The ASPPA Journal Committee the Sexagenarian Boom Barry Kozak, MSPA, Co-Chair Jane S

JANUARY-FEBRUARY 2006 :: VOL 36, NO 1

THE ASPPAJournal ASPPA’s Bi-monthly Journal for Actuaries, Consultants, Administrators and Other Retirement Plan Professionals

FROM THE PRESIDENT Lessons Learned from Hurricane In This Issue: Katrina Washington Update

Fiduciary Breaches and Prohibited Transactions Involving Revenue Sharing— and How to Avoid Them

401(k), 403(b) and 457 Plan Basics in 2006 by Sarah E. Simoneaux, CPC As retirement industry professionals and as dedicated, busy members of our communities and families, deadlines and schedules What if Plan Fiduciaries rule our lives. We ﬁll our calendars and we are often overwhelmed Could Provide Invest- by the magnitude of our commitments—401(k) plan distributions, tax return ﬁlings, document restatements, ASPPA committee ment Advice to 401(k) conference calls, religious and community activities, college application deadlines and other important family obligations like Participants? a child’s conference/performance/game/bee that we just cannot miss. What if everything was swept away or under water for three weeks, leaving you with only your family and friends? What would matter most to you? Those of us living on the Gulf Coast and in the metro New Orleans area faced those questions just a few months ago. Freed from the tyranny of our calendars (as well Continued on page 4

JANUARY-FEBRUARY 2006 :: 3

FROM THE EDITOR

Editor in Chief Brian H. Graff, Esq., APM

The ASPPA Journal Committee The Sexagenarian Boom Barry Kozak, MSPA, Co-chair Jane S. Grimm, Co-chair by Chris L. Stroud, MSPA Amy L. Cavanaugh, CPC, QPA, QKA Kimberly A. Flett, QKA William G. Karbon, MSPA, CPC, QPA Constance E. King, CPC, QPA Erin D. Patton, CPC, QPA, QKA he oldest members of the Baby of which is Social Security. Medicare, health Robert M. Richter, APM Boomer generation will turn 60 care and tax reform also weigh in as important Chris L. Stroud, MSPA this year. In the pension world, topics. Some of the crises in these areas can Peter K. Swisher, QPA that means that this first wave even be attributed to the Boomers. As the Baby James J. Waters, FSPA, CPC of Boomers has now passed that all important Boomers begin to exit the workforce, their tax age 59½ milestone, and some will start taking contributions to these systems will be sacrificed Editors distributions from their qualified plans and and replaced with their potential need for Chris L. Stroud, MSPA IRAs. Many disciplines have taken great benefits from these systems. However, Boomers Jane S. Grimm interest in this group for quite some time. After grew up feeling a sense of social responsibility, Associate Editors all, the sheer numbers of the group make it so hopefully some of them will step forward Troy L. Cornett impossible to ignore. One can only wonder and help the country figure out these dilemmas. Jolynne M. Flores what will transpire as the Baby Boomers After all, they have already managed to redefine Kim L. Szatkowski, CPC, QPA, QKA become the Sexagenarian Boomers! “old.” Age 60 is the new 40, and ages 50-64 Baby Boomers are people born after World have been referred to as “the new teenage Production Manager War II, between 1946 and 1964. This group years!” (Only Boomers could have come up Jolynne M. Flores has often been a target for research regarding with these uplifting thoughts—just think about Technical Review Board trends, consumerism, health, etc. This group has whom you see driving Harleys these days!) Michael Cohen-Greenberg sometimes been referred to as the “sandwich Boomers have lived in a world of change, Lawrence Deutsch, MSPA generation”—being “sandwiched” between and they themselves have significantly changed Barry Kozak, MSPA elderly parents and college-aged children. the world. As they reach this new phase of Marjorie R. Martin, MSPA Some of us (Yes, I am a card-carrying Baby their lives, they will likely redefine “retirement,” Duane L. Mayer, MSPA Boomer!) have already become “orphans,” also. Many of my contemporaries talk about Nicholas L. Saakvitne, APM having lost both parents. Faced with their own “slowing down” someday, hoping to work part- mortality, some Boomers are forced to accept time at something—perhaps a new career or a Advertising Sales the fact that their “sandwiches” are now “open- passionate interest. Some dream of a “cyclical Patty K. Hashmi faced” and that soon they will be promoted to semi-retirement,” rotating periods of work, Design and Layout the “top bread” position! travel, education and leisure time. Don’t expect Lynn A. Lema Baby Boomers’ parents were products of these Boomers to just sit back and grow old! the Great Depression and World War II. They As they ponder the mixed blessing of ▲ ▲ ▲ were savers, and in their later years, many of longevity, many Boomers admit their fears of them lived in a world where their houses were outliving their money or losing their mental ASPPA OFFICERS paid for and their pensions, Social Security and/or physical health. As a result, Boomers

President checks and modest savings were enough to may define new options for the aging as meet their needs. Will the Baby Boomers be so they themselves become part of the “aging” Sarah E. Simoneaux, CPC lucky in their later years? After all, how many population. Some Boomers have already President-Elect will have home mortgages that are paid off? dealt with assisted living and nursing home Chris L. Stroud, MSPA Can they depend on Social Security? Only a care issues for family members, and many lucky few will have pension checks, although Boomers are adamant that they never want to Vice Presidents hopefully, significantly more will have 401(k) be dependent or lack quality of life. Without Susan J. Chambers, FSPA balances to draw from. Boomers’ parents also a doubt, the Sexagenarian Boomers will not Sheldon H. Smith, APM didn’t have to carve out space in their fixed submit quietly to this next life phase. By 2024, Sal L. Tripodi, APM income budgets for expenses from cell phones, the last wave of Baby Boomers will turn 60. It Secretary/Treasurer high-speed Internet access, satellite TV or other will be interesting to see how things develop Stephen L. Dobrow, CPC, QPA, QKA “necessities.” between now and then. Without a doubt, There are several political hot potatoes similar to a sonic boom, these Sexagenarian Immediate Past President that will have a significant effect on Boomers Boomers’ voices will be heard and their Stephen H. Rosen, MSPA, CPC and their lifestyles in later years, not the least impact will be felt. ▲ 4 :: THE ASPPAJournal

CONTINUED FROM PAGE 1

FROM THE PRESIDENT

as the tyranny of anything else run by electricity), we were up, put their kids in different schools and went back to forced to confront some of life’s larger lessons. After trying work. No CNN videotape exists on them, or on the folks to absorb those lessons personally, I discovered that they can with chainsaws who appeared an hour after the storm to also teach us about ASPPA’s mission to be the home for all help clear roads for emergency vehicles, or on those who retirement plan professionals. fed and nursed the rescuers, the sick and the dying, or on the families who are still housing grandparents, aunts, uncles, Lesson #1: Embrace Change cousins, friends and strangers. I have often said how much I enjoy change. In fact, in Lesson for ASPPA members: Change that could be the past I have often said I would enjoy just living out of a almost as wrenching looms for us—tax reform, industry suitcase, traveling around and experiencing different things. consolidation and government-imposed credentials. Be careful what you wish for! My residence is in a suburb Embrace these changes, mold them to your advantage of New Orleans. Last September, embracing change meant when you have warning and find the opportunities in them three days worth of clothes spread over two weeks, living when you do not. This strategy is exactly what ASPPA’s in five different cities and returning home after Hurricane Government Affairs Committee does every day. Change is Katrina to a landscape so different that the word “change” this committee’s lifeblood. took on a whole new meaning. And my house was intact. Threats in one area often produce opportunities in Beverly Haslauer, CPC, QPA, owner of a TPA firm in another. No one could have imagined opportunities New Orleans, had her office destroyed. Maureen Lambert, existing in New Orleans in the days after Katrina. But you a pension administrator, had water up to the roof of her need people to stock grocery shelves, to tend to sick patients Lakeview home. She had been unable to prepare her house and to clear downed trees and debris. Better yet, you need before the storm because she was taking her daughter to people who have expertise and experience in these jobs— college. Her photographs lay spread on her living room computers and untrained employees are not enough. floor, where she was finally getting around to putting them Experience and credentials matter in a landscape in scrapbooks. Returning to her house three weeks after of change. ASPPA’s primary mission—to educate all the storm, she touched the books, which looked remarkably retirement plan professionals—continues to be the one that intact. They crumbled beneath her fingers. will matter the most to members in the long run. Although Sudden, wrenching change upended lives in a matter of a computer can perform an ADP test or a cost calculation, days. Our family was lucky, by comparison. However, not it takes an educated professional to tell employees and once did I hear Bev or Maureen or my family complain employers what the numbers mean. Change will not about the seemingly never ending changes before, during diminish the worth of an ASPPA credential—it just may or after the storm. Instead, they embraced it, rolled with it, change the jobs that the credential-holders perform. cared for family and friends who were less fortunate, cleaned

3 From the Editor 18 2006 Harry T. 25 Latest Additions 33 Learning Your Eidson Founders to the ASPPA Board ABCs—in Chicago 6 Washington Update: Award Nominations of Directors The Tax Reform 33 ABC Meetings Commission Lays an 20 2005 ASPPA 26 New Year. New Calendar Egg Annual Conference Credential. The Highlights QPFC Comes to Life! 34 ASPPA Beneﬁts 9 Fiduciary Breaches Council of Western and Prohibited 23 What if Plan 28 ASPPA Continuing Pennsylvania Transactions Fiduciaries Could Education Program Involving Revenue Provide Investment Update 35 ASPPA Welcomes Sharing—and How to Advice to 401(k) a New ABC—The Avoid Them Participants? 29 ASPPA Carries Tax ASPPA Beneﬁts Reform Concerns to Council of New 14 401(k), 403(b) and 24 Welcome New Capitol Hill England 457 Plan Basics Members and contents in 2006 Recent Designees 32 Actuarial Issues 37 Calendar of Events Committee 38 Fun-da-Mentals JANUARY-FEBRUARY 2006 :: 5

Lesson #2: Generosity and Goodness Some were well off; some Rule the Day, Even in the Face of were not. All they had in common before Katrina Ugliness and Tragedy was where they lived—but Cramped in a small hotel room in Memphis, not that was enough. They knowing if we had a home or a business to go back cook, they laugh, they cook to, we were deluged with offers of homes to live in some more. They cry, tell and schools for our kids—many of the offers from stories, but they never talk Take that people we barely knew. The pension community about how different they generous responded immediately. ASPPA’s Web site had a once thought they were. special Katrina bulletin board up and running only Lesson for ASPPA spirit that is three days after the storm, which helped Bev find members: Does it really a place to live in Texas. I relocated to Houston matter who is an actuary particularly so my children could attend school while my or a CPC or a QKA? strong in husband, Peter, stayed back home to rebuild his Don’t we also have room business. Chuck McLeod, FSPA, CPC, actuary for those professionals Americans and and owner of his own firm in Houston, set up a who work in our industry conference room that I could use as an office near more with investments than with administration? in our industry the Houston “satellite version” of my son’s New Certainly we are all more alike than we are and put it to Orleans high school. different. Find those similarities and help ASPPA Lesson for ASPPA members: Take that generous reach out to everyone in the retirement industry. work every day. spirit that is particularly strong in Americans and ASPPA’s education programs and conferences are in our industry and put it to work every day. second to none. ASPPA’s programs can educate Volunteer for an ASPPA committee, give to the and credential all retirement professionals, not just ASPPA PAC (Political Action Committee), go a select few. Do not let a disaster force you to find to Capitol Hill during the Annual Conference, this common thread—do it now! ▲ send folks to conferences and most importantly, give your employees encouragement and financial Sarah E. Simoneaux, CPC, is a pension incentives to take ASPPA exams. You—and consultant specializing in qualified plan they—can and will make a difference. compliance software. She is vice president of Actuarial Systems Corporation, a qualified Lesson #3: We All Have More in plan system and software provider. Before Common than We Think joining ASC, Sarah owned a pension consulting firm in California. Sarah is the 2005-2006 Because my house and my area survived the storm ASPPA President and has served on ASPPA’s Board of fairly well, I return home every other weekend to Directors for over a decade. She has also held the positions of find my house full of people whose homes did not President-Elect, Vice President and Treasurer with ASPPA, survive Katrina. Some are family members, some and has chaired the ASPPA Conferences, Membership and are friends and some are friends of friends that Marketing Committees. She has lectured at ASPPA’s Annual we did not know at all pre-Katrina. The people and regional conferences, as well as at the AICPA Annual range in age from three weeks old to 82 years old. Employee Benefits meetings.

