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[Guidance Overview]
Proposed Rule under Investment Advisers Act Would Limit 'Pay to Play' Practices
Excerpt: "On August 3, the Securities and Exchange Commission (SEC) proposed new Rule 206(4)-5 under the Investment Advisers Act of 1940 (Advisers Act) aimed at curtailing 'pay to play' practices by investment advisers that seek to manage assets of state and local governments. The proposed rule would substantially restrict contribution and solicitation practices of investment advisers and certain of their related persons, and poses possibly draconian consequences for slip-ups. If adopted, the proposed rule will significantly affect investment advisers' compliance policies and procedures as well as recordkeeping requirements. [W]e discuss key aspects of the proposed rule and some of the many unresolved issues that will have to be sorted out in the comment process." (Morgan, Lewis & Bockius LLP)


[Guidance Overview]
Are Distributions to Nonspouse Beneficiaries Subject to 20% Mandatory Withholding?
Excerpt: "[Once new rules are] effective, all nonspouse beneficiary distributions will be subject to the normal rules for eligible rollover distributions, including the 402(f) notice and including the 20% mandatory withholding when the funds are paid to the nonspouse beneficiary, instead of being directly rolled to an inherited IRA." (McKay Hochman Co., Inc.)


[Guidance Overview]
Failure to Provide a 401(k) Safe Harbor Notice
Excerpt: "What happens if a plan does not provide the safe harbor notice to an individual or for all individuals for a year? The IRS has made it clear that nonetheless the safe harbor contribution must be made and that the plan is still safe harbored from testing, provided the safe harbor contribution is made. How is the failure to provide the notice to be handled? The IRS addressed this question in its Retirement News for Employers newsletter, Fall 2008 edition, page 6. Based on that article, the following examples reflect the IRS recommended handling of the situation when a safe harbor notice is not provided to an eligible employee." (McKay Hochman Co., Inc.)


[Guidance Overview]
FBAR Filing Deadline Extension
Excerpt: "In Notice 2009-62, the Internal Revenue Service (IRS) extends the deadline to file a Report of Foreign Bank and Financial Accounts form (FBAR) for the 2008 calendar year until June 30, 2010, for persons with (i) signature authority over, but no financial interest in, a foreign financial account or (ii) a financial interest in, or signature authority over, a foreign commingled fund." (Groom Law Group)


[Guidance Overview]
The Role of ERISA Counsel in the Fiduciary Process
Excerpt: "The recent case of In Re: Delphi Corporation Securities, Derivative & ERISA Litigation represents another victory for fiduciaries in a company stock case. As in most of the recent cases holding for fiduciaries, prudent practices and processes won the day and this recent case is no exception. However, what stands out in the case is the illustration that the case provides of the various roles that ERISA counsel can play in the fiduciary process and how utilizing counsel at critical junctures in the process can contribute towards a positive outcome for fiduciaries." (ERISA Fiduciary Guidebook)


[Guidance Overview]
IRS Expansion of Correction Procedure to Permit Correction of 401(k) Excess Amounts
Excerpt: "Under the most recent version of EPCRS (Rev. Proc. 2008-50), the IRS has expanded the definition of excess amount in such a manner that it should now cover [excess amounts described elsewhere]. Section 5.01(3) of EPCRS now provides the following definition: 'The term 'Excess Amount' means a qualification failure due to a contribution, allocation, or similar credit that is made on behalf of a participant or beneficiary to a plan in excess of the maximum amount permitted to be contributed, allocated, or credited on behalf of the participant or beneficiary under the terms of the plan or that exceeds a limitation on contributions or allocations provided in the Code or regulations.' Therefore, since a contribution of these other excess amounts is inconsistent with the plan terms, the employer should comfortably be able to correct this type of operational error under the self correction procedure (SCP) of EPCRS." (SunGard)


[Guidance Overview]
Navigating Qualified Plan Correction in Light of IRS and DOL Differing Perspectives
Excerpt: "The Employee Retirement Income Security Act of 1974, as amended (ERISA) is organized statutorily to empower the DOL to regulate the applicable fiduciary, trust, and claims and enforcement requirements. However, other requirements of qualified plans concerning coverage, eligibility, vesting, funding, and enforcement are included in ERISA but also duplicated in the Internal Revenue Code (Code). In addition, the reporting and disclosure requirements overlap regulation by both agencies. The result is that certain plan provisions, when violated, come under the regulatory authority of both the IRS and the DOL concerning the consequences, i.e., the method of correction and the penalties involved for violation. Recently, both agencies have been working to improve coordination between the two primary programs available for correction with agency approval, i.e., the Voluntary Correction Program (VCP), part of the Employee Plans Compliance Resolution System (EPCRS), under IRS auspices and the Voluntary Fiduciary Correction Program (VFCP) under DOL auspices." (Tax Management Inc.)


