals has determined that a pension plan must recognize a qualified domestic relations order (QDRO) under Washington state law because the payee maintained a 'quasi-marital' relationship with the plan participant for more than 30 years. The court agreed with a federal district court in Washington that the Order issued by the Superior Court of King County awarding Norma Owens a 50% interest in Phillip R. Owens, Sr.'s pension benefits constituted a valid QDRO because it relates to 'marital property rights' and Norma qualifies as a 'dependent' of Phillip, and therefore as an 'Alternate Payee.'" (PLANSPONSOR.com; free registration required)
U.S. Supreme Court Turns Away AK Steel Review Request
Excerpt: "The nation's high court has turned down a request to review a $46-million award to former steel workers in a long-running pension dispute over whipsaw calculations used in determining lump sum pension distributions. The U.S. Supreme Court's decision came in a request by the AK Steel Corp. Retirement Accumulation Plan for it to take a look at an April 2007 6th U.S. Circuit Court of Appeals case (See AK Steel Cash Balance Distributions Not Covered by PPA) that kept intact the award for benefits and interest for the 1,250 former AK Steel workers." (PLANSPONSOR.com; free registration required)
Need for Help in Retirement Income Planning Grows, According to Report
Excerpt: "New reports from the Vanguard Center for Retirement Research indicate American workers increasingly need help to generate a sustainable income stream in retirement and a variety of solutions exist. In its first report, 'Spending the nest egg: Retirement income decisions among older investors,' Vanguard said its survey of older American investors (ages 55-75) revealed half of retired households tapped into their retirement accounts in the past year, typically as a large, one-time withdrawal. Only two in ten retirees are generating systematic payments from long-term accounts." (PLANSPONSOR.com; free registration required)
Study Shows U.S. Companies Face $109 Billion Pension Tab in '09
Excerpt: "U.S. companies may be forced to contribute almost $109 billion to their corporate pension plans this year to fill funding gaps caused by turmoil in the financial markets, a new study showed on Tuesday. Companies are failing to meet the minimum funding thresholds on their pension plans, which will force them to devote more capital to shore up their obligations, according to consulting firm Watson Wyatt (WW.N), which conducted the study." (Reuters)
[Opinion]
Pensions and Retirement Security: A Roadmap for Policy Makers
Excerpt: "Americans believe pensions can help reduce insecurity, with 55% expressing that a pension would increase their own retirement confidence and 84% saying that policymakers should make it easier for employers to offer pensions. Further, nearly nine out of ten Americans believe all workers should have a pension plan." (National Institute on Retirement Security)
[Opinion]
Text of American Benefits Council Letter to IRS on Use of 'Full Corporate Bond Yield Curve' in Proposed Regs Under Code Sec. 430(h)(2) on DB Plan Funding (PDF)
2 pages; January 13, 2009. Excerpt: "Briefly stated, there is no statutory basis for eliminating a plan sponsor's ability to use the corporate bond yield curve for any applicable month." (American Benefits Council)
[Opinion]
Vanguard Managing Director Defends 401(k) Plans
Excerpt: "Recent hearings before the U.S. House of Representatives Committee on Education and Labor have been critical of defined contribution (DC) plans. R. Gregory Barton, managing director of Vanguard Institutional Investor Group, responded to those 401(k) criticisms in a written statement dated October 21. Mr. Barton's statement defended DC plans as 'a cornerstone of Americans' retirement security.' The statement goes on to describe DC plan innovations 'that we believe will fulfill the promise to American workers of a retirement savings vehicle that is portable, secure, and capable of generating sufficient retirement income' -- innovations that include automatic enrollment, qualified default investments, and advice." (The Vanguard Group, Inc.)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview]
Milliman's Monthly Benefits News and Developments. Jan. 2009 Edition (PDF)
2 page list of principal employee benefits news and developments in December, 2008. (Milliman)
[Guidance Overview]
Related Employers May Rely on Single Filing for Top-Hat Deferred Compensation Plan
Excerpt: "Related employers sponsoring a top-hat deferred compensation plan need only file one registration statement, according to a new Department of Labor (DOL) advisory opinion. Top-hat plans are exempt from most ERISA reporting and disclosure rules if a one-time registration statement is filed with DOL. The guidance explains how to identify the 'employer' for a top-hat plan maintained by members of the same controlled group." (Mercer)
Civil Service Benefits Under Fire in New York As Costs Rise
Excerpt: "Pensions and health insurance -- once considered the sacred cows of Civil Service -- are under fire for their growing cost to the city and the state." (NYDailyNews.com)
The Case for a Complete Picture of Benefits Being Communicated to Participants (PDF)
Pages 1-3 of 9 pages. Excerpt: "Given that benefits play a significant role in employees' choices of where to work as well as their motivation and productivity once on board, how can an organization assemble a more complete picture of benefits for its employees? If 70% of organizations participating in a recent survey are any indication, the answer involves increased communication and education surrounding rewards programs." (Deloitte LLP)
ERISA Suits Led Workplace Class Actions in 2008
Excerpt: "The fifth Annual Workplace Class Action Litigation Report by Seyfarth Shaw LLP found that more than any other area of workplace litigation, Employee Retirement Income Security Act (ERISA) class actions took center stage in 2008 as case filings surged and settlements led all other types of class actions." (PLANSPONSOR.com; free registration required)
Newly Posted Events
2009 RMD Relief and Updated Reporting Requirements
Nationwide on January 15, 2009
presented by Convergent Retirement Plan Solutions, LLC
Paper! Paper! How to Implement a Paperless, Digital Workplace
in District of Columbia on January 28, 2009
presented by WEB (Worldwide Employee Benefits Network) Washington Chapter
Rochester Workplace Breakfast Briefing Series: Avoiding Common Employee Benefit Mistakes
in New York on February 26, 2009
presented by Bond, Schoeneck & King, PLLC
Newly Posted Press Releases
U.S. Employers Face More Than $108 Billion Pension Funding Tab in 2009, Watson Wyatt Analysis Finds
Watson Wyatt
ExpertPlan Continues Growth by Acquisition
ExpertPlan
Federal Court Prevents Fiduciary From Using Bankruptcy To Avoid Repaying Funds Owed To South Carolina Company?s SIMPLE IRA
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
U.S. Department Of Labor Sues Former Fort Lauderdale, Florida, Entertainment Company On Behalf Of Profit-sharing Plan Participants
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
U.S. Labor Department Sues To Appoint Independent Fiduciary For Retirement Plan Abandoned By Minneapolis-area Employer
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Reminder for Funding Opportunity: Sandell Grant Program
Center for Retirement Research at Boston College
RAND Launches Unique Tool to Evaluate Health Care Proposals
RAND Corporation
Newly Posted or Renewed Job Openings
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)Client Relations Representative
for Decimal, Inc. (www.theonline401k.com)
in CA
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