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Insight
Deflation and the effect on benefit plan limits
Most 2010 IRS benefit plan limits and Social Security benefits and thresholds remained unchanged from 2009 despite a roughly 2% decrease in the CPI. In this article we look at the implications of this unusual occurrence beyond 2010.
IRS publishes final PPA funding rules
The IRS recently released a copy of final defined benefit funding regulations that indicate changes made by PPA. In this article, we review new provisions not previously covered in our articles and summarize the new funding and benefit restriction rules.
Retirement income – the axiomatic case for annuities
In this second article on the topic of retirement income, we lay out the case for annuities being the investment instrument to provide retirement income.
Pension finance update – November
In our monthly pension finance update, we review changes in market-driven assets and liabilities during the month of October. While both asset levels and discount rates generally fell during the month, funded ratios for many plans will be very similar to those that they experienced at December 31, 2008.
DB funding relief bill introduced
Congressmen Pomeroy (D-ND) and Tiberi (R-OH) have introduced the Preserve Benefit and Jobs Act of 2009, a bill implementing many of the defined benefit plan funding relief proposals being advocated by sponsor and participant groups. In this article we review the bill and its implications for plan sponsors.
Pension finance update – October
Stocks, generally, have advanced steadily every month since the March trough. Concurrently, there’s been a steady downward movement in corporate bond yields. In pension finance terms, what stocks have given, interest rate movements have taken away, pushing pension assets and liabilities alike higher without significantly affecting funded ratios.
IRS guidance on safe harbor distribution notices; automatic enrollment/increase arrangements; contribution of unused paid time off to qualified plans
The IRS recently published a myriad of guidance concerning new safe harbor rollover notices, additional information on automatic enrollment/increase arrangements and the contribution of unused paid time off to qualified plans. Here we review the rulings and notices.
Retirement income – fundamental issues
In this first of a series of articles, we review retirement income "basics" in the United States: competing theories of adequacy, key priorities from both the participant's and the sponsor's point of view, and the role of the employer and the government in providing retirement income.
IRS will permit switchback to smoothed interest rates for 2010
The IRS recently provided guidance allowing pension plan sponsors the freedom to select a different yield curve basis for 2010 valuations from what is used for 2009. Here we explain why this is great news for plan sponsors and which options most sponsors should avail themselves of.
PPA compliance: buttoning up
Pension plan sponsors will face several PPA-imposed requirements and deadlines between now and the end of the year. Here we provide a guide to help plan sponsors ensure compliance for their plans.
Current pension legislative and regulatory outlook – September 2009 – DB plan initiatives
Here we review the current legislative and regulatory landscape with respect to defined benefit plans.
Current pension legislative and regulatory outlook – September 2009 – DC plan initiatives
Here we review the current legislative and regulatory landscape with respect to defined contribution plans.
Pension finance update – September
The equity markets continue to rebound and corporate bond yields continue to decrease, resulting in a deterioration in pension funded status during the month. But overall, a typical defined benefit plan has still seen an improvement in funded status year-to-date of 2-5%.
Pension finance update – August
After starting out as a continuation of the latter half of 2008, the rebound in equity markets has more than offset the increase in pension liabilities due to decreases in corporate bond yields. A typical defined benefit plan has probably enjoyed an increase in funded status year-to-date of 5-8%.
Credit balances and contribution timing under PPA
We've already presented a number of articles reviewing the impact that PPA funding rules and end-of-2008 market turmoil have had on defined benefit funding. Here we turn our attention to a more specific set of issues – the use of credit balances to manage defined benefit funding demands. We first provide an overview of the new rules under PPA, followed by an examination of practical considerations, particularly contribution timing and preserving credit balances.
A different way of looking at 401(k) plan refunds
When a 401(k) plan fails the ADP test, the usual cure is to give refunds to highly compensated employees. And, recommendations to fix that problem going forward are often restricted to the plan in question. In this article however, we consider the possibility of looking outside that plan for a solution.
DB contribution timing under PPA
In the wake of PPA and its new funding rules, both practitioners and plan sponsors have found it more difficult to get their arms around the timing of required contributions as well as the timing of the calculations that may affect those contributions. In this article, we walk you through the process with stops along the way to better understand the mechanics and the timing.
PPA DB funding – "Medium" term implications of asset and interest rate volatility
We've already examined what PPA funding options plan sponsors have for 2009. In this article we jump ahead to future considerations - what might be the funding considerations in 2010, 2011 and beyond?
Congressman Pomeroy issues discussion draft of DB funding relief proposals
Legislative activity related to PPA funding relief continues, the latest being Representative Earl Pomeroy's "Discussion Draft of Pension Plan Funding Proposals." Here we review the proposals and their potential implications.
House Education and Labor Committee approves fee, advice and DB funding legislation
On June 23, Representative George Miller, the Chair of the House Education and Labor Committee, introduced H.R. 2989, a bill targeting 401(k) fee disclosure and investment advice, as well as offering some defined benefit plan funding relief. In this article we focus on the DB funding provisions in detail, and highlight the key differences in the fee disclosure and investment advice sections from previous bills. (Our articles Chairman Miller re-introduces fee bill and Advice legislation introduced provide detail on those proposals.)
IRS and Treasury propose new 401(k) regulations
We've previously looked at the issues plan sponsors face when changing employer contributions to their 401(k) plans, particularly for "safe harbor" plans. With the IRS recently releasing proposed regulations providing very needed relief, we update our prior review.
Plan investments – Target date funds
As 401(k) account balances have seen precipitous declines, Congress has begun to increase the attention that it is giving to plan investments, in particular, target date funds. In this article we review the current initiatives and the outlook for legislation and rulemaking.
Stock contributions to pension plans
With the current cash-tight environment, some sponsors are considering using stock in lieu of cash as a contribution to pension plans. In this article we highlight key considerations for plan sponsors considering a stock contribution.
Accounting for pensions: very much under construction
The world of financial accounting is changing. As the IASB and FASB move toward international convergence, the FASB is also codifying its standards. In this article, we look at those changes as they relate to corporate financial accounting for pension plans.
Plan investments – Hard to value assets
The topic of hard to value pension plan assets continues to garner attention. While the accounting and regulatory communities make efforts to push plan sponsors to "better" value assets, many sponsors are confused about the exact nature of their requirements to report those assets. First we fundamentally discuss issues that hard to value assets raise, followed by a look at recent regulatory activity.
Seventh Circuit rules on 401(k) plan fees
We first wrote nearly two years ago about the District Court decision in the Hecker v. Deere case. Critical to plan sponsors in this case are plaintiffs' allegations that Deere violated ERISA by failing to disclose certain revenue sharing arrangements and by including funds in the plans' fund menus that (allegedly) charged excessive fees. In February 2009, the Seventh Circuit court ruled in favor of Deere on these issues, and we review the ruling in this article.
Insights: Beyond Rebalancing — Rethinking Long-term Asset Allocation
This is a summary of the piece: Insights: Beyond Rebalancing — Rethinking Long-term Asset Allocation prepared by Karin Franceries of J.P. Morgan Asset Management's Strategic Investment Advisory Group.
2009 pension funding – Where are we now?
In a surprise pronouncement that should be welcome news to all sponsors of underfunded defined benefit plans, the IRS announced that for 2009, it would allow plan sponsors to use an "applicable month" approach to selecting a PPA yield curve. In this article, we show that the October full yield curve will often be most favorable and discuss the welcome effects.