The ASPPA Journal is produced by The ASPPA Journal a reputation for high quality training that is thorough Committee and the Executive Director/CEO of ASPPA. and specialized. ASPPA credentials are bestowed Statements of fact and opinion in this publication, on administrators, consultants, actuaries and other including editorials and letters to the editor, are professionals associated with the retirement plan the sole responsibility of the authors and do not industry. necessarily represent the position of ASPPA or the © ASPPA 2006. All rights reserved. ASPPA is a not-for- editors of The ASPPA Journal. proﬁt professional society. The materials contained The American Society of Pension Professionals & herein are intended for instruction only and are not a Actuaries (ASPPA), a national organization made up substitute for professional advice. ISSN 1544-9769. of more than 5,500 retirement plan professionals, is To submit comments or suggestions, send an e-mail dedicated to the preservation and enhancement of the to [email protected]. For information about private retirement plan system in the United States. advertising, send an e-mail to [email protected]. 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 6 :: THE ASPPAJournal

WASHINGTON UPDATE

The Tax Reform Commission Lays an Egg

by Brian H. Graff, Esq., APM

As expected, the report of the President’s Advisory Panel on Federal Tax Reform (Tax Reform Report) was issued on November 1, 2005, and also as expected, it was not too kind to our nation’s private retirement plan system. Needless to say, ASPPA immediately expressed strong concerns about the recommendations in the report. For example, ASPPA issued a press release and sent 330 people to Capitol Hill to express our concerns. You can ﬁnd our press release at www.asppa.org and read about the Visit to Capitol Hill on page 29. A more detailed outline of the Panel’s recommendations with respect to savings can be found at the end of this article.

hief among ASPPA’s concerns is a proposal to possibly eliminate the up-front deduction for contributions to 401(k)s and Csimilar plans. Many American workers will simply not be able to afford to contribute to their plans without the immediate tax savings provided by this deduction. The Tax Reform Report admits that the elimination of the deduction pays for a reduced top marginal income tax rate. It is simply outrageous and short-sighted policy to pay for a reduced tax rate for the highest income earners at the expense of retirement savings rates by low-to- moderate income workers. But our concerns certainly do not end there. The Tax Reform Report recommends that all of the current savings vehicles, including the myriad of special savings vehicles for retirement, education and medical expenses, be replaced with three new accounts: Save at Work, Save for Retirement and Obviously, we are concerned that this ability to save outside of a plan will Save for Family accounts. Taken together, the eliminate the incentive for many small business owners to adopt a plan for proposed Save for Retirement and Save for Family themselves and their workers. $40,000 in tax-preferred savings is probably accounts would allow a small business couple more than many small business families would likely save in a year anyway. to save up to $40,000 on a tax-preferred basis, If small business owners can save in a tax-preferred manner on their own without using a qualiﬁed plan. By comparison, the without the costs and potential liability of a qualiﬁed plan1, we suspect many same small business couple could only save up to will forego a plan, and, even worse, terminate existing ones. Although some of $12,000 in current-law IRAs (assuming catch-up these small business owners might give workers some additional compensation contributions) when EGTRRA is fully phased-in. to incent them to save on their own as a substitute, it is extremely unlikely that JANUARY-FEBRUARY 2006 :: 7

they would. In fact, according to the Employee the incentive for business owners to adopt a plan. Benefits Research Institute, less than 5 percent of Many of you whom I speak with about tax moderate income workers save in an IRA when reform often ask me, “Why don’t they leave well not covered by a workplace retirement plan. By enough alone?” The answer is complicated, but While recognizing contrast, almost 80 percent of moderate income basically, what drives these proposals is a belief workers save in a salary reduction plan when among some that our nation’s tax system, by that the employer- covered. These statistics underscore the importance taxing savings and not consumption, discourages of the convenience of payroll deduction, the aggregate national savings. In addition, these sponsored incentive of the match and the culture of savings same people tend to believe that the employer- retirement plan fostered at the workplace. Simply put, workplace sponsored retirement plan system, with its harsh retirement plans have been the only sustainable nondiscrimination rules, is overly paternalistic system is not effective mechanisms to get moderate income and effectively forces savings on many workers workers to save. who might not otherwise choose to save. I perfect and could Finally, the Tax Reform Report includes an recognize that these two arguments seem certainly use some indirect attack on our nation’s retirement savings entirely inconsistent, but they are, nonetheless, system. The Report includes a proposal to exclude often made at the same time. The rationale for fine tuning, it from income tax 100 percent of dividends paid the inconsistency is that we should be striving and 75 percent of capital gains on US stock. We for increased aggregate national savings, while most definitely estimate that a domestic fund could easily be allowing individuals to choose whether or not to should not be developed with an effective tax rate of less than save as opposed to being “forced” to save through 5 percent. In other words, even small business employer plans. scrapped. owners wanting to save more than $40,000 on a As you would suspect, ASPPA strongly tax-preferred basis would now be able to save an disagrees with this point of view. While unlimited additional amount at a nominal tax rate. recognizing that the employer-sponsored These tax reductions would even further diminish retirement plan system is not perfect and could

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www.colonialsurety.com Colonial Surety Company, Affiliates and Reinsurers are US Treasury approved and rated Excellent by AM Best. Coverage referenced herein may not be available in all states. Issuance of coverage is subject to underwriting. The above is not intended to be relied upon as legal, tax or accounting advice.The Pension Partnership Program is patent pending and Trademarked by Colonial Surety Company. THE 8 :: THE ASPPAJournal Outline of Tax Reform Advisory Panel Recommendations Regarding Savings certainly use some fine tuning, it most Save at Work Accounts definitely should • All employer-sponsored salary reduction plans [e.g., 401(k), 403(b), 457, not be scrapped. As SIMPLE, SARSEP] would be replaced. mentioned earlier, • One version of the proposal would only permit after-tax contributions. it has been the only • Current-law contribution limits would apply. effective means to get • Simplified nondiscrimination rules similar to ERSA (e.g., if NHCE% < 6%, HCE% working Americans cannot exceed 2x NHCE%; if NHCE% >6%, HCE% not limited) and simplified safe to save, and as a result, harbor (50% match up to 6% of pay) would apply. employer plans now own a • Qualified trusts would be subject to limits and rules similar to 401(k). substantial part of capital markets. These facts are • Custodial accounts would be allowed for plans with ten participants or less. points ASPPA will continue to stress vigorously. • Proposals to encourage automatic enrollment would be included. The only good news with respect to all of Save for Retirement Accounts this is that our contacts at the White House and • All IRAs (deductible, non-deductible and Roth) would be replaced. Treasury tell us that it is unlikely that the Bush • Deferred annuities and non-qualified executive deferred compensation would be Administration will announce a formal tax reform replaced. proposal before the second half of 2006, at the • Annual after-tax contributions up to $10,000 would be permitted, and there would earliest. The strong negative reactions, including be no income limits on contributions. ASPPA’s, to the Tax Reform Report is certainly • Distributions by individuals age 58 and older would be tax-free, and rollovers a contributing factor to this delay. Further, the would be allowed. President is presently hampered with low approval • Early distributions would be subject to an additional 10 percent penalty tax, with ratings, significantly inhibiting the Administration’s no exceptions. ability to take on a broad issue like tax reform. • No minimum required distributions rules would apply. That said, there is strong interest among • Existing IRAs could remain in place or be converted to Save for Retirement Accounts, but no new IRA contributions would be permitted. many congressional Republicans in addressing tax reform in 2006. This interest is particularly strong Save for Family Accounts in the House because it is an election year and • Education IRAs, Section 529 plans, HSAs and FSAs would be replaced. Existing Republicans want something “positive” to talk accounts could be converted. about, especially given the President’s low approval • Annual after-tax contributions up to $10,000 would be allowed, and there would ratings. Putting retirement savings issues aside, the be no income limits on contributions. American people’s disdain for the tax code polls • Distributions for family education costs, medical expenses and purchase of a primary residence would be tax-free. very strongly. A rallying cry against our nation’s • All distributions by individuals age 58 and older would be tax-free regardless of the tax system is always a good political message. Of purpose. (Combined with the Save for Retirement Account, a couple could save course, the dirty details of what tax reform could up to $40,000 annually without a plan.) mean to retirement savings is typically left out of • Prior to age 58, up to $1,000 per year could be withdrawn tax-free for any that message. It is ultimately up to ASPPA and its purpose. Other distributions not qualified would be subject to a 10 percent members to make sure that the potential effects of penalty tax. tax reform on the retirement security of American • No minimum required distributions would apply. workers get heard loud and clear. Ultimately, only Saver’s Credit we can make sure that they don’t take away America’s • Current law credit would be replaced with an annual 25 percent credit up to 401(k). ▲ $2,000 in contributions ($500 maximum credit). • The credit would be phased out ratably for families with adjusted gross income Brian H. Graff, Esq., APM, is the Executive between $30,000 and $40,000. Director/CEO of ASPPA. Before joining • The credit is refundable (e.g., paid to taxpayer regardless of whether there is any ASPPA, he was pension and benefits counsel tax liability). to the US Congress Joint Committee on • The credit would apply to contributions to any of the accounts, but if contributions Taxation. Brian is a nationally recognized are made to the Save for Family Account, no nonqualified withdrawals (e.g., the leader in retirement policy, frequently $1,000 annual exception) would be permitted. speaking at pension conferences throughout the country. He has • Saver’s credits would have to be deposited into either a Save for Retirement served as a delegate to the White House/Congressional Summit Account or a Save for Family Account that did not permit nonqualified withdrawals. on Retirement Savings, and he serves on the employee benefits Nonqualified Investments committee of the US Chamber of Commerce and the board of • One proposal would permanently extend the 15 percent tax rate on capital gains the Small Business Council of America. and dividends. • Another proposal would exclude from tax 100 percent of dividends paid by US companies on domestic earnings and 75 percent of capital gains on the sale of US stock. ▲ ▲ ▲ 1 In addition to administrative costs, these costs include the need to • We expect that funds would be created to maximize the tax benefits and we make contributions on behalf of workers in order to satisfy ERISA- estimate the effective tax rate for such a fund (including both dividends and mandated nondiscrimination and top heavy rules. capital gains) would be less than 5 percent. JANUARY-FEBRUARY 2006 :: 9

Fiduciary Breaches and Prohibited Transactions Involving Revenue Sharing— and How to Avoid Them

by Pete Swisher, QPA

Are you or your firm engaging in prohibited transactions? If your answer is “no”— are you sure? The 401(k) industry has grown over the years based on the premise that vendors and service providers are not fiduciaries and are instead simply selling product or performing ministerial functions. Non-fiduciaries are free to design compensation arrangements as they see fit.

t is true that a non-fiduciary has great • The definition of a latitude in structuring its compensation. fiduciary in ERISA The problem is that today’s service §3(21); and providers have become multi- • The clarification Idimensional—mixing administrative work with of what constitutes product sales, participant advice and plan level investment advice for investment guidance in ways that may render them purposes of ERISA fiduciaries according to the functional definition of §(3)(21)(A) found in a fiduciary, and fiduciaries are subject to different 29 CFR 2510.3-21 rules than non-fiduciaries. and again in 29 CFR This article develops two themes: 2510.96-1 (Interpretive 1. Ignorance is still widespread concerning receipt Bulletin 96-1 or of compensation and use of revenue sharing IB 96-1). by qualified plan service providers, and this For an overview ignorance may lead to prohibited transactions of terminology and and breaches of fiduciary duty. various revenue sharing 2. Staying out of trouble is simple. arrangements, see “What The following discussion assumes a basic Plan Sponsors Must Know familiarity with the rules governing revenue About 401(k) Revenue Sharing Deals” from the September 15, 2004, edition of sharing, including the following: Employee Benefit News. (See www.benefitnews.com/retire/archives.cfm.) • The exclusive benefit rule of ERISA §403(c), ERISA §404(a)(1) and IRC §401(a)(2); Bad Revenue Sharing: Examples • DOL Advisory Opinions 97-15A (“the Frost The following examples are hypothetical but are based, in part, on actual letter”), 97-16A (“the Aetna letter”), 2001-09A experience with plan clients. They are intended to highlight situations that (“the SunAmerica letter”) and 2003-09A (“the can lead to prohibited transactions, breaches of fiduciary duty—or both. ABN AMRO letter”) (See www.dol.gov/ Example #1: $250 Million Plan ebsa/Regs/AOs/main.html to review copies Situation: Non-fiduciary Broker + Fiduciary Vendor. A broker has an of these opinions.); excellent relationship with the owners of a company that has $250 million • The prohibited transaction rules of ERISA in a 401(k) plan. The broker succeeds in closing the case with the help of a §§406(a), (b) and (c) and the associated national vendor, who agrees to serve as the investment advisor to the plan. prohibited transaction regulations under Among other duties, the vendor selects and oversees the fund menu for IRC §4975; 10 :: THE ASPPAJournal

approval by the client. The client retains discretion ERISA §§403(c) and 404(a)(1) as well as IRC as to the choice of investments. However, the §401(a)(2)—the three ERISA and Code sections The TPA vendor is nonetheless serving in the capacity of an most concerned with the exclusive benefit rule should have ERISA Investment Advisor as defined by ERISA that requires that fiduciaries act in the sole interest §3(21)(A) and 29 CFR 2510.3-21, which provides of participants and beneficiaries. a mechanism a five-part functional test of fiduciary status—and The problem here is that the fiduciary acted in the vendor actually acknowledges that status in its own interest in selecting funds for the purpose for accurately writing. The broker is paid strictly from 12(b)(1) of paying a broker. The broker brought this plan accounting for fees. The level of compensation agreed upon to the vendor, so it is the vendor’s self-interest that between the vendor and the broker is the 25 basis is served by arranging for these payments to the and reporting the point 12(b)(1) fees. To facilitate these payments, broker—not the participants’ interests. the vendor recommends only funds that pay 25 Imagine a conversation with the DOL auditor. actual amounts basis point trails. You are the advisor. of compensation Analysis: Prohibited Transaction and Breach of Advisor: “We have access to 10,000 mutual Duty. Assuming the broker is a non-fiduciary funds but we first eliminated from consideration all received with (we do not have enough information to conclude those that do not generate a 25 basis point 12(b)(1) otherwise) the vendor/advisor has engaged in a fee.” respect to each prohibited transaction and breached its fiduciary DOL Auditor: “Why?” plan and each duty under the exclusive benefit rule. The Advisor: “It’s the only way we could pay the investment advisor (the vendor) is a fiduciary broker who brought us the case. Is that okay?” vendor. based upon the five-part functional definition in DOL Auditor: “Would you prefer Rocko or ��the regulations. As such, the advisor is bound by Bruiser as a cell mate?”

