feature issue - asppa journal... · feature issue sheldon h. smith, apm, ... green with envy, going...

ASPPAJournalTHE

ASPPA’s Quarterly Journal for Actuaries, Consultants, Administrators and Other Retirement Plan Professionals

FALL 2009 :: VOL 39, NO 4

Continued on page 4

F E A T U R E I S S U EF E A T U R E I S S U E

Sheldon H. Smith, APM, Elected 2009-2010 ASPPA President

by Troy L. Cornett

In July, ASPPA’s Board of Directors elected Sheldon H. Smith, APM, as ASPPA’s President for the 2009-2010 term. His term begins at the close of the 2009 ASPPA Annual Conference. Sheldon is a partner in the Compensation and Benefits Group of the Denver law firm Holme, Roberts & Owen LLP, advising clients on ERISA, executive compensation, fiduciary duties, health and welfare plans and qualified retirement plans.

Since 1980, Sheldon has been a member of either the adjunct or visiting faculties of the University of Denver College of Law. He received his undergraduate degree (BA) from Washington University in St. Louis and both of his law degrees [JD and LLM (taxation)] from the University of Denver.

In This Issue:

Washington Update: In Search of Relief—What’s a DB Plan Sponsor Supposed to Do?

The Importance of 404(c) Compliance and QDIAs in Minimizing Fiduciary Liability

How to Identify and Avoid Conflicts of Interest When Selecting Service Providers

Welfare Benefit Plans Redux: Here We Go Again!

Defined Contribution Plan Amendments from GUST to WRERA

FALL 2009 :: 3

Editor in Chief

Brian H. Graff, Esq., APM

The ASPPA Journal CommitteeKimberly A. Flett, QPA, QKA, Co-chair

James T. Comer

Catherine J. Gianotto, QPA, QKA

William C. Grossman, QPA

William G. Karbon, MSPA, CPC, QPA

Barry Kozak, MSPA

Michelle C. Miller, QKA

Mary L. Patch, QKA, QPFC

Peter K. Swisher, CPC, QPA

Nicholas J. White

David J. Witz

Editor

Chris L. Stroud, MSPA

Associate Editor

Troy L. Cornett

Production Manager

Troy L. Cornett

Technical Review BoardMichael Cohen-Greenberg

Barry Kozak, MSPA

Marjorie R. Martin, MSPA

Robert M. Richter, APM

Nicholas L. Saakvitne, APM

Advertising Sales

Dawn Frappollo

Design and Layout

Lynn A. Lema

s s s

ASPPA OFFICERS

President

Stephen L. Dobrow, CPC, QPA, QKA,

QPFC

President-Elect

Sheldon H. Smith, APM

Senior Vice President

Thomas J. Finnegan, MSPA, CPC, QPA

Vice President

Laura S. Moskwa, CPC, QPA

Treasurer

Robert M. Richter, APM

Secretary

Barry Max Levy, QKA

Immediate Past President

Sal L. Tripodi, APM

Ex-Officio Member of the Executive Committee

Marcy L. Supovitz, CPC, QPA, QKA

It’s a Colorful World

s I write this article, millions of children are headed back to

school, and ads for “back to school” supplies abound—

notebooks, pencils, crayons, etc. I remember the excitement and anticipation I felt as each new school year began, wondering about teachers, classmates and homework. I also remember the joy of breaking open a new pack of sharp crayons!

It’s a colorful world and people have been fascinated for years by crayons and the names assigned to them. The first Crayola® crayons were introduced in 1903 with simply eight colors: black, blue, brown, green, orange, red, violet and yellow.

These basic colors found their way into our vocabulary. Code blue, feeling blue, black and blue, yellow streak, yellow brick road, in the red (or in the black), green with envy, going green, red with anger, orange (the fruit), shrinking violet and chocolate brownies are all part of normal conversation. We have also enjoyed many colorful movie titles and books (e.g., The Green Mile, The Blue Lagoon, The Wild Blue Yonder, Little Red Riding Hood, The Hunt for Red October, The Red Badge of Courage, Black Beauty). And, of course, we can’t forget about colorful song titles like Yellow Submarine, Mellow Yellow, Blue Hawaii, Black is Black, Brown Eyed Girl and my personal favorite—Red, Red Wine.

Over time, additional crayon colors were added to the basic eight and by 1958, 64 distinct crayon colors existed. Last year, Crayola celebrated the 50th anniversary of that wonderful 64-pack of crayons. (I remember feeling really grown up when I got my first 64-pack—with the built-in sharpener. What an innovation!) Many of the newer crayons that lived in the 64-pack carried descriptors with their names to help distinguish the colors. The world got even more colorful as we came to know carnation pink, olive green, aquamarine, navy blue, sky blue, burnt sienna and many others.

Today, there are at least 120 crayon colors for children (and adults) to enjoy. We have been graced with neon colors with fun names like

screamin’ green, shocking pink, laser lemon, electric lime, radical red, purple pizzazz and atomic tangerine. At times, colors have been named by consumers, bringing us such shades as mauvelous, denim, macaroni and cheese, asparagus, tickle me pink and razzmatazz (what color is razzmatazz, anyway?).

Some colors have changed names once or twice. For example, what started out as ultra red laser became wild watermelon and last year was renamed again to awesome. Other crayon colors have been retired and replaced with totally new colors. Believe it or not, a number of retired colors were enshrined in the Crayola Hall of Fame in 1990, including violet blue, maize, lemon yellow and raw umber. In 2003, to celebrate the 100th birthday of Crayola, consumers were allowed to name four new colors and vote out four old colors. The winners: inch worm, jazzberry jam, mango tango and wild blue yonder. The losers: blizzard blue, magic mint, mulberry and teal blue.

Yes, the times—and crayon names—are a-changing. Orchid has become best friends, hot magenta has become famous, ultra yellow has become super happy and screamin’ green has become giving tree. It’s obvious that our youth are having an impact on these names. Crayola ran a State-Your-Color contest in 2004, which resulted in a limited edition patriotic version of the 64-pack crayons with unique color names that pertained to various states and patriotism. Some of my favorites from this list and the related states/colors were alligator alley (FL, asparagus), sweet Georgia peach (GA, melon), tater tan (ID, desert sand), hog wild red (AR, brick red), Fort Knox gold (KY, gold) and the patriotic replacements for blue and orange—America the blue-tiful and orange you glad you’re in America.

In today’s rapidly changing world full of technology, I hope that the computer mouse never completely replaces crayons in the hands of our children of the future. To make sure the children in your life have fond memories of crayons, check out www.crayola.com for more fun crayon facts and for access to 1,000+ free coloring pages to add color to your world.

by Chris L. Stroud, MSPA

F R O M T H E E D I T O R

A

4 :: ASPPAJournalTHE

cont

ents

5 Washington Update

8 The Importance of 404(c) Compliance and QDIAs in Minimizing Fiduciary Liability

14 How to Identify and Avoid Conflicts of Interest When Selecting Service Providers

20 Welfare Benefit Plans Redux: Here We Go Again!

24 Defined Contribution Plan Amendments from GUST to WRERA

26 Thank You to All of the Participants of the Western Benefits Conference 2009!

31 2009 Educator’s Award Presented to Kathryn J. Kennedy

32 2009 Martin Rosenberg Academic Achievement Awards

33 CEOs Talk About the ASPPA Recordkeeper Certification Program

35 ASPPA Joins the Employee Benefit Research Institute Board

37 ASPPA Adds Ethics/Professionalism to Continuing Education Requirement

38 From the President

40 ASPPA’s Government Affairs Committee Meets in Washington

41 GAC Corner

44 ABC of the Texas Gulf Coast Provides Continuing Education on a Budget

46 The ABC of Cleveland—Reflecting on Accomplishments and Looking Ahead

47 ABC of Central Florida—Looking Toward the Future by Embracing Our Past

48 Welcome New Members and Recent Designees

49 Calendar of Events

50 Fun-da-Mentals

C O N T I N U E D F R O M P A G E 1

CORRECTION

The following sentence appears in the section entitled “Employee Contributions” on page 23 of the Summer 2009 issue of The ASPPA Journal:

“401(k) contributions are exempt from state and federal tax...”

We would like to point out that although 401(k) contributions are exempt from state tax in many states, they are not exempt in all states (e.g., in Pennsylvania, 401(k) contributions do not reduce earned income for state purposes).

Thanks to our astute member, J. Scott Groene, CPC, from Pennsylvania Pension Planners, Inc. of Harrisburg, PA, for bringing this correction to our attention.

Sheldon has been a member of the Western Pension & Benefits Conference since 1986 and has served as its president and as president of the Denver chapter. Sheldon is the Chair of the Colorado Regional Cabinet of Washington University in St. Louis.

Sheldon is a fellow of The American College of Employee Benefits Counsel and has been selected to “Chambers USA – America’s Leading Lawyers,” “The Best Lawyers in America,” “Who’s Who in American Law,” “Who’s Who in American Education” and has been named as a Colorado Super Lawyer. He is a member of the American Bar Association, the Colorado Bar Association and the Denver Bar Association. Sheldon is admitted to practice before the Colorado Supreme Court, the United States District Court for the District of Colorado, the United States Tax Court, the Tenth Circuit US Court of Appeals and the Seventh Circuit US Court of Appeals.

The other ASPPA officers for 2009-2010 are:

President-Elect Thomas J. Finnegan, MSPA, CPC, QPA

Senior Vice President Robert M. Richter, APM

Vice President Martella A. Joseph, MSPA

Vice PresidentDavid M. Lipkin, MSPA

Treasurer Barry M. Levy, QKA

Secretary Marcy L. Supovitz, CPC, QPA, QKA

Immediate Past President Stephen L. Dobrow, CPC, QPA, QKA, QPFC

Troy L. Cornett is the Office Manager and Board of Directors Liaison for ASPPA. He is also the Production Manager and Associate Editor of The ASPPA Journal and manages the human resources functions for the ASPPA staff. Troy has been an ASPPA employee since July 2000. ([email protected])

FALL 2009 :: 5

The ASPPA Journal is produced by The ASPPA Journal Committee and the Executive Director/CEO of ASPPA. Statements of fact and opinion in this publication, including editorials and letters to the editor, are the sole responsibility of the authors and do not necessarily represent the position of ASPPA or the editors of The ASPPA Journal.

The American Society of Pension Professionals & Actuaries (ASPPA), a national organization made up of more than 6,500 retirement plan professionals, is dedicated to the preservation and enhancement of the private retirement plan system in the United States. ASPPA is the only organization comprised exclusively of pension professionals that actively advocates for legislative and regulatory changes to expand and improve the private pension system. In addition, ASPPA offers an extensive credentialing program with a reputation for high quality training that is thorough and specialized. ASPPA credentials are bestowed on administrators, consultants, actuaries and other professionals associated with the retirement plan industry.

© ASPPA 2009. All rights reserved. Reprints with permission. ASPPA is a not-for-profit professional society. The materials contained herein are intended for instruction only and are not a substitute for professional advice. ISSN 1544-9769.

To submit comments or suggestions, send an e-mail to [email protected]. For information about advertising, send an e-mail to [email protected].

In Search of ReliefWhat’s a DB Plan Sponsor Supposed to Do?

W A S H I N G T O N U P D A T E

by Judy A. Miller, MSPA

hen the market plummeted in September 2008, participants in 401(k) plans saw

account balances drop dramatically. Benefits for the more than 40 million

workers and retirees covered by defined benefit pension plans were protected from the market downturn, but the employers that sponsor those plans were not. Assets for defined benefit plans were invested in the same falling market as 401(k) plan assets, resulting in dramatically higher minimum contribution requirements. ASPPA’s Government Affairs Committee and the ASPPA College of Pension Actuaries (ACOPA) have been working toward obtaining funding relief for defined benefit plan sponsors. Legislative and regulatory actions have cushioned the blow for many plan sponsors, if only temporarily. However, many are still struggling to meet current funding obligations, and

others are anticipating serious difficulty in the upcoming year if legislative funding relief is not forthcoming.

Relief to DateThe Worker, Retiree and Employer Recovery Act of 2008 (WRERA) provided limited funding relief to plans that were not subject to Deficit Reduction Contribution requirements in 2007. It also protected participants from accrual freezes that otherwise may have occurred as a result of the market plunge (see ASPPA asap No. 08-44). A March 2009 Special Edition of Employee Plans News provided another tool for dealing with the market downturn by permitting the use of a lookback period for the full yield curve. The full yield curve is more sensitive to interest rates because it is based on a one-month average of interest rates instead of the two-year average used for

W


segment rates. Interest rates peaked in October 2008, so adopting the full yield curve with a lookback to the October 2008 rates substantially reduces the target liability and target normal cost for plans with a December 31, 2008 or January 1, 2009 valuation date. The publication also anticipated the inclusion in final regulations of automatic approval for a change in interest rate method for 2009 to facilitate adoption of the full yield curve. Many plans with January 1, 2009 valuation dates were hesitant to adopt the full yield curve without assurance that a change to the smoothed segment rates can be made in 2010. Since final regulations will not be effective until 2010, there is an expectation that switching back to the segment rates in 2010 will not be a problem, but that cannot be confirmed at the time of this writing.

Proposals for Additional Funding ReliefThere is bipartisan support for funding relief. Minority Leader Boehner included relief provisions in HR 2021, the Savings Recovery Act of 2009. Relief provisions were also included in HR 2989, the 401(k) Fair Disclosure and Pension Security Act of 2009, which was passed by the House Education and Labor Committee on June 24, 2009. HR 2989 includes a “two plus seven” relief provision, whereby an employer could pay only interest on a plan’s 2008 losses for two years and then begin the seven-year amortization of those losses at the end of the two-year period. This relief provision was added to the bill by amendment during the Committee markup of the bill. [Rep. Guthrie (R-KY) had proposed an amendment that also included an expansion of the 10% corridor around market value to 20%, but he agreed to drop the corridor expansion to get Chairman Miller’s support for the two plus seven relief.] Congressman Pomeroy, who sits on the House Ways and Means Committee, released a discussion draft of funding relief proposals in June and is expected to file a bill when Congress returns in September.

OutlookASPPA’s Government Affairs Committee and ACOPA are working with other organizations to get Congress to enact funding relief this fall. Recently, ACOPA joined with more than 30 other organizations in writing a letter to Congress, urging them to provide needed relief. ASPPA’s Government Affairs staff is also meeting with members of Congress and their staff to convey the message that employers that have been “good guys” and provided defined benefit plans for employees need relief to save benefits, jobs and, in some cases, the business itself. The message is being heard. However, you can turn up the volume. If you have clients who need funding relief, contact your representatives (and encourage your clients to contact their representatives) and tell them the need for relief is urgent. We do not expect a stand-alone pension bill to move through Congress this year, so relief also will need another moving legislative vehicle on which to ride. The most likely possibility is legislation that modifies the estate tax rules before the estate tax repeal is effective for 2010. When that train starts moving, we are working to see that funding relief is on board.

Judy A. Miller, EA, MSPA, FSA, Chief of Actuarial Issues, joined the ASPPA staff in December 2007. Prior to joining the ASPPA staff, Judy served as senior benefits advisor on the staff of the US Senate Committee on Finance from 2003 to November 2007. Before joining the congressional committee staff, Judy provided consulting and actuarial services to employer-sponsored retirement programs for nearly 30 years. A native of Greensburg, PA, she enjoyed living in Helena, MT from 1975 until she moved to Washington, DC in 2003. Immediately before leaving Montana, she was a shareholder in Anderson ZurMuehlen & Co., providing consulting services through its affiliate, Employee Benefit Resources, LLP (EBR). Prior to joining

EBR, she was vice president of Hendrickson, Miller & Associates, Inc. for 15 years. Judy is a fellow of the Society of Actuaries, an MSPA with ASPPA and an Enrolled Actuary. ([email protected])

If you have clients who need funding relief, contact your representatives (and encourage your clients to contact their representatives) and tell them the need for relief is urgent.

FALL 2009 :: 7

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The Importance of 404(c) Compliance and QDIAs in Minimizing Fiduciary Liability

by Lisa A. Scalia, CPC, QPA, QKA

The responsibilities of an ERISA fiduciary have been described as “the highest known to the law.”1 Given this high level of responsibility, fiduciaries need to take every precaution to minimize fiduciary liability. While fiduciaries will always be responsible for the selection and ongoing monitoring of investments, they can protect themselves against imprudent investment decisions made by a participant by complying with 404(c).

n today’s world, most plans offer participant investment direction as a plan provision. That feature carries with it the risk that

a participant may invest unwisely and potentially initiate a lawsuit, hence the need for fiduciary protection.

According to a recent survey, 94% of plan sponsors believe that their plans are structured to comply with 404(c)2; however, industry experts suggest that the vast majority fail to successfully meet all the requirements.3 The objective of this article is to summarize the importance of compliance with Section 404(c) and the use of a qualified default investment alternative (QDIA) in reducing fiduciary liability as well as the requirements for each.

Historically, 404(c) protection was only garnered when a participant made an affirmative investment election (i.e., it was not available when a default fund was used in the absence of an affirmative election). However, the Pension Protection Act of 2006 extended 404(c) protection to default funds which satisfy the QDIA requirements.

