December 2006
401(k) Newsletter
General Issues
Year-End Checkup for Benefit Plans — Summary: This article will help identify general year-end administrative and planning issues that could lead to compliance or employee relations problems if not addressed before, or early in, 2007. In addition, we have highlighted recent legislative or regulatory developments that may require plan design changes, particularly issues to think about in response to the Pension Protection Act of 2006 (PPA). Located at: Aon Consulting (PDF File). Click on headline for full article.
What Will the New Congress Mean for Employee Benefits? — Summary: For the first time since the 103rd Congress, Democrats will have majorities in both the House and Senate and thus will set the legislative agenda for the next two years. Deloitte comments on what this may mean for Employee Benefits. Located at: Benefitslink.com. Click on headline for full article.
Retirement Security: Is There a Path Forward? — Summary: The recent passage of The Pension Protection Act of 2006 shows the commitment of the U.S. Congress to reforming the current retirement system to help ensure that American workers are able to accumulate adequate savings for their retirement years. But more can and needs to be done. Located at: BCSolutionsmag.com (PDF File). Click on headline for full article.
Overview of the PPA — Summary: New rules for retirement plans, new plan design options, new plan requirements, and new fiduciary protection. Located at: Hay Group (PDF File). Click on headline for full article.
A Syntheti(k) Pension Plan — Summary: How to make a self-directed defined contribution plan look, feel, and taste like a conventional defined benefit pension plan. A defined contribution plan can be designed and managed to provide employees with the primary beneficial attributes of a pension plan. This article explains a 12-step program for the contemporary management of defined contribution plans. Located at: 401khelpcenter.com. Click on headline for full article.
Deadline Approaching for Participant Diversification Requirements — Summary: Under the Pension Protection Act of 2006, defined contribution plans that offer publicly-traded employer stock as an investment option must now satisfy new diversification requirements. Located at: BNATax.com. Click on headline for full article.
Deadline for Notices for Automatic Enrollment — Summary: In order to obtain the benefit of preemption of state payroll laws (such as in California, which prohibits withholding from an employee’s paycheck without written consent), notices must be sent to participants within a reasonable period of time before the beginning of the plan year. Located at: Reish Luftman Reicher & Cohen (PDF File). Click on headline for full article.
PPAs Notice and Disclosure Requirements — Summary: The PPA contains many provisions imposing, modifying and deleting employee benefit plan notices and disclosures. The Act assesses significant penalties for failure to provide certain notices. This newsletter highlights, in order of effective date, the Act's major changes in the notice and disclosure requirements that apply to single-employer benefit plans. Located at: Reinhart Boerner Van Deuren S.C. (PDF File). Click on headline for full article.
PPA Signals a New Era for the Private Pension System — Summary: In August, with the signature of President Bush, the Pension Protection Act of 2006 (PPA) quietly became the most comprehensive pension reform package since ERISA was passed in 1974. Its significance cannot be overstated! Located at: 401khelpcenter.com. Click on headline for full article.
Research
How America Saves — Summary: The latest edition of How America Saves, the annual study of defined (DC) saving and investing from the Vanguard Center for Retirement Research, provides a detailed look at the savings adequacy issue and its implications for tomorrow’s retirees. And for the first time since this valuable reference was initially published in 2000, it offers an in-depth look at employer contributions and autopilot plan design features. Located at: Vanguard Center for Retirement Research (PDF File). Click on headline for full article.
2006 On Track Retirement Study — Summary: The results of our most recent survey are not encouraging: Thirty-nine percent of employers believe that half of their employees will not have enough income to retire at a reasonable age (ages 62 to 65). Aon offers suggestions and tools on how to get employees save more and take more responsibility for their future. Located at: Aon Consulting (PDF File). Click on headline for full article.
Fiduciary Issues
New Paradigm for 401k Fiduciaries — Summary: A single St. Louis-based law firm filed a series of class action lawsuits that target some large plan sponsors and the fiduciaries of their 401k plans. These lawsuits should not be taken lightly for these litigators have stumbled across the Achilles heel of 401k fiduciaries-a compliance and procedure, rather than a value and results, driven approach to running 401k plans. Located at: Investment Horizons (PDF File). Click on headline for full article.
DOL and IRS Issues
IRS Final Regs Provide Standards for Electronic Employee Plan Notices — Summary: The Securities and Exchange Commission is accelerating a probe of 27 investment company advisers that paid $230 million in mutual funds assets for administrative fees from 1999 to 2004 to a third-party service provider that funneled most of the payments right back to the investment advisers. Located at: CCH.com. Click on headline for full article.
Default Investment Regulations Sweep Far Beyond Auto-Enrollment — Summary: The Department of Labor's new regulations governing default investments in participant directed retirement accounts go far beyond automatic enrollment. The regulations would affect employer handling of retirement assets in many different situations according to ERIC. Located at: ERISA Industry Committee (ERIC). Click on headline for full article.