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The arrangement in this example violates the • Basis point payments directly from a provider based on plan assets; or general prohibition against self-dealing of ERISA • A commission or commission override from an insurance company. §406, making it a prohibited transaction, and it Analysis: That’s Okay. The TPA is a non-fiduciary, and the non-fiduciary violates the exclusive benefit rule, making it a status of TPAs has been well documented, as long as the TPA is careful not breach of fiduciary duty. That means potential to exercise discretion with respect to plan assets. Note, however, that there is prohibited transaction penalties, taxes and interest some risk that a vendor with undisclosed compensation may be considered to (on $250 million), not to mention the fact be setting its own compensation, and that the act of choosing a compensation that the exclusive benefit rule is a qualification amount is a fiduciary decision. Thus, it could be argued that a TPA accepting requirement, and breaching it therefore subjects the undisclosed payments from an insurance company has in effect set its own plan to potential disqualification (unlikely, yes, but compensation and thereby becomes a fiduciary by virtue of exercising the still technically true and therefore to be strenuously discretion to choose the compensation. avoided). Solution: Full Disclosure. As long as the TPA fully discloses its compensation, Example #2: Conflicted Advice to Sponsor it should be immune to the argument that it exercises discretion in setting Situation: A large bank offers qualified plan its own compensation. ASPPA’s Code of Conduct requires full disclosure services to its clients. Within the plans offered by of compensation anyway. The TPA should have a mechanism for accurately the bank are many of the bank’s own mutual funds. accounting for and reporting the actual amounts of compensation received Acme Tools is one of the bank’s 401(k) customers. with respect to each plan and each vendor. The actual mechanism for A representative from the bank visits quarterly with accomplishing this feat of accounting requires powerful software that is Acme to review the investments and recommends seldom, if ever found “off the shelf” and often requires customized program- changes based upon the advice of a bank subsidiary ming. Other than this concern about how to deliver accurate and complete that is a Registered Investment Advisor. In one disclosure, it is perfectly acceptable under DOL Advisory Opinion 97-16A case, the bank representative actually recommends for a non-fiduciary TPA to receive and keep revenue sharing payments. firing one of the bank’s own funds for failing Situation B: Producing TPA. The second TPA, the one with a sister to meet certain minimum standards. The bank company that performs investment advisory services, operates in much offers lifestyle funds that are funds of funds using the same way as the first TPA. It accepts revenue sharing payments from exclusively the bank’s own mutual funds for the insurance companies and other vendors in the form of sub-transfer agency underlying portfolio and charging a “wrapper” fee fees or basis point payments. To be safe, the TPA gives a one-line disclosure of 25 basis points. The bank serves as a directed to the effect that it may receive such compensation from various vendors. trustee and does not have discretion over plan But the disclosure does not name the vendor or the amount of compensation. investments. The client receives no annual reconciliation of the compensation. At no time Analysis: Prohibited Transaction. The actual recommendations come from a subsidiary of the bank that is an investment advisory firm, but Are you ready for because the advisory firm is owned by the bank, it is not independent. The bank is thus making recommendations with respect to investments, Roth(k) & Catch-up? and many of those investments pay the bank more than others—especially the bank’s own funds. It ASC Can help! is clear from DOL Advisory Opinions 97-15A, 2001-09A and 2003-09A, the Frost, SunAmerica and ABN AMRO letters, respectively, that this Quickly create Roth-401(k) amendment arrangement constitutes a prohibited transaction. packages for all of your clients at one time! Example #3: TPAs and Revenue Sharing There are two TPAs. The first is a “non- ASC Compliance Testing System fully producing” TPA that serves exclusively as a non- updated for Roth(k) & Catch-up! fiduciary contract administrator and does not sell investments or provide investment advice. The See a 3 minute demo today at: second is a “producing” TPA whose advisory arm www.asc-net.com meets the definition of a fiduciary investment or contact us to learn more: advisor found in the regulations. [email protected] 800-950-2082 x295 Situation A: Non-Producing TPA. The non- producing TPA accepts revenue sharing payments from qualified plan vendors, typically in one or more of the following forms: Retirement plan software, documents & training for 25 years • Sub-transfer agency fees; 12 :: THE ASPPAJournal

does the client see the actual dollar or percentage The second problem with this arrangement amounts of compensation. is that the advisor is choosing load funds (more Analysis: Prohibited Transaction. Because of the expensive for participants in many cases) over no- Gone are the TPA’s affiliation with the investment advisor, load funds (less expensive) in order to get paid. He compensation for the TPA must be considered to is using his influence as a fiduciary to cause plan days when be benefiting the investment advisor as well. The assets to be invested in funds that pay him 25 basis only safe course, therefore, is to treat the combined points over those that do not. This choice conflicts TPAs were revenues of the two companies as being subject with the exclusive benefit rule and is arguably actuaries and to the rules governing revenue sharing. Since the a prohibited transaction under ERISA §406(b), advisory firm is serving as an ERISA Investment which is not covered by the various statutory and administrators, Advisor, it is bound by the Frost letter and is, administrative exemptions. therefore, obligated to return all revenue sharing Note that there are some who argue brokers were payments to the plan in the form of direct credits (incorrectly, I believe) that the broker does not just salespeople or dollar-for-dollar fee offsets. Since this course of have a problem as long as his compensation is level. action is not happening, the advisor/TPA may be In other words, as long as he fully discloses his 25 and only plan engaging in prohibited transactions with its clients. basis points of compensation and ensures that every Solution: Follow the Frost Model. Study the details single fund within the plan pays exactly 25 basis sponsors were of DOL Advisory Opinion 97-15A and implement points of commission, he is revenue neutral—not fiduciaries. them. making any more or less money based on the investment options selected. While it is true that Example #4: The Open Architecture Broker he must remain revenue neutral as a fiduciary, his Situation: A broker works with a regional TPA duty does not end there. that does daily valuation recordkeeping and offers The Frost letter is quite explicit about how a selection of several thousand mutual funds via these payments must be handled, and 12(b)(1) fees its trading partner. The mutual funds include are the specific focus of that letter. He has two both load and no load funds. The broker is very choices: name a fee and use the 12(b)(1) fees to successful, has several hundred million dollars offset that fee, or pay all of the 12(b)(1) fees back to of qualified plan assets under management and the plan. Receiving the 12(b)(1) fees directly, even operates on a full disclosure model. He offers if the compensation is level, does not meet the clients the choice of working with him on strictly requirements of the Frost letter and, therefore, may a fee basis, but says that, “My clients prefer to have constitute a prohibited transaction. the mutual funds pay me directly.” The broker has a list of load funds that he uses to construct the Staying Out of Trouble is Easy: A View investment menus for his clients. Drawing from From the Top this list of funds, each of which generally pays a 25 Picture yourself atop a mountain with a clear view basis point 12(b)(1) fee, he recommends investment of the 401(k) wilderness spread below you. From menus for his clients and helps them monitor the your perch you can see a clear and shining pathway. funds on an ongoing basis. His broker/dealer You know that any plan fiduciary that follows receives the 12(b)(1) fees and passes them on to the this clear pathway is not violating any fiduciary broker. rules—the arrangement is “clean.” From such a Analysis: Prohibited Transaction and Potential vantage point, you easily grow suspicious of any Breach of Fiduciary Duty. There are two problems arrangement that deviates even slightly from the with this arrangement. First, the broker is acting path because the “right” path is in fact so clear to as a fiduciary according to the functional test of you. You realize that it might be okay to deviate 29 CFR 2510.3-21. As an ERISA Investment from the path, but that a prudent plan fiduciary Advisor, he is, therefore, bound by the Frost letter, must ask a lot of questions before agreeing to a DOL Advisory Opinion 97-15A. The Frost “non-clear path” arrangement. letter says that he must return all revenue sharing This view from the top of the mountain is a payments to the plan or else use them as a dollar- good analogy for the situation today for a 401(k) for-dollar offset of fees. But that is not what he is sponsor. There is a very clear pathway along which doing; he is receiving commissions and not passing plan fiduciaries need not fear conflicts of interest them back to the plan. He may be in violation or prohibited transactions from service provider of the Frost letter and, therefore, committing a compensation arrangements. Any deviation from prohibited transaction. this pathway is, therefore, suspect. JANUARY-FEBRUARY 2006 :: 13

The “Clear Path” for Fiduciary and Conclusion: How Does This “Clear Path” Apply to TPAs Service Provider Compensation and Other Service Providers? • Fee only: Name a price for services rendered. Gone are the days when TPAs were actuaries and administrators, brokers were That fee is your sole compensation. just salespeople and only plan sponsors were fiduciaries. The lines are blurring. • Full disclosure and transparency: All fees and Most commentators agree that brokers often meet the functional definition expenses are fully disclosed in a clear, transparent of a fiduciary under the service arrangements common in today’s marketplace. manner consistent with the DOL’s model fee CPAs are opening advisory arms to perform investment advisory services or to disclosure. sell securities to their plan clients. Vendors, once careful to define themselves as non-fiduciaries, have begun offering “co-fiduciary” services in droves. The • Revenue neutral: No service provider makes old product sales culture is no longer valid. Any TPA, broker or vendor that any more or less money regardless of which is serious about the 401(k) business must, therefore, carefully examine its investment options are chosen. compensation practices from the vantage point of the “top of the mountain.” • 100% Frost model revenue sharing: Complete “Take nothing for granted” is good advice in any profession. In our pass-through of all revenue sharing payments. profession of serving qualified plans, it is wise not to take for granted that the Take the broker in Example #4. He is compensation arrangements common in our industry are not prohibited. The following some of the steps on the path, but fact that something is widespread does not make it wise. In the end, the safest not others. He is revenue neutral and offers full approach is also the cleanest: fee only, full disclosure, revenue neutral, 100% Frost disclosure, but he is not fee only and is arguably model revenue sharing. Any deviation from that “clear path” is suspect. ▲ not complying with the Frost model. Accepting commissions versus fees is not in itself problematic, Pete Swisher, QPA, CFP, is vice president of Advisory Services for Unified but failing to follow the Frost model when one Trust Company, NA, where he serves as head of national sales and Unified is advising sponsors on which funds to select Trust’s 401(k) wholesaling effort. Pete’s area of specialization is the fiduciary is a problem. Again, it is conceivable that a management of qualified plans. He is a frequent speaker and author on the compensation arrangement could take a different topics of fiduciary governance, revenue sharing and qualified plan investing. form and be okay, but where there is smoke there is fire. Compensation other than the “clear path” method I describe above should make any prudent fiduciary smell smoke and investigate. of the South Save the Date! Benefits Conference Benefits 14 :: THE ASPPAJournal

401(k), 403(b) and 457 Plan Basics in 2006

by Kimberly J. Boggs

Most qualiﬁed plan practitioners regularly work with 401(k) plans but only occasionally with 403(b) and 457 plans. These three plan types have many similarities but also many differences, and the discussion and following chart provide a comparison of the core components and 2006 plan limits of each plan type.

he information in this article is intended to offer a basic comparison and does not provide an in-depth The key review of recent legal developments Tor an explanation of design alternatives. differences 401(k) Plans between 401(k) plans are a type of qualified retirement plan the three types and must satisfy the requirements of both Internal Revenue Code (Code) §401(a) and Code §401(k) of plans and may be adopted by any non-governmental employer. With a 401(k) plan, employees may are in elect to defer taxation on a portion of their salary the design under a salary reduction agreement that may or may not be matched by an employer contribution. alternatives. A designated portion of the employee’s salary is contributed to a 401(k) plan sponsored by an employer. 401(k) plans may also include a profit sharing component. Conceived as a retirement plan for school teachers and college professors, What can employers do in a 401(k) that they 403(b) plans are now available for employees of tax exempt organizations cannot do in a 403(b) or 457? The short answer [under Code §501(c)(3)] or governmental educational organizations. Due to is “design.” The key differences between the EGTRRA and the new proposed 403(b) regulations, plans established under three types of plans are in the design alternatives. Code §§403(b) and 401(k) have even more similarities than in the past, but “Qualified” plans, such as 401(k) plans, have a they also have significant differences. well-defined range of design options that allow One key point is that trustee-to-trustee transfers are not permitted great flexibility. Employees may be included or between 403(b) and 401(a) plans—a significant issue, since it presents an excluded within certain limits; some employees can operational roadblock when attempting to convert or “upgrade” a client. receive higher contributions than others; eligibility For example, it is quite common for non-profit organizations to have may be defined in a variety of ways. These design multiple plans, such as a deferral-only 403(b), a 401(a) for employer matching options are all examples of things that are generally contributions, plus a 457(b) or (f). Since multiple plans are confusing to not possible in a 403(b) or eligible 457 plan. On employees, a sound recommendation is to combine them, but combining is the other hand, 401(k) plans are subject to the difficult because of the sponsor’s inability to simply merge the plans’ assets. nondiscrimination requirements of Code §§401(k) Another significant difference in 403(b) plans is that they are not subject and 401(a)(4)—not true of either 403(b) or 457 to ERISA if they meet certain requirements. In the outline for the workshop plans, with few exceptions. See the chart for on 403(b) plans at the 2005 ASPPA Annual Conference, Cheryl Press of details. the IRS and David Pratt of Albany Law School noted the non-ERISA requirements: “There is…a badly defined exemption for plans where the plan 403(b) Plans is funded only with employee deferrals and the employer’s involvement is 403(b) plans, sometimes referred to as a tax limited.” The requirements for the exemption include the following: sheltered annuity program, are similar to 401(k) • No contributions other than employee deferrals (i.e., no match or non- plans in that they facilitate elective deferrals. elective contributions); JANUARY-FEBRUARY 2006 :: 15

