Category: Benefits

I have finally added a links section over on the right pertaining to the mutual fund investigations. In addition, Plan Sponsor.com has announced today that they are providing a resource regarding the investigations here.

What do you do with your retirement portfolio for 2004? Some might be tempted to think this is the answer. (Some humor from the Tax Guru .)

Earlier this year, Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which includes new tax provisions allowing the establishment of Health Savings Accounts (“HSAs”) starting in 2004. The Bill was signed into law by President Bush on December 8, 2003. You can access the Conference Report here.

The IRS has now provided some limited guidance for the new Health Savings Accounts in this Notice 2004-2 (via Benefitslink.com).

In addition, this would be a good place to provide a list of all of the articles I have collected so far discussing the new HSAs. These links will be added in the “Recent Hot Topics” Section of links on the right. The articles were written before the IRS guidance was issued:

Chart by the Groom Law Group: “How Health Savings Accounts Compare To Health Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs).”
Kilpatrick Stockton LLP: “Health Savings Accounts: Medicare Reform Reshapes the Landscape for Active Employee Health Coverage.”
Alston & Bird LLP: “Health Savings Accounts (HSAs): New Option for Consumer Drive Health Care.”
The Galen Institute: “Health Savings Accounts.”
Faegre & Benson: “Health Savings Accounts Under the New Medicare Law.”
Gardner Carton & Douglas: “What the New Medicare Law Means to Employers.”
Kirkpatrick & Lockhart LLP: “Medicare Bill Includes New Health Savings Accounts.”
McDermott Will & Emory: “Impact of the Medicare Prescription Drug Act on Plan Sponsors.”
Roth CPA.com: “The New Health Savings Accounts: How They Work.”

You can also access the IRS Treasury Fact Sheet here.

Mike O’Sullivan at CorpLawBlog today announced that he had added a search feature to his website which allowed readers to search the SEC website. Mike has graciously shared his technical expertise with me and I have now added a search feature over on the right which allows readers to search the DOL website, the IRS website, or the PBGC website via the Google search engine as well.

Thanks to Matt Hutcheson, for mentioning Benefitsblog yesterday on the Retirement Hour, a radio show which airs Thursdays at 4:00 PM PST on KBNP, AM 1410, The Money Station. Matt hosts the Retirement Hour which included Benefitsblog in the “Top Ten” list of retirement-related websites. Rick Meigs from the 401khelpcenter.com participated and is a frequent guest on the show. Apparently, the show will be aired again on Christmas Day. You can listen online to KBNP, a business and financial talk radio, by clicking here.

Kerry Kerstetter has some good links at the Tax Guru-Ker$tetter Letter here on the Section 179 deduction for vehicles weighing more than 6,000 pounds. In addition, here is a good article by Gleeson, Sklar, Sawyers & Cumpata LLP on the subject which seems to dispel some of the myths associated with it: “Depreciation Deductions Keep Hummin’ Along.” Also, as Kerry mentions Kiplinger.com has the most comprehensive list of vehicles eligible for the deduction here. (The gross weight of a Hummer, by the way, is only 10,300 pounds, according to the Kiplinger.com.)

This article from the ABA Journal E-Report is a must-read for in-house attorneys: “NAKED AND NERVOUS: Many In-House Lawyers Find That Directors and Officers Insurance Won’t Shield Them.” Quote of Note:

“You cannot assume that simply because you are a corporate general counsel or are practicing within a corporate law department that you are immune from personal liability,” says Gary Beck, a consultant in Austin, Texas, for insurance broker AON’s legal practice group. “Likewise, you should not assume that your company’s existing general liability or D&O insurance covers you as an attorney, because it probably doesn’t.”

Did you know that there is a little-known, easy-to-use online tool which allows you to have input into the federal government’s promulgation of regulations at this site: Regulations.gov? For instance, at this page you can comment on the recent “Electronic Registration Requirements for Investment Advisers To Be Investment Managers Under Title I of ERISA.” You can view the proposed regulations in html or pdf format and then submit a comment online.

Internal Revenue Service open regulations appear here.

