Watson Wyatt Worldwide - Articles

Insider: Who Prefers Annuities? Observations About Retirement Decisions

As baby boomers retire, they must decide how to receive payouts from their defined benefit (DB) plans, defined contribution (DC) plans and personal savings. Many pension experts believe that life annuities are the best way for retirees to ensure that they don�t run out of money. But most people do not choose annuities, and experts are wondering why. To find out, Watson Wyatt Worldwide asked a national panel of older workers and recent retirees about their payout and risk preferences, retirement decisions and related issues.

Insider: DOL Proposes Employee Contribution Safe Harbor Rule for Small Pension Plans

The U.S. Department of Labor (DOL) has proposed a safe harbor for deposits of employee contributions to pension plans (including 401(k) plans) with fewer than 100 participants. Employers sponsoring such plans would have seven business days after the employer received or withheld the contribution to make the deposits.

Insider: House Approves PPA Technical Corrections

On March 12, the House approved the Pension Protection Technical Corrections Act (H.R.3361), which would make important corrections and clarifications to the Pension Protection Act of 2006 (PPA).

Insider: San Francisco Health Care Mandate Goes Into Effect While Court Considers ERISA Preemption Appeal

On January 9, 2008, a federal appeals court ruled that San Francisco�s health care ordinance could get under way while the court considers the ERISA preemption challenge. The mandate requires employers to spend specific amounts on health care for or on behalf of their employees.

Insider: Health Care on the Campaign Trail

Health care reform is a hot topic right now. The presidential candidates have made speeches, debated and discussed health care at voter forums. All three major party candidates have issued proposals aimed at increasing access or coverage, reducing costs and improving quality.

Insider: IRS Answers Questions About PPA Distributions

In Notice 2008-30, the IRS answers questions about certain distribution-related provisions of the Pension Protection Act of 2006 (PPA) that took effect in 2008. The notice addresses interest rate assumptions for lump sum distributions, rollovers from eligible retirement plans to Roth IRAs, qualified optional survivor annuity (QOSA) requirements and gap-period earnings.

Insider: IASB Paper on Retirement Benefit Accounting Being Watched Around the World

The International Accounting Standards Board (IASB) has published a �preliminary views� paper that would make a number of changes to the way retirement benefits are accounted for on employer financial statements. The proposal would result in significant changes on both the balance sheet and income statement for companies that sponsor these types of plans.

Insider: House Passes Mental Health Parity Bill

Mental health parity reform moved another step closer to enactment when the House approved the Paul Wellstone Mental Health and Addiction Equity Act (H.R.1424) on March 5. The Senate approved the Mental Health Parity Act (S.558) � a version supported by the business community and mental health advocates � by unanimous consent in September 2007.

Insider: DOL Proposes New FMLA Regulations

The U.S. Department of Labor (DOL) has proposed new regulations for the Family and Medical Leave Act (FMLA). Although employers were hoping for significant guidance, these proposed regulations provide mostly clarifications and minor changes.

Insider: Recent Developments Regarding Global Accounting Convergence and FASB Restructuring

Global accounting standards might be adopted much sooner than anyone expected (within years versus decades). Recent events and public statements from various accounting constituencies suggest an intensified focus on convergence and an uncertain future for the U.S. Financial Accounting Standards Board (FASB).

Insider: Is the Executive Pay Model Improving?
It Depends on Whom You Ask

Corporate directors are considerably more optimistic than institutional shareholders about the effectiveness and future of the U.S. executive pay model. Both groups think the new proxy disclosures have improved transparency but need more work. These and other findings are from a new study by Watson Wyatt Worldwide, 2008 Report on Directors� and Investors� Views on Executive Pay and Corporate Governance.

Insider: Congress Considers Medicare Legislation

Medicare and Medicaid legislation has seen considerable debate this legislative session. The Medicare, Medicaid and SCHIP Extension Act of 2007 (S. 2499) delayed scheduled cuts in physician reimbursements for six months, reauthorized the State Children�s Health Insurance Program (SCHIP) for 18 months and required employer-provided health plans to provide enrollment data to the secretary of Health and Human Services.

Strategy At Work: Retiree Health: Challenges for Brazilian Companies

Employers around the world are struggling with the implications of retiree health care, and Brazil is no exception. A recent Watson Wyatt Voice of the Consumer survey asked more than 2,700 Brazilian employees how they feel about their prospects for post-retirement health care. Seven out of ten (68 percent) said they are concerned or very concerned, while another 29 percent are somewhat concerned.

