2009 was a challenging year for employers and employees. 

From our vintage point, we are seeing more employers than in recent years finding it necessary to return excess 401(k) contributions to Highly Compensated Employees by the March 15 deadline or provide a supplemental 100% vested contribution called a Qualified Non-Elective Contribution, a/k/a “QNEC”.

 

Unfortunately, passing 401(k) discrimination tests is not as easy as it was for Bill and Ted passing  their history test in the 1989 classic comedy, Bill & Ted’s Excellent Adventure. If you missed it (it comes around from time to time on cable), Bill S. Preston, Esq. played by Alex Winter and and Ted Logan played by Keanu Reeves are two high school slackers that use a time machine to go back in time to bring back a group of famous historical figures to use in their presentation. 

 

Those illustrious individuals, shown above, that were thrust into 1989 California (and what a trip that was) included Napoleon Bonaparte, Billy the Kid, Socrates, Sigmund Freud, Ludwig van Beethoven, Genghis Khan, Joan of Arc, and Abraham Lincoln.

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Tags:   401(k) plans,blog

Reforms Proposed for Reg FD Compliance Week (subscription) The committee, co-chaired by AARP Financial President Richard Hisey and TIAA-CREF's head of corporate governance, Hye-Won Choi, was formed last June to give ...

Tags:   tiaa

In "It's Time for Swaps to Lose Their Swagger," New York Times reporter Gretchen Morgenson points the finger at regulators for not doing enough to stem the tide of moral hazard with respect to credit default swaps. While this superstar financial analyst rightly points out that risk transference continues to favor "high octane" traders and cost taxpayers and shareholders plenty, I don't agree that more "one size fits all" regulation is the answer. There is simply no evidence that a greater quantity of statutes will bridge the gap between risk management and reward. I don't have to be a behavioral expert to know that financial traders are motivated by the money they can make in a relatively short period of time. New rules beget changed incentives and often times perverse behavior. Does the law of unintended consequences ring a bell? Let's undo all the bad rules in place and focus on incentives that count. Start with bonuses that take into account the risk cost associated with expected return. Risk budgetize trading payouts.

If I'm playing by the rules, doing a great job of risk controls and acting in good faith on behalf of the proper constituencies, why should I be forced to pay for others' folly? Wouldn't my money and time be better spent on trying to encourage prudence on the part of industry participants, while informing the market at large how much my organization is doing right? For those who are in the vanguard of excellent risk management, take a bow. Get out the megaphones. Let the world know!

In December 1994, I was honored by the

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Tags:   regulation,risk management,derivatives,pension risk matters,blog

Excerpt: "[In a conversation with Kathy Elliott, (a CPA specializing in 403(b) audits)] we went into more detail on my blog on 403(b) plan disqualification. In talking about what now seems to be the obvious, Kathy pointed out the absurdity of 'disqualifying' an entire 403(b) plan: the employer suffers little direct tax sanction, and the burden of the employer's errors are borne by the employees. There is no 'stick' to the 'carrot and stick' combination that makes 401k plans work, according to Kathy." (Robert J. Toth, Jr.)

Tags:   admin

Our friends at Employee Benefit News Legal Alert published one of those "must read" articles. Attorney Cynthia Marcotte Stamer writes Tough Times Are No Excuse for ERISA Shortcuts.

Ms. Stamer correctly points out that irrespective of the business hardships that plan sponsors are facing, the Department of Labor (DOL) will aggressively pursue enforcement if they perceive that a plan sponsor has failed take the necessary steps to protect plan participants.

Here are three key points she makes:

1. Many employers don't understand their fiduciary responsibilities and potential liabilities associated with sponsoring a retirement plan.
2. Plan sponsors frequently incorrectly assume that they can rely upon retirement plan service providers to ensure that their fiduciary responsibilities are being met.
3. Plan sponsors in other cases don't realize that they meet ERISA's functional definition of a fiduciary.

For comprehensive and understandable resources on what this "fiduciary stuff" is all about, check out The Fiduciary Education Campaign, a compliance assistance initiative of the Employee Benefits Security Administration (EBSA), the DOL agency responsible for fiduciary oversight.

Employee Benefit News Legal Alert is just one of the free

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Tags:   401(k) plans,pension plans,blog

SEC Tinkers With Variable Annuity Prospectus Compliance Reporter Kotapish said early attempts at variable annuity summary prospectuses have been heavy with cross-references to the larger prospectus documents, ...

IRS to Mail 401(k) Compliance Questionnaires Planadviser.com Other IRS reviews have shown significant 401(k) noncompliance from a lack of internal controls at the plan sponsor. According to the alert, ...

Tags:   401k

Excerpt: "Although the new regulations governing 403(b) plans are already in effect, many plan sponsors admit to not fully understanding certain compliance requirements. The TIAA-CREF Institute said its survey found nearly three-quarters (74%) of respondents believe they are fully compliant with the new regulations. However, nearly half (45%) say they have difficulty understanding the regulations." (PLANSPONSOR.com)

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ERISA compliance: 55% of firms wide open for big fines CFODailyNews.com A recent study gives powerful incentive to check-in with your Benefits department to be sure you're in compliance with the Employee Retirement Income ...

Nationwide Executive among Top 75 Most Powerful African American Business ... Business Wire (press release) Prior to joining Nationwide, Baldwin Moody headed global compliance and legal groups at Citibank and served as chief compliance officer for TIAA-CREF. ... and more »

Tags:   tiaa