Advice legislation introduced
Congressman Rob Andrews (D-NJ) recently introduced the "Conflicted Investment Advice Prohibition Act of 2009," a bill that would significantly restrict the types of advice programs that providers and sponsors of 401(k) plans could offer to participants. In this article we review the bill, focusing particularly on the issues of fiduciary exposure and compliance for plan sponsors.
Maximizing the value of benefits in a recession
In light of current economic conditions, many employers have had to consider, or even implement cutbacks in the benefits offered to their employees. Not all reward changes have to be a negative. In this article, we look at ways in which employers can motivate their workforce without having to spend a lot of cash.
May 2009 pension legislative outlook – Administration retirement proposals
Two of President Obama's key retirement policy proposals were the creation of "Automatic Workplace Pensions" and the expansion of the Saver's Credit during his campaign. These proposals were included in the administration's 2010 budget, along with legislation implementing the Saver's Credit expansion introduced by Congressman Pomeroy (D-ND). We provide an overview of these in this article.
Chairman Miller re-introduces fee bill
Congressman George Miller (D-CA), chairman of the House Education and Labor Committee, recently introduced the 401(k) Fair Disclosure for Retirement Security Act of 2009. The bill is very similar to the one reported last year out of the Committee by Chairman Miller. Here we review the bill and highlight key differences between it and its predecessor from one year ago.
Pension finance update – May
After an ominous beginning, the financial environment during 2009 has recently shown signs of stabilizing, and fears that 2009 will be a continuation of the 2008 decline have receded.
Aiming at a Moving Target - Managing inflation risk in target date funds
This is a summary of the white paper: Aiming at a Moving Target - Managing inflation risk in target date funds prepared by Anne Lester and Katherine Santiago of J.P. Morgan Asset Management's Global Multi-Asset Group.
How safe is that harbor?
It seems that every day, a few more companies are reducing or eliminating their 401(k) match. For those companies who were maintaining safe harbor plans, this causes some surprising complexities. In this article, we discuss the traps and pitfalls.
IRS publishes asset valuation guidance
The IRS recently released Notice 2009-22, to provide pension plan sponsors assistance on applying new asset valuation rules introduced in the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA). Here we give background on the issues and discuss application of the new guidance.
PBGC finalizes rules for 4010 reporting
The PBGC recently published final regulations on ERISA section 4010 reporting requirements. PPA made two key changes to these requirements, changing the rules about the information that filers must provide and about who must file. Here, we review the PBGC's final rules.
Current pension legislative outlook
In this article we review what we have learned about the "funding problem." We look at how PPA is stressing DB plan sponsors in times of broader financial stress and the various efforts (primarily, legislative) to provide some relief from that problem.
IRS finalizes automatic contribution regulations
The IRS recently released final automatic contribution regulations to reflect changes made by PPA. In this article, we explore the key differences in the final regulations and discuss their effect on 401(k) plans.
PPA year two – key funding deadlines
For most defined benefit plans, 2009 is the second year of the PPA funding regimen. Asset losses during the fourth quarter are history. But, there are three requirements and associated dates in April that take those losses into consideration. In this article, we review the options that plan sponsors have and the steps that they should consider.
DOL issues funding notice guidance
PPA requires that defined benefit plan administrators provide participants, labor organizations and the PBGC an annual funding notice, generally describing the funded status of the plan and providing a variety of other information. In this article, we review this requirement, and analyze the DOL's recently issued Field Assistance Bulletin that provides guidance on complying with the notice requirement.
30-year Treasury yields: How low is too low?
As many are aware, the basis for paying out lump sums from traditional defined benefit plans has changed with PPA. But, decisions may not be final yet. In this article, we explore the remaining options that plan sponsors have, as well as consider the impact of historically low yields on 30-year Treasuries.
Current pension legislative outlook
Within this article we highlight current pension policy initiatives under the new Obama administration.
FASB finalizes rules for financial reporting of DB plan assets
The Financial Accounting Standards Board (FASB) issued a (final) FASB Staff Position (FSP) amending FASB Statement No. 132(R) (Employers’ Disclosures about Pensions and Other Postretirement Benefits). FSP FAS 132(R)-1 provides new rules for financial statement disclosures about defined benefit plan assets, requiring, among other things, detailed disclosure of the categories of plan assets, concentrations of risk and methodologies used to value investments.
Defined contribution compliance issues
In the final installment of this series, we explore how employers can use old-fashioned defined contribution plans to provide additional retirement benefits in conjunction with 401(k) plans. Here, we examine compliance issues for these plans, particularly highlighting those that differ by plan structure.
PPA and market turmoil – selecting and changing funding methods
How does you actuary value your plan's liabilities? How does your actuary value your plan's assets? In the new world of PPA and its amendments by WRERA, there are many choices to be made. In this article, we explore those choices, as well as some as yet unresolved questions on the topic.
Congress passes temporary funding relief – President signs into law
President Bush recently signed into law the "Worker, Retiree, and Employer Recovery Act of 2008,” which includes technical corrections to the Pension Protection Act of 2006 and certain "Pension Provisions Relating To Economic Crisis." Here we highlight and review key pieces of the legislation affecting retirement plans.
Action by December 31, 2008 – Should I waive my carryover balance?
Defined benefit plan sponsors have learned of many key decision points under PPA. An important one that may have gotten short shrift to date relates to the old law credit balance, now known as the carryover balance. The decision: to waive or not to waive.
FAS 132 update
Earlier this year we reviewed Financial Accounting Standards Board deliberations on a proposed FASB Staff Position (FSP). In this article, we begin with a summary of the proposed FSP and then discuss changes that, since our last article, have been tentatively approved by FASB.
Advantages and disadvantages of DC designs
In this continuing series, we explore how employers can use old-fashioned defined contribution plans to provide additional retirement benefits in conjunction with 401(k) plans. In this article, we look at how different situations might cause employers to choose varying designs.
Navigating financial turmoil
Everyone seems to be profoundly aware of the volatility and turmoil in capital markets. Here, we provide insights on the effect of that volatility on defined benefit plans.
A symposium on pension finance – Follow-up
In this article, we eavesdrop on a fictional dialogue amongst colleagues regarding pension plan assets and financing. Follow along, as our fictional characters weigh different factors related to asset allocation in pension plans. We first listened in on their thoughts in 2007; the original conversation can be found here.
Rediscovering defined contribution plans – Design basics
In this continuing series, we explore how employers can use old-fashioned defined contribution plans to provide additional retirement benefits in conjunction with 401(k) plans. In this article, we review what plan design issues employers must consider when adopting these plans.
2009 IRS benefit limits, Social Security increases now available
We have calculated 2009 IRS limits on qualified retirement plan benefits and the PBGC maximum guaranteed benefit.
Managing through turbulence
During 2008, we have seen what for most of us is unprecedented turmoil in the financial markets both with respect to financial assets in virtually all asset classes and with respect to the underlying interest rates on fixed income investments. This volatility has left nothing untouched, from individuals’ retirement accounts to corporate pension plans. In this article, we explore some of the effects of this turmoil in a PPA world. Readers will note that cash management opportunities may yet abound for many of these corporate plans.
DOL finalizes DC annuity purchase safe harbor
On October 6, the Department of Labor amended the “safest available annuity” rule to specify that it applies to defined benefit plans only. PPA provides, however, that DC plan annuity purchases are "subject to all otherwise applicable fiduciary standards." This guidance provides a safe harbor for DC plans to comply, but assures that the safe harbor is not the exclusive means of satisfying the safest available annuity rule. This article examines the guidance with particular emphasis on the safe harbor.