Under the DOL final regulations, a QDIA is an investment vehicle that must meet certain investment, disclosure and notice requirements. The use of a QDIA provides protection from fiduciary risk from market fluctuations and losses when plan fiduciaries choose investments for participants who are automatically enrolled or who do not make their own investment decisions.

If all the relevant criteria are met, the

fiduciaries will be protected from fiduciary liability when making such investment decisions on behalf of a participant. The use of a QDIA completes the 404(c) fiduciary protection for the direction process of participant investments.

Section 404(c)ERISA Section 404(c)(1) provides protection for plan fiduciaries against lawsuits where participants have made investments that result in losses. For Section 404(c) protection to apply, the participant must have the ability to make an investment election and the participant must have exercised this right. In the absence of a participant investment election, the QDIA rules may apply and are discussed later in this article.

Section 404(c) requires compliance with a long list of key steps. Plan fiduciaries are wise to follow a checklist detailing these steps and to ask

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their service providers to demonstrate compliance. Fiduciaries may elect to comply with all or part of 404(c) and, while not required to adopt all provisions, true protection is only achieved if all criteria are met.

The requirements of Section 404(c) can be summarized in the following categories—requirements regarding the range of investments the plan must offer, required disclosures to participants and disclosures that must be provided to participants upon request.

Investment RequirementsThe plan must offer a broad range of investment alternatives. The objective is to enable the participant to create a diversified portfolio appropriate for him or her that should minimize the risk of loss. There must be at least three materially different investment alternatives. Each investment must be diversified in and of itself and each must have materially different risk and reward characteristics (core investments).

Instructions on how to make investment elections must be provided. Transfers must be permitted frequently enough and in small enough increments appropriate for the volatility of the fund.

The requirement is that transfers of any portion of the investment be at least quarterly (note that four transfers per year does not satisfy the requirement, but once a quarter is fine), but many plans allow for daily transfers in 1% increments, thereby satisfying this requirement.

Certain restrictions regarding how participants invest in the core funds are not permitted if the plan wishes to be compliant with 404(c). For example, the plan may not impose a maximum percentage of a participant’s account balance that may be invested in a given core fund.

In the event that the employer wishes to include employer securities as an investment option for a qualified plan, limited 404(c) protection is available. In order to retain relief, the employer securities must be publicly traded on a national exchange or recognized market. Frequency of trading must enable the plan to buy and sell stock promptly. All voting rights must be passed through to participants and/or beneficiaries. In addition, the employer securities may not be one of the three core investments. Courts are still wrestling with exactly how much fiduciary protection 404(c) provides for employer security investments.


Required Disclosures to ParticipantsThe following information must be provided to participants automatically:• Theplanmuststatethatitintendstoqualify

as a 404(c) plan and that the fiduciary may be relieved of liability due to adherence to the provisions of 404(c). This intent is generally documented in the Summary Plan Description (SPD). In addition, the Form 5500 will be coded as to whether the plan intends to qualify for 404(c) protection.

• Theplanmuststatethename,addressandphone number of the plan fiduciary responsible for disseminating the information required for 404(c) compliance.

• Iftheplandesignatesaninvestmentmanager,theparticipants must be notified.

• Participantsmustbegivenacopyofthemostrecent prospectus for the fund in which they are investing immediately before or after the participant initially invests in the selected fund.

• Anytransactionfeesthatarechargedinconnection with the purchase or sale of investments alternatives must be disclosed (e.g., if the plan charges a redemption fee, it must be disclosed).

Information that Must Be Provided Upon RequestParticipants have the right to the following information upon request:• Adescriptionoftheannualoperatingexpenses

of each investment alternative provided in the plan. This description includes all fees such as management fees, administrative fees or transaction costs. The description relates to all expenses which reduce the rate of return for the participant’s account.

• Copiesofanyprospectuses,financialstatementsand reports. These items are in addition to providing prospectuses as participants actually invest in a particular investment.

• Alistofassetscomprisingtheportfolioofeach investment, the value of the asset and the proportion of the investment which it comprises. If the investment is a fixed rate investment contract, then relevant details regarding the contract must be provided. These details include the name of the issuer of the contract, term of the contract and rate of return on the contract.

• Informationregardingthevalueofthesharesorunits in a designated investment alternative as

well as past and current investment performance, net of expenses. In addition, the participant must be given the value of the shares held by his or her account.

Investment Advice or EducationSection 404(c) does not require the plan fiduciaries to provide investment advice for participants in order to be afforded protection. While not required, it would behoove plan sponsors to provide some form of education (whether in training materials or investment tools online), investment advice or investment management products.

The greater the level of services provided to participants, the stronger the case for the plan fiduciaries should a participant exercise his or her right to sue. By having a more educated workforce (i.e., more investment savvy), the participants will be better invested, that is, better diversified and thus be less exposed to dramatic losses in the market and, one could therefore conclude, constitute a workforce less likely to sue. Advice may help get participants to that point.

Should one fall short of full compliance with 404(c), the plan may have some protection from liability by having provided investment education or advice.

Qualified Default Investment Alternative (QDIA)While 404(c) may provide protection for participant investments directed by participants, situations will arise where a participant does not make an election. As mentioned, ERISA 404(c)-1 will not protect in situations where the participant does not affirmatively make an election.

The Pension Protection Act of 2006 created ERISA Section 404(c)(5), which was effective on December 24, 2007. This section effectively created the QDIA and defined the requirements to be afforded fiduciary protection. The most likely scenario, and one of the driving reasons for the QDIA, is the automatic contribution arrangement. Other situations include plan designs where there are nonelective contributions such as a profit sharing and the participant has not made an investment election. Given that plans may fund a profit sharing contribution and that 401(k) automatic enrollment is gaining in popularity, the situation exists for an employer to be faced with depositing contributions on behalf of a participant without investment direction from the participant.

The use of a QDIA provides protection from fiduciary risk from market fluctuations and losses when plan fiduciaries choose investments for participants who are automatically enrolled or who do not make their own investment decisions.

FALL 2009 :: 11

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Under ERISA 404(c)(5), a fiduciary of a qualified plan will not be liable for any losses resulting from the investment in a QDIA if the following criteria are met:• Assetsmustbeinvestedinaninvestmentthat

qualifies as a QDIA. Investments that qualify as QDIAs include:

— A product designed to provide varying degrees of equity and fixed income exposure based on the participant’s age or planned retirement date (e.g., life cycle or target date funds);

— An investment management service such as professionally managed accounts under which the fiduciary allocates assets to equity and fixed income exposures based on the participant’s age; or

— A product with a mix of investments that addresses the characteristics of the participant group as a whole (e.g., a balanced fund).

For assets held prior to December 24, 2007 in a stable value fund, the QDIA protection status is grandfathered.

• Participantsmustbefurnishedawrittennoticecontaining information regarding how to direct investments and an explanation of the QDIA including investment objectives, risk and return. The notice must be provided prior to the participant being defaulted into the QDIA and must be provided annually at least 30 days prior to the start of the plan year. The notice must be provided separately, unless being provided with the safe harbor 401(k) plan notice. While the QDIA information may be provided in the SPD, this method may not be the only form of communication.

• Theparticipantmustbeprovidedprospectusesfor the QDIA and all relevant information required to be provided under 404(c).

• TheQDIAmustallowfrequenttransfersnotless frequently than once in any three-month period. Contributions deposited in the QDIA within the first 90 days must not be subject to any restrictions or expenses such as redemption fees or exchange fees. Fees that do not relate to the decision to transfer or withdraw from the QDIA, such as investment management or plan administrative fees, may be charged. Following the 90-day period, any fees normally charged to a participant for withdrawal or transfer transactions may be applied as long as they are the same for any participant who would have actually selected the QDIA.

Ongoing Satisfaction of 404(c)On an ongoing basis, the plan’s investment fiduciaries must monitor the investment vehicles to ensure that each continues to meet the criteria for the asset class and style and is performing well enough to continue to be offered to the participants. In addition, the investment options should be monitored for issues such as expenses and management turnover.

If one or more of the investment vehicles fails to meet the plan’s criteria or ERISA’s requirements, the investment fiduciaries must remove and replace the problem investment(s). Failure to remove an underperforming fund may be a fiduciary breach under ERISA and can make plan fiduciaries personally liable for any losses that result. While 404(c) can protect fiduciaries if the fund options are properly selected and monitored, that protection is lost for any investment option that should have been removed if the plan fiduciaries had done their jobs. To this regard, it would be wise to make sure an Investment Policy Statement is created and followed.

SummaryAll the requirements of 404(c) provide participants with information to make better decisions. While adherence to 404(c) is completely voluntary, the requirements of 404(c) make good business sense and are important for the success of the plan. Employers are encouraged to review their fund lineup, employee education programs and communications to participants. A discussion with the recordkeeper and a review of a 404(c) checklist will determine if true compliance is really happening.

Many employers select code “2F” on the Form 5500 believing that they are compliant, but they may be surprised to realize that they are not. Now would be a good time for a 404(c) checkup.

Lisa A. Scalia, CPC, QPA, QKA, has more than 20 years experience in employee benefits, most recently as an ERISA consultant, second vice president with New York Life Retirement Plan Services. She counsels plan sponsors on plan design,

compliance issues and fiduciary liability. She volunteers with ASPPA as part of the Education and Examination Committee by peer reviewing examinations. In addition to her ASPPA credentials, she holds the Series 6 and 63 securities registrations with FINRA. ([email protected])

s s s

1 Donovan v. Bierwirth 680F. 2nd 263, 272 (2nd Cir. 1982).2 2008 401(k) Benchmarking Survey, Deloitte Consulting, July 2008.3 2006 ERISA Advisory Council, Reish Luftman Reicher & Cohen,

September 2006.

While adherence to 404(c) is completely voluntary, the requirements of 404(c) make good business sense and are important for the success of the plan.

FALL 2009 :: 13


How to Identify and Avoid Conflicts of Interest When Selecting Service Providers

by Gary D. Blachman

In the last few years, plan fiduciaries have seen a dramatically increased focus on their responsibilities, resulting in dozens of class action lawsuits alleging that fiduciaries have breached their duties with respect to certain requirements, such as the selection and monitoring of prudent investments, providing required disclosures and the appointment of independent advisors.

ue to the increased attention that the government (i.e.,

IRS, DOL and SEC) is giving potential conflicts of interest with a plan’s consultants, plan fiduciaries should diligently assess each proposed service provider regarding the retirement plan to identify any potential conflicts that may impede the service provider’s ability to provide objective advice for the benefit of the plan’s participants. Many plan fiduciaries have robust procedures to recognize and manage conflicts of interest. However, many do not have such resources and may not be following best practices. It is vital that decisions are made by plan fiduciaries, and are perceived to be made, in the best interest of the plan participants and beneficiaries.

If a responsible plan fiduciary does not understand his or her responsibility in selecting and monitoring service providers or does not have appropriate experience in doing so, there can be significant financial consequences to the plan sponsor. This article discusses the laws relating to conflicts of interest that plan fiduciaries will need to know when selecting the investments and service providers for their retirement plans with a view to sharing best practices.

Identifying the FiduciaryThe Employee Retirement Income Security Act of 1974 (ERISA) as amended imposes significant responsibilities upon the plan sponsor of an employee benefit plan. Due to the significance of these responsibilities, many employers choose to create a benefits committee (a “Committee”) to

manage and control the daily operation and administration of any retirement plans they sponsor. ERISA Section 3(21) establishes a broad definition of a fiduciary. Generally, a person is a fiduciary to the extent that he or she has any discretionary authority or responsibility in the administration or management of a plan or exercises any discretionary authority or control with respect to management or disposition of the plan’s assets. Under this definition, Committee members generally function as fiduciaries for purposes of ERISA and are subject to higher standards of conduct because they act on behalf of plan participants and beneficiaries.

What are the Fiduciaries’ Responsibilities?ERISA Section 404(a) contains the following standards to which fiduciaries are held in the discharge of their duties:• Actingsolelyintheinterestofplanparticipantsandtheirbeneficiariesand

with the exclusive purpose of providing benefits to them and defraying reasonable expenses of administering the plan;

D

FALL 2009 :: 15

• Carryingouttheirdutiesprudently;

• Diversifyinginvestmentsoftheplantominimizeriskoflargelosses(unlessunderthecircumstances it is prudent not to do so); and

• Followingtheplandocuments(unlessinconsistentwithERISA).

Therefore, plan fiduciaries have a duty of loyalty to participating employees and must act for the exclusive purpose of providing retirement benefits to participants. Further, the duty to act prudently requires plan fiduciaries to implement sound procedures when selecting service providers to the plan which requires careful consideration of any potential conflicts of interest.

Identifying Conflicts of Interest and the Prohibited Transaction RulesWhen a conflict exists involving a tax-qualified retirement plan, either the fiduciary requirements of ERISA Section 404(a) and/or the prohibited transaction rules under ERISA Section 406(a) and/or (b) will be involved. A conflict of interest may arise when a fiduciary (which includes a trustee) is required to make a decision where:• thefiduciaryisobligedtoactinthebestinterestsoftheparticipantandbeneficiary;and

• atthesametimeheorshehasormayhaveeither

(a) a direct or indirect personal interest, or

(b) another fiduciary duty owed to a different beneficiary relative to that decision, giving rise to a possible conflict with the first fiduciary duty. For example, a retirement plan trustee of company “A” may own shares or have financial interests in various companies in which the other retirement plan trustees of company “A” wish to invest the retirement plan assets of company “A,” giving rise to a conflict of interest.

Generally, a person is a fiduciary to the extent that he or she has any discretionary authority or responsibility in the administration or management of a plan or exercises any discretionary authority or control with respect to management or disposition of the plan’s assets.


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ERISA’s prohibited transaction rules are considered “per se” violations and do not require fiduciary wrongdoing under ERISA Section 404(a). However, even if a transaction is statutorily exempt from the prohibited transaction rules, the fiduciary rules of ERISA Section 404(a) will still apply. For example, it is not a prohibited transaction or “per se” violation under ERISA Section 406 for a bank which serves as an ESOP trustee (fiduciary) to purchase the stock of employer “X” (plan sponsor) for the ESOP even though the bank was a secured creditor of employer “X.” However, the bank could be held liable for a breach of its fiduciary duty upon sufficient proof that the decision was not prudent or entered into for the exclusive benefit of the plan participants and beneficiaries.

Under ERISA Section 406(a), fiduciaries are prohibited from allowing the plan to enter into certain transactions with “parties in interest” such as service providers or other fiduciaries. ERISA Section 406(a) is intended to prohibit fiduciaries from engaging in certain transactions with the plan such as selling or leasing property, lending money or extending credit or transferring plan assets to a party in interest. Fiduciaries who violate ERISA Section 406(a) can be held liable to the plan and required to return any unreasonable or excessive fees.

ERISA Section 406(b) prohibits fiduciaries from (1) dealing with plan assets for their own interest; (2) acting adverse to the plan; and (3) receiving consideration from a party dealing with the plan in a transaction involving plan assets. Fiduciaries who violate ERISA Section 406(b) can be held liable to the plan and required to disgorge any “ill-gotten profits” resulting from the breach even if the plan does not suffer any actual losses.

Evaluating whether transactions that involve a conflict of interest are violations of ERISA’s fiduciary and prohibited transaction rules is challenging at best. Generally, when considering conflicts of interest, a fiduciary should consider these steps:• identification—foranyconflictsmanagement

procedure to be successful it must include a process for identifying conflicts;

• monitoring;and

• managingconflicts.

Fiduciaries are obligated by ERISA to (1) identify conflicts (or potential conflicts) that may impact the management of the plan; (2) evaluate the conflicts and the impact they may have on the plan and its participants; (3) determine whether the conflicts will adversely impact the plan; (4) consider protections for the plan and participants arising from any conflicts; and (5) change service providers if the conflict negatively affects the plan and the participants and beneficiaries. Therefore, when selecting service providers, fiduciaries must engage in a prudent process. As part of that process, the fiduciaries must also consider avoiding conflicts of interest.

Fee Disclosures and Conflicts of Interest in the Current EnvironmentERISA’s existing fiduciary duties in Sections 404 and 408(b)(2) require plan fiduciaries to ensure that fees paid to service providers are reasonable. To satisfy this duty, plan fiduciaries must obtain information about fees and potential conflicts of interest. When selecting service providers, ERISA Section 404(a)(1) requires fiduciaries to act prudently and solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable plan expenses. It is paramount then that appropriate information be available so that fiduciaries can evaluate data and make informed decisions about services providers, the services being offered and the costs of those services. Current DOL guidance regarding the obligations of fiduciaries and required disclosures can be found

When selecting service providers, ERISA Section 404(a)(1) requires fiduciaries to act prudently and solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable plan expenses.

FALL 2009 :: 17

in Field Assistance Bulletin 2002-3 (November 5, 2002) and Advisory Opinions 97-16A (May 22, 1997) and 97-15A (May 22, 1997). The DOL Web site (www.dol.gov/ebsa/publications) also provides guidance for plan fiduciaries to evaluate fees and service provider relationships including a Model Plan Fee Disclosure Form to compare the costs of investment products offered by service providers.