• Minimal involvement by the plan sponsor other than to facilitate payroll (and, in the case of a tax-exempt plan sponsor, the deferrals; and requirements of ERISA), then the participant is • The plan sponsor does not select investments or providers, though a not taxed until the amounts are made available to reasonable limitation on the number of providers is probably permissible. the participant. Plans that meet these requirements are referred to as “eligible” or “qualified” 457 plans. When all of these requirements (and others) are met, the sponsor is, If a 457 plan fails to meet the requirements of in essence, simply facilitating via payroll deduction a transaction between Code §457(b), then the plan is an “ineligible” or participant and vendor (i.e., the sponsor is not a fiduciary under ERISA). “nonqualified” plan under Code §457(f), which Among other advantages, this arrangement means that non-ERISA 403(b) provides that the account balances are includible plans are not subject to ERISA audit requirements. Among the disadvantages in income as soon as they are no longer subject is the fact that ERISA pre-emption of state law does not apply, which means to a substantial risk of forfeiture. Some tax- no pre-emption of state laws that prohibit negative election enrollment— exempt employers purposely create a plan that is making “automatic” plans difficult or even impossible to implement in many ineligible under Code §457(f) by designing the states at present. plan to fail the contribution limits and limiting The notion that a “non-ERISA” 403(b) eliminates fiduciary responsibility participation to a select group of management or for the sponsor can sometimes be a trap for the unwary for two reasons. First, highly compensated employees and, in so doing, the plan may not meet the above criteria for non-ERISA status. Perhaps the avoid most of ERISA’s requirements. Note: For sponsor has chosen a single vendor, or a handful of vendors—that decision taxable years beginning on or after January 1, may make the arrangement subject to ERISA. Second, exemption from 2005, 457(f) plans are subject to the new Code ERISA does not exempt a plan from state fiduciary laws. Most states have §409A requirements for nonqualified deferred adopted a version of the Uniform Prudent Investor Act (UPIA), which is compensation arrangements. the common law equivalent of ERISA. A non-ERISA 403(b) might still be One key advantage of 457 plans is that there is subject to the state’s version of UPIA. A prudent sponsor, therefore, would be no coordination of benefits between 457 plans and well-advised to manage the plan as if it is an ERISA plan regardless of whether other employer plans, such as 403(b) and 401(k) non-ERISA status is claimed. plans. Thus, a participant may defer the maximum A 403(b) is not subject to the nondiscrim-ination requirements of Code under both plans—the limitations under Code §§401(a)(4) or 401(k)—there is no nondiscrimination testing as long as §§402(g) and 415 do not apply. ▲ the only contributions are employee deferrals. Note, however, that 403(b)s with matching contributions are not only subject to ERISA but also must pass the ACP test of Code §401(m), yet are still not subject to the 401(k) ADP The following chart compares the core test. From a practical standpoint, these facts have led to a 403(b) market characteristics and the contribution limits that has historically favored multiple plans—such as a non-ERISA, deferral- associated with each type of plan. only 403(b) plan plus a 401(a) plan for employer matching and non-elective contributions, plus a “top hat” 457(f) plan for a handful of top employees. It is Kimberly J. Boggs is an associate in the not uncommon to find non-profit organizations with as many as four or five HR law department in the Milwaukee separate plans. As a practical matter, multiple plans are confusing for sponsors office of Gardner Carton & Douglas LLP. and participants alike and there is an emerging trend toward simplification into Licensed in both Illinois and Wisconsin, a single plan. Kimberly counsels employee benefits clients The key points making 403(b)s different from 401(k)s are, therefore: in a variety of areas, including health & • No audit requirement for non-ERISA plans; welfare benefits, tax-qualified retirement plans and nonqualified plans. • No ADP test: HCEs can maximize deferrals without a safe harbor; • Strict eligibility and plan provisions—less design flexibility; • Sponsors may believe their plans are non-ERISA when in fact they are; and • Can transfer assets from one 403(b) provider to another but cannot transfer assets from a 403(b) to a 401(k) or 457—participants must roll over their accounts if they leave the plan.

457 Supplemental Retirement Plans A 457 plan is a special type of nonqualified deferred compensation plan maintained by a state or local government or certain tax-exempt employers. A 457 plan maintained for a select group of management or highly compensated employees of a tax-exempt employer is exempt from the vesting, funding and fiduciary requirements of ERISA, but remains subject to ERISA’s other requirements. If the 457 plan satisfies the requirements of Code §457(b) 2006 Comparison of Retirement Plan Characteristics and Contribution Limits

Limit/Characteristic 401(k) Retirement Plan 403(b) Retirement Plan 457(b) Plan (Public) 457(b) Plan (Private) 457(f) Plan Eligibility Open to any individual Open to any individual Open to any individual Limited to a select group Limited to a who performs services who performs services who performs services of management or highly select group of for the employer; high for the employer; few for the employer compensated employees management or degree of ﬂexibility in permissible restrictions highly compensated design as long as plans employees pass coverage and nondiscrimination Type of Employer Any non-governmental Public education State and local Any 501(c)(3) State and local employer employers and any government employers organization government 501(c)(3) organization only employers and any 501(c)(3) organization Written Plan Yes (IRS rules) Yes (DOL rules) Yes (IRS rules) Yes (IRS rules) Yes, typically found in Document Required employment contract 2006 Maximum Lesser of $15,000 or Lesser of $15,000 or Lesser of $15,000 Lesser of $15,000 No limit Employee Pre-Tax 100% of adjusted gross 100% of adjusted gross or 100% of taxable or 100% of taxable Salary Reduction salary [taxable income + salary [taxable income + compensation compensation Funds remain assets Contributions 403(b), 132(f) and 125 403(b), 132(f) and 125 of the employer and pre-tax contributions] pre-tax contributions] (§457 and regulations) Note: Once invested, subject to employer’s funds become assets of creditors. [§402(g)] [§402(g)] the employer and subject to employer’s creditors. (§457 and regulations) 2006 Total Annual Lesser of $44,000 Lesser of $44,000 Not applicable Not applicable Not applicable Contribution or 100% of taxable or 100% of taxable Limit (Employer + compensation compensation Employee) [§415(c) Limit] 2006 Compensation $220,000 $220,000 Not applicable Not applicable Not applicable Limit [§401(a)(17)] Allow Employee After- Yes, but §415 limits Yes, but §415 limits No No No Tax Salary Reduction apply apply Contributions 2006 Age 50 Catch- An additional $5,000 An additional $5,000 An additional $5,000 No No Up Amounts elective salary deferral elective salary deferral elective salary deferral permitted permitted permitted [§414(v)] Only one catch-up May use age 50 catch- May use age 50 catch- allowed for 401(k) and up for both 403(b) and up for both 457(b) and 403(b) if employee 457(b) in the same year 403(b) in the same year participates in both Only one catch-up Exception: If within three allowed for 401(k) and years of plan’s normal 403(b) if employee retirement age, employee participates in both is eligible for the greater of age 50 catch-up or enhanced limit, but not both Other Catch-Up 15-year catch-up not If 15 years or more of 15-year catch-up not 15-year catch-up not 15-year catch-up not Amounts available service at one qualifying available available available institution, up to an additional $3,000 Enhanced Limit: If within Enhanced Limit: If within elective salary deferral three years of plan’s three years of plan’s per year ($15,000 max normal retirement age, normal retirement age, lifetime) [§402(g)(7)] additional amount additional amount may be contributed up may be contributed up Prior year contributions to the lesser of twice to the lesser of twice may limit this the applicable limit or the applicable limit or amount—must complete unused amounts from unused amounts from worksheet prior years prior years

Employee may be eligible Exception: If within three for both age 50 and years of plan’s normal 15-year catch-up in the retirement age, employee same year is eligible for the greater of age 50 catch-up or enhanced limit but not both JANUARY-FEBRUARY 2006 :: 17

2006 Comparison of Retirement Plan Characteristics and Contribution Limits

Limit/Characteristic 401(k) Retirement Plan 403(b) Retirement Plan 457(b) Plan (Public) 457(b) Plan (Private) 457(f) Plan Contribution Employee pre-tax Employee pre-tax 401(k) and 403(b) 401(k) and 403(b) Not aggregated Aggregation contributions to a 401(k) contributions to a 403(b) contributions are not contributions are not and a 403(b) plan [but and a 401(k) plan [but aggregated with 457(b) aggregated with 457(b) [§402(g) Limit] not a 457(b) plan] in the not a 457(b) plan] in the private contributions; private contributions; same year are limited same year are limited participants may participants may in the aggregate to the in the aggregate to the contribute the contribute the §402(g) limit §402(g) limit maximum to two plans maximum to two plans simultaneously simultaneously

Type of Funding Funded—not subject Funded—not subject Funded—not subject Unfunded—subject to Unfunded—subject to to the creditors of the to the creditors of the to the creditors of the the rights of creditors of the rights of creditors employer employer employer the employer of the employer Loans Allowed Allowed Allowed No No Distribution Triggers Severance from service, Severance from service, Severance from service, Severance from service, Severance from age 59½, disability or age 59½, disability or age 70½ or death age 70½ or death service, age 70½ or death death death Unforeseeable Unforeseeable Hardship withdrawal may Hardship withdrawal may emergency withdrawal emergency withdrawal Unforeseeable be available be available may also be available may also be available emergency withdrawal may also be available Early Withdrawal 10% before age 59½ 10% before age 59½ No No No Penalty Rollovers Out Permitted to IRA, 403(b), Permitted to IRA, 401(a), Permitted to IRA, 403(b), Rollovers to other plans Not available 401(a), 457(b) public 401(k), 457(b) public and 401(a), 401(k) and other not permitted plans and other 401(k) other 403(b) plans 457(b) public plans plans Exception: direct 10% penalty on early 10% penalty on early transfers to other 457(b) 10% penalty on early withdrawal applies withdrawals applies private plans may be withdrawals applies permitted, if both plans Not permitted to 457(b) Not permitted to 457(b) allow Not permitted to 457(b) private plans private plans private plans Rollovers In If plan allows, from IRA, If plan allows, from IRA, If plan allows, from IRA, Rollovers from other Not available 403(b), 457(b) public, 401(a), 403(a), 401(k), 403(b), 401(a), 403(a) plans not permitted 401(a), 403(a) and other 457(b) public and other and 401(k) plans 401(k) plans 403(b) plans Exception: direct 10% penalty on early transfers from other 10% penalty on early 10% penalty on early withdrawal still applies 457(b) private plans, if withdrawal still applies withdrawal still applies permitted by new plan Direct transfers from Not permitted from Not permitted from other 457(b) public plans 457(b) private plans 457(b) private plans permitted, if permitted by new plan Not permitted from 457(b) private plans Minimum Distribution Applicable to entire Applicable to post-1986 Applicable to entire Not applicable Not applicable Requirements accumulation at age accumulation at age accumulation at age 70½ or retirement, if 70½ (age 75 for pre- 70½ or retirement, if later 1987 accumulations) or later retirement, if later Timing of Income Deferred Deferred Deferred Deferred until paid Deferred until paid Taxation or “made available,” or “made available,” whichever occurs first whichever occurs first Amounts are “made Amounts are “made available” if there is available” if there is no “substantial risk of no “substantial risk forfeiture” of forfeiture” IRS Form 5500 Filing Yes, and more involved Yes, but minimal Not required An exemption from the Not required than 403(b) filing requirements annual Form 5500 filing requirements requirement is available to the extent a one-time Schedules must be filing is made to the completed Department of Labor (“top hat” statement) Determination Letter Yes No No No No Available Non-Discrimination Yes Yes No No No Testing References to “Code,” “Section” or “§” refer to the Internal Revenue Code of 1986, as amended. 2006 Harry T. Eidson Founders Award Nominations Now Being Accepted

arry T. Eidson Founders Award nominations for 2006 will be accepted until HJune 1, 2006. Nominations can be submitted directly from the Home Page or Membership Awards and Honors sections of ASPPA’s Web site at www.asppa.org/ membership. In 1995, ASPPA established the Harry T. Eidson Founders Award to honor the memory of our founder, Harry T. Eidson, FSPA, CPC. Eidson was the initial inspiration behind the formation of ASPPA in 1966. Eidson ﬁrmly believed in the importance of a private pension system for the United States and was committed to building an organization dedicated to preserving and enhancing such a system. This award is presented to an individual who has made a signiﬁcant contribution to ASPPA, the private pension system or both.

The following criteria are used to determine the nominee: • The contribution must be consistent with the ASPPA mission statement and should have a lasting, positive inﬂuence on ASPPA or the private pension system. • The contribution may be current, one that spanned many years or one made years ago that ASPPA or the private pension system beneﬁt from today. • The contribution should be a result of time devoted above and beyond reasonable expectations, not a result of time spent primarily for personal gain. • The contribution may have been made and/or recognized on a national or regional level; however, publicity is not a criterion.

