DOL Proposes Default Investment Guidance
The U.S. Department of Labor (DOL) has proposed guidance concerning default investments in participant-directed defined contribution plans under ERISA section 404(c), as required by the Pension Protection Act of 2006. The guidance would protect plan fiduciaries if, in the absence of investment direction from the participant, the fiduciary invests the participant’s assets in a qualified default investment alternative (QDIA) and certain notice and other conditions are met. Plan fiduciaries would still have to prudently select and monitor any QDIAs under their plans. |
Meeting the Challenges of Drafting a Compensation Discussion and Analysis
As companies prepare their compensation disclosures under the Securities and Exchange Commission’s (SEC’s) new reporting regime, questions arise about the best approach to creating the Compensation Discussion and Analysis (CD&A). To comply with the new rules, companies need to understand exactly what the SEC expects to find in the CD&A. Age-Discrimination Claims Against Cash Balance Plans Still Have Life
Two recent decisions show there is still life in age-discrimination claims against cash balance plans. In In Re J.P. Morgan Chase, the district court for the Southern District of New York denied the plan’s motion to dismiss an age-discrimination claim, applying an analysis that considers all cash balance plans inherently age-discriminatory. In Richards v. FleetBoston, the district court for the District of Connecticut denied FleetBoston’s motion for reconsideration of the court’s original denial of a motion to dismiss an age-discrimination claim earlier this year. FASB Issues Final Statement on Accounting Reform for Postretirement Benefits
On September 29, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards (SFAS) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. The two biggest changes for sponsors are the requirements to: (1) put the net financial status of their pensions and other retirement benefits on the balance sheet, and (2) measure assets and liabilities as of the end of the fiscal year. The changes are intended to make reported financial information more complete, useful and transparent. IRS Issues Guidance on Debit Cards
In Notice 2006-69, the IRS simplifies the use of debit cards for health flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs). The notice also expands allowable expenses, adds a new substantiation method and clarifies acceptable substantiation practices, and permits the use of debit cards in dependent care plans. The guidance generally takes effect immediately. House Ways and Means Committee Clears HSA Improvement Bill
As health savings accounts (HSAs) have become more popular, employers, participants and policymakers have become aware of some of their shortcomings. Over the past year, lawmakers have shown growing interest in fixing some of these problems (see Watson Wyatt Insider, July 2006). On September 27, the House Ways and Means Committee approved a bill to allow rollovers from health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and individual retirement accounts (IRAs). The bill would also increase the deductible contribution limit and make other changes. IRS Releases 2007 Benefit Limits
The IRS has announced the annual cost-of-living and statutory adjustments of various dollar limits for employee benefit plans. Market Payouts From Immediate-Life Annuities: Trends and Volatility
Popular discussions of the shift from defined benefit plans to defined contribution and other individual account plans have thus far focused mainly on differences in risks, returns and flexibility during the benefit accrual/asset accumulation phase of the retirement cycle. As the baby boom generation begins to retire, however, the zeitgeist will follow the money, focusing on differences in risks, returns and flexibility at the other end of the retirement cycle, when distributions begin in earnest. Court Rules That Service Cannot Define NRA and Affirms That Cash Balance Plans Are Not Inherently Age-Discriminatory
The federal district court for the Southern District of New York recently ruled that defining a plan’s normal retirement age (NRA) by years of service violates ERISA if it makes the NRA earlier than age 65. It also follows a majority of courts by ruling that cash balance plans are not inherently age-discriminatory. IRS Issues 2006-2007 Priority Guidance Plan
The IRS released its to-do list for the year on August 15, two days before the Pension Protection Act was signed into law. The PPA is certain to require reams of new guidance, so future quarterly updates of the priority plan will likely include PPA-related projects.
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