ERISA Section 406(a)(1)(C) prohibits the furnishing of goods, services or facilities between a plan and a party in interest to the plan. Without specific relief, a relationship between a plan and service provider would constitute a prohibited transaction. To alleviate this problem, ERISA Section 408(b)(2) provides exemption relief from the prohibited transaction rules for service contracts between a plan and party in interest if the contract is reasonable, the services are necessary for the establishment or ongoing plan operation and reasonable compensation is charged for the services. Current regulations clarify these conditions and provide that a contract or arrangement is not reasonable unless it permits the plan to terminate without penalty on reasonably short notice.

Over the years technology has improved administrative efficiencies and reduced the costs of services offered to retirement plans and their participants and beneficiaries. However, the changes in the way services are provided have not always made it easier for plan sponsors and fiduciaries to know exactly what the plan pays for services, the extent to which service provider fee arrangements might present potential conflicts of interest or if a contract is reasonable. As a result, there is an increased demand for guidance regarding service provider compensation and conflicts of interest that may affect a service provider’s performance.

Fee Disclosures and Conflicts of Interest under Proposed LegislationIn response to the complexities of service provider arrangements and the potential for conflicts of interest that may affect administrative costs and the services provided, a number of measures have recently been introduced in Congress that would require detailed disclosures of fees paid to service providers. These proposed laws are the direct result of a number of lawsuits filed against Fortune 500 companies alleging that these companies’ 401(k) plans were paying unreasonable fees and the companies did not adequately disclose these fees to plan participants. In 2007, the US Department of Labor (DOL) issued proposed rules under

ERISA Section 408(b)(2) regarding fee disclosures by fiduciaries of retirement plans. The purpose of the proposed rules is to help fiduciaries (1) determine the reasonableness of compensation paid to service providers to the plan and (2) identify any conflicts of interest that may affect a service provider’s performance under its arrangement with the plan sponsor.

The DOL realized that plan fiduciaries may not always need all of the required disclosures from every type of service provider to evaluate the reasonableness of the service provider’s compensation. Therefore, with regard to conflicts of interest, the DOL’s proposed rules require disclosure of the following: (1) whether the service provider or an affiliate will be acting as a fiduciary, under ERISA or the Investment Advisers Act of 1940; (2) whether the service provider or an affiliate expects to acquire a financial interest in any transaction involving the plan that will occur in connection with the service arrangement; (3) whether the service provider or an affiliate has any material financial, referral or other relationship with any other parties that creates or may create a conflict of interest; (4) whether the service provider or an affiliate has the ability to affect its own compensation (direct or indirect) without the prior approval of an independent plan fiduciary; and (5) whether the service provider or an affiliate has procedures to prevent and/or manage these conflicts of interest. Additionally, the proposed rules include ongoing disclosure obligations that should help in preventing conflicts of interest. Certainly with respect to fee disclosures and potential conflicts of interest, we can expect to see more attempts by Congress to develop new regulations with higher expectations that sponsors are aware of and avoiding any conflicts of interest with service providers.

Best PracticesDeveloping a process for identifying conflicts is instrumental to the management process. Fiduciaries who take the time to identify conflicts of interest are inherently better situated to manage conflict situations as they

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arise. Fiduciaries must manage actual conflicts and determine what types of action, if any, are required. The point at which a potential conflict becomes an actual conflict will vary and should be factored into the management process. Perceived conflicts are also very important. Such conflicts may surface when, although a trustee’s decision is appropriate, it may appear to others (e.g., plan participants) as influenced, or open to influence, by other persons or responsibilities of the trustee. When selecting the plan’s investments, fiduciaries should be careful to focus on the plan’s interests and not be swayed by outside economic factors that may subordinate the interests of plan participants and beneficiaries.

Are Fiduciaries and Trustees Required to Declare Potential Conflicts?Even before a real or potential conflict can be identified, all fiduciaries and trustees must be aware of the other interests or obligations owed by each to another party that may cause a conflict. A formal process to declare conflicts becomes essential at this point.

Is There a Formal Process to Identify Potential Conflicts?A newly appointed fiduciary or trustee should be required to disclose any potential interests or conflicts. The declaration does not need to be formal and could consist of requiring the trustee to simply declare that he or she is not aware of any potential conflicts of interest that may adversely affect his or her new role, other than those interests that were previously and expressly disclosed. This disclosure will enable the current named fiduciary to be aware of any current conflicts and monitor any potential conflicts that may arise down the road. To be effective, any declaration should be periodically updated (e.g., annually) and when circumstances change. Fiduciaries and trustees should consider discussing conflicts during committee meetings so that there is open communication about situations that could give rise to a potential conflict.

Should the Minutes of Meetings Record when Conflicts Are Disclosed or Identified and the Specific Actions to Be Taken to Address Real or Potential Conflict?

Formal meeting minutes should record any discussions of actual or potential conflicts and the agreed upon actions that will be taken to address such conflicts. A record of any conflicts, along with the

actions taken and key factors influencing any decisions that are made, should be recorded and maintained for effective monitoring. This process allows time for sufficient planning and the development of any action steps necessary to recognize and diffuse any conflicts of interest. If litigation should ever arise, a practice of recording conflicts in the minutes will enable the trustees to demonstrate that appropriate steps were taken to satisfy their fiduciary duty to act independently. Of course, once a potential conflict is identified and recorded, specific actions must also be taken to monitor and avoid an actual conflict of interest in order to satisfy fiduciary duties.

Although ERISA permits named fiduciaries of a retirement plan to allocate non-trustee responsibilities for the operation and administration of the plan amongst themselves, and to designate persons other than named fiduciaries to carry out fiduciary responsibilities (other than trustee responsibilities), these limitations offer less than perfect protection to fiduciaries. Specifically, under ERISA Section 405(a), if a plan has more than one fiduciary, each fiduciary will be liable for a breach of fiduciary responsibility by a co-fiduciary if: (i) he or she participates knowingly in, or knowingly tries to conceal, the other fiduciary’s act or omission, knowing that it is a breach; (ii) by his or her failure to comply with the fiduciary responsibility rules in the administration of his or her specific fiduciary responsibilities he or she has enabled the other fiduciary to commit a breach; or (iii) he or she has knowledge of a breach by the other fiduciary and does not make a reasonable effort to remedy the breach. For example, if the terms of a trust agreement require assets not to be invested in commodity futures and one of the two co-trustees suggests to the second trustee that he or she invest plan assets in commodity futures, if the second trustee makes the investment, both trustees will be held liable for the breach of fiduciary duty under ERISA Section 405(a).

Is There a Documented Conflicts of Interest Policy?Trustees should have a thorough understanding of their powers, duties and responsibilities so that they can more easily recognize conflicts. A solid conflicts policy should provide specific examples of the types of conflicts that could arise during the course of business. By identifying conflicts, plan fiduciaries are better situated to implement procedures to monitor and avoid conflicts. A documented conflicts of interest policy should include procedures to identify and manage conflicts. All of the plan trustees should approve

Given the desire by Congress to require greater transparency with regard to 401(k) fees and to reduce the number of potential conflicts of interest involving service providers, the retirement plan community should not be surprised to see more regulation in this area in the very near future.

FALL 2009 :: 19

any governing documentation to manage conflicts and ensure independence throughout the process. This policy will allow trustees to demonstrate to participants that appropriate measures have been taken to ensure conflicts are properly managed.

What Should Be Included in the Conflicts of Interest Policy?The policy should include: (i) an explanation of the fiduciary obligation to act independently and in the best interests of participants and beneficiaries; (ii) a process for identifying conflicts; (iii) the types of conflicts that may arise; (iv) options for managing conflicts; (v) the process to avoid potential conflicts; and (vi) procedures for monitoring non-compliance with the policy.

What Happens if a Fiduciary Violates His or Her Duties?To avoid liability for violations of ERISA’s fiduciary or prohibited transaction rules involving conflicts of interest, fiduciaries must be able to identify when liability can be imposed. A fiduciary who violates his or her duties and fails to avoid a conflict of interest may, depending on the violation, be subject to certain excise taxes, lost opportunity costs, disgorgement of profits, equitable relief and personal liability to restore any losses to the plan.

Under the Employee Benefits Security Administration’s (EBSA’s) voluntary fiduciary correction (VFC) program, adopted by the DOL, certain persons who are potentially liable for a breach of fiduciary duties because of specified transactions may be relieved of (i) civil penalties and (ii) possible civil investigation or civil action by the DOL. The EBSA will issue a “no action letter” for any breach if the VFC program eligibility requirements are met and the fiduciary breach is corrected. A VFC correction requires any losses to be restored to the plan and to affected participants and beneficiaries.

The Internal Revenue Service (IRS) also provides a voluntary correction program for qualified retirement plans under Revenue Procedure 2008-50. This latest version of the Employee Plans Compliance Resolution System (EPCRS) revised earlier versions of the program and continues to have a self-correction program (SCP) available for minor errors and more significant, recent errors; a voluntary correction program (VCP) involving a submission to the IRS and a fixed fee for errors that cannot be corrected through SCP; and a correction program for errors discovered by the IRS on audit (Audit CAP). Generally, the most common fiduciary

and prohibited transaction errors found in retirement plans may be corrected under either the DOL’s VFC program or the IRS’s EPCRS program.

ConclusionCommittee members often have discretion over the selection of plan service providers or investment providers and are therefore considered fiduciaries. Plan fiduciaries are responsible for prudently selecting investment consultants and monitoring their ongoing performance. By establishing appropriate practices to select and monitor investment consultants and other service providers, plan trustees can successfully fulfill their fiduciary duties to the plan participants and beneficiaries while avoiding conflicts of interest. Avoiding conflicts of interest and taking appropriate steps to reduce the negative impact of any conflicts is essential to safeguard retirement plans and the benefits of participants and beneficiaries. Given the desire by Congress to require greater transparency with regard to 401(k) fees and to reduce the number of potential conflicts of interest involving service providers, the retirement plan community should not be surprised to see more regulation in this area in the very near future.

Gary D. Blachman, Esq., is a partner with Thompson Hine, LLP where he is a member of the firm’s national employee benefits and executive compensation group. He counsels large public and private companies in the design and administration of tax-qualified retirement plans, executive compensation under IRC 409A and health and welfare plan matters. Gary also has extensive experience in the employee benefit aspects of mergers and

acquisitions. Additionally, he counsels clients on IRS and DOL compliance matters, including voluntary correction programs and determination letter filings. Gary is a past president of the Cincinnati ASPPA Benefits Council and is currently serving as Co-chair of 2009’s The ASPPA Cincinnati Pension Conference. Gary is also a member of the Great Lakes Area IRS Tax Exempt and Government Entities Council. ([email protected])

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Welfare Benefit Plans Redux: Here We Go Again!

by Lawrence C. Starr, CPC, QPFC

In the Spring 2009 issue of The ASPPA Journal, an article regarding welfare benefit plans was published. In a nutshell, it was an explanation of why welfare benefit plans purporting to comply with IRS requirements (especially under Code Section 419 and 419A) were still a viable plan design for small business clients and not an abusive tax shelter. There were positions in that previous article that must not go unchallenged. It is also fair to say that the subject of welfare benefit plans is a difficult and confusing interplay of law and regulations, and that expertise on the topic seems to be at a premium.

t is imperative that if one of your clients or his or her advisor brings to you a “funded” welfare benefit plan purporting to give

your client big deductions, your antennae must go up! One of the hallmarks of this scheme will be large amounts of life insurance; it seems like we have been through this scenario many times before. Now, what supposedly makes it different this time is that the promoters assure us that their particular promotion is different from those other programs with which the IRS has found fault. Of course, that is the same assurance that we have seen in all the prior programs that the IRS has knocked down over and over. Some of you may remember the Section 79 insurance schemes or the abusive VEBAs and multiemployer welfare plan arrangements; even more of you will remember the abusive type of fully insured defined benefit plans [412(i) plans] or the “springing” cash value policies designed to strip money, tax free, from retirement plans. Never underestimate the creative mind of the insurance industry when there are large commissions at hand.

While it is certainly true that Congress created legitimate tax deductible benefit programs within the tax code for certain welfare benefit plans, these are generally intended for unions, true multiemployer associations and large companies. It is not true that Congress contemplated these programs would be appropriate to provide, for example, lavish post-retirement medical care or cash value life insurance on a deductible basis for the small medical practice with a doctor, a spouse and two medical assistants!

Let’s make one thing very clear—the IRS does not like the abusive use of these programs and they are doing everything they can to shut them down. You must take that as a given, and your client must decide if he or she really wants to be challenging the IRS on this design. Some insurance companies have even announced they will no longer sell any insurance policies to a 419(e) welfare benefit plan.

Of course, as the IRS issues rules and attempts to clamp down on what it sees as abusive programs, the promoters make their own interpretations of those new rules and make modifications to their programs so that this time (at least, in their view) their program is “good” under the new rules. However, the history is that the IRS challenges even the so-called “good” programs and it could cost your clients a fortune in penalties. For example, in the 412(i) arena we are receiving many reports of huge amounts of taxes, fines and penalties being assessed on “innocent” consumers of these tax-avoidance schemes. A group of these taxpayers has even banded together to petition Congress for relief from the fines and penalties (but they accept as a given the loss of the deductions).

I

FALL 2009 :: 21

In my opinion, the recently published article utilized logical fallacies to conclude that the designs being suggested would be just fine. The IRS issued a series of three items as a package (two Notices and one Revenue Ruling), yet the crux of the justification in the article for the viability of these programs was the application of a narrow interpretation to one of the notices. That conclusion seems to be like trying to apply the retirement plan nondiscrimination rules by reference only to IRC Section 401(a)(4) and ignoring the complementary rules under Section 410(b), 401(l) and 414(s).

There are two significant analyses in the article with which I have problems. The first is that it appears that the author believes that if a welfare plan provides both pre- and post-retirement benefits, it is not subject to the listed transaction rules because it provides the post-retirement benefits (even though the author admits many benefit professionals believe otherwise). However, in the article, the author does go on to assume that the other benefit professionals are correct on this point, but he still tries to make his argument on other points. Even here, I believe his analysis is faulty.

From the author’s discussion, he clearly believes that the IRS will not treat annuity contracts as cash value life insurance contracts (the author’s design that includes pre-retirement benefits appears to depend on term insurance with annuities for its existence). I do not believe the IRS will be so generous. For a quick refresher, an annuity contract: (1) is a contract issued by a life insurance company; (2) depends on life contingencies for its benefit structure; and (3) has cash values. That it does not provide an insured death benefit as in a traditional whole life contract is correct; that the lack of an insured death benefit makes it any less a cash value life insurance contract is not correct. This particular analysis (that annuity contracts are cash value life insurance contracts) is something that has not been noted in any other discussions of 419 plans that I have seen anywhere, and pursuing the concept would probably be worth the solicitation of an opinion regarding it from the IRS. And if the IRS has not yet thought of it, they will.

The other, perhaps more significant oversight, again in my opinion, is the complete avoidance of a discussion of the scheme being basically a program of deferred compensation, for that is truly what it is—that is the way it is sold and that is the (only) way clients buy it. In the notice that receives particular attention in the article (Notice 2007-83), the IRS clearly states that: “Depending on the facts and circumstances of a particular arrangement, contributions to a purported welfare benefit fund on behalf of an employee who is a shareholder

may properly be characterized as dividend income to the owner, the value of which is includible in the owner’s gross income, and for which amounts are not deductible by the corporation.” It goes on to say (in part): “In addition, an arrangement may properly be characterized as a non-qualified deferred compensation plan for purposes for IRC Section 409A.”

The previous article includes the comment that:“Plans that provide post-retirement benefits, such as life insurance or medical reimbursement benefits, are not described in the Notice. It should follow, then, that such plans are not listed transactions...”

It is true that a plan that provides no pre-retirement benefits but provides only post-retirement death and/or medical benefits is not the subject of Notice 2007-83, and thus the plan is not automatically going to be subject to the listed transaction rules. Because the Notice does not automatically make these arrangements listed transactions, the promoters of these programs perceive in this language a new plan design to market: “Let’s design a plan that provides no pre-retirement benefits, that only provides post-retirement death and medical benefits, and we are guaranteed not to be troubled by any IRS attacks.”

I agree that such a plan will not fall into the listed transaction requirements, at least, not yet (except, possibly as noted below). However, I would be very concerned that at some later date the IRS might change its mind, so vigilance will be the hallmark. In the IRS attack on purported welfare benefit plans, they have had no compunction in applying the rules retroactively. In fact, they state that “further guidance might be forthcoming and might not apply prospectively only.” How is that for giving you a warm and fuzzy feeling in your tummy? Nonetheless, at this time, and for purposes of this article, let’s concede that it is not a listed transaction.

Even though it might not be a listed transaction, the IRS very clearly states that the post-retirement medical deduction will not be allowed “unless the employer actually intends to use the contributions for that purpose.” This language should concern any practitioner or client who is considering the installation of such a program. This phrase means that the IRS will be able to challenge the intent of the small business owner who is accumulating all this money; they will want to get into his or her head to determine the intent of the program. It also likely means that all the marketing material (which usually provides examples of how this money will not be used for such purposes) will be subject to review by the IRS. And, don’t forget,

While it is certainly true that Congress created legitimate tax deductible benefit programs within the tax code for certain welfare benefit plans, these are generally intended for unions, true multiemployer associations and large companies.


just like in Notice 2007-83, the IRS can find that this program is properly characterized as dividends or as non-qualified deferred compensation subject to IRC Section 404(a)(5) or 409A (or both). Not a welcomed fight, for sure.