Any credentialed ASPPA member who knows someone who meets the award criteria can submit a nomination form. All nominations are reviewed by a special Eidson Award Subcommittee working with ASPPA’s Membership Committee Co-chairs. Please note that the recipient need not be an ASPPA member. If the Subcommittee determines that there is a deserving candidate, then such recommendation is made to the Board of Directors by the Membership Committee Co-chairs. The Board makes the ﬁnal determination at its July meeting. The award is presented at the ASPPA Annual Conference, with the recipient receiving a personalized award memento. In addition, the recipient’s name is engraved on a permanent plaque displayed in the ASPPA National Ofﬁce. Previous winners: G. Patrick Byrnes, MSPA, in 2005; C. Frederick Reish, APM, in 2004; Robert D. Lebenson, MSPA, in 2003; Curtis D. Hamilton, MSPA, CPC, in 2002; Ruth F. Frew, FSPA, CPC, in 2001; Leslie S. Shapiro, JD, in 2000; Howard J. Johnson, MSPA, in 1999; Andrew J. Fair, APM, in 1998; Chester J. Salkind in 1997; John N. Erlenborn in 1996; and Edward E. Burrows, MSPA, in 1995. Award Nominations Award We encourage you to take the time to nominate a worthy candidate for this prestigious award. 2006 Harry T. Eidson Founders Award Nominations Now Being Accepted

Any credentialed ASPPA member who knows someone who meets the award criteria can submit a nomination form. All nominations are reviewed by a special Eidson Award Subcommittee working with ASPPA’s Membership Committee Co-chairs. Please note that the recipient need not be an ASPPA member. If the Subcommittee determines that there is a deserving candidate, then such recommendation is made to the Board of Directors by the Membership Committee Co-chairs. The Board makes the ﬁnal determination at its July meeting. The award is presented at the ASPPA Annual Conference, with the recipient receiving a personalized award memento. In addition, the recipient’s name is engraved on a permanent plaque displayed in the ASPPA National Ofﬁce. Previous winners: G. Patrick Byrnes, MSPA, in 2005; C. Frederick Reish, APM, in 2004; Robert D. Lebenson, MSPA, in 2003; Curtis D. Hamilton, MSPA, CPC, in 2002; Ruth F. Frew, FSPA, CPC, in 2001; Leslie S. Shapiro, JD, in 2000; Howard J. Johnson, MSPA, in 1999; Andrew J. Fair, APM, in 1998; Chester J. Salkind in 1997; John N. Erlenborn in 1996; and Edward E. Burrows, MSPA, in 1995. Award Nominations Award We encourage you to take the time to nominate a worthy candidate for this prestigious award. 2005 ASPPA Annual Conference HIGHLIGHTS November 6-9, 2005 Washington Hilton and Towers Washington, DC

Incoming ASPPA President Sarah E. Simoneaux, CPC, congratulates outgoing 2005 ANNUAL CONFERENCE ASPPA President Stephen H. Rosen, SPONSORS MSPA, CPC, on a successful year. PLATINUM • ING • Reish Luftman Reicher & Cohen

GOLD • Ameritrade Corporate Services • MetLife/Travelers Life & Annuity • Newkirk/McKay Hochman • Prudential Financial • The Principal Financial Group • Transamerica Retirement Services Brian H. Graff, Esq., APM, addresses the audience with the Washington Update. SILVER • CalSurance • Fidelity Investments ASPPA members • Nationwide Financial Virginia C. • SunGard Wentz, MSPA, • The Hartford CPC, [sporting the hottest button BRONZE at the conference, • The Paragon Consulting Group “Don’t take away • Union Central Retirement my 401(k)”], & Investment Services Beth Davies and the entire audience CD-ROM SPONSOR listen intently to the • Lincoln Financial Group Washington Update. Photos courtesy of Bill Petros

2005 ANNUAL CONFERENCE Benefit Insights, Inc. Colonial Surety Company ERISA Expertise LLC IRS TE/GE Employee Plans National Investment Managers, Inc. Retirement Planning Center The Paragon Consulting Group EXHIBITORS BenefitStreet Inc. Conference of Consulting Actuaries ExpertPlan Ivy Funds Nationwide Financial RIA The Principal Financial Group 401k ASP Bisys Retirement Services CyberTPA Fidelity Investments John Hancock Financial Services Newkirk/McKay Hochman RolloverSystems Transamerica Retirement Services 401kLoans, LLC BLAZE SSI DailyAccess Corporation Fiserv ISS Lincoln Financial Group OneAmerica Standard Insurance Company T. Rowe Price Retirement Plan Accudraft BNA DATAIR Employee Benefit Systems, Inc. FlexSoft, Inc./PensionOnline.com Matrix Settlement and Clearance ParkereSSe Ltd. SunGard Services, Inc. Ameritrade Corporate Services BPA-Harbridge Diversified Investment Advisors ftwilliam.com Services Penchecks, Inc. Technical Answer Group, Inc. Union Central Retirement & ASC CalSurance Dorsa Consulting India Outsourcing Services MetLife Pension Benefit Guaranty Corporation The Hartford Investment Services ASPPA Education & Exams CCH Incorporated eFileCabinet ING MetLife/Travelers Life & Annuity (PBGC) The National Registry of Unclaimed Wystar Global ASPPA Membership & Programs Charles Schwab Corporate Services Employee Benefit Adviser International Foundation MFS Investment Management, Inc. Prudential Financial Retirement Benefits ASPPA PAC CJA & Associates, Inc. Envisage Information Systems, LLC InvestLink National Institute of Pension Reish Luftman Reicher & Cohen The Newport Group Administrators 2005 ANNUAL CONFERENCE SPEAKERS Harold J. Ashner, Esq., APM Bruce L. Ashton, Esq., APM Michael L. Bain, MSPA Bradley D. Belt Kerry M. Boyce, CPC, QPA Alex M. Brucker, Esq., APM Marty Burns Stephen W. Canter, QPA Amy L. Cavanaugh, CPC, QPA, QKA Ruth Frew, FSPA, Ann L. Combs, Esq. Lawrence Deutsch, MSPA CPC, presents the Lorraine Dorsa, MSPA Eidson Founders David B. Farber, MSPA Award to recipient Attendees fill the main ballroom during the Keeping Ilene H. Ferenczy, Esq., CPC Michael J. Finch, CPC G. Patrick Byrnes, Current session by Sal L. Tripodi, APM. Thomas J. Finnegan, MSPA, CPC, QPA MSPA. Stephen W. Forbes E. Thomas Foster, Jr. Carol D. Gold, Esq. Brian H. Graff, Esq., APM Joan A. Gucciardi, MSPA, CPC Martin M. Heming, Esq., APM Richard A. Hochman, Esq., APM Craig P. Hoffman, Esq., APM James E. Holland, Jr. Diann Howland R. Bradford Huss, Esq., APM Dawn M. Hynes Robert M. Kaplan, CPC, QPA William G. Karbon, MSPA, CPC, QPA James J. Keightley Charles J. Klose, FSPA, CPC Joan A. Gucciardi, Blaine Laverick Barry Max Levy, QKA MSPA, CPC, Harold A. Loeb congratulates W. Paul McCrossan the Educators Pat McDonough G. Neff McGhie, III, MSPA Award recipient Charles N. McLeod, FSPA Carol R. Sears, Pamela C. Means, MSPA, QPA, QKA Nancy M. Michael FSPA, CPC. Judy Miller Lisa Mojiri-Azad, Esq. Cheryl L. Morgan, CPC, QKA Conference attendees head toward Gwen S. O’Connell, CPC, QPA the sold-out exhibit hall. Jane L. Osa, MSPA Margery F. Paul, MSPA Kurt F. Piper, MSPA Thomas E. Poje, CPC, QPA, QKA Adam C. Pozek, QKA David A. Pratt, Esq., APM Cheryl Press, Esq. Michael B. Preston, MSPA W. Thomas Reeder, Esq. C. Frederick Reish, Esq., APM Stephen H. Rosen, MSPA, CPC Marilyn Ryding, QPA Fredric S. Singerman, Esq. Sheldon H. Smith, Esq., APM Virginia C. Smith, Esq. Michael W. Spaid, MSPA, QPA Lawrence C. Starr, CPC Virginia Krieger Sutton Cheryl Ann Tabbi George J. Taylor, MSPA Karen A. Jordan, CPC, QPA, QKA, 2005 ASPPA Sal L. Tripodi, Esq., APM PAC Co-chair, presents Annette Williams with the S. Derrin Watson, APM Nicholas J. White, Esq., APM PAC’s drawing prize, a flag flown over the US Capitol. Leonard J. Witman, Esq., APM Attendees enjoy the craps table during casino night. Photos from this year’s conference are available for purchase at: www.billpetrosphotography.photoreflect.com

What if Plan Fiduciaries Could Provide Investment Advice to 401(k) Participants?

by Donald B. Trone

One thing we can almost all agree on regarding 401(k) investment selection—401(k) participants need help. Where we disagree as an industry is in the form and substance of that help.

nline retirement tools, call There is centers and educational materials have been helpful, but nothing within more needs to be done. Most industry observers now believe it is time to send ERISA or in the cavalry—to make available to participants any guidance an investment consultant (the term intending to be inclusive of like-terms, such as financial advisor, from the DOL financial consultant, investment advisor and wealth manager) who can provide participant-specific, as that prohibits opposed to plan-general, advice. plan sponsors The movement toward participant-specific advice carries a number of fiduciary implications, from hiring not the least of which is the liability the plan sponsor incurs when such services are made investment available to participants. There is nothing within consultants. ERISA or any guidance from the Department of Labor (DOL) that prohibits plan sponsors from hiring investment consultants. However, under current rules and guidelines, the plan sponsor what impact will it have on investment consultants? The answer depends retains full responsibility and liability for the upon which bill passes in Congress, and subsequently, which side of the debate advice provided. In other words, neither the plan the DOL favors. The House version would allow advice to be provided by sponsor nor the fiduciary has a safe harbor similar qualified representatives of a plan’s vendors. (For example, if Fidelity was the to what was defined by the DOL under ERISA recordkeeper, Fidelity could also provide the investment advice.) The Senate Section 404(c) for participant-directed investment version would require that the investment consultant be independent. decisions. This safe harbor protects plan fiduciaries Our firm’s response to the debate—it does not matter, as long as the from personal liability if a participant makes a investment consultant is required to provide advice that meets a fiduciary bad investment decision and his or her account standard of care and acknowledges fiduciary status. This position is consistent loses value. with other previously released DOL safe harbor rules and with ERISA. It Congress is working on a remedy. As this would also help resolve some of the confusion that has arisen over the SEC’s article is being written, both the Senate and the broker-dealer exemption, which makes it difficult for the public to discern the House have each passed their own pension reform demarcation between a suitability standard and a fiduciary standard of care. bills that include language that could serve as a There is no reason to expect that the actual components of participant- basis for such a safe harbor. And, whether a bill is specific advice (the investment process) should be any different than what is signed or not, the DOL could release an advisory currently practiced by financial planners and investment consultants. And opinion that provides applicable safe harbor that, perhaps, best describes the ideal process: the participant should be able procedures. The ERISA Advisory Council made to receive personally tailored advice that combines the elements of financial just such a recommendation to the Secretary of planning (cash flow, needs-based adequacy) with investment consulting (what Labor in 2003. asset classes, which funds). Assuming plan sponsors are provided a safe It should be mentioned that there is nothing that precludes a participant harbor (and I believe the likelihood is very high), from hiring an investment consultant directly and compensating the consultant 24 :: THE ASPPAJournal 24 :: THE ASPPAJournal

Welcome New Members from personal savings. Such a contractual relationship should not expose the plan sponsor and Recent Designees to liability, unless the plan sponsor made the investment consultant available to the participants. Other alternative solutions include plan ▲ MSPA ▲ AFFILIATE provisions that would make a participant’s Gregory W. Elnyczky Vilma Acevedo enrollment in the plan automatic unless the Kathleen M. Hockenberry Angela S. Achatz participant opted-out, and/or providing for a Michael Sautebin Elijah Gbadebowale Adeniran diversified default investment option unless the ▲ Scott F. Betts participant directed a different allocation and fund CPC Craig Birchenough selection. Gregory J. Galla Darlene Blair Retirement security has become an oxymoron Richard J. Levesque Kimberly Cady of terms. The Social Security trust cannot be Michael D. Locascio Jim R. Donatell trusted, and many defined benefit plans have Virginia C. Wentz Bret A. Farris become the defined obligation of taxpayers. The Sherron Faulkner one retirement bastion that still offers hope is ▲ QPA Judith Florczyk Jeffrey S. Aga 401(k) plans, but only if Congress, or at least John E. Fritz the DOL, takes substantial steps to shore up the Edward T. Angello Margaret Gallagher Maureen E. Hamblin inherent weaknesses in the current structure. One B. Janell Grenier significant improvement that would be easy to Karen C. Miracle Angela Griffith Michael G. O’Connor implement is legislation and/or a DOL safe harbor Patricia L. Groschadl provision that would encourage plan sponsors Nancy Jo Ponce De Leon Gavin Gruenberg Lora D. Trent to retain investment consultants to provide Allison T. Hawkins participant-specific investment advice without any ▲ QKA Lawrence Isaacs fear of lawsuits for breaches of fiduciary duties. ▲ Jennifer Kiesewetter Jean C. Banaszek John K. Kopra Rita A. Brandeen Don Trone, AIFA®, is the founder and Petros P. Koumantaros Tanya C. Buehler chief executive officer of Fiduciary360, an Yannis P. Koumantaros Susan Conerly investment consulting organization that C. Todd Lacey coordinates the activities of the Foundation Denise Conroy Karen S. Lackey for Fiduciary Studies, Fiduciary Analytics David DeSandre Elaine Leighton and the Center for Fiduciary Studies—a Stephanie Doane Jessica M. Lermond nonprofit center operating in association with the University Leisha Gosling Jo-Ellen Lishnoff of Pittsburgh’s Katz Graduate School of Business. Don has Maureen E. Hamblin Peter Macaluso been appointed by the US Secretary of Labor to be the sole Kimberlee J. Hanophy representative from the investment counseling industry on the Cheryl M. Macartney Ramona J. Johnson ERISA Advisory Council. Stephen O. Meidahl James A. Laudermilch Judy K. Mesecher Andrea K. McLane Kenneth P. Mungan Gerald P. Noel Jennifer S. Nelson Spring 2006 Laura O’Connor Kim M. O’Connor EA-1 and EA-2B Review Courses Michael G. O’Connor John R. Paliga Adam Pagenkopf Instructor: Richard S. Phillips Christina M. Pakidis David B. Farber, MSPA, EA, ASA John Pileggi Patricia J. Ragan Will Ray II Kathryn J. Rosanova EA-1 Review Course Susan R. Retchin Kenneth A. Shatto Chicago, IL ...... April 3-5 Linda Rustic Chad Sherman Tina L. Smith Jessica Sietsema EA-2B Review Courses Frank N. Stockdale Virginia Krieger Sutton Steven C. Vernale Washington, DC ...... March 24-27 Eugene Y. Trakhtenberg C. Dewayne Wilson Regina Verzosa Chicago, IL ...... March 30-April 2 Donna J. Wimbec Los Angeles, CA ...... April 7-10 ▲ APM Jacyne J. Woodcox Keith M. Young Richard L. Hope Early registration ends February 17. Lawrence Wiener Register online at www.asppa.org. N IO AT