Rediscovering defined contribution plans
As little as ten years ago, most large employers still used the defined benefit plan as the primary means of providing retirement benefits for their employees. For many of those companies, that mantra has changed, and in a large number of those cases, new employees are left with defined contribution plans only. Most all of those companies sponsor 401(k) plans, but many are coming to the realization that those plans alone may not be enough. Even if companies are not going to sponsor defined benefit plans, additional retirement benefits, probably in the form of old-fashioned defined contribution plans, are going to be necessary. In the first of a series, we re-introduce our readers to defined contribution plans that don’t require employee contributions.
Hey big spender – Observations on pension cash flow in a cash-tight world
How would you describe your defined benefit plan? Is your company a net contributor or a net spender? If the answer is spender, or if you’re not sure, this article may have some much needed answers to the questions that you should be considering. What are the implications of a cash-tight market? And, how important is your role as the project manager of all of your plan’s outside providers? This article considers those important questions and more as we consider pension plan cash management in these tumultuous times.
Human resources and the 2008 “Bailout Bill”
On October 3, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (EESA), better known as the “Bailout Bill”. While the provisions intended to save certain troubled financial institutions got all the press, EESA had provisions in it that affect human resource programs especially those related to compensation and mental health. In this article, we focus on those human resource programs and the changes that EESA brings to them.
Solvency, mark-to-market and insurance
Every year or two, there is a new set of catchphrases. Leading up to the passage of PPA and even since then, the term “mark-to-market” has certainly been in the forefront. But – now as America faces life after the “Bailout Bill” – we see Congress laying some of the blame on mark-to-market. Still, it’s a critical part of pension funding rules, and as of now, it’s the direction that financial accounting remains headed. In this article, we comment on the impact that the concept of mark-to-market has on employer-provided benefit programs.
Department of Labor proposes guidance on participant advice
The Department of Labor recently released a proposed regulation implementing the statutory exemption under the Pension Protection Act (PPA) for the provision of investment advice to participants in participant-directed individual account plans (such as 401(k) plans). Additionally they’ve released a proposed class exemption, expanding the statutory exemption in two respects. In this article we review the proposed regulation and (briefly and in passing) the class exemption, focusing on the key issues for plan sponsors.
Options for transitioning to PPA lump sums
The Pension Protection Act of 2006 (PPA) changed the minimum basis for calculating lump sums. IRS Notice 2008-30, issued in March 2008, provides helpful guidance for transitioning from “old law lump sums” to “PPA lump sums.” In this article, we explore the paths a plan sponsor may take as they transition to the new “PPA lump sums.”
Senator Obama's pension proposals
Senator Barack Obama (D-IL) has made a number of (relatively) concrete pension reform proposals. In this article we evaluate them. Our focus in this article is on Senator Obama's proposals that will affect private pension plans. Thus, we will not be addressing, for example, Senator Obama's Social Security proposals. With respect to private pension policy, we identify three major Obama-supported initiatives.
What pension policy issues are at stake this November?
As the 2008 presidential election draws near, in this article we discuss the major pension policy issues that will confront Congress and the next president, observing, where the issues may become polarizing, how Democrats and Republicans may line up.
IRS rules on frozen plan buyouts
On August 6, 2008, the IRS published Revenue Ruling (RR) 2008-45, holding that, under current rules, frozen pension plan “buyouts” would generally violate the Internal Revenue Code's “exclusive benefit” rule. In connection with the ruling, the Bush administration also published a press release subtitled "Agencies Offer Framework for Possible Legislative Change," which outlines rules the administration believes should be part of any legislation that would allow for the transfer of frozen pension plans. In this article, we review the ruling and the "Framework" and then discuss some of the policy issues at stake.
HEART Act provides special benefits for active duty military
On June 17, President Bush signed into law the Heroes Earnings Assistance and Relief Tax Act (HEART Act) of 2008. This bill, originally passed in a nearly unprecedented 410-0 vote by the US House of Representatives, provides certain qualified plan and other tax benefits for members of the military on active duty (or who become disabled or die while on active duty). In this article, we’ll discuss briefly the benefit plan issues raised by the HEART Act.
DOL proposes sponsor-participant disclosure regulations
On July 22, 2008, the DOL released proposed regulations under section 404(a) of ERISA revising the rules for disclosure of fee and other information to participants in directed individual account plans – plans in which participants choose from a menu of investment funds. The proposal requires disclosure of "plan-related" and "investment-related" information. In this article we review the proposal and its implications for plan administrators.
DOL publishes further guidance on 5500 fee reporting rules
In 2007, the DOL finalized a new Form 5500 Schedule C (Service Provider Information), adding a requirement for detailed disclosure of fees paid directly or indirectly to plan service providers. The new requirements would generally be effective for the 2009 reporting year. On July 14, 2008, the DOL published "FAQs [frequently asked questions] About The 2009 Form 5500 Schedule C," providing further guidance on how Form 5500 fee reporting is to work. In this article we review the FAQ guidance.
Managing PPA DB contributions and the September 15, 2008 due date
It’s the summer of 2008 and defined benefit plan sponsors have unique opportunities with regard to funding their plans. Have you thought about this? Do you know what you can accomplish by funding before September 15 has come and gone?
This article should have relevance to anyone involved in financial decisions around pensions, no matter what their specific role. In the article, we’ll review those opportunities in a way that should be relevant to you whether your plan is well-funded or not as well-funded, whether you have lots of cash available or not as much cash available. And, we’ll discuss why, as a result of the Pension Protection Act of 2006 (PPA), this may be the best opportunity you’ll ever have.
Financial reporting of pension and postretirement benefit plan assets
In March, the Financial Accounting Standards Board (FASB) proposed a FASB Staff Position that would amend FASB Statement No. 132(R), Employers’ Disclosures about Pensions and Other Postretirement Benefits. In this article we review the proposal and discuss the issue of alternative asset valuation generally, with respect to both DB and DC plans.
The next 401(k) policy initiative: adequacy
The Government Accountability Office released a report titled "Private Pensions – Low Defined Contribution Plan Savings May Pose Challenges to Retirement Security, Especially for Many Low-Income Workers." In this article we review the GAO report and various policy initiatives being considered to improve 401(k) plan "adequacy."
"Greater of" formulas and the IRS backloading position
In September 2007 we discussed the Wheeler v. Boeing decision, in which a federal district court rejected the IRS's application of defined benefit plan “backloading” or accrual rules to a "greater of" formula in a cash balance plan conversion. Since then, the IRS issued Revenue Ruling 2008-7 and has now proposed regulations providing relief from the application of its anti-backloading analysis in the case of multiple formulas.
PPA funding targets
The JPMorgan PPA funding target exhibit describes in detail the calculation and application of the various PPA funding targets.
Getting plan terminations right
If a sponsor is no longer committed to the defined benefit (DB) system, if a decision has already been made to freeze or terminate the DB plan, what is the best way to wind things up? That issue – of DB "exit strategy" – is more complicated than it sounds. In this article we review the exit strategy process and considerations plan sponsors should be aware of.
PBGC premiums after PPA
PPA not only overhauled the funding rules for DB plans, but also changed the way premiums are assessed for the mandatory benefit guaranty insurance coverage provided by the PBGC. In this article, we discuss the changes to the premium calculations and touch on funding strategies to minimize these premiums.