As noted above, there is a possible significant exception to the “post-retirement only” plan being exempt from the listed transaction rules. There is a provision in Notice 2007-83 that provides that any transaction that is substantially similar to the transaction as defined in the notice is also a listed transaction. If the IRS were to determine that a transaction involving a post-retirement benefit only plan is “close enough” to meet this provision (which is, alas, a facts and circumstances determination made by the IRS), then we might have a listed transaction which the client knew nothing about. The problem with such a result is that there are now filing requirements that most likely have not been met, with severe income tax penalties measured in the hundreds of thousands of dollars! For example, if the funding of the post retirement benefits was exclusively with cash value life insurance, an argument might be made that the program is now substantially similar to the listed transactions enumerated in Notice 2007-83 (part of the reason why some insurance companies have ceased writing any insurance contracts for any of these type of welfare benefit programs). Bad news for everyone!

Let’s not forget that Notice 2007-84 also reminds us that if the IRS finds, on a facts and circumstances basis, that any of the benefits of the “post-retirement only” plan are disqualified benefits for purposes of IRC Section 4976, the employer will be subject to a 100% excise tax (and that includes any part of the fund reverting to the employer).

The IRS also may impose penalties on persons involved in the arrangements described in Notice 2007-84 or similar arrangements as follows: (1) under the accuracy-related penalties of Section 6662, 20% of the underpayment, paid by the taxpayer; (2) under the tax return preparer liability of Section 6694, the greater of $1,000 or 50% of the income for the return, paid by the preparer; (3) under the promoting of abusive tax shelters penalty of Section 6700, $1,000 per activity or, if lesser, 100% of the gross income derived, paid by the person who promotes it; and (4) under the aiding and abetting the understatement of tax liability of Section 6701, $1,000.

The area of Section 419 is under intense scrutiny at the Service, and many employers with such plans are being audited. While it is (or might be) possible that a retiree medical plan with cash value insurance would provide deductions to the

sponsor, the vast majority of welfare plans that I have seen come to me via my clients are of the variety that are clearly problematic. They are almost always plans that seem to be designed for the sole purpose of selling (high commission) cash value life insurance which “primarily benefits the owners or other key employees of the businesses” (a key phrase from Notice 2007-84).

If you are involved in any situation where a client is asking for your review or for an opinion on such a program, there are two things you need to do for your client:1. You need to tell them that YOU are not an

expert and can’t give them an opinion (unless you actually are, and are willing to risk your own hide on that opinion); and

2. You need to make sure that they get to a competent, independent legal/accounting advisor with substantial expertise in this area who can give them a truly informed and knowledgeable opinion.

There is another item that deserves review, and that is a Tax Court case (DeAngelis) released on December 5, 2007 and decided by the very knowledgeable Judge Laro (who also wrote the opinions on the well known Booth and Neonatology tax court cases). Although this case involved a multiple employer 419A(f)(6) plan involving several doctor groups and providing severance and pre-retirement death benefits, Judge Laro’s comments are well worth reading. The benefits under this structure were provided by whole life contracts issued on the doctors and an office manager.

After an extensive review of the transactions that led to the implementation of this plan and the purchase of the insurance, Judge Laro opened his opinion with the following sentence:

“We are faced once again with an issue arising from a plan designed to aggressively bolster the sale of insurance products through a claim of permissible tax savings.”

Judge Laro did not even look at the statutory language of IRC Section 419 and 419A; instead he focused on whether these deductions were permissible as “ordinary and necessary” business expenses under IRC Section 162. Judge Laro did not think they were:

“While the ... plan may have been cleverly designed to appear to be a welfare benefits plan and marketed as such, the facts of these cases establish that the plan was nothing more than a subterfuge through which the participating doctors ... used surplus cash of the PCs (professional corporations) to purchase cash-laden whole life insurance contracts primarily for the benefit of the participating doctors personally.

FALL 2009 :: 23

While employers are not generally prohibited from funding term insurance for their employees and deducting the premiums on that insurance under Section 162(a), employees are not allowed to disguise their investments in life insurance as deductible benefit-plan expenses when those investments accumulate cash value for employees personally.”

We can expect that the IRS will mercilessly wield this new approach to welfare benefit plan deductions with power and efficiency while slicing through these schemes and preserving the government’s revenue!

The last item that requires comment is Revenue Ruling 2007-65, the third and last part of the released ruling package (including the two Notices, 2007-83 and 84). Revenue Ruling 2007-65 specifically addresses the deductibility of premiums paid by the 419(e) plan on cash value life insurance policies (and remember, I think that can be expanded to include annuity contracts). It concludes that even if an arrangement is a welfare benefit plan under 419(e), an employer would not be entitled to a deduction with respect to any premiums paid if the fund or employer is directly or indirectly a beneficiary under the life insurance policy with the meaning of IRC Section 264(a). The IRS contends (and will no doubt assert) that in many of the arrangements under discussion, the fund or employer are direct or indirect beneficiaries under the policy and therefore any contributions used to pay the premiums are not deductible. That should be viewed, possibly, as the so-called “final nail in the coffin.”

The previous article omitted a discussion of this Revenue Ruling (but it did admit that the Revenue Ruling was a part of the IRS guidance package). The article attempted to suggest that a taxpayer would be able to take the deductions because they are allowed under the Internal Revenue Code (the law), but seemed to dismiss the IRS’s ability to effectively implement that law (and limit any deductions) through properly issued regulations, rulings and other processes available to it. This approach is a risky, dangerous and potentially expensive approach to take. It amounts to saying “I don’t care what the IRS says you can do, the law says otherwise.” The only way you have to win that fight is in court, and it is a rare client who purposely wants to take on that very expensive fight.

The IRS has told us that they don’t like these schemes; they’ve told us that they’re going to do everything possible to discredit and disallow them. Is that really a fight our clients want to take on?

Over the years, I have noted one unfailing characteristic of these schemes, and that is that the promoter specifically says that they do not guarantee the tax results, and that you should check with your own adviser for an interpretation of the law. I have had a very simple approach to dealing with these schemes over the years. After taking the client through the complex legal analysis, I simply say: why don’t you ask the insurance company that is selling the insurance to guarantee the deduction in writing, and if they won’t do that (and they won’t), ask them to apply for a private letter ruling from the IRS on your behalf that appropriately outlines the transaction and asks for IRS review and blessing. In all the years of taking this approach, neither of those things have ever happened, and all the clients who made the requests and were turned down have, wisely, realized that they were not particularly interested in playing Russian roulette with their tax returns!

Caveat Emptor!

Lawrence C. Starr, CPC, QPFC, EA, ATA, FLMI, CLU, CEBS, ChFC, is president of Qualified Plan Consultants, Inc. (QPC), a West Springfield, MA firm providing pension and profit sharing plan consulting, administration and actuarial services on a fee-for-service basis. He is a frequent lecturer and speaker and has participated in many seminars all across the country. He has served many roles within ASPPA, including Vice President of ASPPA and many years on the ASPPA Board of Directors, the ASPPA Education and Examination Committee, and the Executive Committee of the ASPPA Government Affairs Committee, where he has chaired the Communications Committee which oversees the GAC publications, Q&A sessions with the government agencies and ASPPA’s webcasts and is now Senior Advisor. He has also served as Chair of ASPPA’s Political Action Committee (ASPPA PAC). Larry is Senior Editor of the Journal of Pension Benefits, is the co-author of the Life Insurance Answer Book: For Qualified Plans and Estate Planning published by Panel Publishers, and he is a contributing author of The CPA’s Guide to Retirement Plans for Small Businesses published by the American Institute of Certified Public Accountants. ([email protected])


Defined Contribution Plan Amendments from GUST to WRERA

by William C. Grossman, QPA

Prior to the GUST document, qualified plans generally operated in a simpler world in which law changes and regulatory changes did not often require an amendment.

enerally, a qualified plan simply operated under a law change as

of the applicable effective date and incorporated the law into the document when the IRS next required a full restatement. Terminating plans were the exception as at the time of the termination the plan was required to be amended to incorporate all the changes since the last restatement as part of the termination process. There were occasional exceptions, such as the amendment for the Unemployment Compensation Amendment Act (UCA) of 1992’s eligible rollover distribution rules and the snap-on for the OBRA ’93 compensation cap amendment. Luckily, for some vendors, an amendment, such as for UCA, was able to be included in the 1993 IRS preapproved document as it was being finalized. Thus, for those plans, when auditors looked for an amendment for UCA ’92, the auditor was able to be shown that it was already in the ’93 preapproved plan document.

Snap-on AmendmentsThe era of the GUST restatement (circa 2001-2003) saw the beginning of the increase of “snap-on” amendments, whereby plans were required to add an amendment for law changes and regulation changes as they occurred, versus operating under the law until the next restatement. By 2009, we have become accustomed to living with recurring “snap-on” amendments and look forward to when they can be sponsor level amendments versus employer-by-employer signature required amendments.

Unfortunately, for the employer (who is really just trying to provide a benefit to his or her employees), “snap-on” amendments add complications and often involve fees for the additional services required. Both the GUST and EGTRRA preapproved defined contribution plans

have not seemed to be “preapproved documents” because each came with at least one or two “snap-on” amendments. [GUST was accompanied by an EGTRRA good-faith “snap-on” amendment and before the GUST deadline, there was also a required minimum distribution (RMD) final regulation “snap-on.” The EGTRRA prototype document has a “snap-on” amendment for the Pension Protection Act of 2006 (PPA) and a separate amendment for the final 415 regulations.]

It seems we are at the point where offering a new “IRS preapproved plan document” for the employer to adopt, without a “snap-on” or two amending the brand-new “preapproved” document, might never be possible.

There is currently a growing list of pending and optional “snap-ons” to the “preapproved plan,” such as for PPA, 415, HEART, EESA and WRERA. (See the section on Laws Since EGTRRA.)

Congress, unlike the IRS, has provided lengthier deadlines to adopt “snap-on” amendments that are needed due to legislative changes. For example, PPA was enacted in 2006 with provisions effective on various dates ranging from before enactment through 2009. However, Congress wrote that plans were not to be amended for PPA until the last day of the 2009 plan year. Thus, Congress was having the employer operate the plan in compliance with the law for years prior to 2009 without a “snap-on” amendment.

G

FALL 2009 :: 25

GUST Restatement DeadlineFebruary 28, 2002 was the GUST restatement deadline for individually designed documents. For preapproved plan documents that were on a mass submitter list as of December 31, 2000, the deadline was extended more than once so that the preapproved plans needed to be restated onto a GUST document by September 30, 2003. As a last possible extension, Rev. Proc. 2003-72 provided the ability for non-amenders to adopt a preapproved plan by January 31, 2004, provided that the plan was submitted to the IRS for a determination letter with a fee of $250.

Amendment Usage Deadline Type

Community Renewal Tax Relief Act Salary reduction amounts under 132(f)(4) must be included

First plan year beginning after December 31, 2000

Interim

2001 Proposed RMD Regulations Needed if 2001 Pro. RMD Regs used in 2001 or 2002

By end of year used, i.e., 2001 or 2002 Discretionary

125 Cafeteria Amendment Needed if a §125 plan also exists By the end of the 2002 plan year Integral

EGTRRA Good Faith Amendment All qualified plans By later of last day of 2002 plan year or the end of the GUST RAP

Interim

RMD Amendment All DC, 403(b) and IRA By the end of 2003 Interim

Deemed IRA Optional By the end of the plan year in which deemed IRA contributions are first accepted

Discretionary

Roth Amendment Optional By the end of the plan year in which Roth 401(k) contributions are first accepted, starting with 2006. Notice 2005-95 and 2006-44

Discretionary

Automatic Rollover Required for all plans using involuntary cash-out

Later of December 31, 2005 or tax filing deadline for plan year that included March 28, 2005

Integral

401(k) and 401(m) Final Regulations Required for all 401(k) and (m) plans. Also required for plans that have hardship: i.e., profit sharing plans and 403(b) plans

Generally by the end of 2006 Interim

401(k) and 401(m) Final Regulations For profit sharing with hardship Generally by the end of 2006 Integral

KETRA, GOZA Plans incorporating the hurricane provisions

By the end of the 2007 plan year Discretionary

Notice 2005-70 IRS agency relief for Hurricane Katrina By the end of the 2006 plan year Discretionary

Final 415 Regulations All qualified plans Last day of the first limitation year starting with limitation years beginning on or after July 1, 2007

Interim

PEO-sponsored Plans PEO multiple employer DC plans must meet exclusive benefit rule by amendment to plan or restatement onto individual plan for each employer

Rev. Proc. 2002-21 and Rev. Proc. 2003-86 detailed the process and provided deadline as of the end of the EGTRRA RAP

Interim

EGTRRA Restatement All qualified plans EGTRRA restatement cycle set forth in Rev. Proc. 2007-44

Restatement

Job Creation and Worker Assistance Act of 2002 (JCWAA)(Though not a plan amendment, note the point under the deadline column. )

Clarified catch-up provisions; Ordering of pre and post tax amounts distributions; Deduction limit for combined DB/DC plans doesn’t apply if only DC amounts are elective defferals (no employer amounts); Top heavy distributions taken into account for only one year after termination of employment

Small business tax credit for new plan expenses only applicable for the new plans first effective after 2001. Plans with an effective date before 2002 are not entitled to this.

Amendment not required

PPA Amendment All qualified plans By the end of the 2009 plan year Interim

HEART Amendment All qualified plans By the end of the 2010 plan year Interim

EESA Plans incorporating the EESA Midwest Disaster Relief Provisions (Similar to KETRA provisions)

By the end of the 2010 plan year Discretionary

WRERA All affected DC plans By the end of the 2011 plan year Interim

Chart of Defined Contribution Plan Amendments Since the GUST Document

Note: Governmental plans generally have two years beyond the deadlines stated above, except for WRERA, for which they have one year.

Continued on page 28

Register online at www.asppa.org/wbc

Thank You to All of the Participants of the Western Benefits Conference 2009!Combining the best of Western Pension & Benefits Conference’s Annual Meeting and ASPPA’s Summer Conference

Actuarial Systems Corporation (ASC)Anton Collins Mitchell, LLPBCG Terminal Funding Company Chang Ruthenberg & Long, PC Charles Schwab

Colonial Surety CompanyDATAIR Employee Benefit Systems, Inc.First Mercantileftwilliam.comIRS - Employee Plans

Exhibitors

Hundreds of participants at the Western Benefits Conference arrived in Denver for three days of education, activities, networking and preparation for a busy year in the employee benefits industry.

Constance M. Hiatt, president of the Joint Council of Presidents, WP&BC, listens to ASPPA President Stephen L. Dobrow welcome participants to the jointly sponsored Western Benefits Conference in Denver this year.

Former Colorado governor Richard D. Lamm was the featured luncheon speaker at the Western Benefits Conference.

Relaxation Station and Platinum Sponsor Nationwide representatives take a moment to smile for the camera.

A conference attendee visits with Gold Sponsor Vanguard during a networking break.

Conference Co-sponsorsASPPAWP&BC

PlatinumNationwide Financial

GoldJohn Hancock Retirement

Plan ServicesVanguard

SilverAutoRolloversING

BronzeBuck Consultants Stoel Rives LLPTrucker HussWells Fargo

Supporter SponsorsAltman & Cronin Benefit

Consultants, LLC

Register online at www.asppa.org/wbc

Thank You to All of the Participants of the Western Benefits Conference 2009!Combining the best of Western Pension & Benefits Conference’s Annual Meeting and ASPPA’s Summer Conference

Janus Capital GroupLincoln Financial GroupManning & Napier Advisors, Inc.Matrix Financial SolutionsMillenium Trust Company

Newkirk Products, Inc.PenChecks, Inc.Prudential RetirementTD Ameritrade

ASPPA General Counsel and Director of Regulatory Affairs Craig Hoffman served as moderator for ASPPA past president Sal Tripodi, James E. Holland and Andrew E. Zuckerman, both from the Internal Revenue Service, during the workshop “IRS Questions & Answers – Defined Contribution Plans.”

All workshops at the Western Benefits Conference were popular, especially those about fee disclosure issues and health care reform, both active subjects of debate in Washington.

(left to right) Donna Dobrow; ASPPA President Stephen Dobrow; Brian Graff, ASPPA Executive Director/CEO; Lucy Smith; and Sheldon Smith, ASPPA President-elect, share a conversation in the exhibit hall of the Western Benefits Conference.

An attendee chats with Jason Brady of John Hancock Retirement Plan Services, a Gold Sponsor, during a networking reception.

A Bronze Sponsor Buck Consultants representative chats with an attendee during one of the networking breaks in the exhibit hall.

Key card Silver Sponsor ING representatives engage an attendee during a networking break.

Beverage break sponsor Wells Fargo representatives await attendees in their booth.