[Guidance Overview]
No Payment for Employee Who Died Before Application Was Received
Excerpt: "The 3rd U.S. Circuit Court of Appeals has ruled that a plan administrator did not abuse its discretion in denying a disability retirement benefit payment to an employee who died before his payment application was received. In its opinion, the court said the plan explicitly granted the Committee the authority to create a requirement for receipt of the application before death and the requirement is not an unreasonable interpretation of the plan. '[T]he Committee has consistently applied the receipt requirement, it does not conflict with the Plan, and it is consistent with both the Plan and ERISA's statutory provisions,' the court said." (PLANSPONSOR.com; free registration required)


Buyouts Lure 9,000 State Workers into Retirement in Six States
Excerpt: "Looking to shield their work forces from tumultuous cutbacks, at least six cash-strapped states have decided this year to spend millions on incentives to encourage government employees to retire. As the job security traditionally associated with state employment becomes increasingly uncertain in the face of large-scale layoffs and furloughs, these buyouts give states the chance to tighten their belts without fracturing morale." (StateLine.org)


Summary of Provisions of S. 1612, the ESOP Promotion and Improvement Act of 2009 (PDF)
1 page. Excerpt: "[Two provisions are as follows:] S. 1612 would repeal the punitive 10% penalty tax on S corporations distributions from current earnings, also referred to as dividends, placed on the distributions from current earnings that are passed through to ESOP participants in cash. S. 1612 would clarify that dividends paid by C corporations on ESOP stock are not a preference item in calculating the corporate alternative minimum tax." (The ESOP Association)


CBO's Long-Term Projections for Social Security: 2009 Update
Excerpt: "The Congressional Budget Office (CBO) projects that the Social Security trust funds will be exhausted in 2043. (Unless otherwise stated, the years referred to in this report are calendar years.) Thus, if the law remains unchanged, CBO projects that 34 years from now, the Social Security Administration (SSA) will not have the legal authority to pay full benefits. Such long-term projections are necessarily uncertain; nevertheless, the general conclusions presented here hold true under a wide range of assumptions." (U.S. Congressional Budget Office)


SEC Announces Enforcement Initiatives
Excerpt: "In a speech before the New York City Bar Association, marking the end of his first 100 days as Director of the Securities and Exchange Commission Division of Enforcement, Robert Khuzami formally announced several changes to the Enforcement program. Compliance Week reports that under a newly implemented rule, the commission has now amended its rules to 'delegate authority to the Director of the Division of Enforcement to issue formal orders of investigation.' In addition, Khuzami announced the formation of five specialized units within the Enforcement Division: asset management, structured products, municipal securities and public pensions, foreign corrupt practices, and market abuse." (PLANSPONSOR.com; free registration required)


Taking Advantage of the Required Minimum Distribution Holiday for IRAs
Excerpt: "The RMD holiday provides some flexibility: Forgoing the distribution is optional; it is not an all-or-nothing provision. The recipient may withdraw any amount, down to and including $0. Because a plan participant may take a distribution as late as the last day of the year, the participant is in a good position to take a distribution that optimizes tax savings. [For example, i]f a taxpayer has unusually high medical expenses, much of the income resulting from an IRA distribution may be shielded from tax. Excess medical expenses cannot be carried over to another tax year, so the deduction will be lost if not offset." (American Institute of Certified Public Accountants)