Department of Labor open regulations appear here.

SEC open regulations appear here including the controversial “Disclosure Regarding Market Timing and Selective Disclosure of Portfolio Holdings” or the “Amendments to Rules Governing Pricing of Mutual Fund Shares.”

Also, at this link you can view all of the regulations for which today is the last day to submit comments.

The site allows you to search by agency and also by keyword.

In a press release issued December 16, 2003, Fiduciary Analytics announced that it had “completed research on mutual fund families that ranks them by the percentage of their individual funds that pass fiduciary due-diligence screens.” Fiduciary Analytics is a Pittsburgh-based organization that provides fiduciary training and research to pension plan sponsors and investment advisers. This fiduciary scoring process developed by Fiduciary Analytics ranks funds within their peer group as “passed, acceptable, watch, or replace.” The funds are scored according to an established eight-point due diligence process which consists of the following:

• Minimum track record
• Amount of assets under management
• Stability of the organization (manager turnover)
• Holdings consistent with style
• Correlation to style or peer group
• Expense ratios/fees
• Performance relative to assumed risk
• One-Year performance relative to peer group
• Three-Year performance relative to a peer group
• Five-Year performance relative to a peer group.

Why is all of this important? The press release says it best:

Fiduciaries–such as trustees, investment advisors, and retirement plan investment committees–are required to prudently manage investment decisions. As such, when a mutual fund family is implicated in wrongdoing, the fiduciary must show evidence that a process was followed in deciding whether or not the fund family should be retained. Knowing the fund family’s overall fiduciary ranking can significantly help in reaching a sound decision, and demonstrating that a prudent process was followed.

The Street.com reports on the research tool: “Does Your Fund Meet Its Fiduciary Responsibilities?” Quote of Note: “Don Trone, founder and president of Fiduciary Analytics, said the firm conducted the extensive study due to the groundswell of investors and retirement-plan fiduciaries asking what to do with funds from families implicated in the scandal. “Not surprisingly, the funds that have been implicated didn’t rank very well,” Trone said.”

Additional quote of note: “Of Vanguard’s 100 funds, 85% were in the “passed/acceptable” camps, while 71% of T. Rowe Price’s 83 funds made the cut. . . [Vanguard founder John] Bogle always talks about meeting the fiduciary responsibilities of Vanguard’s investors, and this ranking is a vindication,” Trone said. Also turning up among the top 50 were American Funds Group (No. 31, with 62% of its funds making the top two categories) and Fidelity (No. 48, with 50% of its funds making the cut).

It is important to understand that the rankings do not factor in recent allegations, scandals, market-timing confessions, etc. in any quantifiable way. Even ERISA fiduciaries using this tool would still have to obtain information regarding the various funds in their 401(k) line-up and analyze that information as discussed in this previous post: Plan Fiduciaries: Navigating the Rough Waters of the Mutual Fund Investigations.

By the way, I would be interested in hearing from plan sponsors and others on what sources they find the most helpful in obtaining information regarding the mutual funds being implicated. I have mentioned some sources to use here at Benefitsblog, but would be interested in hearing about how plan sponsors are coping with this issue. Please email me by clicking here if you would like to share your experience. Any information I receive will be kept confidential. I would be glad to publish results here on a collective and purely anonymous basis.

The Wall Street Journal has this today,”Is Money Missing from Your 401(k)?” The article reports how a certain company failed to credit employee contributions and matches under a 401(k) plan to employee accounts, going all the way back to 1999. Apparently, the problem which can occur inadvertently through administrative error as well as for other reasons is more common that one would like to think. The article reports that the Department of Labor, which polices employee-benefit plans, says reports of troubled corporate retirement plans are on the rise and that the number of civil and criminal retirement-plan cases closed by the Labor Department has risen to 1,459 in the year ended Sept. 30, from 962 in 1999. Quote of Note: “Experts stress the importance of tracking your contributions. “You have to keep comparing your pay stub and account statements to make sure they match up,” says Jack Van Derhai, a retirement-plan expert and business professor at Temple University. He says he has found errors in his own statements in the past when he worked for a different university.”