Monthly Archives: May 2011

IRS issues guidance on terminating 403(b) plans

The IRS has issued a new ruling, providing guidance to eligible tax-exempt organizations, public schools, and churches on terminating and distributing assets from certain 403(b) tax-sheltered annuity plans. The ruling, which was issued in February, provides four examples illustrating how a 403(b) retirement plan funded in different ways may be terminated and explains when the terminating plan’s distributions are taxable to participants. For more on this, read the Client Action Bulletin.

Retirement Town Hall rewind

Spring has sprung in much of the country so we’ll forgive you if you haven’t checked in to Retirement Town Hall recently. Don’t worry, we’ve got you covered with this rewind of the last few weeks.

DB vs. DC dissected

We’ve covered the differences between defined benefit (DB) pension plans and defined contribution (DC) plans from time to time on this blog. Last week we asked you which one you would prefer in our You make the call poll. The response? As the pie chart below shows, a majority of voters would opt for some form of DB plan.

Given the poll results, we thought we’d highlight just how DC plans became the norm in many companies. Bart Pushaw highlighted the root causes for the shift in “How DB plans became DC plans.”

The 411 on 401(k)
This week we asked you about Inspiring employees to contribute to the company’s 401(k) plan in our weekly poll question. And Jeff Marzinsky showed us how the GAO looks at conflicts of interest in retirement plan advising and what this means for you if your company offers a 401(k).

While we’re on the topic of things the GAO has reported recently, how about a $119 billion footnote? Charles Clark’s post offered us some interesting yet underreported data about Retirement savings incentives and your taxes.

As always, the polls are still open and anyone can comment, so if any of the above spurs you to speak your mind, we welcome your thoughts and votes.

Retirement savings incentives and your taxes

Charles ClarkIf you ever wondered how much income tax our federal government doesn’t collect by allowing employers to sponsor retirement programs and Americans to defer payment of taxes by contributing to IRAs, the numbers may shock you. In this current fiscal year, it’s $119 billion and that fact is buried in a footnote in a March 2011 report (Report GAO-11-333, page 1 footnote).

U.S. Federal Government FY 2011
Retirement Program Revenue Loss
401(k) plans $62,900,000,000
DB plans $42,200,000,000
IRAs $13,900,000,000
Total $119,000,000,000

It’s no wonder current members of Congress have been considering curtailing these tax-favored plans. In the same report, the GAO presents data that allegedly supports the claim that these tax-favored plans favor Americans with private sector jobs. They’ve titled it “Some Key Features Lead to an Uneven Distribution of Benefits.” What do you think?

Inspiring employees

With a title like “Inspiring employees” you might have guessed that this post would be the incredible story of how one man climbed the corporate ladder and went from the mail room to the board room. Sorry to disappoint you, but we’re actually using “inspiring” as a verb, not an adjective. We want to know how you inspire your employees to use the retirement planning tools you offer.

Unlike previous poll questions, this time we’re leaving an open-ended “other” section where you can write in what methods you’ve used to get employees to enroll in a 401(k) plan. And if that’s not enough space to tell your story, leave a comment on this post.

GAO looks at conflicts of interest in retirement plan advising

Jeff_MarzinskyThe Government Accounting Office (GAO) recently released a study, “401(k) plans: Improved regulation could better protect participants from conflicts of interest.”  As you can guess from the title, the study examines the independence of advice provided to plan participants and plan sponsors and considers how conflicts of interest might affect the advice provided to sponsors and participants.

The study references a white paper I wrote several years ago that is worth revisiting. The paper looks at 401(k) fees and poses key questions for plan sponsors: What is being paid for record-keeping? Are you getting the best price for mutual funds? And who is paying for what?

You make the call

If you’re not old enough to remember the old “You make the call” segment during NFL games, the gist of it was that an odd play was replayed and fans at home had to try to make a ruling. After a commercial break, viewers would get to see the correct call (Here is a YouTube video, complete with the commercial break, from an ’80s Monday Night Football Game). We decided to do our own “You make the call” feature on a topic that’s much more relevant than whether some wide receiver got both feet into the end zone for a touchdown—your retirement plan.

We’ve been writing a lot recently about the differences between defined benefit (DB) and defined contribution (DC) retirement plans. We know that changing your retirement benefit is not something you do on a whim, but we wondered, if you could snap your fingers and choose the perfect plan for your company, what would it be?