Lisa AlexanderGary AllenRobert J. ArchitectBruce L. Ashton, Esq., APMLaura Ann BartlettAvaneesh K. BhagatDavid Blanchett, QPA, QKAAlex M. Brucker, Esq., APMBarbara ClarkRenee J. Conner, QPALorne O. Dauenhauer, Esq.,

APMLawrence Deutsch, MSPAKevin J. Donovan, MSPAThomas J. Finnegan, MSPA,

COPA, CPC, QPAStephen W. Forbes, J.D.Irene F. Gallagher, Esq., APMBrian H. Graff, Esq., APMConstance J. HiattCraig P. Hoffman, Esq., APMDaniel HogansJames E. Holland, Jr.R. Bradford Huss, APMRobert M. Kaplan, CPC, QPA

Norman Levinrad, FSPA, COPA, CPC

W. Waldan Lloyd, Esq.Charles D. LockwoodJohn E. Lucas, CPCLisa McCargarKaren NgRenee W. O’Rourke, Esq.Kurt F. Piper, MSPA, COPAAdam C. Pozek, QPA, QKA,

QPFCMichael B. Preston, MSPA, COPAW. Thomas ReederKenneth W. Ruthenberg, Jr.Sheldon H. Smith, Esq., APMMichael W. Spaid, MSPA, QPADebra Stoll, Esq.George J. Taylor, MSPA, COPAMartha L. TejeraMonika A. TemplemanSal L. Tripodi, Esq., APMMichele VarnhagenJanice M. Wegesin, CPC, QPAKristen L. ZarenkoAndrew E. Zuckerman

Speakers


Post-GUST Required Amendments

Community Renewal Tax Relief ActThe Community Renewal Tax Relief Act of 2000 (CRA) requires plans to be amended to include qualified transportation fringe benefits. This provision needs to be included in the definition of compensation in the plan document. The relevant Internal Revenue Code citation is 132(f)(4). Although this amendment is listed as a post-GUST amendment, it was able to be included in certain GUST preapproved documents. To see if it is in a preapproved document, look at the definition of compensation to see if Code Section 132(f)(4) is referenced.

EGTRRA Good-faith AmendmentIRS Notice 2001-42 required that all qualified plans adopt a good-faith EGTRRA amendment generally by the end of the GUST restatement deadline.

Required Minimum Distribution Final and Temporary Regulation AmendmentThe final and temporary required minimum distribution regulations were required to be used to calculate the 2003 distribution calendar year minimum distributions for defined contribution plans, 403(b)s and IRAs. Temporary defined benefit rules were incorporated in these regulations although the final defined benefit regulations were not issued for another two years and will be part of the EGTRRA DB restatement. The defined contribution RMD regulation amendment had to be added to DC plans by the end of the 2003 plan year.

Automatic Rollover AmendmentEGTRRA required involuntary cash-out amounts between $1,000 and $5,000 to be rolled into an IRA instead of being paid out in cash in order to prevent leakage of retirement plan assets over time. The DOL issued final regulations effective March 28, 2005. Plans needed to be amended to add these automatic rollover rules by the later of December 31, 2005 or the tax filing deadline for the plan year that included March 28, 2005.

401(k) and (m) Final AmendmentThe final 401(k) and (m) regulations were issued on December 29, 2004 and were effective for plan years beginning on or after January 1, 2006 (early implementation was available). The regulations were issued just in time to be incorporated in the preapproved EGTRRA defined contribution plan document. The amendment affected 401(k) plans and plans permitting hardship distributions, such as 403(b) plans and some profit sharing plans. The deadline for the amendment was generally the end of the 2006 plan year.

Final 415 RegulationsThe final 415 regulations affected the definition of compensation. The amendment was due by the end of the limitation year beginning on or after July 1, 2007. This amendment is unusual in that the effective date is based on the limitation year rather than the plan year, tax year or calendar year. The timing of this amendment created a need for it to be added to the GUST preapproved plan just before the EGTRRA restatement was made. Without clear guidance, it is wise to also add this amendment to the EGTRRA preapproved plan.

Post-GUST Optional Amendments

2001 Proposed RMD RegulationsThe proposed RMD regulations were optional regulations, and for the year 2001, the plan sponsor had the choice of using either the 1987 proposed regulations or the new 2001 proposed regulations. For 2002, the plan sponsor had the optional choice of using either the 1987 or 2001 proposed regulations or 2002 final RMD regulations. The 2001 proposed regulations only needed to be adopted if they were used to calculate the RMDs for either the 2001 or 2002 distribution calendar year.

Deemed Section 125 Cafeteria AmendmentRevenue Ruling 2002-27 had very limited application, but required an amendment for those few employers to which it applied. The Rev. Rul. provides that an employer may “deem” an amount to be excluded under IRC Section 125 if an employee does not have an opportunity to elect cash in lieu of group health coverage because the employee cannot certify that he or she has other health coverage. Thus, the cash-out amount could be included in compensation (just as other amounts that are excluded pursuant to IRC Section 125 can be included in compensation).

Deemed IRAThis EGTRRA-created optional plan provision was first available in 2003 and the amendment to add this provision needs to be made by the end of the year in which the Deemed IRA was first utilized. IRS Proposed Regulations issued May 20, 2003 and final and temporary regulations issued July 14, 2004.

Designated RothThis EGTRRA-created optional plan provision was first available in 2006 and the amendment to add this provision needs to be made by the end of the year in which the Designated Roth was first utilized.

Continued from page 25

FALL 2009 :: 29

KETRA, GOZAThese laws permitted special rules for loans, distributions and rollovers for qualified individuals in qualified plans that adopted these provisions. The amendment was due by the end of the 2007 plan year. Notice 2005-95.

Notice 2005-70 Katrina ReliefNotice 2005-70 preceded KETRA and permitted special distribution provisions for qualified individuals in qualified retirement plans. The amendment was due by the end of the 2006 plan year.

EGTRRA Document RestatementProvided a good-faith EGTRRA amendment was timely adopted (see above), plans must be restated for EGTRRA in accordance with the five and six-year restatement cycles in Rev. Proc. 2007-44 (which was initially contained in Rev. Proc. 2005-66). These procedures also introduced the interim amendment process and created the new categorization of plan amendments (see below). As part of this process, the IRS announced that the deadline for employers adopting an EGTRRA preapproved defined contribution plan is April 30, 2010.

Laws Since EGTRRA

JCWAAThe Jobs Creation and Workers Assistance Act of 2002 (JCWAA) contained the technical corrections to EGTRRA and did not require a separate amendment. However, recently IRS auditors have been seeking a change in the good-faith EGTRRA amendment wording of separation from service to severance of employment. This may seem strange as the IRS model good-faith amendment for EGTRRA in IRS Notice 2002-57 used the term separation from service and there was no further IRS guidance requiring this wording to be changed. Nonetheless, it is suggested that the good-faith amendment be amended if an IRS auditor requests it.

PPA, HEART, EESA, WRERAThe Pension Protection Act of 2006 (PPA) is required to be amended into the plan document for the 2009 plan year. Although the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) amendment is not due until the 2010 plan year, plans are incorporating provisions of HEART at the same time as PPA. Although the Emergency Economic Stabilization Act of 2008 (EESA) amendment is not due until the 2010 plan year, plans are incorporating provisions of EESA at the same time as PPA. An amendment for the Required Minimum Distribution suspension

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provision contained in the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) is not due until the 2011 plan year; however, we await IRS guidance on the scope and timing of the amendment.

New Names for Types of AmendmentsUnder the IRS Revenue Procedures dealing with restatement cycles and interim amendments (2005-16, 2005-66, 2007-44), amendments have been categorized by new names. Specifically, amendments required due to law regulation change are interim amendments. Amendments made at the option of the employer are discretionary amendments.

EPCRS Non-amender ProcessIn 2008, the IRS updated the Employee Plans Compliance Resolution System (EPCRS) (Rev. Proc. 2008-50). With the establishment of remedial amendment cycles (initially under Rev. Proc. 2005-66 and then updated under Rev. Proc. 2007-44), interim (previously referred to as required) and discretionary amendment rules were formally made part of the on-going restatement procedures. Rev. Proc. 2008-50 added a category of failures to amend a plan document, consisting of discretionary amendments for law changes that are optional for plans to adopt.

EPCRS 12.03 VCP for non-amender failures are subject to the normal fee schedule based on the number of participants in the plan for a restatement that was not done during the remedial amendment period. If the restatement is made during the first 12 months after the RAP has passed, the penalty is 50% of the amount on the schedule.

A certain amount of confusion exists about whether a particular amendment is interim or discretionary, therefore the IRS decided to apply the same rules to both categories of amendment failures. EPCRS gives an employer until the end of the remedial amendment cycle to correct good


faith, discretionary and interim non-amender failures. Employers can voluntarily correct these failures under the Voluntary Correction Program (VCP) or as part of the Audit Closing Agreement Program (Audit CAP). Under VCP, the correction fee is $375 for a plan of any size. An employer is permitted to correct these types of failures by amending its plan to reflect the actual operation of the plan, rather than having to change its plan operations to reflect what the plan says.

Under EPCRS, there are certain situations that will require employers to submit requests for determination letters in order to correct a failure. Determination letter requests are not required when employers correct failures to adopt discretionary amendments. A determination letter application will be required if a plan failed to adopt a required amendment. Failing to amend for GUST and failing to amend during a plan’s assigned remedial amendment cycle will also require the employer to submit a determination letter request when correcting the failures under VCP or Audit CAP.

Interim Plan Amendments IRS now defines interim amendments to include:

• amendmentsrequiredtobemadetoaplanasaresultof changes to qualification requirements that are effective after December 31, 2001; and

• integralamendments—amendmentsthataplansponsor chooses to adopt that are integral to both a change in the qualification requirements and to a plan provision that is required to be amended as a result of a change to the qualification requirements.

As with the EGTRRA good-faith amendment requirement, the effect of timely adopting an interim amendment that is adopted in good faith with the intent of maintaining qualified status is the eligibility of the employer for an extended remedial amendment period (RAP)—to the end of the plan’s applicable remedial amendment cycle (cycle)—in which to correct good faith mistakes in the plan document related to such amendments.

Discretionary AmendmentsDiscretionary amendments are plan amendments other than interim amendments. Discretionary plan amendments include:• amendmentsthataplansponsoradoptsasaresultof

a change in the qualification requirements that are neither required nor integral, and

• amendmentsmadetoaplanthatarenotrelatedtoachange in the qualification requirements.

For more information on Nonamenders and the Volun-tary Correction Program (VCP), visit www.irs.gov/retirement/article/0,,id=205524,00.html.

Fees for Non-amendersRev. Proc. 2006-27 introduced the above reduced fee schedule for use when the IRS finds an amendment missing when an employer submits for a determination letter. This schedule has been carried forward into Rev. Proc. 2008-50. Frequently, an employer is unaware that an amendment is missing until its plan is submitted for a determination letter and the IRS discovers that an earlier amendment is missing. Under the updated EPCRS, a new fee schedule will apply. The penalties are greater than those imposed by the VCP submission schedule but fewer than those under the Audit Cap program. The penalty schedule is tiered according to number of participants and has a separate fee for each amendment that may be missing.

William C. Grossman, QPA, ERPA, is the director of education and communications at McKay Hochman Co., Inc. in Butler, NJ. Bill is also the editor of E-mail Alert, mhco.com, Retirement Plan News, Prototype Plan News and 403(b) Perspectives. ([email protected])

Number of ParticipantsEGTRRA/

Subsequent Legislation

GUST/ 401(a)(9) Regs

UCA/OBRA ‘93 TRA ‘86

TEFRA/ DEFRA/

REAERISA

20 or fewer $ 2,500 $ 3,000 $ 3,500 $ 4,000 $ 4,500 $ 5,00021 - 50 $ 5,000 $ 6,000 $ 7,000 $ 8,000 $ 9,000 $ 10,00051 - 100 $ 7,500 $ 9,000 $ 10,500 $ 12,000 $ 13,500 $ 15,000101 - 500 $ 12,500 $ 15,000 $ 17,500 $ 20,000 $ 22,500 $ 25,000501 - 1,000 $ 17,500 $ 21,000 $ 24,500 $ 28,000 $ 31,500 $ 35,0001,001 - 5,000 $ 25,000 $ 30,000 $ 35,000 $ 40,000 $ 45,000 $ 50,0005,001 - 10,000 $ 32,500 $ 39,000 $ 45,500 $ 52,000 $ 58,500 $ 65,000More than 10,000 $ 40,000 $ 48,000 $ 56,000 $ 64,000 $ 72,000 $ 80,000

Fee Schedule for Non-amenders

FALL 2009 :: 31

2009 Educator’s Award Presented to Kathryn J. Kennedy

Kathryn J. Kennedy will receive the prestigious Educator’s Award for 2009 during the Awards Luncheon at the ASPPA Annual Conference at the Gaylord National Resort & Convention Center in National Harbor, MD.

Kathryn was selected by ASPPA’s Management Council and the Education and Examination Committee’s Chairs and Vice Chairs in honor and recognition of her superior and dedicated commitment to education.

Kathryn joined The John Marshall Law School as a full-time faculty member after many years of private practice and as an adjunct professor specializing in employee benefits law. She practiced with the law firm of McDermott, Will & Emery in Chicago, IL and was an actuary with the actuarial consulting firm of Towers Perrin. She established the LL.M. program in employee benefits, expanding upon the graduate tax’s employee benefits concentration. In 2005, she developed an M.S. degree program in employee benefits law for non-attorneys.

Kathryn graduated from Drake University, with honors, in 1974, and from Northwestern University School of Law, summa cum laude, in 1980, where she was on the law review editorial board and a member of the Order of the Coif. She became a fellow of the Society of Actuaries in 1976. Due to her combined legal and actuarial background, she offers the law school a unique perspective in the area of employee benefits law. She has published numerous articles, portfolios for BNA Compensation Planning Journal and a textbook on employee benefits and tax issues.

Kathryn has testified before the US Senate Finance Committee on several occasions and was invited to speak before the President’s Advisory Panel for Tax Reform. She was a member of the US Department of Labor’s ERISA Advisory Board (2005-08) and was a delegate for the US Department of Labor 2006 National SAVER Summit. She is a member of the IRS Great Lakes Area TE/GE Advisory Council (2005-09), and in 2009 she was named to the IRS Advisory Committee on Tax-Exempt and Government Entities (ACT). She was the chair person of the Chicago Bar Association Employee Benefits Committee and the Illinois State Bar Association Employee Benefits Section Council. She chairs the Distributions Subcommittee of the ABA Tax Section/Employee Benefits Committee.

Congratulations to Kathryn!

ASPPA’s Educator’s Award has been presented to outstanding educators in the pension field since 1997. Presented annually at the ASPPA Annual Conference, the award recognizes and honors an ASPPA member who has made a significant contribution to retirement plan education.


ASPPA will recognize each recipient of the Martin Rosenberg Academic Achievement Award for 2009 with a plaque during the Awards Luncheon at the ASPPA Annual Conference. The 2009 awardees follow:

2009 Martin Rosenberg Academic Achievement Awards

The Martin Rosenberg Academic Achievement Award honors its namesake, the late Martin Rosenberg, a fellow of ASPPA. Rosenberg served as an Education and Examination Committee member from 1979 to 1985 and its general chairperson from 1985 until his death in 1987. The award annually recognizes top performing ASPPA examination candidates.

Steve S. Riordan, CPC, QPA, QKA, of Fairfield, OH, is the recipient of the Martin Rosenberg Academic Achievement Award for the fall 2008 Advanced Retirement Plan Consulting (C-4) examination. He currently serves as a senior technical manager with Fidelity Investments Testing, Reporting & QDRO Services. Steve has worked in the retirement industry in various capacities for more than seven years and specializes in compliance testing. He has attained ASPPA’s CPC, QPA and QKA credentials and has been an ASPPA member since 2005. Steve is a graduate of Miami University where he majored in Finance.

Melissa Warner is the recipient of the Martin Rosenberg Academic Achievement Award for the spring 2009 Defined Contribution Administrative Issues—Compliance Issues (DC-2) examination. She graduated cum laude in May 2003 from Nazareth College in Rochester, NY. She holds a B.A. in Mathematics and three teaching certifications from Nazareth. After two years of teaching special education at Hope Hall School in Rochester, NY, Melissa joined the Retirement Services division of Paychex, Inc., a leading provider of payroll and human resource services, in November 2005. She is currently a 401(k) conversions communication specialist, supporting clients who are changing their plan recordkeeping services to Paychex from other providers.

Leslie L. Wechling, QKA, is the recipient of the Martin Rosenberg Academic Achievement Award for the spring 2009 Defined Contribution Administrative Issues—Advanced Topics (DC-3) examination. She has been a retirement plan professional for the past 18 years. As a compliance specialist, Leslie provided consulting services to her CIGNA clients for five years; as a relationship manager and trust officer, she provided administrative and consulting services to her Mercantile Bank clients for one year; and as a senior qualified plan consultant, she provided underwriting and consulting services to her MetLife clients for more than nine years. Currently, Leslie is a retirement plan consultant with Retirement Plan Services, LLC in St. Louis, MO. She has acquired the CEBS and QKA credentials. She is currently preparing for the DB examination to obtain the QPA credential. Leslie received her Master of Liberal Arts degree at Washington University and her Bachelor of Arts at Maryville University, both located in St. Louis. Leslie is also a recipient of the Phi Beta Kappa key.

Congratulations to Steve, Melissa and Leslie!