Insider: IRS Clarifies 162(m) Ruling Position � Finance Departments Breathe Sigh of Relief

In January, the IRS released a private letter ruling (PLR) calling into question the tax deductibility of pay-for-performance plans that pay out at target at �not for cause� or �good reason� terminations or at retirement. Had that ruling been the last word, many companies would have had to scramble to change their financial statements and their plans. Thankfully, the IRS subsequently issued a revenue ruling that ratchets down the urgency.

Insider: Accounting Proposal Would Require More Postretirement Benefit Disclosure

A Financial Accounting Standards Board (FASB) proposal made public on March 18, 2008, would significantly increase the amount and types of disclosures employers are required to file regarding postretirement benefits, such as pensions and retiree medical plans. These changes are proposed to take effect for fiscal years ending after December 15, 2008.

Insider: Executive Pay: A Proposal to Protect Core Pay-for-Performance Programs

The U.S. executive pay-for-performance model is not only viable, it is essential to the continued success of corporations and the U.S. economy.

Strategy At Work: A Matter of Choice

As director of HR at PT Bank Danamon Indonesia, Muliadi Rahardja knows his company competes in three important markets. First, the bank competes with other banks to attract and retain desirable customers. Second, Danamon competes in the capital market, for business expansion resources. Finally, it competes in the talent market to hire and keep the best employees.

Strategy At Work: Technology and the Workforce: How to Engage Talent and Build Strategic Advantage

As attracting and retaining critical talent becomes even more challenging, companies need to focus on how to successfully engage their employees once they�re on board. Engaged employees not only are highly committed but also understand how they make a positive contribution.

Strategy At Work: Russia�s Changing Pensions Landscape

Are you considering doing business in Russia? Already there? Then take note: Things are changing on the pensions landscape.

Strategy At Work: 10 questions for George Bogdewiecz, senior vice president, human resources, Great-West Life and Annuity Insurance Company

Insider: U.K. Recommendations Could Have Significant Effects on Pension Accounting Worldwide

Recent recommendations by the U.K. Accounting Standards Board (ASB) could have significant effects on pension accounting worldwide if the International Accounting Standards Board (IASB) and U.S. Financial Accounting Standards Board (FASB) follow the same line of reasoning. The ASB�s recommendations would substantially increase the reported pension liabilities that appear on the balance sheet.

Insider: President Bush Releases Fiscal 2009 Budget Proposal

President Bush has proposed a budget for fiscal year 2009. Many of the budget�s health care and retirement proposals appeared in earlier budget submissions, such as replacing the tax exclusion for employer-provided health insurance with a standard tax deduction, and establishing a new retirement savings plan to replace existing defined contribution plans. These proposals failed to gain legislative traction in earlier years and are unlikely to do so this year either.

Insider: DOL Addresses Exemption From HIPAA Portability Rules

In a recent Field Assistance Bulletin (FAB), the U.S. Department of Labor (DOL) differentiates exempt from nonexempt supplemental health coverage under the Health Insurance Portability and Accountability Act (HIPAA). The DOL is responding to concerns about some insurance products being improperly marketed as HIPAA-exempt supplemental plans.

Insider: IRS Relaxes Restrictions on Payments for Cafeteria Plan Coverage

The IRS recently modified its position on the permissibility of pretax payments for health coverage under a cafeteria plan for domestic partners and others who are not tax dependents. Formerly, employees had to pay taxable health benefits with after-tax dollars. Now, employees may pay for both nontaxable and taxable health benefits with pretax dollars, and the cost of the taxable benefits will be imputed to employees� gross incomes.

Insider: EEOC Issues Final Rule Permitting Coordination of Retiree Medical and Medicare

The Equal Employment Opportunity Commission (EEOC) released final regulations that allow employers to coordinate retiree health benefits with Medicare benefits. Although the EEOC decided to approve this long-standing employer practice some time ago, the agency had been blocked from issuing these final rules by litigation brought by AARP. Under the final rules, employers can eliminate or reduce retiree health benefits when retirees become eligible for Medicare without violating the Age Discrimination in Employment Act (ADEA).

Strategy At Work: Market Turmoil: Making Sense of Today's Investment Landscape

The subprime mortgage crisis in the United States and the declining U.S. dollar have caused market turmoil worldwide. With public officials predicting continuing volatility for the near future, investors, including pension funds, face a perplexing landscape.

Strategy At Work: New Countries, New Plans:
Preparing for More Global Expansion

China. Russia. Poland. Singapore. Mexico. With stiffer global competition and a weak U.S. dollar, many companies are considering expansion into these and other countries. The reasons are simple: To create new markets for products and services, establish a foothold for future business in a particular region and source more efficient pools of labor.

