Watson Wyatt Worldwide - 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.

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.

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).

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.

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.

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.

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.

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.

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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.

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).