FALL 2009 :: 33

CEOs Talk About the ASPPA Recordkeeper Certification ProgramA Tool to Win Business and Keep Clients

by Janice L. Salzar

When John Blossom, who is president of Alliance Benefit Group of Illinois, first heard about the certification program for recordkeepers and third party administrators (TPAs), he was not surprised that ASPPA was behind it. “I have felt for a long time that our industry is ripe for federal regulation of some kind. Even though my firm already has a SAS 70 audit, I didn’t think it would be the type of thing that would forestall the government’s interest in licensing recordkeepers if it wanted to. I believe ASPPA’s program will.”

lthough the name of the certification program, the ASPPA Recordkeeper Certification

program, mentions only recordkeepers, it is important to note that the program targets recordkeepers and TPAs. The need to organize both recordkeepers and TPAs in an industry-wide self regulation program is more evident today than when ASPPA launched the task force in 2007 that produced its program. Events in the securities markets, the US Congress and the courts over the last couple of years have raised questions about pension service providers of all stripes. Since plan sponsors and participants have intimate contact with their recordkeepers and/or TPAs, it is only natural that the competency of these service providers would be questioned too. The competency question raises another issue that ASPPA’s program is addressing very effectively, which is winning new business and keeping current clients.

Donald Ford is the CEO of Pinnacle Financial Services, Inc. His firm provides administration only services to pension plans. Pinnacle works very closely with advisors to 401(k) plans. Don recently said, “My firm’s ASPPA certification has really changed the perception of advisors and our plan sponsors toward Pinnacle. It has allowed us to keep pace with their expectations at a time when an independent test of the practices of TPAs is almost essential. We are included in new business opportunities that we weren’t before. We have made a concerted effort to track our clients’ response to the news of our certification. The results are very gratifying.”

How the Certification Process WorksWhile the enthusiasm expressed by John Blossom and Don Ford about the value of ASPPA’s certification bodes well for the program, we were interested in learning how they viewed the

process for getting there. Their comments appear later in this article. First, let’s review briefly how the process works.

In order to gain admission to ASPPA’s certification program, firms undergo a certification Assessment. At the conclusion of the Assessment, the auditor prepares a report and presents it to the Certification Registration Committee (CRC). In order to maintain complete independence during the certification decision process, the Centre for Fiduciary Excellence (CEFEX) manages the CRC under a license agreement with ASPPA.

The Assessment procedure, which was developed by Roland|Criss, mirrors the audit method or Assessment defined in the global ISO 19011 standard. Many readers will recognize it as the same method used to certify companies for ISO 9001. The ISO approach enforces uniformity on all certification Assessments. Its rigid structure ensures that every Assessment is conducted without deviation. In other words, every candidate gets the same treatment within its business model type. John Blossom feels that it is one of the many strengths of the program. He stated, “Roland|Criss adds to the value of ASPPA’s certifications by virtue of its separation from the recordkeeping and investment industries. It is not a recordkeeper nor does it advise on investments. It is only a certification and process auditor. I like knowing that my firm’s information is not being seen by a competitor.”

CEOs Comment About the Certification ProcessSince few recordkeepers or TPAs have ever engaged in a certification Assessment, we were curious to find out how CEOs of certified firms felt about the experience once completed. Don Ford admitted to some apprehension before agreeing to go forward. He put it this way, “I wasn’t concerned about how our firm would test out as much as I was a bit worried about

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the time it would take away from our staff just to do the audit.” He added, “As it turned out, we only spent about 15 man hours for the first year’s audit. The annual renewals since have required fewer than that. We had most of the information that Roland|Criss needed. The items we didn’t have showed up as Opportunities for Improvement (OFIs) in our Assessment report, which gave us time to address them.”

Don Ford’s reference to OFIs points out an important feature of the Assessment process. More than just a pass or fail evaluation, an Assessment produces valuable feedback for recordkeepers and TPAs. In case a candidate’s practices are out of alignment with the ASPPA standard, the auditor documents for its use each occurrence as an OFI. When revealed, OFIs do not affect the outcome of the CRC’s decision. A survey of all firms certified thus far revealed their unanimous appreciation for the value of the OFIs they received. OFIs were purposely built into the Assessment method in order to show recordkeepers and TPAs the way to achieve continued process improvements. If a candidate’s practices are too misaligned with ASPPA’s standard, the auditor may refer the firm to a consultant to help get things in order before proceeding with the certification process.

When we asked John Blossom for his perception of the certification experience, he commented on an issue that surfaces frequently. “The Alliance Benefit Group of Illinois prides itself on the high level of our clients’ satisfaction

with us. Our employee morale is also high because they feel like they work for a terrific organization. That didn’t mean that I wasn’t sure how ready we were for the ASPPA certification program because it covers so much more ground than our other annual audits.”

Many recordkeepers have been a little reluctant to start their Assessments until they have more time to “get ready.” The OFI system gives the Assessment a built-in tool that allows firms to get ready as they go. Commenting about this, John Blossom added, “I encourage any firm that is considering certification not spend too much energy preparing for it unless something big jumps out at you after reading the ASPPA practices. Roland|Criss is very good about clarifying how the weak areas need to improve. The certification process is an excellent experience.”

Early Adopters Hail the Benefits of CertificationThe queue of firms seeking the ASPPA Recordkeeper Certification continues to grow, with many in process at the time of this article. The results of completed certifications are universally excellent. Major custodians have studied ASPPA’s standard, which is built on 17 critical practices (for more details go to www.asppa.org/recordkeepercert). The first of several completed its study recently and has approved ASPPA’s certification for firms that perform recordkeeping on their platform.

John Blossom and Don Ford are just two of the many CEOs who have lauded ASPPA’s foresight for launching the certification program. Winning new business, retaining clients and getting a head start on federal regulation—what could be better? To learn more about the certification program and the audit process, contact Jan Salzar at [email protected] or 817.861.7963.

Janice L. Salzar serves as manager-program specialist at Roland|Criss in Arlington, TX, with a specific focus on the national implementation of Roland|Criss’s Rating and Certification programs, including their work related to the ASPPA Recordkeeper

Certification program. Jan is a seasoned client relationship management executive. She has more than 25 years of experience of delivering client solutions in the banking and financial services industries. She is well versed with the intricate aspects of retirement plan operations, the increasing pressures placed on plan fiduciaries and the new requirements service providers must overcome to prove their trustworthiness. Prior to joining Roland|Criss, Jan served as senior sales and marketing manager for 3Core Software, Inc., a Houston, TX-based provider of banking software solutions. She was instrumental in creating awareness, providing training and developing support systems for 3Core’s bank clients. ([email protected])

More than just a pass or fail evaluation, an Assessment produces valuable feedback for recordkeepers and TPAs.

ASPPA Recordkeeper CertificationLet clients know that your firm has practices in place that are

certified and audited as the best in the industry.

ASPPA-developed standards of practice with certification conducted by CEFEX

Independently audited

Three service classifications

Registration in a public database and a certificate of registration

Annual assessment to maintain certification

For additional information go to www.asppa.org/recordkeepercert.

Knowledge • Advocacy • Credibility • Leadership

FALL 2009 :: 35

ASPPA Joins the Employee Benefit Research Institute Board

by Geralyn M. Miller

ASPPA is now a sponsoring member of the Employee Benefit Research Institute (EBRI) participating as a member of its board of directors. The semi-annual EBRI board and research committee meetings take place in Washington, DC, in the months of May and December. In conjunction with each of the board meetings, EBRI sponsors a policy forum that features the perspectives of experts and top industry leaders on issues involving healthcare and/or retirement savings and planning.

enerally, the policy forum in December is dedicated to

healthcare and the May forum to retirement savings issues. The meetings are intense, dynamic and a valuable source of information on the latest happenings in the world of employee benefits. As ASPPA’s trustee on that board, I am delighted to be able to provide to you the highlights from the May 2009 board meeting and policy forum.

EBRI Retirement Research AccomplishmentsEfforts by the EBRI research team have resulted in the publication of four issue briefs published between November 2008 and April 2009. In December 2008, results of a study into 401(k) data on account balances, asset allocation and loan activity showed that about two-thirds of 401(k) plans included lifecycle funds in their investment lineup at year-end 2007. Also at year end 2007, 28 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 24 percent in 2006, 19 percent in 2005 and 7 percent in 1998. The number is expected to climb even higher in upcoming years.

The February 2009 brief dealt with the question of the length of time it will take for 401(k) participants to recover 2008 losses. The brief did not include any surprises. Basically, it reported that the length of time for recovery

G of losses depends on future market performance. Since we have no way of predicting this outcome, we find ourselves in a wait-and-see situation.

The March 2009 brief examined target date fund usage in 401(k) plans. The brief indicated that of the participants in plans where target date funds were offered, 37 percent had at least some fraction of these types of funds in their plan balances. Furthermore, target-date funds were more likely to be used by participants with lower salaries, and investors in specific fund families are more likely to invest all of their assets in a single target-date fund from that family.

The April 2009 brief reports the findings from the 2009 Retirement Confidence Survey. It indicated, as expected, a lower confidence about retirement and an expected need to work longer into retirement. Participants are not optimistic about the future of their retirement benefits. Also, the survey findings indicated a continuing growth in workers’ belief that a defined contribution plan was their primary retirement plan.

Update on the Defined Contribution Research Program ActivitiesThe Defined Contribution Research Program began in 1994 in response to the interest of EBRI member organizations related to the impact of sponsor and/or provider educational efforts on the investment behavior of participants in participant-sponsor directed defined contribution plans. The program has evolved into one that now focuses on the creation of a multi-source longitudinal database that provides information on participant-level decisions with respect to participation, contributions, loans and asset allocation. The construction of the extensive EBRI database and studies conducted using its data have helped to position EBRI into the role of a trusted source of information by key congressional and industry decision-makers. Numerous projects have been completed using the database and eight additional projects are currently in progress that will be a valuable source of information in a variety of venues.


Highlights of the EBRI Policy Forum: Decumulation/Retirement Income in Defined Contribution PlansThis policy forum, the 64th in EBRI’s history, focused on how best to decumulate assets amassed over the lifetime of plan participants. Industry experts presented a variety of perspectives on this topic throughout the course of the forum. Interest and, indeed, usage appears to be spreading on the subject of decumulation at a rapid pace. The EBRI forum provided the venue for an open and rich discussion of this topic.

One panel, moderated by Stacy Schaus of PIMCO, which featured representatives from a variety of organizations including Barclays Global Investors, MassMutual, Prudential Retirement, AllianceBernstein and MetLife, explored the various approaches that organizations are taking with respect to addressing decumulation. They discussed the products that their own organizations currently offer, and the discussion made it clear that a variety of innovative approaches to decumulation do exist in the marketplace at the present time (e.g., fixed annuity, variable annuity, living benefit, longevity insurance, capital market products like bond funds, systematic withdrawal and hybrid products). Furthermore, the discussion that took place indicated an eagerness on the part of the industry to develop subsequent generations of decumulation products.

Among the most informative of the presentations given at the forum was one by John Ameriks of Vanguard who looked at client retirement issues. He indicated that among his research findings, he has found that there is a real fear on the part of retirees regarding their future. While the greatest “angst” of the parents of mature baby boomers was the possibility of World War III and/or a nuclear holocaust, the baby boomers worry most about what will happen to them financially in their retirement. Ameriks feels that this fear needs to be addressed with a stepped up research agenda that includes a more in-depth examination of retiree spending patterns. Conventional research bases estimates of sufficient amounts of savings on cost of living for present day workers; however, it may be important to consider the fact that retirees actually spend less than active workers due to changing preferences in their later years. His presentation concluded with some thoughts on defaults with regard to annuity usage. He indicated that there is no real evidence that annuities are getting any significant traction over past patterns.

Overall, both the reports at the board meetings and the presentations given at the policy forum were tremendously informative, providing insights into what will be needed to meet the demands of current and future generations of retirees from both product and policy perspectives. EBRI’s work truly makes a substantial contribution to public policy and private enterprise in today’s intensely dynamic retirement planning world. ASPPA’s presence on the EBRI board, therefore, positions us well to be able to contribute to and make significant use of the supply of information relied upon by those involved in shaping the future of retirement planning and savings in this country. I look forward to providing the membership with the updates and information made available to us at future EBRI meetings.

Geralyn M. Miller, Ph.D., is an associate professor in the school of business at Indiana University-Purdue University Fort Wayne and the director of research for the Institute for Pension Plan Management. She teaches courses in business ethics, management

and financial public policy and is a member of ASPPA. ([email protected])

ASPPA’s presence on the EBRI board, therefore, positions us well to be able to contribute to and make significant use of the supply of information relied upon by those involved in shaping the future of retirement planning and savings in this country.

FALL 2009 :: 37

ASPPA Adds Ethics/Professionalism to Continuing Education Requirement

by Heidi J. Cook, CPC, QPA, QKA

The ethics discipline, which has long been integrated into the ASPPA Code of Professional Conduct and credentialing exams, is now a continuing education focus as well. After much research and discussion, the ASPPA Board of Directors has modified ASPPA’s continuing education (CE) requirements in order to better represent ASPPA as the “Premier National Organization for Career Retirement Plan Professionals.”

ffective for the 2009-2010 CE cycle, one of the 40 hours of pension, investment or employee benefit related continuing education credits must

cover Ethics/Professionalism. For the 2011-2012 CE cycle and beyond, two of the 40 hours must cover Ethics/Professionalism.

ASPPA will provide members many opportunities to view webcasts, attend conference sessions and take online quizzes that specifically satisfy this new Ethics/Professionalism CE requirement. Currently, you may view a recorded Ethics webcast at www.aspa.org/Main-Menu/Knowledge/2009/archived/090109.aspx to earn two CE credits in Ethics, with another live webcast being offered on December 8, 2009.

Ethics and Professionalism CE topics include, but are not limited to, the following standards as described in the ASPPA Code of Professional Conduct:11. Compliance: Members must be familiar with the ASPPA

Code of Professional Conduct.12. Conflicts of Interest: Professional services may not be

performed if a conflict of interest exists. (Some exceptions may apply.)

13. Professional Integrity: Professional services must be performed with honesty, integrity, skill and care.

14. Control of Work Product: Professional services may not be provided if they can be used to mislead, violate or evade the law.

15. Confidentiality: Confidential information obtained through a professional assignment may not be shared unless authorized by the client to do so.

16. Qualification Standards: Professional services may only be provided by qualified members based on education, training or experience.

17. Disclosure: Full and timely disclosure to the client of all sources of compensation in relation to an assignment is required.

18. Courtesy and Cooperation: Professional services shall be performed with courtesy and cooperation with others in the client’s best interest.

19. Advertising: False or misleading advertising in any medium is prohibited.

10. Titles and Credentials: ASPPA membership titles and credentials may be used only as authorized by ASPPA.

11. Collateral Obligations: ASPPA members who are also actuaries shall also abide by the Code of Professional Conduct for Actuaries.

In addition to the ethics CE offerings, which will be clearly identified as such when they are offered, there are numerous ways an ASPPA member can satisfy CE requirements, including:• attendinganASPPA-sponsorednationalorregional

conference;• attendinganASPPABenefitsCouncil(ABC)meeting;• passingaCEquizfromThe ASPPA Journal;• registeringandviewinganASPPAwebcastorrecording;• attendingaliveASPPAreviewsession;• obtainingarequiredscoreonanASPPAexam;• servingasaspeakerorpanelistatanyprofessionalmeetingor

program covering acceptable subject matter;• publishinganarticleonacceptablesubjectmatter;• instructingacoursesponsoredbyASPPA;• servingasanASPPAsubjectmatterexpert;• servingasafull-timememberoftheASPPAEducationand

Examination Committee;• successfullycompletinganon-ASPPAsponsoredself-study

program covering acceptable subject matter;• attendingaqualifiedin-housetrainingprogram;• participatinginaqualifiedstudygroupprogram;or• attendinganon-ASPPAsponsoredconferenceorseminar

covering acceptable subject matter.This information and much more is located on the

Continuing Education pages of the ASPPA Web site for your convenience at www.asppa.org/asppace. If you have any questions, please contact [email protected]. The CE reporting deadline for the 2009-2010 continuing education cycle is January 10, 2011. Don’t delay; it will be here sooner than you think!

Heidi J. Cook, CPC, QPA, QKA, is a Principal at InWest Retirement Solutions, where she is responsible for all compliance issues for the firm. With more than 20 years of experience in the retirement industry, Heidi specializes in the design and consulting of retirement plans for small to medium size businesses. She is currently the Co-chair of the ASPPA Membership Development Committee and also serves as chair of the Heritage USA FCU Supervisory Committee.

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t seems that each year of ASPPA’s history has brought some kind of event or disaster or other challenge, and each year ASPPA

has risen to the occasion to deal with that situation. In ASPPA’s formative years, it was about being recognized as an actuarial organization, which led to our early Government Affairs Committee efforts and inter-societal struggles. In other years it was government action, such as the Actuarial Audit programs of the 1990s, the attack on cross-testing or fighting deadly new small plan audit requirements. Some years’ challenges were driven more by external events, such as 9/11, the anthrax scare and hurricanes Katrina, Wilma and Rita. Challenges in other years have been internally focused, such as a search for an executive director (thankfully that was almost 15 years ago), the merger that formed ACOPA or changing our name from ASPA to ASPPA.