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CONTINUING EDUC ASPP

l JANUARY-FEBRUARY 2006 :: 25 S IONS l AT S l l l l l Latest Additions to the ASPPA l l EXAMIN l & Board of Directors TECHNOLOGY CONFERENCE T I O N by Troy L. Cornett

BOARD OF DIRECTOR The ASPPA membership has elected two new directors and ﬁve EDUCA directors to serve additional terms.

avid M. Lipkin, MSPA, has Adam is the chair of Swerdlin & Company’s been elected to ASPPA’s Board technical advisory board and provides peer-review, of Directors and will serve a as needed, for work prepared by the firm’s client partial term until 2007. Adam managers. He also conducts internal training for DC. Pozek, QKA, has also been elected to the Board Swerdlin employees and writes regular articles for of Directors and will serve his first full term until The Swerdlin Quarterly newsletter. David M. Lipkin, 2008. Adam is involved both locally and nationally MSPA with ASPPA on many levels. In addition to his David M. Lipkin, MSPA current role as president of the ASPPA Benefits S SUESDavid M. Lipkin, MSPA, is the president of Metro Council (ABC) of Atlanta, he has served on IR Benefits, Inc, Pittsburgh, PA. After receiving Atlanta’s programs committee as membership chair. FA a BA in Mathematics from Hamilton College, He is Co-chair of the ABC Committee, which G C David began his career in 1977 with Aetna Life represents the interests of ASPPA’s 15 ABCs, and PA and Casualty. In 1983, he moved to William M. ASPPA’s Co-chair of a new 2006 conference, the A Adam C. Pozek, Mercer in Pittsburgh, where he served on the Benefits Conference of the South. Adam also QKA actuarial committee and acted as senior actuary serves on ASPPA’s Government Affairs 401(k) and consultant to a variety of clients, including a ASPP Subcommittee. MARKETIN number of Fortune 500 companies. Adam is a nationally known speaker and has David founded Metro Benefits, Inc., in authored or been quoted in numerous articles on GOVERNMENT AF 1986. Metro’s commitment to provide clear, pension-related topics. He has spoken across the comprehensive and worry-free service has made country for such organizations as ASPPA, AICPA, ACTUARIAL COMMITTEE IS it one of the region’s fastest growing companies in WEB and Lorman Education Services. the field. Adam has earned the professional credentials David is actively involved in the profession of Qualified 401(k) Administrator (QKA) from and has been asked to speak on a variety of topics, ASPPA, as well as the Registered Employee Benefits including the professional responsibilities of the Consultant (REBC) and Registered Health actuary. He has published numerous articles Underwriter (RHU) from the American College. ▲ in professional publications. He has also been selected by the US Department of Labor to serve Donald A. Barnes, FSPA; Charles N. McLeod, as an Independent Fiduciary for several orphan/ FSPA, CPC; and Laura S. Moskwa, QKA, abandoned plans. previously serving partial terms, have also been David currently serves as Co-chair of ASPPA’s elected to serve on the Board of Directors for their Government Affairs Committee (GAC). He first full term until 2008. Kerry M. Boyce, CPC, previously served as Chair of GAC’s Defined QPA, and Susan J. Chambers, FSPA, have been Benefits Subcommittee. elected to serve on the Board of Directors for their Adam C. Pozek, QKA second full term until 2008. Adam C. Pozek, QKA, is the manager of consulting services for Swerdlin & Company, an Troy L. Cornett is the Office Manager for ASPPA and is the liaison to the ASPPA Atlanta-based actuarial and pension consulting firm Executive Committee, Board of Directors where he specializes in plan design and compliance and ASPPA Management Team. He issues related to qualified retirement plans. He also manages ASPPA’s Data Services works with clients of all sizes from varying Department and is an Associate Editor of industries to create and maintain retirement The ASPPA Journal. Troy has been an ASPPA employee programs tailored to their specific goals. since July 2000. In his time away from the ASPPA office, Troy enjoys seeing the latest movie releases, driving his VW Beetle and sipping lattes with his friends at Starbucks. N IO AT

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CONTINUING EDUC ASPP

26 :: THE ASPPAJournal S IONS l AT S l l l l l l l EXAMIN New Year. New Credential. l & The QPFC Comes to Life! TECHNOLOGY CONFERENCE T I O N by Bunny Wing Fernhall BOARD OF DIRECTOR EDUCA January marks the start of a new year, a fresh outlook and an optimistic attitude toward reaching the lofty goals and resolutions of the next 12 months.

ost significant to ASPPA’s Education and Examination program is that January 2006 signifies Mthe rollout of ASPPA’s new credential, Qualified Plan Financial Consultant (QPFC). Reaching S this goal opens the next important phase in SUES IR ASPPA’s mission to be the premier educator for all FA retirement plan professionals. G C Background PA Conceived in response to requests from sales and A investment advisors for a meaningful credential from ASPPA, QPFC has been designed and MARKETIN ASPP developed to demonstrate retirement plan expertise from the financial investment side of the GOVERNMENT AF house. The QPFC advisor is the specialist who stands apart from the crowded retirement planning ACTUARIAL COMMITTEE IS field and is ahead of the pack. as “meaty” or “with teeth,” the results are the same…ASPPA credentials have This credential is not for everyone. QPFC was real significance in providing professional career development and building built for the serious career financial professional confidence in client service. who sells, markets, supports or provides advice within the qualified retirement plan marketplace. Do You Have What It Takes? QPFC candidates include financial advisors, ASPPA has set the bar high for the QPFC. Candidate qualifications include at brokers, insurance agents, wholesalers, producing least two years of retirement plan experience and at least one of the following TPAs, RIAs, Registered Reps, sales and marketing credentials: support staff, trainers and other professionals within • NASD series 6, 7 or 65 licenses; the broad spectrum of financial, investment and • State life or annuity insurance license; insurance industry specialists. QPFC can also serve as a building block for • Investment Advisor Representative or Registered Investment Advisor. retirement professionals interested in pursuing QPFC candidacy will also be considered for an advisor without any of other specialized credentials or as a supplemental the above credentials but having a minimum of three years of retirement credential for senior level advisors seeking investment experience and supporting letters of recommendation from two investment expertise credibility to complement credible industry sources. their career portfolio. The QPFC academic requirements are also substantial. Each candidate ASPPA’s reputation as the heavy hitter in must pass two self-paced Retirement Plan Fundamentals (RPF) exams delivering retirement plan professional credentials and two advanced level Plan Financial Consultant (PFC) proctored exams. has been steadily built over the past 40 years. Candidates can register online in the Education and Examination section of ASPPA’s in-depth education programs and the ASPPA Web site: www.asppa.org. challenging exams are developed in cooperation Registrations are rapidly rolling in. Candidates have already signed up to with our academic partner, the University of complete RPF exams in January and February in time to sit for PFC exams Michigan. Whether people describe our programs during the six-week 2006 spring window which runs from May 15 to June JANUARY-FEBRUARY 2006 :: 27

30. The fall exam window runs from November maximize opportunities for candidate questions and discussions, participant 1 to December 15, 2006. Thus, a candidate who numbers will be limited to 20 per session. begins his or her pursuit of QPFC early in the year The webinar course format received extremely positive reviews from can complete the entire process in 2006 and apply beta-test participants, and ASPPA is excited to introduce this new education for the credential before the year ends. format to QPFC candidates this spring. Candidates who have previously passed ASPPA’s PA (Pension Administrator) series of Continuing Education exams are allowed to waive the RPF requirement ASPPA’s continuing education requirement of 40 credits every two and need to only pass the two PFC exams to meet years applies to QPFC credentialed members. In light of the new QPFC academic requirements. This waiver is an financial investment perspective, ASPPA plans to develop CE courses and opportunity for PA certificate holders who seek complementary conference seminars focused on related topics of interest. an advanced financial credential to step up and Financial advisor topics may even be delivered using our webinar format, attain the QPFC in less than a year and, for current providing opportunity for the financial advisor to earn CE credits without ASPPA credentialed members, to quickly complete leaving the office. the new program requirements. We are also seeking continuing education sponsor status so that Textbooks and other exam study materials can ASPPA’s courses and exams will fulfill CE credits required to maintain other by purchased at ASPPA’s new online bookstore. credentials or licenses such as CFP and CLU. More information about this Introduced in January, the ASPPA bookstore is initiative will be released in The ASPPA Journal and The Candidate Connection your resource room for books to prepare for newsletter when approvals are in place. exams or update your knowledge base or to We are really excited that the launch of QPFC at The 401(k) SUMMIT simply add a new text to your retirement plan 2006 will be a rollout of grand proportions. Take the opportunity to hear library. Bookstore orders will flow directly to our the latest and greatest QPFC facts and news from in-the-know experts. The fulfillment company, streamlining the payment and special session titled “QPFC: What’s all the BUZZ About?” is scheduled for delivery processes. Sunday, February 26, at 4:15 p.m. Don’t miss it! ▲

Optional Courses Bunny Wing Fernhall, Chief of Pension Education, joined ASPPA in Interactive webinar sessions will be introduced in March 2005. She is an employee of the University of Michigan through spring 2006 to aid candidates studying for PFC-1. an arrangement with ASPPA Pension Education and Research Foundation. These interactive education sessions will consist of She has served as the director of strategic planning and administration at four or ﬁve modules covering some of the most George Washington University. Most recently she served as a credential challenging topics in the course curriculum. To specialist for a national trade association. There she engaged in marketing and building their association credentialing program.

Subject Matter Experts Needed for ASPPA’s E&E Nominations Open Committee for Educator’s Award Two volunteers are needed to assist E&E as Subject Matter Experts (SME) in the areas of coverage and plan design, The Education and Examination (E&E) Committee is seeking respectively. SMEs act in an expert nominations for ASPPA’s Educator’s Award to recognize and advisor role and participate in the honor outstanding educators. development and evaluation of learning objectives, program curriculum, exam questions and text material. SMEs If you know an ASPPA member who has made a signiﬁcant recommend changes and participate contribution to pension education (e.g., through instruction, in discussions of the depth and breadth conferences, ASPPA Beneﬁts Councils, promotion of ASPPA’s of topic coverage in particular exams. education program or preparation of education materials), Openings are available immediately. please visit www.asppa.org and submit your nomination by For more information, contact Bunny July 1, 2006. Please include a few paragraphs in support of Wing Fernhall, Chief of Pension your nomination, including nominee background information. Education, at 703.516.9300 or by e-mail at [email protected]. N 28 :: THE ASPPAJournal IO AT ASPPA Continuing Education

MEMBERSHIP Program Update A BENEFITS COUNCILS by Denise E. Calvert CONTINUING EDUC ASPP

SPPA’s current continuing education Did you know that ASPPA credentialed (CE) program cycle began on members may access, view and January 1, 2005, and continues through December 31, 2006. report their continuing education AASPPA has a mandatory program of continuing credits online? education that affects all credentialed members. This new convenient service allows credentialed If a credentialed member does not comply members to log on to the Members Only section with the continuing education requirements, his or of the ASPPA Web site and view their ASPPA CE her credentials will be suspended. Members may credits for the current CE cycle as well as complete reinstate the suspended credential by earning 40 and submit their ASPPA Continuing Education l CE credits and paying a $50 reinstatement fee. Reporting Form online. S IONS l CPCs, QPAs, QKAs, QPFCs and APMs How to Use the Online Service S AT l In order to maintain your ASPPA credential in Log on to the Members Only section of the l l good standing, you must earn 40 continuing ASPPA Web site using your member login and l l password. From there, select the CE Reporting l education credits during this cycle (and in future l l two-year cycles). For newly credentialed membersEXAMIN Form link on the left hand side of the page to & and those reinstating a credential, the number of access the online CE Reporting Form. CE credits required is pro-rated based on the date The form will outline the number of CE TECHNOLOGY CONFERENCE of admittance or reinstatement withinT the I O Ntwo-year credits required for the current cycle, the number CE cycle. of ASPPA-sponsored credits already earned and the balance of credits still required. Continue scrolling BOARD OF DIRECTOR FSPAs and MSPAs EDUCA down to view additional credit details and to On March 19, 2005, the ASPPA Board of Directors complete and submit your reporting form. Please passed a resolution establishing a new continuing note that your reporting form cannot be submitted education requirement for FSPAs and MSPAs to online unless the total number of CE credits coincide with the requirements and three-year required for the cycle has been recorded. continuing education cycle to which the Joint All CPCs, QPAs, QKAs, QPFCs and APMs Board for the Enrollment of Actuaries (JBEA) are required to submit an ASPPA Continuing currently adheres. ASPPA will verify Enrolled Education Reporting Form in order to retain Actuary status with the JBEA for all FSPA and credentials. For a full explanation of ASPPA’s MSPA members at the end of each three-year CE Program requirements and qualifying CE JBEA CE cycle. FSPAs and MSPAs do not need to activities, refer to the 2005-2006 CE Guidelines file an ASPPA CE reporting form. & Forms brochure inserted in this issue of The ASPPA Journal or check the ASPPA Web site at S www.asppa.org/faq/conted.htm. ▲ SUES IR FA Denise E. Calvert is ASPPA’s Director G Don’t forget! 2005-2006 of Membership. At ASPPA, she directs C membership projects, maintains, develops and PA CE Reporting Forms must implements membership benefits and services A and assists the Membership Committee in be submitted to ASPPA by marketing ASPPA membership and benefits. MARKETIN Denise also serves as the liaison to the Membership and ASPP January 10, 2007. CE committees and oversees the coordination of the ASPPA Benefits Councils program. Denise joined ASPPA in 2002 GOVERNMENT AF and has worked in association management since 1988. ACTUARIAL COMMITTEE IS N IO AT