Current pension legislative and regulatory outlook
In this article we survey current pension policy initiatives both in Congress and in the government agencies.
401(k) fee bill reported out of Education and Labor Committee
The House Committee on Education and Labor recently approved a revised 401(k) Fair Disclosure for Retirement Security Act (H.R. 3185). The new bill is substantially different from the one originally introduced and represents a compromise with critics of the earlier bill's detailed disclosure requirements. In this article, we review the bill, primarily focusing on the language in the revised bill.
Getting PPA funding right
The Pension Protection Act (PPA) requires a fundamental change in how sponsors think about pension funding. In this article, we discuss the new strategies that apply under PPA. We identify the key issues you should consider when you approach the PPA funding challenge.
Quarterly contribution requirements and credit balances
In this article, we review the IRS quarterly contribution proposal, focusing on the effect of credit balances on the obligation to make quarterly contributions and the use of credit balances to satisfy them. Critically, we address 2008 compliance issues, which, with respect to quarterly contributions, are particularly difficult.
DOL proposes new FMLA regulations
On February 12, the Department of Labor (DOL) proposed the first new regulations under the Family and Medical Leave Act of 1993 (FMLA) since 1995. In this article, we’ll discuss many of the key FMLA issues, trying to focus somewhat equally on what the proposed regulations tell us, what’s different in the proposed regulations, and what guidance is still needed.
Calculating lump sums after PPA
This article examines the changes ushered in by the Pension Protection Act of 2006 (PPA) affecting virtually all aspects of employer-sponsored pension plans.
A review of current 401(k) plan fee legislation and regulation
At least three bills related to 401(k) plan fees have been introduced in Congress, and the Department of Labor (DOL) is about halfway through its three-part regulatory initiative concerning fees. In this article, we review, generally, where these legislative and regulatory initiatives stand.
PPA check up
In this article, we review strategic decisions confronting, and critical choices available to, plan sponsors in complying with new PPA rules generally and the benefit restriction certification requirements specifically.
PBGC proposes rules for 4010 reporting for underfunded DB plans
This article briefly reviews the new 4010 reporting requirements and the PBGC's proposed regulations.
Supreme Court holds that DC participant may sue for fiduciary failure to follow instructions
In this article we review the Supreme Court ruling on the LaRue v. DeWolfe decision and briefly consider its implications for plan investment administration in 401(k) and similar defined contribution plans.
Sharpening your aim: selecting the best target date strategy for your participants
This is a summary of Sharpening your aim: selecting the best target date strategy for your participants prepared by Anne Lester and Katherine Santiago of JPMorgan Asset Management.
PPA Effective Dates
We examine the IRS issued Notice 2008-21 revising the effective date rules for PPA funding-related regulations.
IRS Proposes Cash Balance Regulations
At the end of last year, the IRS published regulations under the cash balance provisions of the Pension Protection Act (PPA). The proposal provides guidance on the PPA cash balance plan vesting requirement, age discrimination "safe harbor," conversion protection and permitted interest crediting rates. In this article, we review the proposal.
IRS Provides Long-Awaited Guidance on Backloading Rules
Here we'll examine the Revenue Ruling 2008-7 published February 1, by the IRS. It provides long-awaited guidance on the so-called “backloading” or accrual rules for defined benefit pension plans with multiple formulas.
DOL Proposes Fee Disclosure Rules
The Department of Labor recently proposed regulations under section 408(b)(2) of the Employee Retirement Income Security Act -- ERISA's "service provider exemption" -- requiring extensive provider-to-sponsor fee disclosure. In this article we review the proposal in detail with a focus on defined contribution plan fees.
Preparing for 2008 – IRS Proposes “Final” Funding Rules
At the end of 2007, the IRS published proposed regulations under the defined benefit funding provisions of PPA. Here, we review the proposal and focus on its implications to two key PPA funding issues -- the valuation of assets and the at-risk rules for 2008.
PPA...Ready or Not
In this article, we review the single-employer funding rules under PPA, reflecting regulatory guidance through December 2007. This article does not cover special issues for hybrid plans, however we plan to provide an article focusing on hybrid plan funding issues in our next publication.
Preparing for 2008 -- IRS Corrects Rules for 2008 Benefit Restriction Presumptions
The IRS has published a corrected proposal relating to the application of presumptions to the 2008 year. In this article, as we understand it, and based on the IRS's correction, is how the presumptions apply for 2008.
Final Revised Form 5500 -- New Fee Reporting Rules
The Department of Labor published final revisions to Form 5500 for 2009, part one of a three-part DOL project on defined contribution plan fees. This article reviews new reporting requirements for Schedule C, with respect to DC plans.
How Does Your Pension Plan Measure Up? A Framework for Assessing and Improving Your Plan’s Competitive Risk Profile
This is a summary of How Does Your Pension Plan Measure Up? A Framework for Assessing and Improving Your Plan’s Competitive Risk Profile prepared by Abdullah Z. Sheikh of JPMorgan Asset Management.
IRS Publishes Lump Sum Guidance
The IRS recently provided guidance concerning the calculation of lump sums in defined benefit plans. Additionally, separate guidance was released regarding "204(h) notice" requirements. Here we review the guidance and discuss its implications.
Pension Extension: FAQS on Strategies for Extending Duration
This is a summary of Pension Extension: FAQs on Strategies for Extending Duration White Paper prepared by Bill McHugh of JPMorgan Asset Management.
IRS Proposes 401(k) Automatic Enrollment Regulations
The IRS recently released proposed 401(k) automatic enrollment regulations that cover two major changes to 401(k) rules made by the PPA. It also includes rules implementing certain other 401(k)-related PPA provisions. Here, we review the proposal.
Picking the Yield Curve
The IRS recently provided guidance on the calculation of the yield curve, together with numbers for August - October, 2007. In this article, we analyze the advantages and disadvantages of various yield curve "versions."
Preparing for 2008 -- DB Funding under PPA
In this article, we review generally the challenges PPA compliance presents for plan sponsors, discuss what guidance has been published and, critically, what guidance has not been published, and then briefly review some strategic considerations.
DOL Finalizes Default Investment Rules
On October 24, 2007, the Department of Labor (DOL) published final qualified default investment alternative (QDIA) regulations. Here, we provide an overview of the key items and examine the regulation in detail.
2008 IRS Benefit Limits, Social Security Increases Now Available
We have calculated 2008 IRS limits on qualified retirement plan benefits and the PBGC maximum guaranteed benefit.
Solving the Longevity Risk Problem
In this article, we discuss the issue of longevity risk as it is related to retirement plans. We review several proposals made to address the issues and problems of longevity risk in relation to both defined benefit and defined contribution plans.
Could Data Genealogy Unlock Your Data Puzzle?
In this article, we review the reasons administrators need to maintain quality data, and introduce the concept of data genealogy. We also examine how developing a data genealogy can produce time and cost savings for plan administrators.
Federal Court Dismisses Backloading Claim
In this article, we examine the court ruling in the case of Wheeler v. Boeing relating to cash balance plan issues. Particularly, determining if Boeing violated ERISA backloading rules by following PPA grandfather provisions to attain qualified status.
A Symposium on Pension Finance
In this article, we eavesdrop on a ficitional dialogue amongst colleagues regarding pension plan assets and financing. Follow along, as our ficitional characters weigh different factors in regards to funding pension obligation liabilities.
Preparing for 2008 -- PPA Rules Affecting DB Lump Sums
In this article, we review the key PPA changes affecting DB lump sum payments, the areas where guidance is needed, and some strategies sponsors may want to consider in preparing for 2008.
