Form 5500 isn’t just transforming disclosures as our friend and fellow blogger, Bob Toth, explained in his post 2009 Form 5500 Schedules A and C Will Create New Fiduciary Burdens For Plan Sponsors.
The reporting road will be also be different, and there will be red flags along the way.
Here’s why.
That’s The Police, circa 1983, pictured above. 1983 as the year when Sting was the King of Pain. That was the title, of course, of the hit song he wrote, one of the tracks on the album Synchronicity – the last and greatest Police album.
The story goes that King of Pain was a very personal song for Sting. He had recently separated from his first wife and was not getting along with the other two members of the band. Sting wrote the song in Jamaica at the house where Ian Fleming wrote the James Bond books. Fleming called his house in Oracabessa, Goldeneye (available for your next vacation, and not exactly where you would expect to see "a little black spot on the sun today").
Now some 26 years later, employees commuting back to work after the Labor Day weekend are the new Kings and Queens of Pain. That’s the findings of the second annual IBM Commuter Pain survey released last week. The survey indicates that the recession is taking its toll on urban motorists, who have become significantly more sensitive to gas prices and are looking for ways to spend more time with family and friends.
IBM has compiled the results of the survey into a Commuter Plan Index that ranks the emotional and economic toll of commuting in each city on a scale of one to 10, with 10 being the most onerous. Here’s how the cities stack up ranking those with the highest commuter pain index first:
To deal with the problem, the IBM survey concludes that:
Commuters too, will have to do their part. Continued use of public transportation, carpooling, vanpooling, and alternate forms of transportation like walking or biking will help ease the burden on our roads.
Employers can, in fact, help employees do their part by offering a Commuter Transit Benefit, the link to which will take you to the blog posts I’ve written on this topic. It’s an increasingly popular program that allows employers to offer employees the opportunity pay for certain transportation expenses on a pre-tax basis under Internal Revenue Code Section 132 and the Transportation Equity Act for the 21st Century (TEA-21).
In 2009, employees may reduce their salary or receive up to $230 per month for transit passes, transportation in a commuter highway vehicle, or parking expenses.
Employees can also receive up to $20 per month tax-free for the reasonable expenses they incur during a calendar year for the purchase of a bicycle, for bicycle improvements, and for repair and storage if the bicycle is regularly used for travel between the employee’s residence and place of employment.
A Commuter Transit Benefit may not take all the pain away from commuting, but it’s better than simply taking two aspirins.
Nuff said. Now let’s roll the video and scroll the lyrics.
https://youtube.com/watch?v=aw1MNBgLw0w%26hl%3Den%26fs%3D1%26rel%3D0 The Police lyricshttp://www.qualitylyrics.com/widget/w_.swf?file=2c47bb7f5c2c0d67d41e4b1fbeacf2c2&image_url=&brd=0066CC&bg=003366&ttl=ffffff&txt=ffffff&noembed=1
Bankruptcy cases increased approximately 35% for the 12-month period ending June 30, 2009 , according to statistics released by the Administrative Office of the U.S. Courts. The number of cases went from 967,831 to 1,306,305. These statistics call attention to one of the often overlooked aspects of a retirement plan – protection from bankruptcy.
It’s a complicated topic which Joseph Hogue, CFA, makes understandable in his post, Guide to Personal Bankruptcy: Everything You Need to Know.
The picture above is the cover of Jim Collins’ bestseller, Good To Great. The book, says Mr. Collins, shows that
Greatness is not primarily a function of circumstance; but largely a matter of conscious choice and discipline.
He’s talking about corporate management, of course. But why not think about 401(k) plans in those same terms. How do we go from good 401(k) plans to great 401(k) plans?
That process is clearly underway. There are folks out there leading the charge. They include our friends and fellow bloggers Brightscope, a firm which quantitatively rates 401k plans, and Josh Itzoe. Josh is both a CFP® and AIF® and is a Principal of Greenspring Wealth Management, Inc., a registered investment advisory firm and Independent Fiduciary in Towson, MD. I reviewed Josh’s book Fixing The 401(k) earlier this year.
There’s also Roger Wohlner, CFP®, whose local, and in his blog, Chicago Financial Planner, writes about the characteristics of a good 401(k) plan. Those ingredients, he says, are:
What can take a 401(k) plan from good to great is Roger’s conclusion:
In the future hopefully plans will offer their participants the option of having an unbiased, unconflicted Fiduciary Advisor manage their individual 401(k) accounts. This goes far beyond the education currently offered by some plans and, in my opinion, gets to the real heart of what participants need.
And why? Participants in 401(k) plans just haven’t been achieving an appropriate rate of return. No great insight on my part, but just take a look at recent research to see how really bad it’s been.
For the past 15 years, Dalbar, a Boston-based financial research firm, has been issuing a report called the Quantitative Analysis of Investor Behavior (QAIB) that examines the returns that investors actually realize and the behaviors that produce those returns.
In its 15th annual study, Dalbar discovered that equity, fixed income and asset allocation mutual fund investors experienced average annual losses for all time periods examined except the longest (20-year) time frame. And even those positive returns did not keep pace with the average inflation rate.