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CONTINUING EDUC ASPP

l S IONS l AT S l l l l l l l EXAMIN l &

TECHNOLOGY CONFERENCE T I O N

BOARD OF DIRECTOR EDUCA

S JANUARY-FEBRUARY 2006 :: 29 SUES IR FA G C PA ASPPA Carries Tax Reform A

Concerns to CapitolMARKETIN Hill ASPP

by Jolynne M. Flores GOVERNMENT AF In odd-numbered years, which are non-election years, ASPPA sponsors ACTUARIAL COMMITTEE IS a “Visit to Capitol Hill” concurrent with the ASPPA Annual Conference in Washington, DC. 2005 was such a year.

articipation in the Visit to Capitol Hill is open to all ASPPA Annual George J. Taylor, Conference attendees. Participants MSPA, and J. visit with one of their three members Scott Groene, Pof Congress, advocate the pension issue the CPC, QPA, participant group has been briefed on by visited with a member of ASPPA’s Government Affairs Representative Committee and have the unique advantage of Platts (R-PA), presenting this message from their own local member of the (constituent) perspective. The constant flurry of House Committee pension activity generates the need for participants on Education & to visit with their members of Congress. 2005 Workforce. turned out to be a particularly important year. Since spring 2005, ASPPA had anticipated contribution retirement plans and other retirement savings plans that the 2005 Visit to Capitol Hill, which occurred while permitting only after-tax contributions. on November 8, would include a response to Quite concerned with the Panel’s proposals, a record 330 the President’s Advisory Panel on Federal Tax ASPPA Annual Conference attendees participated in the 2005 Reform (Panel). As expected, the Panel issued Visit to Capitol Hill. After picking up a “Don’t take away my proposals that included significant new savings 401(k)” button, a packet of information to help finalize their 1 proposals which, if enacted, would be detrimental preparations and attending a briefing rally , participants boarded to the health of our nation’s employer-sponsored the buses and headed to Capitol Hill. retirement plan system. The Panel recommended An overwhelming majority of congressional offices were two versions of a tax reform plan that would sympathetic with the participants’ message—Don’t Take Away make a variety of changes to the federal income My 401(k). As David A. Pratt, CPC, an ASPPA member from tax system by lowering rates and eliminating Minnesota, stated, “Both before and after Max Wyman and I or scaling back most tax breaks. Among these met with Karin Hope, the Legislative Director and Counsel to recommendations are several savings accounts Representative Jim Ramstad (R-MN), I had occasion to speak that would simplify and consolidate defined briefly with Congressman Ramstad. At our departure, as we

▲ ▲ ▲ 1 Participants found that the briefing rally was both informative and fun. Attendees were seated according to the state they represented. The room décor included balloons and streamers and made participants feel as if they were delegates at a national political convention. Participants were addressed as, “I recognize the participant from the fine state of Florida.” .

November 10 GAC Corner Proposed IRC §411(d)(6) regulations ASPPA Government Affairs Committee Filed with: IRS Comment Letters Recently Filed Comments: www.asppa.org/archive/gac/2005/2005-11-11-411d6.htm Nov-Dec 2005 November 30 Participant Investment fee disclosure, with model form For all GAC ﬁled comments, go to Filed with: DOL www.asppa.org/government/gov_comment. Comments: www.asppa.org/archive/gac/2005/2005-11-30-fees.htm 30 :: THE ASPPAJournal

ASPPA thanks the following 2005 ASPPA Annual Conference attendees for their participation and advocacy on behalf of the employer-sponsored retirement plan system during their participation in the 2005 Visit to Capitol Hill.

Alabama Ingrid J. Fils, QPA D. Carlton Garner, MSPA Steven Fraidstern, APM Robert A. McKendry, QPA, QKA Rodger A. Graves Patricia A. Nier, QKA Cameron M. Kelly, QPA Ruth M. Roper, QPA Barry Max Levy, QKA Fred G. Stickney, QKA Kevin E. Merrill Arizona Calvin E. Nystrom, QPA Kerry M. Boyce, CPC, QPA Janet B. Richardson, QKA Bruce R. Gardner, MSPA Robert M. Richter, APM Lynn Karabinas Kim L. Szatkowski, CPC, QPA, QKA Katherine M. Manker, MSPA Donna L. Teat, QPA, QKA Andrew J. Molzahn, QPA Richard H. Thompson, QPA Lynn M. Young, MSPA Kenneth M. Vollmer, MSPA Arkansas Anne M. Weinblatt, QKA Gail A. Engblom, CPC, QPA Brenda W. Wren, QPA Karen A. Jordan, CPC, QPA, QKA Judith A. Zoller Pamela G. Frazzitta, QKA, and Sally J. Zavattari, FSPA, CPC, had a Duane L. Mayer, MSPA Georgia valuable discussion with Representative Johnson (R-TX), chair of the House California Becky A. Conner Subcommittee on Employer-Employee Relations. Osmundo A. Bernabe, MSPA Ilene H. Ferenczy, CPC G. Patrick Byrnes, MSPA Allison T. Hawkins Pamela J. Constantino, CPC, QPA Margaret M. Heffernan, CPC, QPA, QKA shook hands, and without provocation, Ramstad looked at my Lawrence Deutsch, MSPA Andy Hudson button and mentioned that I was ‘darn right’ and that they were Cynthia S. Ellner Jane C. Jackson, QPA Catherine Hill-Waggoner Joni L. Jennings, CPC, QPA not going to take away anybody’s 401(k). I’d say the buttons Guy J Hocker, III, CPC, QPA James J. McKinney, IV, QPA, QKA were effective!” R. Bradford Huss, APM Katrina Moody ASPPA hopes you can find a way to participate in the James S. Moyer, QPA, QKA Adam C. Pozek, QKA Margery F. Paul, MSPA Kasey R. Price, QKA next Visit to Capitol Hill, planned for 2007. ASPPA members, Kurt F. Piper, MSPA David C. Schultz, APM the retirement plan industry and lawmakers will inevitably be Michael B. Preston, MSPA Bernadette Sharma, QPA enriched by your participation. As Rebecca L. Poore, QKA, Deborah G. Printz, QKA Michael C. Williams Marilyn Ryding, QPA Susan Miner Wright an ASPPA member from Ohio, stated, “More people in the John M. Sciarra Tim Wright legislature need to be contacted directly. You assume that Michael B. Stuber, QPA Illinois Virginia Krieger Sutton, QKA Andrew C. Atseff legislators are aware of the important issues because the issues Cheryl Ann Tabbi Tamara L. Bowman, CPC, QPA are within your reality, but that doesn’t mean they are aware of Kelly A. Thompson, QPA, QKA Charlie L. Clark, III, QPA, QKA these issues. There are too many issues for them to follow or to Natalie D. Vaughn, CPC, QPA Lanning R. Hochhauser, APM Michael Weintraub Andrew C. Hoskins be knowledgeable about all of them. We work in this field, so Colorado James Patrick Ingold, APM ASPPA and retirement plans are important to us. They are not Tom Briggs Danny L. Kiedaisch a part of everyone’s priority. If we want to make an impact, we Dirk Camilletti Barry Kozak, MSPA W. Frank Porter, QPA, QKA Marianne T. Kral, CPC, QPA, QKA have to speak up.” Michael N. Staples, QKA Robert D. Lees, QKA When asked why he participated, Michael B. Preston, Sal L. Tripodi, APM Gary R. Mann, APM MSPA, an ASPPA member from California, replied, “There are Connecticut Michael J. McCabe, CPC Michael E. Callahan, FSPA, CPC Jeffrey C. McGill, QPA many reasons. I believe in our system of government and that Scott D. McCarthy, QKA, QPA Audra Nanni it cannot always find the right course without education. Who Heather S. Perry, QKA Kimberly A. Roberts, QPA Florida Gary R. Saake better to communicate/educate relative to employer-sponsored Richard P. Blum Harvey Shifrin retirement plan issues than us? One never knows who will Gary A. Burns Kathleen J. Tompkins, MSPA decide that key vote, or sway that influential legislator. Please Rebeccah L. Cardillo, QKA Aaron Venouziou, MSPA Donald D. Chapman, MSPA take this opportunity to encourage your representative or Herbert V. Danielson, Jr., MSPA senator to see things as they are, so that they can be poised to do Eric C. Droblyen, CPC, QPA the right thing!” ▲

Jolynne M. Flores, MBA, has been ASPPA’s Government Affairs Manager for ﬁve years. She is also the ASPPA PAC Manager and Production Manager and Associate Editor for The ASPPA Journal. Since arriving in Washington, DC, she has worked in international project coordination for a professional association of behavioral scientists and in government affairs for an association of municipal electric utilities. Prior to moving to Washington, she worked for the State of California as a regulator in the energy industry. She was an active member of Toastmasters International for 18 years. JANUARY-FEBRUARY 2006 :: 31