Preparing for 2008 -- IRS Proposes PPA Benefit Restriction Rules
On August 28, 2007, IRS proposed regulations detailing the application of the PPA benefit restrictions to underfunded plans. Here, we review the proposed regulations and their implications.
Workforce Strategies: A Case Study in Workforce Planning
In Part 2 of this continuing series on workforce strategies, we examine the need for workforce planning. We discuss the steps it involves and how it will help our ficitonal company, Big Wheels, to operate more efficiently.
Ready! Fire! Aim?
This is an executive summary of the Ready! Fire! Aim? White Paper prepared by Anne Lester and Katherine Santiago of JPMorgan Asset Management.
Stable Value Funds: Looking Good... or Overlooked?
Given the increased attention placed on the nation’s broader retirement challenges, the time is overdue to examine the procedures plan fiduciaries use in evaluating their stable value fund options. Here, we review this evaluation process.
Defendant Sponsor Wins First Round in Fee Litigation
On June 21, 2007, the US District Court for the Western District of Wisconsin handed down a decision in Hecker v. Deere, dismissing participants' complaint alleging that the sponsor's 401(k) fee arrangements violated ERISA. Here, we discuss the decision.
IRS Publishes Proposed PPA Mortality Regulations
The IRS recently published proposed regulations under the PPA on the use of mortality in determining defined benefit plan liabilities and funding requirements. Here, we review the proposal, focusing on key issues for plan sponsors.
Developing a Workforce Strategy: Introducing a Three-Phased Framework
In this article, the first of a series, we illustrate why employers need a workforce strategy and focus on the first phase of developing one - workforce analysis.
Final Roth 401(k) Regulations Published
The IRS recently published final regulations under IRC Section 402A on the taxation of Roth 401(k) distributions. These can present difficult and technical issues for sponsors, administrators and participants. Here, we'll discuss those issues in detail.
Current Pension Regulatory Outlook - 401(k) Plan Fees
In this article, we briefly review several recent developments relating to various regulatory and legislative initiatives concerning 401(k) plan fees.
Defined Benefit Funding -- Preparing for 2008, Part 2
In the second of this two-part series focusing on funding issues under the PPA, we take a look at three issues that key off of funded status but do not necessarily affect the amount of the sponsor's plan contribution.
PPA and 2007 Pension Funding: What in the World Are We Waiting For?
In this article, we look at the issues arising in regards to pension funding under the PPA. Specifically we examine the uncertainty surrounding the Funding Attainment Percentage (FTAP) for plan years.
Recent Cash Balance Plan Developments
In December, the IRS provided guidance on the appliication of new Pension Protection Act cash balance rules. In this article, we review IRS Notice 2007-6 and review the state of cash balance plan litigation in the United States.
PPA 2006 -- Defined Contribution Provisions
While the Pension Protection Act of 2006 (PPA) began life as defined benefit funding reform legislation, along the way it picked up a number of provisions that address defined contribution plan issues. In this article we're going to review key PPA provisions applicable to single employer DC plans.
PPA 2006 -- Pension Funding Provisions
The Pension Protection Act of 2006 (PPA) provides for a comprehensive overhaul of the defined benefit plan funding rules under ERISA and the Tax Code. In this article, we review PPA changes to the pension funding for single employer plans, in summary form, provide an analysis of the major changes and the details of some of the more complicated changes.
PPA 2006 -- Hybrid/Cash Balance Provisions
The Pension Protection Act of 2006 (PPA) includes a number of provisions applicable to "hybrid" plans (including cash balance plans). In this article we begin with review of PPA changes to hybrid/cash balance plan rules in summary form and follow with a detailed analysis of the issues hybrid/cash balance plans have presented and what PPA does about them.
PPA 2006 -- Reporting and Disclosure Provisions
New government reporting and participant disclosure rules under the Pension Protection Act of 2006 (PPA) will be of immediate interest to sponsors and administrators. In this article we review new reporting and/or disclosure requirements under PPA applicable to single employer plans.
CCA Editorial: Living with the Cash Balance Burden -- Time to Act?
In the wake of the IBM ruling, cash balance plan sponsors are in a state of limbo and potential legal risk. This editorial puts the risk in proper perspective, and offers options moving forward.
Roth 401(k)s -- How They Work
IRS recently published final regulations implementing Roth 401(k)s and providing guidance on certain recordkeeping and administrative issues. Here we review, briefly, the basics of Roth 401(k)s and the regulation.
Happy New Year Administrators: What to Expect in 2006
There is significant coverage of pension plan design, funding and strategy but little talk about the resulting administration impact that results from new social policy decisions. This article overviews the new complexities facing administrators.
2006 Pension Policy Agenda
In this article we review the pension policy agenda (as of January) for 2006, much of which is leftover from 2005 (or 2004).
IRS Acknowledges Delay in Finalization of Relative Value Regulations
According to the IRS Winter 2006 Employee Plan News periodical, finalization of the "relative value" regulations will not be completed in time for the February 1, 2006 effective date.
Current Legislative Outlook: December 2005
Here we review the PBGC premium provisions in the budget bill and House DB reform bill. We've also included an updated comparison of the House and Senate DB reform proposals. Finally, we'll briefly discuss the outlook for passage of a final final bill.
Defined Contribution Proposals Included In Defined Benefit Legislation
In this article, we review the defined contribution legislative initiatives included in Senate and House DB reform proposals. Many of these DC proposals enjoy broad support and may find their way into a final DB funding bill or other legislation.
2005 "To Do" List Under Code Section 409A
This article highlights some key "to-do's" between now and the end of the year under Code Section 409A. We will focus on account balance plans, non-account balance plans, and separation pay plans.
FASB's November 10th Meeting: Fair Value Accounting for Pension and OPRB Plans
In this article we review the balance sheet issues related to pensions and OPRBs as well as the income statement issues under this new FASB project.
Current Legislative Outlook, November 2005
After more than two years of proposals and negotiations over DB funding reform and the current temporary "fix" set to expire at year end, what is Congress going to do? In this article we review year end alternative solutions to the DB funding "crisis."
2006 IRS Benefit Limits, Social Security Increases Now Available
Here, we overview the 2006 increases for Social Security benefits and IRS benefit limits for retirement plans.
Proposed Deferred Compensation (409A) Regulations -- Focus On SERPs
On October 4, 2005, Treasury published proposed regulations under Tax Code section 409A, relating to the taxation of nonqualified deferred compensation. In this article, we are going to focus on issues relating to retirement plans.
Funding Reform: Status of Cash Balance Provisions
While it appears that there's no logical necessity for Congress to address cash balance plans at the same time it reforms DB funding, it's beginning to look inevitable that it will. Here we review current proposals to "fix" or reform cash balance plans.
Current Legislative Outlook, September 2005
In this article we review the politics of defined benefit plan funding reform and the key provisions of the third entry in the DB reform project -- the Senate Health, Education, Labor and Pensions (HELP) Committee's Defined Benefit Security Act.
Update on Senate DB Funding Bill
In this article, we revisit our comparison of the House and Senate DB funding reform proposals to reflect the combination of separate Senate Finance and HELP Committee bills into a single Senate proposal -- the Pension Security and Transparency Act.
Treasury Issues Final Regulations Allowing Elimination Of Certain Protected DB Benefits
The Department of the Treasury published final regulations under Tax Code section 411(d)(6) allowing the elimination of certain benefits and payment forms in defined benefit plans where certain criteria are met. Here we review the regulations in detail.