Strategy At Work: Reevaluating Your China Strategy

China�s new labor contract law is just 14 pages long, but its impact looms large for any company with employees in that country.

Strategy At Work: Evolution of Excellence

Since its inception more than 175 years ago in Trieste, Italy, the Generali Group has become one of Europe�s largest and most successful insurers, with millions of clients on five continents. Watson Wyatt has been a trusted advisor to Generali through several key milestones in that evolution, working closely with executives to help the company adapt to changing priorities, new procedures, and better ideas and strategies.

Insider: IRS Provides Guidance on �Greater of� Cash Balance Conversions

The IRS recently released a revenue ruling that addresses whether �greater of� transitions in cash balance conversions violate the accrual rules. In a greater-of transition, participants receive benefits under whichever formula gives them the larger benefit � the previous plan formula or the cash balance formula.

Insider: Partially Prefunding the Canadian Public Pension Plans: Lessons for the United States?

During the 1990s, both Canada and the United States were facing many of the same challenges to their Social Security programs. But while the United States has continued on the same course, with no changes made � despite continued projections of severe shortfalls ahead � Canada began partially prefunding its public pension plans with real assets in 1998. Would a similar approach be possible or appropriate for the financially challenged Social Security program in the United States?

Insider: Pension Funding Improves Again in 2007

Pension plan funding has been up and down during the last seven years. In many firms, the pension plan surpluses of the late 1990s turned into deficits early in the next decade, as both the stock market and interest rates declined. Then in 2006, an inverse of the earlier �perfect storm� delivered strong asset returns and higher discount rates for pension liabilities. These market trends helped to bring pension plans� aggregate funding status back to full financial health.

Insider: Major Expansion of FMLA Allows Six-Month Leave to Care for Injured Servicemembers

Employees may take up to six months of job- and benefit-protected leave to care for family members injured in the line of active military duty. In certain other circumstances, workers may take up to 12 weeks of leave when a family member is on active duty or has been notified of an impending call to active duty.

Insider: DOL Proposes Regulation and Class Exemption for Fee Disclosure

The U.S. Department of Labor (DOL) has released proposed regulations that require certain service providers to disclose information about fees and compensation � both direct and indirect � to plan fiduciaries.

Insider: IRS Proposes Regulations on PPA Requirements for Hybrid Plans

The IRS has proposed regulations to implement the Pension Protection Act of 2006 (PPA) requirements for hybrid plans. The regulations expand on the transitional guidance released last year in Notice 2007-6, clarifying some issues and asking for comments on others.

Insider: Form 5500 in Transition

The U.S. Department of Labor�s Employee Benefits Security Administration, in conjunction with the IRS and the Pension Benefit Guaranty Corporation, recently finalized new Form 5500 regulations, making a few changes to the proposed version.

Insider: DOL Releases Opinion Letter on Pension Assets and Politically Motivated Proxy Activity

Pension fiduciaries may not engage in politically motivated proxy activity, according to an opinion letter released by the U.S. Department of Labor (DOL). The letter states that fiduciaries may not introduce or support proxy resolutions unless doing so would provide a clear economic benefit to the plan. The DOL was responding to an inquiry from the U.S. Chamber of Commerce about whether a shareholder activism campaign organized by an employee organization to promote its health care agenda � and reportedly to seek disclosure of political contributions from corporate directors and officers to candidates who oppose that agenda � was compatible with ERISA.

Insider: Much Talk, Little Action During 2007 Legislative Session

Mental health parity. 401(k) fees. Deferred compensation. COBRA. Carried interest. Medicare. Expatriate taxation. These are just some of the benefit and compensation issues Congress discussed last year. During 2007, lawmakers evinced a continuing desire to enact legislation that would affect employer-sponsored health, retirement and compensation programs � yet very little of that legislation passed. The year also marked the emergence of new issues that would affect plan investments.

Insider: Recent Developments in Pension Plans in the Netherlands

Pension systems in developed countries are often described as having three pillars: Social Security, employer-sponsored pensions and personal savings. In the Netherlands, the first two pillars are unusually comprehensive and widespread among workers. Nonetheless, employer-sponsored pensions have undergone significant changes recently, both in benefit structures and in regulatory oversight.

Insider: Influences on Workers� Asset Allocations in Defined Contribution Accounts

Defined contribution (DC) plan participants in the private sector who are younger, better-educated, more risk-tolerant, and have an employer-sponsored defined benefit (DB) plan and a longer planning horizon, generally hold a larger share of equities in their DC accounts than other participants. Being married and in good health reduces the likelihood that a household will avoid equities altogether. These and other findings are from Watson Wyatt�s recent analysis into asset allocations in DC plans.