If we asked Bob Seger and the Silver Bullet Band to describe ASPPA through all of these times, Bob might write as he did for his fans (and a car company):

Like a rockI was strong as I could beLike a rockNothin’ ever got to meLike a rockI was something to seeLike a rock

This year, ASPPA had to rise to the occasion yet again. Break out that box of silver bullets! We had the major market meltdown in 2008 and the aftermath in 2009. The companies that supported ASPPA, such as our vendor-partners, institutional providers and firms owned by ASPPA members, suffered major changes to their level of incomes. With a cut in revenue, a cut in expenses is bound to follow, and ASPPA was not immune to the changing reality of its landscape.

Members have been asking all year how ASPPA has reacted to the situation, and how we have been coping. Here are some thoughts:

• First,wedecidedtoworkharderatcontrollingexpenses. Our staff and volunteer partnership has always been very good at watching the pennies. Every line item of our budget was scrutinized. We asked every vendor if they had a “better deal” for us. We even went shopping for a new office lease.

• Ourchiefsdidawonderfuljob.Evencontractsthat were considered “unbreakable” in the past were renegotiated, such as hotels that we had booked for future conference events and meetings. We got the hotels to cut their room rates. Every concession that we could get from our suppliers was warmly coaxed. We approached our partners (such as Indiana Purdue University Fort Wayne, who oversees our webcourse production) and rearranged the workload so that ASPPA was in better control of the process of obtaining revenue.

• OurBoardofDirectorsdidn’tpanic.Sincewereview our financial situation at every monthly Board meeting, the Board was asked if they would like to make changes to our departmental business plans and cut some of the projects that were being developed. Since we had so many important new initiatives underway, it was felt that it would have been harmful to our continued development as an organization if we abandoned our plans. When the Board weighed the efforts of the ASPPA staff to cut expenses, along with the “safety net” provided by our financial reserve, the Board ultimately decided to make no changes to our programs. We went “full steam ahead” on developing new webcourses, forming NAIRPA (National Association of Independent Retirement Plan Advisors, our newest subsidiary), offering our new TGPC (Tax-Exempt and Governmental Plan Consultant) credential and two new exams, revamping our Web site and ASPPA store and continuing various other important projects. We continued to strive to meet the needs of our members and did not want to disappoint them.

• OurmemberscameandASPPAdelivered.Whilea few of the conferences experienced a significant decline in attendance, many of the smaller,

by Stephen L. Dobrow, CPC, QPA, QKA, QPFC

F R O M T H E P R E S I D E N T

It’s All About the Silver Bullets

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FALL 2009 :: 39

Register today to take the RPF-1 and RPF-2 exams.Earn 7.5 CE Credits per exam.

Exam Registrationwww.asppa.org/fallexams09

Order Exam Study Guideswww.asppa.org/bookstore

RETIREMENT PLANFUNDAMENTALS CERTIFICATE

QUESTIONS? E-mail us at [email protected] www.asppa.org

The 2009 RPF exams must be submitted by

December 15, 2009 (midnight, EST).

Establishes a foundation of retirement plan knowledgeIncreases your ability to assist clientsDemonstrates a proven knowledge levelLays the groundwork for ASPPA credentials

regional conferences did very well. ACOPA’s actuarial conferences experienced sold-out status. Our publications, exams and courses provided for a mixed bag of success and setback, but the trend turned toward success. Proceeds from AIRE (American Institute of Retirement Education), the new partnership with NIPA (National Institute of Pension Administrators) to provide education and exams to candidates for the IRS designation called ERPA (Enrolled Retirement Plan Agent), proved to be a welcomed addition to our revenue. Our Membership Development Committee obtained many new members by focusing its efforts on recruitment of various groups – and caused our overall membership to grow despite the economic downturn!

• Ourwebcastsbecamemorepopular.Sincecorporate travel budgets became more restrictive, our members increased their interest in our educational webcasts. Every ASPPA committee was charged with developing new topics or content that would be of interest to our constituents, and the result was an expanded webcast schedule that helped make up for revenue shortfall in other areas and provided valuable continuing education opportunities to our members.

At the time of this writing, we are only two-thirds through the year. However, we have been able to weather the storm so far. We have not had to access our reserves, and the expense cuts that were made have almost kept up with the dreaded declines in revenue. We have been able to add several significant new programs and have made great progress toward attaining our goals for the year.

In the words of the Silver Bullet Band, we’ve been “against the wind. We’ve been running against the wind. We were young and strong and we were running against the wind.” Say, could you loan us some more of those silver bullets?

Stephen L. Dobrow, CPC, QPA, QKA, QPFC, is president of Primark Benefits, a pension consulting firm in Burlingame, CA, and ASPPA President. Stephen worked in the ASPPA Conferences Committee for many years and oversaw the dramatic expansion undertaken in this area. He also served at various times as chair of committees such as Membership, ASPPA PAC and Finance and Budget, and he has held positions including Treasurer, member of the Board of Directors and member of the ASPPA Executive Committee. Stephen holds a degree in Management from Golden Gate University in San Francisco. He formerly served as a chapter officer for NIPA and is active in the Western Pension & Benefits Conference. ([email protected])


ASPPA’s Government Affairs Committee Meets in Washington

by Craig P. Hoffman, APM

The ASPPA Government Affairs Committee (GAC) held its annual June meeting in Washington, DC. The purpose of the meeting was to review the Committee’s work in progress as well as plan for future initiatives. The Committee also held meetings with the appropriate Federal agencies to discuss issues of interest in the area of retirement plan regulation. What follows is a summary of the Committee’s work at these meetings.

he internal meeting of the Committee began early in the morning on Sunday, June 14. The first order

of business was to receive reports by the various subcommittees of GAC. Some highlights include:• TheDepartmentofLaborSubcommitteecompleted

comment letters on two important topics. The first concerned the “safe harbor” exemption from ERISA coverage for certain 403(b) arrangements with little or no employer involvement. GAC requested greater clarity in light of the new IRS 403(b) regulations. The second letter advocated that the DOL add a self correction feature to the Voluntary Fiduciary Correction Program.

• TheIRSSubcommittee,togetherwiththePlanDocumentsSubcommittee and the Tax-Exempt and Governmental Plans Subcommittee, submitted lengthy comments on the proposed prototype program for 403(b) arrangements. At the top of the list of suggested changes to the IRS proposed program is the ability to include vesting provisions for employer contributions rather than the full vesting approach mandated in the proposal.

• The401(k)Subcommitteewasinstrumentalinseekingrelief for 401(k) safe harbor plan sponsors that would like to suspend the 3% nonelective contribution because of financial hardship without terminating the plan. The IRS has proposed regulations on which GAC will file comments as well as testify at a hearing to be held in September.

• TheDefinedBenefitSubcommitteereportedthatfourtask forces had been created to review and comment upon various IRS regulation projects to implement the provisions of PPA.

• TheForm5500ScheduleCTaskForcereportedontheircontinuing efforts to prepare for EFAST2 and, in particular, their work with the DOL to clarify what will be expected on the 2009 return.

• InresponsetoIRSNotice2009-43,alloftheGACsubcommittees provided input that resulted in a comment letter to the IRS with ASPPA’s recommendations for prioritizing guidance to be issued in the new IRS fiscal year.

• TheCommunicationsSubcommitteereportedonthesuccess and popularity of GAC’s ASPPA asaps and webcasts, as well as upcoming goals.

In addition to the subcommittee reports, numerous other administrative issues were discussed. Among them were better use of volunteers in the Committee’s work, how GAC and the various ASPPA Benefits Councils can work together, planning for the “Visit to the Hill” to be held in conjunction with this year’s ASPPA Annual Conference, and the GAC volunteer orientation meeting, which will once again be led by Janice M. Wegesin, CPC, QPA (to be held in February 2010).

A group of GAC leaders also had meetings on Monday morning with representatives of the IRS and in the afternoon with representatives of the DOL. These meetings are held annually and they have become an integral part of our governmental relations activity. Although we don’t always agree with our governmental regulators, the importance of this dialogue cannot be overstated. We have greatly appreciated the opportunity to discuss matters of common interest and the practical experience ASPPA’s members have accumulated in administering and applying governmental regulations.

The meeting with the IRS was actually attended not only by IRS representatives from the Employee Plans Division, but also representatives from Chief Counsel’s Office and from the Treasury Department. This forum brought together all of the parties for issuing guidance under the tax laws. Highlights of the IRS meeting include:• TheIRSwillsoonbeissuinganewmodel402(f)notice,

updated for the many law changes that have occurred since the original was released. ASPPA GAC previously

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GAC CornerASPPA Government Affairs CommitteeComment Letters and Testimony since May 2009

For all GAC filed comments, visit www.asppa.org/comments. For all GAC testimony, visit www.asppa.org/testimony.

July 23, 2009Robert M. Richter, APM, vice president of SunGard Relius, testified on behalf of ASPPA before the US Department of Labor Advisory Council on Employee Welfare and Pension Benefit Plans on promoting retirement literacy and security by streamlining disclosures to participants and beneficiaries.www.asppa.org/document-vault/pdfs/gac/2009/Promoting-Retirement.aspx

June 18, 2009Mark Wayne, president of Freedom One Investment Advisers, testified on behalf of NAIRPA before a joint hearing held by the Securities and Exchange Commission and the Department of Labor on current issues related to the use of Target Date Funds as 401(k) investments.www.asppa.org/document-vault/pdfs/nairpa/wayne-testimony.aspx

June 15, 2009ASPPA submitted comments to the Department of Labor requesting greater clarity on the exemption from ERISA for certain 403(b) arrangements in light of the final IRS regulations pertaining to 403(b) plans.http://prod-pres.asppa.org/document-vault/pdfs/gac/2009/request-guidance.aspx

June 15, 2009ASPPA submitted comments to the Department of Labor proposing a self-correction component be added to the Voluntary Fiduciary Correction Program for the late deposit of employee contributions.http://prod-pres.asppa.org/document-vault/pdfs/gac/2009/vol-fid.aspx

June 15, 2009ASPPA submitted comments to the IRS in regard to guidance priorities for the fiscal year that begins July 1, 2009.http://prod-pres.asppa.org/document-vault/pdfs/gac/2009/guid-pri.aspx

June 1, 2009ASPPA commented on the Proposed Revenue Procedure for the pre-approved 403(b) plans as well as the draft sample plan language for use in drafting 403(b) prototype plans as stated in Announcement 2009-34.www.asppa.org/document-vault/pdfs/gac/2009/2009-34.aspx

May 8, 2009The ASPPA College of Pension Actuaries participated in group comments submitted to Treasury asking for additional regulatory funding relief.www.asppa.org/document-vault/pdfs/acopa/9funding-joint.aspx

submitted proposed language for an updated notice and has pledged to provide input on the new model when it is released for public comment. The IRS advised that this proposed new notice will be 15 pages long, and will include Roth information.

• TheIRSisworkingonanupdatetotherulesfound in Rev. Proc. 2007-44 for keeping plan documents in compliance with the tax laws. The Plan Documents Subcommittee is in the process of finalizing suggestions on how the process can be improved.

• TheIRSisalsoworkingonanupdatetotherules under EPCRS for correcting qualification defects. The IRS Subcommittee is completing comments on suggested changes and expects to file them in time to be considered for this latest iteration of the program.

• Anotherimportantissuethatwasdiscussedwasthe requirement that if a pension plan uses a normal retirement age below 62, than it must be “reasonably representative of the typical retirement age for the industry.” The preamble to the applicable regulations provides that for normal retirement ages of between 55 and 62, deference will be given to the employer’s good faith determination of whether the age is “reasonably representative.” However, IRS

officials cautioned that the employer must engage in a “good faith” determination process (and the relevant facts must be supportive) to be entitled to the deference suggested by the preamble. We discussed whether a more practical approach (rather than amending the NRA itself) could be effective, such as prohibiting in-service withdrawals. We are not optimistic, however, that such a compromise will be worked out. We also requested a delay in the required amendment date for NRA amendments if due before the PPA amendment deadline.

• Wewereabletoquellarumorthatall2008Schedule SBs (the annual funding report for a defined benefit plan) would need to be immediately re-filed for plans with a “last day” valuation date. While the IRS is working on clarifying the 2008 instructions, any corrections can be submitted in conjunction with the 2009 Schedule SB.

• TheIRSassuredusthattheyareworkingona mutually acceptable solution to the new PPA problem of not being able to terminate a DB plan with a funded ratio below 80%. The problem is that if lump sums are not allowed, it makes it hard, if not impossible, to terminate the plan.


After lunch, GAC met with representatives of the DOL. Once again, the meeting was very cordial and mutually beneficial as we discussed a number of issues of common concern. Highlights of our DOL meeting include:• Alargepartofthemeetingwasdevotedtoadiscussionof

the concerns ASPPA has with the new 2009 Form 5500 and EFAST2. In particular, the new Schedule C instructions are difficult to interpret and further guidance is needed, beyond the 40 “Frequently Asked Questions” that were released last year. Although not certain, it appeared the DOL was seriously considering the need for clarification.

• ASPPA’sproposalthataself-correctionoptionbeaddedtothe Voluntary Fiduciary Correction Program for the late deposit of employee contributions was discussed. ASPPA has proposed such a program in the past, but the DOL has been concerned that the correction would not be done properly if there was no DOL oversight, as is provided with a VFCP filing. However, the latest GAC proposal would allow for self-correction only if reported on the Form 5500 filed for the year of correction. As requested by the DOL, GAC will follow up with ways to ensure that self-correction is done properly.

• The“safeharbor”exemptionfromERISAforcertain403(b)arrangements and ASPPA’s comment letter on the subject was also discussed with DOL officials. ASPPA’s concern is with the interaction of the IRS 403(b) regulations with the existing “safe harbor” regulations for ERISA exemption. Further discussions are anticipated after the DOL has an opportunity to review ASPPA’s comment letter on the subject.

A dialogue with the government officials in charge of regulating the private retirement system is a critical part of GAC’s mission. Much hard work was done by GAC volunteers who studied the issues and wrote the comment letters that are an integral part of GAC’s advocacy efforts. The tone and substance of GAC’s relations with these officials is indicative of the respect and credibility with which ASPPA is held in Washington.

Craig P. Hoffman, APM, of Jacksonville, FL, is the General Counsel and Director of Regulatory Affairs for ASPPA. He previously served as ASPPA President, Co-chair of the Government Affairs Committee and Co-chair of the Political Action Committee. Prior to his employment with ASPPA, Craig served as general counsel for SunGard Relius. Craig

was an expert speaker at the National Summit on Retirement Savings, served as a charter member of the first IRS Advisory Committee on Tax Exempt and Governmental Entities and is a Fellow in the American College of Employee Benefits Counsel. Craig is a frequent speaker at industry meetings and serves on the editorial boards of several pension journals. ([email protected])

The ERISA Outline Book2009 Edition

By Sal L. Tripodi, J.D., LL.M.

This six-volume resource will tell you what you need to know, including:

PPA technical corrections and other provisions of the Worker, Retiree, and Employer Recovery Act of 2008

Provisions in the Heroes Earnings Assistance and Relief

All PPA 2006 guidance issued in 2008, including minimum funding guidance

Revised EPCRS procedures

Guidance on rollovers to Roth IRAs

Guidance on qualified optional survivor annuities (QOSAs)

And much more!

Order your copy of The ERISA Outline Book, 2009 Editiontoday at http://store.asppa.org

Valuable reference toolfor any practitioner

Recommended resourcefor ERPA Exam candidates

FALL 2009 :: 43

LOS ANGELESBENEFITS CONFERENCE

Save the Date!

Hilton Los Angeles/Universal City | Los Angeles, CA

January 20-21, 2010 | January 22, 2010: Post-Conference Conversations with the IRS/DOL

For more information and to register, visit www.asppa.org/labc

Co-sponsored by: Official marketing sponsor:

KEYNOTE ADDRESSSarah Hall IngramCommissioner of TE/GE


The final seminar presentation for the 2009 year will be given by Richard A. Hochman, APM, from McKay Hochman Company, Inc. Rich will be speaking on the topic of Plan Terminations and Partial Terminations. This topic is increasingly pertinent since many of us are experiencing a growth in the number of qualified and 403(b) plan terminations due to changes in the economy.

Our council is experiencing much growth this year. As the year progress, the number of attendees has been ever increasing with each seminar. It seems the demand for information concerning new legislation, regulations and the opportunity for networking by retirement professionals in the Texas Gulf Coast is still on the rise. We are all looking forward to providing quality presentations and continued growth in the future.

Tina L. Leonard, QPA, QKA, has 24 years of experience in plan administration and training in the retirement industry. Tina is employed as senior pension administrator in the plan document unit of the implementation department at The

Variable Annuity Life Insurance Company. Tina has been a board member of the ABC of the Texas Gulf Coast for seven years and is currently treasurer and president-elect. ([email protected])

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ABC of the Texas Gulf Coast Provides Continuing Education on a Budget

by Tina L. Leonard, QPA, QKA

As with most things in Texas, the ABC of the Texas Gulf Coast covers a very large geographic area. This expanse is a challenge for our council, with some attendees driving long distances to attend our presentations.

ur focus this year has been to keep presentation costs at a

minimum. In addition to the cost of driving long distances, we have all felt the pinch of the economic downturn as employers cut their budgets. One of the corporate expenses to often suffer the budget knife is employee continuing education. Scheduling presentations at more centralized locations, making it a shorter distance to drive by most attendees, and alternating luncheons versus breakfast seminars has helped keep our cost down.