Treasury Proposes Electronic Communications Regulations
The proposed regulations pull together, simplify and in some cases extend guidance previously published, in the form of notices and regulations, on the issue of electronic employee benefit notices.
Senate and House DB Funding Reform Alternatives
As expected, on July 26, 2005, the Senate Finance Committee approved a defined benefit funding reform bill, in the form of a revised "National Employee Savings and Trust Equity Guarantee (NESTEG) Act". Here we cover the big issues.
Current Legislative Outlook, July 2005: DB Funding, Hybrid Plans Dominate The Agenda
This article reviews the process, timing and politics of Senate and House consideration of DB funding reform.
House Education And The Workforce Committee Approves Amended Pension Funding Bill
A review of recent amendments to H.R. 2830, the pension funding reform legislation recently approved by the House Education and the Workforce Committee, including relief on the treatment of credit balances and transition and a hybrid plan proposal.
How Much Should You Contribute To Your Defined Benefit Plan?
Many key legal and accounting considerations affect how much a sponsor contributes to a DB plan. This article is intended to help sponsors in contribution planning and provide background on current efforts by Congress to reform minimum contribution rules.
Boehner, Thomas Introduce Comprehensive Defined Benefit Funding Reform Bill
Representatives Boehner and Thomas have introduced the Pension Protection Act of 2005 into Congress. The Act, if passed, would overhaul pension funding rules and pension security rules.
DB Funding Reform, Current Efforts In Congress And Airline Funding Relief
In this article we focus, first, on the politics and process of moving DB funding reform in the House. We then turn to the issue of airline funding relief, thought to be an essential element of any DB funding reform proposal.
Current Legislative Outlook, May 2005
This month, several important pieces of pension legislation have been or will be introduced: NESTEG, DB funding reform, investment advice and Social Security legislation. We'll also review recent action on the budget and required PBGC premium increases.
Heinz, Rev. Proc. 2005-23 and Suspension of Benefits
The Supreme Court held that DB plan amendments to suspension of benefit rules that affect benefits accrued prior to the amendment date violate ERISA's anti-cutback rule. Here we review the decision and recent IRS guidance on its effect on qualified plans.
Portman and Cardin Introduce Comprehensive Pension Legislation
Representatives Portman and Cardin have introduced separate (though nearly identical) bills proposing various changes to rules for both DB and DC plans. We will review the main points of the legislation, focusing on changes to corporate-sponsored plans.
Roth 401(k) Regulations Proposed
We discuss the basics of Roth 401(k)s as proposed by the IRS, including the proposed regulation, the formal requirements, and how distributions would work.
Current Legislative Outlook, March 2005: The Budget and PBGC Premiums: SEC Finalizes Short-Term Trading Rule
Our latest Pension legislative outlook reviews recent efforts to make up the PBGC budget shortfall and recently finalized mutual fund short-term trading redemption fee rules.
Retroactive Annuity Starting Date Rules
We've gotten some questions recently about the use of a "retroactive annuity starting date" in DB plans. This article reviews what they are, when it may be appropriate to use one and related design considerations.
Current Legislative Outlook, February 2005
This month we review the effect on pension policy of Social Security and tax reform, responses to the Administration's DB funding proposal, and legislative interest in automatic enrollment and automatic increase provisions.
The Disclosure of Relative Values of Optional Forms of Benefits: New Proposed Regulations Supplement Existing Final Regulations
This article provides a summary of the new proposed regulations for the disclosure of relative values.
Administration Defined Benefit Funding Reform Proposal
In January, the Administration outlined the substance of a comprehensive DB funding reform proposal. We will review the proposal and the important issues that it raises for DB sponsors.
IRS Clarifies Interest Rates For 415 Lump Sum Calculations
The IRS recently issued Notice 2004-78, providing guidance on changes in the calculation of maximum benefits payable from pension plans. The aim of the guidance is to clarify a provision of the Pension Funding Equity Act of 2004 (PFEA).
2004 In Review
In 2004, Congress, the agencies and the courts dealt with a number of important benefits issues including reform of the 30-year rate, cash balance plans and taxation of deferred compensation.
Current Legislative Outlook, November 2004
This article discusses possible changes in the political environment resulting from the 2004 election and reviews key pension issues that we expect to be "front-burner" items in 2005.
Treasury Publishes Proposed Phased Retirement Regulation
Treasury has proposed regulations designed to allow "phased retirement" programs in limited circumstances. In this article we review and evaluate Treasury's proposal.
Politics and Pension Plans -- Who Wins, Who Loses
What effect will the election have on pension policy? While it hasn't been a primary issue in the campaign, we can offer voters insight on what their candidate of choice has to say about the future of pensions.
DOL Issues Guidance On Missing Participants In Terminating Defined Contribution Plans
DOL has issued guidance on how to handle missing participants in terminating defined contribution plans, a troublesome problem for many sponsors.
DOL Publishes Final Automatic Rollover Safe Harbor Regulation
DOL has finalized automatic rollover safe harbor regulations. Automatic rollover requirements for cash outs between $1,000 and $5,000 will now apply effective March 28, 2005. This article reviews the provisions of the new safe harbor.
Republicans and Pension Policy
During the convention season, we've published two articles on politics. The first was on Democrats and pension policy. This one discusses the same topic and Republicans.
Democrats and Pension Policy
During the convention season, we're going to publish two articles on politics. The first is on Democrats and pension policy. Later in August, we'll follow with an article on the Republicans.
Sorting Out the Relative Value Guidance
The IRS recently delayed the effective date of the "relative value?" regulations. Plan sponsors scrambling to meet the deadline are welcoming the relief. But how broad is the delay?
IRS Delays Effective Date Of Relative Value Regulation
On June 30, IRS published a notice that -- with one exception -- extends the effective date of the relative value regulation to February 1, 2006, providing sponsors and administrators almost a year and a half to comply with the new rules.
Cash Balance Litigation
Tootle v. ARINC, Inc., Eaton v. Onan Corporation, Cooper v. IBM -- we'll review how the courts have responded to the age discrimination challenge to cash balance plans.
Current Legislative Outlook, June 2004: Cash Balance Legislation
We've seen some jockeying for position on cash balance conversion legislation so we wanted to review this issue and how the parties are lining up. We'll outline cash balance basics, discuss general policy framework and analyze Congressional activity.
Elimination Of Optional Forms
Treasury has recently proposed regulations under Tax Code section 411(d)(6) that, if finalized, would allow the elimination of certain benefit forms in defined benefit plans.
Disclosure Of Relative Values
Recent finalization of regulations on the Disclosure of Relative Values of Optional Forms of Benefit will require employers to review DB optional forms.
Congress Has Passed H.R. 3108
After lengthy negotiations between House and Senate conferees, Congress has passed H.R. 3108, legislation that would provide a temporary "fix" to the 30-year rate problem and certain additional DB funding relief. This article reviews the new law.
Regulation Of Market Timing -- Effect On Plan Sponsors
The mutual fund controversy has presented several problems for 401(k) plan sponsors. In this article we review one key areas of sponsor focus: "market timing" and the use of redemption fees or trading restrictions to prevent it.
Current Legislative Outlook, March 2004
This month, we cover recent developments with respect to 30-year rate legislation and the briefly summarize the status of other pension legislative initiatives.