Defined Contribution Plans for Nonprofit Organizations: Understand How New 403(b) Plan Requirements Compare to 401(k)s
Excerpt: "When it comes to qualified retirement plans, the 403(b) has long been the default alternative for nonprofit organizations. The lack of nondiscrimination testing for elective deferrals and no plan audit requirement as well as the ability to avoid Employee Retirement Income Security Act (ERISA) regulations have traditionally been the biggest benefits associated with sponsoring a 403(b) plan. However, because of recent regulations, these key differentiators no longer apply to all 403(b) plans. The challenge for nonprofit organizations and the CPAs who serve them is to understand how these new regulations affect 403(b) plans and when a 401(k) might be a better option. This article explores the new regulations and the key questions CPAs need to ask when discussing these options with their nonprofit employers or clients." (American Institute of Certified Public Accountants)


Sotomayor Expected to Stay Mainstream in Pension Rulings
Excerpt: "Sonia Sotomayor, the U.S. Supreme Court's first Hispanic justice, isn't expected to shatter precedent with her rulings on high court pension cases, according to ERISA attorneys. The Senate confirmed Ms. Sotomayor Aug. 6 by a 68-31 vote. In her almost 11 years as a judge for the U.S. Court of Appeals for the Southern District of New York, Ms. Sotomayor was involved in about 20 ERISA-related cases. In none, sources say, did she betray a bias toward plan participants or plan sponsors -- and her record suggests she will continue down the ERISA mainstream that was followed by former Associate Justice David Souter, whom she is succeeding." (Pensions & Investments)


Will 401(k) Participation Wither Without an Employer's Matching Contribution?
Excerpt: "In April, the accounting firm Grant Thornton conducted a survey of 283 US companies and found that almost 47 percent were considering modifications. What's disturbing is that Grant Thornton found that employers are cutting the match even though they know it could result in failing a key federal test on fairness. Federal rules require that 401(k) plans must comply with annual nondiscrimination testing which can restrict contributions for highly compensated employees. The rule is intended to prevent companies from giving all the good perks to their top earners. When companies eliminate the match, almost half see a decrease in participation and deferral rates, said Scott B. David, Fidelity Investments' president of workplace investing when the survey was released." (The Washington Post via The Boston Globe)


Seven Things Every Plan Sponsor Should Know About Being a Fiduciary
Excerpt: "1) If you're a plan sponsor, you're a fiduciary. Fiduciary status is based on your responsibilities with the plan, not your title. If you have discretion in administering and managing the plan, or if you control the plan's assets (such as choosing the investment options or choosing the firm that chooses those options), you are a fiduciary to the extent of that discretion or control. If you're not sure -- and are worried that you aren't sure -- there's a good chance you are." (planadvisor)


[Opinion]
ACLI Comment Letter to DOL Seeking 403(b) Plan Guidance (PDF)
3 pages. Excerpt: "We also write to urge EBSA to provide audit relief and reporting guidance for purposes of establishing an opening balance for the 2009 Form 5500 annual report for 403(b) plans as well as clarify one of the criteria set forth in the FAB." (American Council of Life Insurers)


[Opinion]
Response to GASB's Invitation to Comment on Revisions to Statements 25 and 27 (PDF)
Excerpt: "On behalf of the above-named organizations, we are responding to the Governmental Accounting Standards Board's Invitation to Comment on possible revisions to GASB Statements 25 and 27, providing standards for accounting and reporting on the pension benefits that governments provide to their employees. Together, we represent a wide range of users of public retirement system financial reports, including state legislators and other policymakers; executive officials, such as mayors, county officials, treasurers, and comptrollers; public employers, public employees and retirees; and trustees or other governing bodies of governmental pension plans." (National Council on Teacher Retirement)

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Links to Items on Executive Comp, Benefits in General

[Guidance Overview]
Nevada's New Domestic Partnership Law: How It Impacts Employer Policies and Procedures
Excerpt: "The law gives domestic partners, g.ay or straight, largely the same rights as those already available to married couples. Domestic partners who register their relationship with the Secretary of State will be entitled to receive benefits such as hospital visitation, funeral planning and community rights. Despite the assumption that many employers may have that they are now required to provide benefits to domestic partners, the new law may give employers a choice. It states that the Act does 'not require a public or private employer in this State to provide health care benefits to or for the domestic partner of an officer or employee.' The Act goes on to state that it 'does not prohibit any public or private employer from voluntarily providing health care benefits to or for the domestic partner of an officer or employee upon such terms and conditions as the affected parties may deem appropriate.'" (Holland & Hart LLP)