We kicked off the first quarter of 2009 with a breakfast presentation by Janice M. Wegesin, CPC, QPA, covering updates to the 2008 Form 5500 and introducing EFAST Filing. The breakfast program was well received by attendees both due to the lower cost (breakfast is cheaper than lunch) as well as the early time frame, which allowed participants to spend less time away from work.

The second quarter presentation costs were kept down by scheduling one of our local experienced pension professionals, Gary A. Nagler, of Gary A. Nagler & Associates, P.L.L.C. Gary provided us with an in depth presentation on the IRS’ Employee Plans Compliance Resolution System (EPCRS). This lunch presentation was very well received. We had more people attend than expected and our caterer had to scramble to provide more lunches.

The third quarter presentation with Craig P. Hoffman, APM, was a Washington Update about changes in the air. Craig discussed the latest developments including 401(k) fee disclosure initiatives from the DOL, legislative proposals, automatic IRAs and expectations from the Obama administration.

O ABC of the Texas Gulf Coast

President Sadie A. Hooker, CPC, QPA, QKA, QPFCTreasurer Tina L. Leonard, QPA, QKAProgram Chair Debbie J. Stransky, QPA, QKACE Chair Arasely ColchadoMembership Chair Gregg S. Ingersoll, CPC, QPA, QKA

FALL 2009 :: 45

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Research SupportBy supporting the groundwork for textbooks, symposia andpublications, The Actuarial Foundation helps actuaries buildstronger relationships with the academic community andreach a broader audience.

Supporting Actuaries, Present and FutureYour donation to The Actuarial Foundation helps fundscholarships, awards and prizes recognizing the exemplarywork of students and professionals in advancing actuarialscience. Scholarships for deserving students range from$1,000 to $7,500. The Foundation recognizes actuaries’accomplishments for research that furthers knowledge aboutactuarial science, employee benefits, enterprise riskmanagement and promotes public awareness of financial riskwith awards from $1,000 to $5,000.

Because of the generosity of our sponsoring actuarialorganizations, 100 percent of your donation goes directly tosupport programs and is 100 percent tax deductible.

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The ABC of Cleveland—Reflecting on Accomplishments and Looking Ahead

by Christopher M. Smith

The leadership of the ASPPA Benefits Council (ABC) of Cleveland likes to take time each summer to reflect on what the ABC has accomplished and consider opportunities for future educational meetings. One way we accomplish this task is by comparing current-year membership rates and attendance rates to rates from prior years. We also review attendee comments.

embership is up significantly compared to last year at this time. ABC of Cleveland

membership has increased 60% due in large part to the continued efforts of its board members. Another reason we believe membership has increased is the economy. Benefits professionals are now more than ever looking for ways to obtain quality continuing education for a reasonable price. The goal of any event sponsored by the ABC of Cleveland is for it to be a quality event that is cost-effective for its attendees.

Attendances at events held in 2009 compared to events held at the same time period last year show an increase of more than 21% percent. Again, we think this increase is due in large part to the cost effective quality events in addition to the interesting timely topics.

A half-day seminar featuring Janice M. Wegesin, CPC, QPA, started out the 2009 year. Janice discussed the current and future developments for Forms 5500. Craig P. Hoffman, APM, headlined the second event which focused on a Legislative and Regulatory Update in his first speech as an ASPPA employee. Another half-day seminar was held in June and featured Robert M. Kaplan, CPC, QPA, as the keynote speaker and featured many other quality local speakers. The topics included What’s New From Washington, using credit balances in defined benefit plans and Roth versus Non-Roth, among others.

We received great feedback on all three events. Following are a few of the comments from individuals who attended the events:

“Excellent dynamic speakers.”

“Mr. Hoffman was an enthusiastic, informed speaker. Great presentation.”

“Very nice presentations, great speakers with a lot of information to pass on.”

The remaining schedule for the 2009 calendar year promises to be packed with presentations from the following speakers:• Sal L. Tripodi, APM

This all-day seminar will include a large majority of the most pressing issues in the defined contribution and defined benefit arena. The agenda was designed with specific input from ABC members.

• Derrin Watson, APM The topics are still to be determined, but it is sure to include a song.

• Susan Clausen, AIF, CRPC, and Steve Wilt, CIMA They will be presenting on a range of investment issues as they relate to retirement plans.

As we reflect, 2009 is turning out to be a great year for the ABC of Cleveland, with already ten CE credits that members could have earned!

For more information about the ABC of Cleveland, including membership registration and upcoming events, contact Brenda Loewenthal, QKA, at Brewster & Brewster, Inc. at 440.951.8889 Ext. 115 or [email protected].

Christopher M. Smith is a principal, director of compliance services for Flexible Benefits Systems, Inc. As an attorney, Chris has extensive ERISA experience, providing plan design and documentation, compliance reporting requirements, plan communication documents and legal counsel for qualified and non-qualified plans. ([email protected])

M

FALL 2009 :: 47

ABC of Central Florida —Looking Toward the Future by Embracing Our Past

by Brian K. Furgala, CPC, QPA

Over its 26-year history, the ABC of Central Florida has had great leadership. Their spirit and guidance in the ever-changing employee benefits area is greatly appreciated. For 2009, the ABC of Central Florida continues its program of honoring its past presidents by asking them to speak during lunch meetings regarding changes that they have witnessed throughout the years and predictions for future developments in the industry.

o date, Tim Messett, president of Pension Investors Corporation of Orlando, Inc.,

and Kim L. Szatkowski, CPC, QPA, QKA, Chief of Pension Education for ASPPA, have spoken to the group. In the fall, we look forward to honoring Rick Hurt, shareholder of Akerman Senterfitt. This program compliments the ABC’s mission statement of encouraging the free exchange of ideas, both practical and academic, in order that the entire membership can benefit from the broad range of the experiences of its members.

In addition, the ABC lunch meetings continue to be led by both national and local speakers. The diversity of the ABC’s local membership gives it access to many different areas within the industry. For example, Greg Handrahan from Chepenik Financial spoke on plan sponsor strategies in a difficult market. National speakers supplement this local pool when topics affect the industry as a whole. The ABC’s first lunch meeting of the year featured Kim Szatkowski and also Deborah Lohning, Internal Revenue Service, who spoke about becoming an Enrolled Retirement Plan Agent (ERPA). Furthermore, John Lowell, a senior pension consultant with JP Morgan, gave an update on recent legislation.

The ABC’s next meeting will be the always well attended social event. We will cap off the year with a lunch meeting focusing on Retirement Income Alternatives in DC plans.

If you are in central Florida and would like to join us or to speak at one of the ABC of Central Florida meetings, please contact speaker chair, Phil Senderowitz, at [email protected] or president, Jeffrey T. Sparks, QPA, at [email protected].

Brian K. Furgala, Esq., CPC, QPA, is an attorney with GrayRobinson, P.A. and the ASPPA Liaison for the ABC of Central Florida. He advises clients on the design, installation and operation of qualified and non-qualified retirement plans. His responsibilities include assisting clients on complying with their benefit-related fiduciary duties, drafting plan documents, consulting with employers and fiduciaries on problem solving in relation to the management

and operation of the plans, representing clients involved in IRS audits, and DOL investigations and providing technical advice to administrators and actuaries. ([email protected])

Registration ends October 30, 2009.

For additional information and to register visitwww.asppa.org/fallexams09.

PROFESSIONALCREDENTIALING PROGRAMS

TGPC QPFC QKAQPA CPC

November 2 - December 11, 2009

FALL EXAMWINDOW OFFERINGS


Welcome New Members and Recent Designees


s MSPAPamela Binder-Escobosa, MSPA,

COPAClint Ashley Blankenship, MSPA,

COPAGail E. Johnson, MSPAAlex Kuhel, MSPA, COPAKaty Lee, MSPA, COPAAdam Pagenkopf, MSPA, QPA,

QKACarol Sullivan, MSPA, COPAPeter Timmons, MSPA, COPAThomas Weber, MSPA, COPA

s CPCMark H. Heller, CPC, QPAKenneth R. Robertson, CPC

s QPASteven D. Allen, QPA, QKAMichael T. Amacher, QPASvetla A. Baeva, QPA, QKAWilma Christine Barrett, QPA,

QKAFelicia W. Brogsdale, QPAKim W. Burdette, QPADenis Burgess, QPAAdam M. Chrestenson, QPA, QKAMichael T. Coyne, QPA, QKAJodie A. Dailey, QPALindsey Dimino, QPA, QKAMarsha L. Donalson, QPA, QKAPamela S. Ernsting, QPA, QKAFrancine S. Ferrante, QPAAmber L. Grant, QPA, QKAMelinda Grason, QPA, QKAJonathan Graziano, QPA, QKAJohn A. Halchuck, QPADarci Hampton, QPA, QKAMark H. Heller, CPC, QPAAnne C. Huss, QPAJeaninne V. Irwin, QPA, QKAZane Z. Ismail, QPA, QKARhonda L. Johnson, QPA, QKATracy Johnson, QPA, QKAHeather Joseph, QPA, QKACourtney N. Koch, QPA, QKAChantal Louvet, QPA, QKAMyron Lurie, QPA, QKA

Amanda Mac Kenzie, QPAJennifer L. McCullough, QPA,

QKAJennifer Mendicki, QPAErin L. Mulqueen, QPA, QKABonnie L. Pflum, QPA, QKATerrie Plewes, QPA, QKAAdam C. Pozek, QPA, QKA, QPFCBarbara Redfield, QPA, QKAYolanda E. Reyes, QPA, QKAFrank Rossi, III, QPA, QKAMarc Schoen, QPABrad S. Simpson, QPA, QKAKatherine Z. Smith, QPA, QKAJohn P. Stebbins, QPALena M. Stumper, QPA, QKAAmy M. Thurlow, QPA, QKAMichael D. Tompkins, QPA, QKAFaith Toole, QPA, QKAMichael Vanderford, QPA, QKAHelen D. Wrinkle, QPA, QKA

s QKAMichael D. Adamson, QKA, QPFCCindy Autry, QKALorinda Baker, QKATheresa Basciano, QKAPatricia Baxter, QKAPatricia Botello, QKADenise A. Broschart, QKAJordan Brown, QKAMark A. Burns, QKABrian Chupp, QKADeborah Curry, QKASusan E. Davis, QKANatasha Dhawan, QKAPamela S. Ernsting, QPA, QKAGregory Fennell, QKAAndrew G. Fleishchamel, QKAErik Gauger, QKACarolyn Gorman, QKABarry Greenstein, QKALateef Harris, QKAKelli J. Hasken, QKAPaul Hasken, QKALisa Head, QKAShawna J. Howell, QKAZane Z. Ismail, QPA, QKAHeather Joseph, QPA, QKAMose Kim, QKAAnn E. Kurtz, QKA

Aaron Lawrence, QKACarey W. Lindsey, QKADerek D. Mantel, QKACherie Matthys, QKA, QPFCMary Jo McGrady, QKAKatrina Moody, QKACraven S. Morrison, QKAKelly Murphy, QKAThomas J.R. O’Keefe, QKAErin Pappas, QKAGunnar Peterson, QKALynn A. Rokosz, QKAJoAnn Ross, QKAFrank Rossi, III, QPA, QKAAlice F. Ruper, QKAChrista J. Santella, QKALauren Schlueter, QKATeresa Self, QKAMichael D. Ship, QKASherril Stone, QKASpiro J. Theodorakakos, QKAJennifer Williams, QKAKaren S. Woods, QKA

s QPFCPetros P. Koumantaros, QPFCWalter Melcher, QPFCRandall L. Reese, QPA, QKA,

QPFCKathryn M. Risch, QPA, QKA,

QPFCRobert Schwartz, QPFCMatthew M. Stroup, QPFC

s TGPCDavid R. Blask, CPC, TGPCJane Brady-Ertz, TGPCDiane Capone, TGPCMarcia Diamant, TGPCPat Drago, TGPCG. Wesley Frazier, TGPCBryce Griffith, TGPCGeorge Hinston, TGPCPaula Hocker, TGPCEleanor A. Lowder, TGPCKaren Moran, TGPCBrian Nauman, TGPCPatrick D. Teague, QPA, QKA,

TGPC

s APMStuart M. Lewis, APMAnn Mackey, APMBernie W. Wesselman, Jr., APM

s AFFILIATEWilliam J. AnastasiadesStacey A. BreslinJohn M. BurtonMichael L. CecereKeisha CrozierDaniel DewittKimberly M. EggebraatenKaren S. JonesKamila KowalkeSharon M. KressElizabeth H. LeachJames LiberiJoseph M. MaierMichael J. MatthewsTimothy Q. MovidoMaria Aurora MuelaJohn RoloffChristopher SilvaggiKeith J. SteidleStephanie L. WalvoordJohn Wesley White

FALL 2009 :: 49

ASPPADate Description CE Credits

2009

Oct 30 Final registration deadline for fall examinations

Nov 1 ASPPA Annual Conference Intensive Review Sessions • National Harbor, MD

Nov 1 – 4 ASPPA Annual Conference • National Harbor, MD 24

Nov 2 – Dec 11 Fall 2009 examination window (DB, DC-1, DC-2, DC-3, PFC-1, PFC-2 and TGPC-2)

Nov 5 Postponement deadline for CPC examination

Nov 12 CPC examination

Nov 16 – 17 The ASPPA Cincinnati Pension Conference • Cincinnati, OH 10

Dec 1 Postponement deadline for fall DB, DC-1, DC-2, DC-3, PFC-1, PFC-2 and TGPC-2 examinations

Dec 1 Final registration deadline for CPC modules

Dec 15 CPC module online examination submission deadline

Dec 15 RPF-1, RPF-2 and TGPC-1 examination deadline for 2009 online submission (midnight, EST)

2010

Jan 20 – 22 Los Angeles Benefits Conference • Los Angeles, CA 15

Mar 14 – 16 The ASPPA 401(k) SUMMIT • Orlando, FL 15

Apr 19 Early registration deadline for spring examinations

May 12 Final registration deadline for spring examinations

May 13 – Jun 25 Spring 2010 examination window (DB, DC-1, DC-2, DC-3, PFC-1, PFC-2 and TGPC-2)

May 19 Postponement deadline for CPC examination

May 26 CPC examination

** Please note that when a deadline date falls on a weekend, the official date shall be the first business day following the weekend.** Please note that listed CE credit information for conferences is subject to change.

Oct 31 Live ERPA Review Courses (prior to

ASPPA Annual Conference) • National Harbor, MD

Jan 5 Registration Deadline for ERPA–SEE

Winter 2010 Examination

Jan 6 – Feb 17 ERPA–SEE Winter 2010 Examination

Window

AIRE & ERPA

A Partnership of ASPPA & NIPA

Calendar of EventsFALL 2009 :: 49

ABC Meetings

For a current listing of ABC meetings, visit www.asppa.org/abc.

November 18ABC of AtlantaPanel Discussion on Plan Terminations

Stuart Baesal; Joni L. Jennings, CPC, QPA, QKA; Katrina Moody; and Cynthia A. Groszkiewicz, MSPA, QPA

November 19ABC of the Delaware ValleyTopic TBDSpeaker TBD

November 19ABC of Greater CincinnatiWelcome Reception

December TBDABC of ChicagoTopic TBDJoan A. Gucciardi, MSPA, CPC

December 10ABC of Dallas/Fort WorthKeeping CurrentSal L. Tripodi, APM

December 15ABC of CincinnatiTopic TBDRichard A. Hochman, APM

December 16ABC of AtlantaWashington UpdateRichard A. Hochman, APM

October 20ABC of ClevelandTopic TBDSpeaker TBD

October 20ABC of Northern IndianaAnnual Board MeetingHalf-day SeminarJanice M. Wegesin, CPC, QPA

October 21ABC of Atlanta403(b) Plan UpdateAmy Klein

October 22ABC of New EnglandProhibited TransactionsSheldon H. Smith, APM

November TBDABC of New EnglandASPPA Annual Conference RecapSpeaker TBD


Fun-da-Mentals

Unscramble these four puzzles—one letter to each space—to reveal

four pension-related words.

SAND DART —— —— —— —— ——

WASH WIP —— —— —— ——

TRY LAQUER —— —— —— —— ——

EAT LOCAL —— —— ——

BONUS: Arrange the boxed letters to form the Mystery Answer as

suggested by the cartoon.

Mystery Answer: “ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __.”

Word Scramble

What the pension consultant’s parrot learned to say after spending a few days in the office.

Answers will be posted at www.asppa.org/taj.

Sudoku FunEvery digit from 1 to 9 must appear:

· In each of the columns,

· in each of the rows,

· and in each of the nine mini-boxes

3 4 1

5 2 62 7 4

8 57 5 3 8 2

5 1 6 49 5

7 5 1

Answers will be posted at www.asppa.org/taj.

Level = Difficult

The ASPPA 401(k) SUMMITAdvisors Working for America’s Retirement

Orlando World Center Marriott | Orlando, FL | March 14-16, 2010 www.asppa.org/summit

SAVE THE DATE!

Advance Your (k)nowledge • Networ(k) with the Experts

O�cial Publication Sponsor:O�cial Marketing Sponsor:

www.asppa.org/summit

Orlando World Center Marriott | Orlando, FL | March 14-16, 2010