I’ll leave the commentary and analysis of the report’s results to the investment experts like Josh and Roger, but one stat jumped out at me. While the S & P 500 earned an average return of 8.41% from 1988 to 2008, the average equity investor earned a mere 1.87%.
Some investment experts call that 6.54% differential the cost of uninformed investing, and others call it the cost of going it alone. I call it the cost of inadequate retirement income.
There’s no guarantee that independent investment advice is the answer. To quote the ubiquitous compliance officer: “Past performance is no guarantee of future investment results.”
But then again, investment education programs haven’t worked.
Each week Nevin E. Adams, JD, PLANADVISER Editor-in-Chief writes a column called IMHO (In My Humble Opinion), and he’s always a good read.
He’s just published a two-part series that’s an excellent, common sense approach for fiduciaries that’s definitely worth keeping handy. It’s called “To Do” List: 10 Things You’re (Probably) Doing Wrong—or Not Doing Right—as a Plan Fiduciary.
His 10 things are:
To get the full picture, here are links to the complete columns: Part 1 and Part 2.
What’s an eligible rollover distribution and what’s not can be as complicated and confusing matter as the maze pictured above. Here’s a recent and handy discussion of the rules and a chart that may be helpful to find your way through it. It’s published by McKay Hochman which you can find here.
I was flipping – or rather, clicking – through my album collection yesterday, and landed on The Well’s On Fire, Procul Harum’s 2003 studio album. If you’re not a child of the ’60s or are too young, they’re the 1960s British rock group best known for their 1967 hit single, A Whiter Shade of Pale, and who are still touring.
And there it was, Track No. 9, The Wall Street Blues which some might say is as relevant now as it was then. So in that light, let’s roll the video and scroll the lyrics:
https://youtube.com/watch?v=QmYH1tqZwRs%26hl%3Den%26fs%3D1%26rel%3D0%26color1%3D0x2b405b%26color2%3D0x6b8ab6
Procol Harum lyricshttp://www.qualitylyrics.com/widget/w_.swf?file=da4c43ee2cd1568042408e1a2e82199d&image_url=&brd=00438a&bg=003366&ttl=ffffff&txt=ffffff&noembed=1
I don’t mean to bum you out on a Monday morning, but, hey, we got to keep it real, don’t we?
The economy doesn’t seem to be improving, and hardship distributions from 401(k) plans continue to be taken. A few months ago I posted, Hard Times Mean More 401(k) Hardship Distributions.
I’m revisiting this matter again to point you to how to make hardship distributions correctly as discussed in the IRS’ Summer 2009 Edition of Retirement News for Employers.
Here are the highlights of the IRS’ 7 steps to making hardship distributions:
Basic, yes. Practical, very. Here is a link to the complete article, 7 Steps to Making a Hardship Distribution (PDF).
That’s Les Stroud pictured above whose TV show, Survivorman, is one of my favorites. One of my other favorites is Bear Gyylls show, Man Versus Wild.
Both are survival experts who go toe-to-toe with some of the harshest environments on the planet and come through alive.
So if you’ll grant me some editorial license, Les’s picture is the visual metaphor I’m using for the harsh environment in which fiduciaries must operate. And it is harsh out there.
Buffeted by the most complex set of forces since ERISA arrived in 1974, plan fiduciaries today must cope with heightened compliance enforcement by the Internal Revenue Service and the Department of Labor, increasing litigation by plan participants and tightened fiduciary liability insurance markets.
But despite all these forces that are swirling around, there are indeed some practical ways that fiduciaries can effectively manage their responsibilities. Here is a link to my column in the August issue of Employee Benefit News in which I discuss this matter. (Free registration may be required).
Employee Benefit News is an employee benefit publication which provides free newsletters including seminars and podcasts from industry experts, and online content for plan sponsors. One of their other publications, Employee Benefit News Legal Alert, also carried my article. You can check all of their publications here.
But I do have one nagging question. Les Stroud is Canadian. Bear Grylls is British. Would I be too much of a homer if I asked where are the Americans?
That’s Bloc Party, a British indie rock block pictured above. And If it can be broken then it can be fixed is the opening line from Pioneers, one of the tracks on Silent Alarm, their 2005 debut album.
The album was crafted by chief lyricist Kele Okereke to examine the feelings and hopes of young adults about pertinent issues of the day. So now let’s fast forward four years, and one of today’s issues that needs fixing is Wall Street.
Just a few months ago I wrote about that issue in my post, The Times They Are A-Changin’ For Wall Street And Big Law. Marc Tracy, my editor at my other blog home, Slate’s Small Business blog, also covered the issue in his post, The Great Rearranging Hits Wall Street.
So what’s the fix? And it can be fixed says our fellow blogger, Bill Singer, a securities lawyer whose blog, Broke and Broker I’ve written about before. Bill also writes a column, Intelligent Investing, for Forbes in which he recently wrote, Becoming Part Of The Solution, his eight-point program to reform Wall Street and its regulatory community.
Here’s a summary of Bill’s suggestions:
You can follow the details in Bill’s future columns.
In the meantime, here’s the complete first stanza from Pioneers:
If it can be broke then it can be fixed, if it can be fused then it can be split
It’s all under control
If it can be lost then it can be won, if it can be touched then it can be turned
All you need is time
And the political will!