The Mutual Fund Controversy And Plan Sponsors -- Late Trading
The mutual fund controversy has presented several problems for 401(k) plan sponsors. In this article we review one key areas of sponsor focus: "late trading" and the use of a "hard close" to prevent it.
A Sponsor's Obligation As A Fiduciary To Monitor (And Avoid) Mutual Fund Abuses
The mutual fund controversy has presented several problems for 401(k) plan sponsors.
Pension Benefit Election Forms Now Require More Disclosure
Treasury recently published final regulations requiring that benefit election forms for all defined benefit pension plans reflect the "relative value" of different forms of benefits.
Current Legislative Outlook, February 2004: 30-Year Rate Legislation One Step Closer To Passage
We?ll review where the House and Senate stand on 30-year rate legislation and what's holding up passage. Then we?ll discuss the imminent problem of quarterly contributions and the DB funding and savings simplification proposals.
Treasury Proposes Legislation That Would Go A Long Way Toward Solving Most Outstanding Cash Balance Issues
The proposal requires that companies converting from a traditional DB plan to a cash balance plan preserve old plan benefits for 5 years, prohibit post-conversion wearaway, eliminate whipsaw and do not violate federal age discrimination laws.
Current Legislative Outlook, January 2004
Because it's an election year, we can expect a relatively short legislative season. Congress has a number of pension issues leftover from last year but the only legislation likely is temporary 30-year rate relief and the cash balance regulations freeze.
Analyzing Advice Legislation
What is the "advice debate"? We review the issues and the pros and cons of different initiatives so you can determine the impact they would have on your plans. And, we couldn't end the article without giving our two cents.
Current Legislative Outlook, December 2003: Current Pension Legislative Outlook: Still Not Over
Congress has yet to fix the 30-year rate problem and it?s possible they won't. We?ll review the status of this legislation, the cash balance regulation freeze, Medicare?s HSA provision and legislative attempts to remedy mutual fund late trading abuses.
Federal District Court Upholds Right Of Enron Participants To Bring ERISA Claim
This article reviews the recent decision holding that directors, officers and employees of Enron could be sued for certain alleged ERISA fiduciary violations.
Current Legislative Outlook, October 2003: Congress Struggles With A 30-Year Rate Solution
Pension policymakers are staking out their agendas for 2004. In this article, we'll review key legislators? current positions on the 30-year rate, the Women's Pension Protection Act of 2003 and the National Employee Savings And Trust Equity Guarantee Act.
Designated Rollover Provider Arrangements
This article reviews arrangements between a plan sponsor and an IRA provider facilitating the establishment of an IRA with the provider when a participant rolls out of a plan. The article reviews legal and policy issues presented by such arrangements.
Is Pension Accounting Broken?
Critics of pension accounting have leveled serious attacks against the current accounting standard (FAS 87) in recent years. Are the attacks overblown or are they hitting their target?
Current Legislative Outlook, September 2003
Solutions to the 30-year rate, DB funding and cash balance issues dominate pension legislative activity. Defined contribution/company stock initiatives and broader pension reform have, for the moment, been relegated to the back burner.
IBM Cash Balance Decision
This article reviews the recent decision by a federal district court that the IBM cash balance plan, and by implication most other cash balance plans, violate ERISA's anti-age discrimination provisions.
Preliminary Decision In WorldCom -- CEO And Director Of Benefits Can Be Sued As ERISA Fiduciaries
This article reviews the recent decision by a federal district court holding that that WorldCom's CEO and its director of benefits were plan fiduciaries and could be held liable under ERISA -- if plaintiffs allegations were proven.
Current Legislative Outlook, July 2003: Portman-Cardin Pension Reform Legislation Reported Out Of Ways And Means After Wild Session
On July 18, 2003, a stripped down version of the Pension Preservation and Savings Expansion Act of 2003 was reported out of the House Ways and Means Committee. We?ll discuss the session, its significance for pension legislation and review the new bill.
Administration Proposes Using A Yield Curve To Determine DB Funding, Lump Sums
This article reviews the Administration proposal to revise ERISA's defined benefit funding and disclosure rules. The proposal includes, among other things, a yield-curve based solution to the 30-year rate problem.
Current Legislative Outlook, June 2003
In this article we briefly review the status of the current major pension legislative initiatives: H.R. 1000, the Pension Security Act of 2003; H.R. 1776, the Pension Preservation and Savings Expansion Act of 2003; and 30-year rate reform.
DOL Fab 2003 3 Provides Guidance On Allocation Of DC Plan Expenses
This article reviews DOL's recently published a Field Assistance Bulletin 2003-3, which provides detailed guidance on the allocation of expenses in defined contribution plans.
Current Legislative Outlook, May 2003: House Passes H.R. 1000: House Passes H.R. 1000
The House recently passed the Pension Security Act of 2003, which includes a requirement that participants be able to diversify out-of-company stock after 3 years of service and that they be provided information about the benefits of diversification.
Conservative Investment Imprudent Even Though Plaintiffs Lost No Principal
This article reviews a recent decision by a Maryland federal district court, holding that a plan fiduciary that invested plan assets almost exclusively in conservative, fixed income securities violated ERISA's prudence and diversification requirements.
Current Legislative Outlook, April 2003: Reps. Portman And Cardin Introduce Next Generation Pension Reform Bill
In this article, we're going to review the key provisions of the Pension Reform bill -- the Pension Preservation and Savings Expansion Act of 2003 -- H.R. 1776, and then discuss the politics of pension legislation and the bill's prospects for passage.
Federal District Court Finds No ERISA Violation In Continued Investment In Declining Stock
A recent decision holding that plan fiduciaries did not violate ERISA prudence requirements by continuing to invest 65 percent of plan assets in company stock during the period leading up to distribution in connection with a plan termination.
First Circuit Approves Cash Balance-Related Wearaway
The First Circuit affirmed a lower court finding that BankBoston's wearaway provisions did not violate ERISA. While benefits already earned under an old plan are protected under ERISA's anti-cutback rules, benefits expected, but not yet accrued, are not.
Summary Of Next Generation Pension Reform Proposal
Reps. Portman (R-OH) and Cardin (D-MD) have published a two-page summary of "The Pension Preservation and Savings Expansion Act of 2003" -- the "next generation" of Pension Reform. This article briefly reviews that summary.
Current Legislative Outlook, March 2003: Fixing The 30-Year Rate
With developing concerns about defined benefit plan funding and the 30-year rate, we thought it was important to review the issues and what they mean for the long-term viability of the DB system.
Administration Retirement Savings Simplification Proposal
At the end of January, the Administration proposed a broad reform of retirement savings tax incentives. This article reviews two key policy issues underlying the Administration's proposal.
Controversy Over Age Discrimination Regulations
Recently, proposed age discrimination regulations have generated significant controversy. Both sponsor and participant advocates have attacked the proposal. We will review the proposal and criticisms - in a way that's much easier to understand!
Current Legislative Outlook, January 2003: New Congress, New Priorities: New Congress, New Priorities
We review the big issues such as will there be a company stock bill? What will it look like? What about the 30-year Treasury Bond rate problem? Will the 2001 EGTRRA changes be made permanent? Will there be advice legislation? What will it look like?
IRS Proposed Age Discrimination Regulations: Effect On Cash Balance Plans
IRS has published proposed regulations concerning the application of age discrimination rules under the Tax Code, ERISA and the Age Discrimination in Employment Act (ADEA) to retirement plans.
