"Pension Trends" Newsletter

Pension Trends Volume V, No. 4, November 2004

In this issue...

Newsworthy Pension News

View Past Issues of Pension Trends

Newsworthy Pension News

There has been some exciting and timely benefits news of late that we thought might be of interest to you or your clients. In at least one case, action may be called for between now and January 1, 2005. Here are the headlines and our commentary.

Major Changes in Store for Nonqualified Deferred Compensation Plans
There is a whole new set of rules that apply to nonqualified deferred compensation plans beginning in 2005. These new rules will substantially change the way nonqualified plans operate.

There are two important points to keep in mind. First, the definition of what is a nonqualified deferred compensation plan is broad. For example, we have a client with a sabbatical leave plan that fits the definition of a deferred compensation plan. A one-person agreement to defer a bonus payment could fall under the definition. The other point is that every plan should be looked at and will probably need to be amended before January 1, 2005. Needless to say, that is a fast-approaching deadline.

If you want more information, let us know.

Returning Soldiers Get Special Treatment
Oregon has a large contingent of military reservists serving in Iraq. In addition to our heartfelt thanks, these men and women are entitled to special treatment with regard to their participation in a retirement plan. For instance, in a 401(k) plan they are entitled to a contribution as if they were still in the plan even though they are away and drawing no wages.

Unfortunately, but not unexpectedly, the guidelines do not cover every possible situation. Again, if you have questions, contact us. Also, Portland attorney Ray Benner made a great presentation on this topic to an OSCPA seminar earlier this month. He has an outline you may find informative.

2005 Plan Limits
Every year the IRS announces the new limits that apply to various aspects of qualified plans. For example, the maximum compensation that may be recognized for plan purposes in 2005 has increased from $205,000 to $210,000. The social security wage base will be $90,000. These and all the other limits announced by the IRS can be found on our website at Retirement Plan Limits.

When doing financial and tax planning with your clients, it is important to keep these changing limits in mind. The amount of tax deductible contribution that can be made to both defined benefit and defined contribution plans continues to go up. However, some of the increases are not automatic and must be incorporated into a plan before your client can take advantage of the higher limits.

Continued Scrutiny of Fiduciary (In)Actions
A plan fiduciary never wants to be in the news. We have written before about the growing number of lawsuits and other actions challenging the actions or lack of actions taken by plan fiduciaries. Such lawsuits and challenges continue to make news in 2004. Most of our small plan sponsors self-trustee their plans, thereby exposing themselves to fiduciary liability. While the risk is generally greater for fiduciaries of defined contribution plans, especially 401(k) plans, than it is for defined benefit plans, every plan fiduciary should adhere to some fundamental guidelines. We encourage you and your clients to pay attention to these fundamentals and thereby minimize the potential for making fiduciary news.

View Past Issues of Pension Trends

This newsletter along with past Pension Trends issues can be viewed on our website www.independentactuaries.com. Simply click on the Pension Trends Newsletter button on the left of the screen. Once the current Pension Trends appears, you will see a link to the list of back issues.

Some of the issues that have generated a lot of interest are “Helping Your Client Choose the Right Plan” (August, 2003), and the “The Retirement Planning Tax Ideas for 2002” series (February, May, August 2002). The topics discussed in these issues are still relevant today and the information has been useful as a resource for our contacts and their clients in evaluating tax planning strategies.

This newsletter has been published in order to share general information with our professional contacts. The information presented in this newsletter should not be relied upon without first seeking the advice of a CPA, Attorney or other benefit professional.