[Guidance Overview]
Employees Using Vested Stock Options as Collateral for Writing Exchange-Listed Calls
Excerpt: "This will follow-up on my July 1 blog titled 'Stock Options Opened for 'Call Writing'' issue. On June 17, 2009, the Securities and Exchange Commission (SEC) approved a rule that would permit a public company to allow its employees to use vested stock options as collateral for writing exchange-listed calls. (SEC Release No. 34-60127) This blog will discuss: 1. Why did the SEC eliminate the margin requirements when an employee utilizes his or her employee stock option as collateral for a call option? 2. Why would an employee sell a call option when the employee owns a vested employee stock option? 3. Whether a company should allow its employees to sell a call option in the company's stock." (Michael Melbinger via Winston & Strawn LLP)


[Guidance Overview]
SEC's Proposed New Proxy Reporting Rules
Excerpt: "With corporate executive compensation practices facing increased public scrutiny, the SEC has responded with new proposed rules on proxy reporting, designed to improve transparency. Here we review the proposed rules and their implications for plan sponsors." (JPMorgan Chase & Co.)


[Guidance Overview]
Proposed SEC Rule Amendments to Executive Compensation and Corporate Governance Disclosure
Excerpt: "The SEC has indicated that if the proposed amendments are adopted, they will likely be effective for the 2010 proxy season. If this is the case, companies will have a relatively short time after adoption of the new rules to incorporate the changes into their drafting process for their 2010 proxy statements. In order to implement the potential changes in a timely manner, companies should consider taking the following steps . . . ." (Haynes and Boone LLP)


[Guidance Overview]
International Financial Reporting Standard 2 and Its Impact on U.S. Equity Compensation
Excerpt: "In the compensation arena, International Financial Reporting Standard 2 (IFRS2) impacts equity compensation plans. On August 27, 2008, the SEC approved a proposed 'roadmap' that could lead to the use of these international standards by US companies beginning in 2014, depending on the size of the company. While this date may be years away, compensation professionals nevertheless need to understand how current awards may be treated if IFRS2 becomes applicable." (Hay Group)


Corporate Boards Scrutinizing Executive Perks More Than Ever Before
Excerpt: "Hay Group's sample of 200 companies (all with revenue in excess of $5 billion) examined for The Wall Street Journal/Hay Group CEO Compensation Study (WSJ 200 companies) provides a reasonable study group for looking at the current prevalence of executive perquisites, how the landscape has changed over the last year, and what changes are likely in the future." (Hay Group)


Washington's New Attempt to Rein in Executive Pay
Excerpt: "THE executive compensation bill that the House passed just before the August recess was advertised as the first in a series of government safeguards to prevent risky, me-first maneuverings around executive pay in corporate America. It's supposed to correct wrongheaded structures that generated untold millions for aggressive managers and monster losses for unwitting taxpayers. But an examination of the bill's fine print raises questions about whether it will, if supported by the Senate and then enacted, have the desired effect." (The New York Times; free registration required)


[Opinion]
Philadelphia Public Workers' Health and Pension Plans Are in Line with Standard Costs and Managed Competently
Excerpt: "An old adage holds that nothing is so absurd that people won't believe it if it's repeated enough. Sadly, it's proven true every time Philadelphia city workers' contracts come up for negotiation. Every few years, the twin misconceptions that union employee benefits are too generous and are wastefully administered are repeated and repeated until people start believing them. But a closer look at the benefits provided and the trust funds that administer them shows just the opposite. The benefits provided to unionized city employees are carefully administered by independently established common-law trusts, also known as funds, that are legally and financially separate from the unions. They are run by city and union trustees whose fiduciary responsibility is exclusively to the employees and their families - not to the unions or the city. No money is ever transferred from the funds to any union entity." (The Philadelphia Inquirer)

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Press Releases

401(k) Plan Sponsors Are Reducing or Eliminating Employer Contributions, but Overall Benefits Budgets Are Increasing, Says Diversified Investment Advisors Survey
Diversified Investment Advisors

Funded Status of Pension Plans Suffers as Impact of Credit Spreads Continues to Eclipse Benefit of Equity Improvements
Mercer

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