Replacing The 30-Year Rate
The 30-year Treasury Bond rate is used to value DB liabilities and calculate DB lump sums under ERISA and the Tax Code. With the discontinuance of the 30-year Bond, selection of some alternative rate is probably necessary, but there are obstacles.
Current Legislative Outlook, October 2002
In this article we are going to discuss the ongoing negotiations in the Senate concerning a possible company stock bill and the recently introduced "Savers Relief" legislation.
DOL Files Brief Supporting Plaintiffs In Enron Litigation
DOL's brief provides us with a view into its current thinking on the responsibilities of in-house fiduciaries of DC plans that hold company stock.
Defined Benefit Plan Alert: New IRS Mortality Table
Recent IRS guidance changed the mortality table required for determining maximum benefits and minimum lump sums under Internal Revenue Code (IRC) Sections 415 and 417(e), respectively, which will be effective in 2003.
Current Legislative Outlook, September 2002
This article will discuss the key issues over which Democrat and Republican Senators are negotiating and the process and timing of consideration and prospects for passage of a company stock bill.
Current Legislative Outlook, July 2002
Enron and company stock-related proposals remain front and center. The Senate Finance Committee has proposed S. 1971 - the National Employee Savings and Trust Equity Guarantee Act, which attempts to blend Republican and Democrat company stock proposals.
Cash Balance Plan Developments
This article reviews the DOL Inspector General's recent report on alleged cash balance plan underpayments and the decision by a Georgia district court that the IRS's application of the "whipsaw" doctrine to cash balance plans is not permitted by ERISA.
Final Minimum Required Distribution Regulations
This article reviews recently finalized IRS/Treasury regulations on required minimum distributions.
ERISA Remedy Reform
This article reviews proposals in Enron-related legislation to change ERISA's remedy provisions.
DOL Final Regulations On Electronic Communication Of ERISA-Required Disclosure
This article reviews recently finalized DOL regulations on the electronic communication (e.g., communication by internet or email) of key ERISA communications.
Analyzing Enron Legislation
At last count, we noted 14 proposed Enron bills. Rather than rehash them all, we will analyze the main issues under consideration and discuss their implications for plan sponsors.
Current Legislative Outlook, January 2002
Congress is back in session. The following article reviews pension legislation prospects as of the beginning of 2002, with emphasis on proposals to address issues raised by the Enron bankruptcy.
Enron 401(k) Litigation
This article reviews what we know about the facts of the Enron 401(k) litigation, who gets sued in these sorts of cases, the types of claims brought in these cases and the significance of a blackout period for these claims.
IRS Cash Balance Plan Math
A brief review of IRS cash balance plan theory -- the calculation of the participant's accrued benefit, whipsaw, satisfaction of the backloading rules and Tax Code section 411(b)(1)(H) (the "no reduction in rate of accrual because of age" rule).
IRS Guidance On EGTRRA Dividend Reinvestment Provision
This article discusses Notice 2002-2, providing guidance on key issues presented by EGTRRA's dividend reinvestment provision.
The Responsibilities Of Defined Contribution Plan Fiduciaries
This article reviews the theory and practice of DC fiduciary obligations, including fund menu design, manager selection and monitoring and education and advice.
Pension Provisions Of The Tax Relief Act -- What To Focus On Now
An article discussing immediate communication and design priorities with respect to the new law.
Proposed Catch-Up Contribution Regulations
This article reviews recently proposed catch-up contribution regulations, discussing key concepts and decision items for plan sponsors.
ESOP Dividend Reinvestment Under EGTRRA
This article discusses a number of issues presented by the new EGTRRA ESOP dividend rule.
Coping With EGTRRA Amendments
This article discusses amendments plan sponsors will have to make to comply with or take advantage of EGTRRA changes.
Lost Opportunity -- Two Cases Involving Safe Investments
This article discusses two cases in which investments in safe, highly liquid investments (a money market fund in one case and T Bills in the other) resulted in participants claims of investment imprudence.
Prudence Litigation
This page brings together articles we have written on ERISA's prudence requirement as it applies to the investment of plan assets.
Pension Reform Passes As Part Of Bush Tax Bill
This article discusses highlights of the recently passed Tax Relief Act, which included many significant pension related provision.
Egelhoff v. Egelhoff -- Supreme Court Holds State Beneficiary Revocation Statutes Preempted
In Egelhoff v. Egelhoff, the Supreme Court ruled that Washington State's beneficiary revocation statute is preempted by ERISA.
Cash Balance Litigation -- Two Recent Decisions Support IRS Whipsaw Analysis
Recently, the 11th Circuit Court of Appeals, in Lyons v. Georgia Pacific Corporation, and the 2nd Circuit Court of Appeals, in Esden v. Bank Of Boston, handed down decisions supporting the IRS's position.
DOL Backs Off On Billing Fees To Plan
In an advisory opinion, and related hypotheticals, DOL has backed off its position, taken in audits by the DOL Kansas City Office, that plan qualification-related fees, and certain other fees, may not be billed to a plan.
Eight Ways The Tax Relief Act Makes It Easier To Pass The 401(k)/(m) Nondiscrimination Tests
In addition, we have prepared an article Eight Ways The Tax Relief Act Makes It Easier To Pass The 401(k)/(m) Nondiscrimination Tests, describing in detail the effect on ADP/ACP testing of the new law.
IRS Proposes Minimum Distribution Regulations
In January, IRS and Treasury re-proposed regulations under Code section 401(a)(9). In this article, we summarize the high points of the proposed regulation and discuss what will be the key issue for sponsors.
Griggs v. Dupont -- Fourth Circuit Equitable Remedy May Be Available For Failure To Explain Tax Consequences Of A Distribution
The Fourth Circuit's decision in Griggs v. Dupont, holding that an equitable remedy may be available where a plan administrator incorrectly tells a plan participant that a benefit distribution may be rolled over.
DOL Audit Of Expenses Billed To Plan
Legal and consulting fees, ADP/ACP testing and other expenses billed to the plan are being challenged during recent DOL audits. We will discuss the rationale and what we think the future has in store.
Cash Balance Litigation -- Decision In Onan -- Cash Balance Plans Legal
The US District Court For The Southern District Of Indiana recently handed down its decision in the Onan case, holding that cash balance plans do not violate the rule prohibiting the reduction of a participant's benefit on account of increasing age.
A Really Short Description Of 401(k)/(m) Nondiscrimination Testing
401(k) plans must satisfy two special, arithmetic nondiscrimination tests: one applicable to salary reduction contributions and one applicable to matching and after-tax contributions.
The Same Desk Rule -- Going But Not Gone
IRS recently published Revenue Ruling 2000-27, which holds that, where a company sells less than substantially all of the assets of a trade or business, it may make 401(k) plan distributions to employees who continue in employment with the buyer.
Employer Stock Fiduciary Issues
This paper reviews ERISA fiduciary issues presented by employer stock buy/hold/sell decisions (including the Moench and Kuper cases) and voting and tendering decisions (including the recently decided NationsBank case.
A Primer On Cash Balance Plans
We review the fundamentals, the regulatory issues, cash balance plan conversion issues and cash balance plan-related litigation and legislation.
Fiduciary Issues Presented By Defined Contribution Plan Fees
A review of DOL guidance concerning 401(k), including third-party fees (e.g., fees in alliances), fees paid for investment and asset allocation advice and DOL's hearings on the fairness of fees generally.
Participant Choice and Participant Education -- Fiduciary Issues
401(k) plans in which participants choose how to invest their account balances raise issues of concern to sponsors and providers alike.