Indiana Mississippi Ohio Tennessee Thomas R. Ackmann Dalton J. Snyder Kenneth L. Barton, CPC, QPA Robert C. Burleigh, Jr. Michael Thomas Burmeister, QPA Missouri Jennifer L. Bufe, QPA Nancy C. Cochran, CPC Stephen W. Canter, QPA Allan D. Browns, QPA, QKA John C. Colvard Kim Anh T. Dang, CPC, QPA, QKA Randall J. Crouch, CPC, QPA, QKA Gary M. Jones, QKA Jan L. Davis, QPA Scott Donnellan, CPC, QPA, QKA Terri L. Dewitt Patrick D. Teague, QPA, QKA Brian Flanagan Terry W. Dunger, APM Peter Gould, CPC, QPA, QKA Montana Ronald Gross, MSPA Matthew L. Grabeel, QKA Christina Hobbs, QKA Gregory E. Matthews, APM Richard L. Jolley, MSPA John K Kopra Brad R. Lankford, MSPA Kathleen Matthews Kevin Krantz, APM Jeffrey Neal Wallace, MSPA Todd Lehmann Nebraska Robert E. Martin, QPA Texas Marilyn V. Manzer, QPA, QKA Timothy G. Ashton Gina R. Moore Cynthia S. Brown, CPC, QPA Alice F. Ruper, QKA John F. Nownes, III Carol L. Nasralla, QKA Kathryn Capage Debra L. Sullenbarger Douglas J. Weishahn Pamela S. Noble, QKA Pamela G. Frazzitta, QKA Linda L. Wallace Nevada James M. Osterhaus, QKA Penelope Kilpatrick Iowa Earl Dysthe, MSPA Steve J. Persons, MSPA Mary R. Ledbetter, QKA Dion J. Brockway, QKA J. Michael Pruett, CPC, QPA Rebecca Poore, QKA Carey W. Lindsey, QKA James L. Kidder, CPC New Hampshire Richard E. Pummill, QPA, QKA John R. McCaw, MSPA Janice Purdum Thomas P. Adams, MSPA Paula Somori-Arnold, QKA Charles N. McLeod, FSPA, CPC Kelli Winchester Peter T. Bozzi, CPC John P. Stebbins Mary H. McLeod Kansas Kevin Burke Haskell, CPC, QPA, QKA Paula M. Steinhart, QPA, QKA Judy K. Mesecher Edward Barash Justine M. Woodard, QKA Doris Takieddine, QKA Jay S. Miers, QPA Nancy L. Lustig, QPA New Jersey Oklahoma Karen Nowiejski, MSPA James R. Nolan Donald A. Barnes, FSPA Robert Stan Anthis, QPA, QKA George C. Patterson, CPC, QPA Debra L. Singer, QKA John M. Bury, MSPA Douglas A. Lawrence, CPC Dale C. Rogers, CPC Willard D. Smith, Jr., CPC, QPA Beth Davies Laymond B. Loyd Judy Tavawalla Sonya D. Wright, QKA Martin K. Falk, QPA, QKA Oregon Larry A. Turner, CPC, QPA Kentucky Kathleen Gnash, QPA, QKA Paul S. Hartwig, QKA Arasely Valdez Colchado Hannah Hurt Slodki Gary Gurman, QPA Pennsylvania Annette Williams A. Michael Marx, APM Elizabeth T. Hallam, CPC Jacqueline A. Albee, CPC, QPA Sally J. Zavattari, FSPA, CPC Jean Watson Sheila Hickey, CPC Bradbury S. Arnold, APM Utah Louisiana Asha M. Mendu Mark K. Dunbar, MSPA Scott F. Betts Mary T. Miller, CPC, QPA, QKA Kevin P. O’Connor, CPC, QPA Randall S. Faurl, QPA, QKA C. Kurt Cox, QPA, QKA Patricia M. Monju, QPA Stephen H. Rosen, MSPA, CPC Timothy J. Feusner, QPA, QKA Gregory Fowler Laurel L. Montagnet, QKA Edgardo A. Saade Ronald R. Froeschle, QPA, QKA Michael S. Rafferty, CPC Sarah E. Simoneaux, CPC James M. Santee J. Scott Groene, CPC, QPA Vermont David A. Winkler E. Joseph Skidmore Stephanie M. Hepler, QPA, QKA Susan Eissler, MSPA, CPC, QPA Maryland Susan Szeller, QPA Lisa S. Hoover, CPC, QPA Virginia Pamela J. Clinch, CPC, QPA, QKA Cathy G. Waxenberg, APM Rebecca L. Hummer, CPC, QPA Burl V. Bachman, MSPA Laurie L. Dalton, QPA, QKA Virginia C. Wentz, MSPA, CPC Barbara B. Leadem, QPA, QKA Craig C. Dewey, APM Lisa M. Eppard, CPC, QPA Lawrence J. Zeller, MSPA Cosmo A. Leboffe, MSPA Kathryn Duke, QPA Mark J. Ivcevich New Mexico David M. Lipkin, MSPA Anna M. Hunter, CPC, QPA Theodore G. Reeder, III, APM Kristina K. Butcher, QPA, QKA Miriam G. Matrangola, QPA, QKA Lauren McCarty Lynn A. Shuppel, APM Susan J. Chambers, FSPA Scott E. Ruehr, MSPA Ronica C. McGovern, QKA Nana A. Waters, QPA Joan E. Scherer, QPA, QKA Christine G. Russell, QPA, QKA Donald J. Potter, Jr., CPC Massachusetts Lisa A. Stifel, QPA, QKA Jeanne T. Schanzenbach, CPC, QPA Phil Schwartz, QPA Carolyn M. Cassetty, CPC, QPA New York Lisa A. Showalter, CPC, QPA, QKA David M. Syrett, MSPA Maryann D. Clark, QKA Sean K. Arnold, QKA George J. Taylor, MSPA Washington Jill B. Donnelly, CPC, QPA Randall J. Broscious, QPA, QKA Lisa S. Weaver, APM Yannis P. Koumantaros Daniel N. Fowler, CPC, QPA, QKA Daniel R. Casella, CPC, QPA Michelle M. Young, CPC, QPA Suzanne Krueger Mary Harris Jean M. Dailey, QKA Rhode Island Michael W. Spaid, MSPA, QPA Ellen S. Houston, QKA Tara A. Donovan Jeffrey A. Brown West Virginia Andrew E. Keith, QKA John M. Doyle, MSPA Karl V. Marzocchi, CPC, QPA, QKA Larry R. McClung, QPA, QKA Janine M. Laverdiere David M. Gelman, MSPA South Carolina Wisconsin Susan R. Retchin Michael J. Hofmann, CPC, QPA Nancy E. Brown, MSPA William F. Brown Lawrence C. Starr, CPC Deborah A. Johnson Thomas A. Brown Rebecca L. Darrow, CPC, QPA, QKA Marcy L. Supovitz, CPC, QPA Eugene L. Joseph, MSPA Joan A. Gucciardi, MSPA, CPC David B Vail, APM Martella A. Joseph, MSPA Phyllis E. Klein Michigan Judy A. Lynch, QPA Sharon L. Severson, CPC, QPA Marcia D. Bratschi Manuel Marques, QKA Leanne M. Stokes, QKA Marlene M. DeBrosse, QKA Jose C. Montenegro, MSPA Sebastian C. Fogle, QKA Duke A. Potter, QKA Sheila M. Freund, QKA Roger M. Ramsay, QPA, QKA Cheryl L. Gabriel, CPC Richard W. Rausser, CPC, QPA, QKA Susan N. Olney, QKA Max Rosenberg, MSPA Diane M. Storm, MSPA Suzanne D. Smith, CPC, QPA Carol Ann Tracey, CPC David J. Tananbaum, MSPA Thomas C. VanDeGrift, MSPA Linda M. Tortu, QPA Randall Elliott Walker, QKA North Carolina Scott A. Westgate, CPC, QPA Robert N. Adams, Jr. Marylis A. Wozniacki, QPA Lisa A. Allen, QKA Minnesota Monica Brame Jerri J. Olson James T. Comer, III David A. Pratt, Esq., CPC James A. Houpt Kathy M. Roland, QPA, QKA Max E. Wyman, MSPA, CPC

Visit to Capitol Hill participants relax in front of the Capitol after meeting with their member of Congress. N IO AT

MEMBERSHIP A BENEFITS COUNCILS

CONTINUING EDUC ASPP

l S IONS l AT S l l l l l l l EXAMIN l &

TECHNOLOGY CONFERENCE T I O N

BOARD OF DIRECTOR EDUCA

:: THE S 32 ASPPAJournal SUES IR FA G C PA A Actuarial Issues Committee

by Charles N. McLeod, FSPA, CPC MARKETIN ASPP ASPPA’s Actuarial Issues Committee (AIC) was formed in 2005 under GOVERNMENT AF the guidance of Stephen H. Rosen, MSPA, CPC, ASPPA’s Immediate ACTUARIAL COMMITTEE IS Past President. The AIC is the main body for coordinating ASPPA’s non-legislative and non-regulatory actuarial activity.

ommittee members from the AIC • Reviewed, for possible comment, a letter from the ABCD to the IRS serve as liaisons to other ASPPA regarding the potential conflicts between the Code of Professional Conduct committees and subcommittees and a proposal to change relative value disclosure for pension plans. to enhance the actuarial content • Reviewed, for possible comment, a directive from the Justice Department of our programs and provide an requiring actuarial consultants to halt anti-competitive information Cactuarial perspective to ASPPA’s future planning. exchange. The AIC also provides a central location for • Reviewed, for relevance to ASPPA actuaries, the International Actuarial ASPPA actuaries to voice their concerns and Standard of Practice 2-8 and glossary of terms. grievances. Additionally, the AIC reviews standards and guidance issued by the other professional or As one can see, the AIC was quite active this first year of its existence. governmental organizations that impact pensions Current committee members and their general areas of responsibility are: in the United States. Finally, the AIC oversees the Teresa T. Bloom, APM Co-chair activities of the various Intersocietal committees in Charles N. McLeod, FSPA, CPC Co-chair which ASPPA has representation. Donald A. Barnes, FSPA Intersocietal committees (USA) Projects that the AIC was involved in during Leonard R. Cargill, Jr., MSPA Public plans and miscellaneous 2005 include: technical issues • Prepared a response to the Canadian Institute of David B. Farber, MSPA Liaison between AIC and the Actuaries regarding the role of pension actuaries Education and Examination in the United States. Committee • Worked with ASPPA's Membership and Bruce R. Gardner, MSPA Standards of Practice and small plan Executive committees in developing a program issues with the Joint Board for the Enrollment of Actuaries in which Enrolled Actuaries attending Curtis E. Huntington, APM Intersocietal committees (USA and ASPPA webcasts could receive continuing abroad) and international standards education credits. See page 39 of the September- David M. Lipkin, MSPA Liaison between AIC and the October 2005, The ASPPA Journal, for more Government Affairs Committee information. Kathleen E. Manning, MSPA FASB and large plan issues • Addressed the use and priority listing of actuarial Steven C. Scudder, APM Legal support and litigation issues and non-actuarial credentials attained by ASPPA Lynn M. Young, MSPA Liaison between AIC and the members from ASPPA, other societies and the Membership Committee Joint Board. If any ASPPA member is interested in learning more about the AIC, • Addressed various actuarial conflict-of-interest contact Jolynne Flores at jfl[email protected]. ▲ issues. • Commented to the Actuarial Standards Board Charles N. McLeod, FSPA, CPC, is president and actuary of National Pension Committee on the Exposure Drafts of Actuarial Pension Services, Inc. (NAPS), a Houston-based pension consulting ASOP 4, ASOP 27 and ASOP 35. firm. He is a member of ASPPA’s Board of Directors and Co-chair of the Actuarial Issues Committee. He is also an Enrolled Actuary, fellow of the • Reviewed, for possible comment, a FASB Conference of Consulting Actuaries and member of the American Academy proposal to eliminate the ability to smooth or of Actuaries. Chuck formed NAPS in 1980, and his firm specializes in the average asset values and move strictly to a fair design, installation and administration of tax qualified pension and profit sharing plans. He market value requirement. regularly speaks to, and provides instruction for, programs sponsored by ASPPA, the Texas Society of Certified Public Accountants, the Houston CPA Society and various financial planning, accounting, attorney, insurance and actuarial groups in the Houston area. N JANUARY-FEBRUARY 2006 :: 33 IO AT Learning Your ABCs—in Chicago!

by Martin D. Jantzen, CPC, QPA MEMBERSHIP A BENEFITS COUNCILSWhat exactly does a local ASPPA Beneﬁts Council (ABC) do for our profession? Since AprilCONTINUING 1997, the EDUC ABC of Chicago has been providing ASPP the Windy City with pension resources second to none.

n average, the ABC of Chicago President Secretary schedules meetings four to Martin D. Jantzen, CPC, QPA Steven L. Haugen five times a year, with each Jantzen Associates, Inc. US Department of Labor, EBSA meeting lasting about 1½ Vice President (Programs) Government Relations Chair hours. Attendees are encouraged to network Sally J. Stresnak Barry Kozak, MSPA and stay after for hors d’oeuvres and refreshments. Transamerica Retirement Services The John Marshall Law School Our speakers provide educational opportunities Vice President (Membership) Publicity Chair Kimberly A. Roberts, QPA David C. Strosnider to actuaries, pension professionals, lawyers, CPAs Datair Employee Benefit Systems, Inc. Chuhak & Tecson, PC and financial advisors. Recent past speakers have Treasurer ASPPA Liaison and CE Chair l included, Brian H. Graff, Esq., APM; Joan A. Mark A. Yahoudy Raymond D. Berry, MSPA S IONS l Gucciardi, MSPA, CPC; Janice M. Wegesin, CPC, RSM McGladrey, Inc. CCA Strategies LLC AT S QPA; Jason Crane; Vickie A. Surguy and Monika l l l A. Templeman. In 2006, we plan to have Sal L. additional benefits of continuing education credits for their respective fields. l Tripodi, APM, speak to our group. We currently are working to provide lawyers licensed in Illinois withl CLE to l l Our EXAMINboard is represented by a cross section comply with the newly mandated continuing education requirements. l of the retirement& plan field (TPAs, recordkeepers, For more information about the ABC of Chicago, please contact me at CPAs, lawyers, actuaries and finance and govern- 773.472.7000 ext 23 or Kim Roberts, Membership Chair, at 630.325.2600. ▲ ment officials). As evidenced by the diversity of TECHNOLOGY CONFERENCE T I O N our board, we also make every effort to provide a Martin D. Jantzen, CPC, QPA, has over 14 years of experience in range of speakers and topics that segment different employee benefit plan administration and financial and fiduciary aspects of BOARD OF DIRECTOR parts of the market place. We openly solicit ideas qualified plans. He has served on the board of the ABC of Chicago since EDUCA for upcoming topics and make every effort to 2004. Jantzen Associates, Inc., established in 1991, is an employee benefits find suitable and timely topics that affect our consulting firm in Chicago, IL, that specializes in the design, management and field. Our growing membership is provided the administration of company retirement plans. ABC Meetings Calendar February 14 April 18 June 15 December 7 ABC of Cleveland ABC of Cleveland ABC of Chicago ABC of Chicago Topic: TBD Topic: Washington Update Topic: TBD Topic: TBD Speaker: Stephen W. Forbes Speaker: Brian H. Graff, Esq., APM Speaker: TBD Speaker: TBD

S February 16 April 26 June 21 December 7 SUES IR ABC of New England ABC of New England ABC of Northern Indiana ABC of Dallas/Ft. Worth FA Topic: Roth 401(k) Topic: Washington Update Topic: Washington Update Topic: Keeping Current Speaker: Adam C.G Pozek, QKA Speaker: Brian H. Graff, Esq., APM Speaker:C Brian H. Graff, Esq., APM (all-day seminar) Speaker: Sal L. Tripodi, APM PA March 16 May 22 AugustA TBD ABC of Chicago ABC of Northern Florida ABC of Dallas/Ft. Worth Topic: TBD Topic: Washington Update Topic: TBD Speaker:MARKETIN TBD Speaker: Brian H. Graff, Esq., APMASPPSpeaker: TBD

April TBD June 13 September 21 GOVERNMENT AF ABC of Dallas/Ft. Worth ABC of Cleveland ABC of Chicago Topic: TBD Topic: 403(b), 457 & Plan Audit Topic: TBD ACTUARIAL COMMITTEE IS Speaker: Phil Bush Activity Speaker: TBD Speaker: TBD THE 34 :: THE ASPPAJournal

ASPPA Beneﬁts Council of Western Pennsylvania

by Michael W. Steve, QPA

The goal of the ASPPA Beneﬁts Council of Western Pennsylvania is to provide educational opportunities to the retirement plan professionals in our area by offering programs where local and nationally recognized speakers discuss topics relating to the retirement plan industry. Also, we want to provide a forum for exchanging ideas and an opportunity for professional networking.

he ASPPA Benefits Council of Western PA recently celebrated its five-year anniversary. Over the years, our ABC has continued to grow and Tbecome more visible among the region’s retirement planning community. Our chapter offers both individual and corporate memberships and currently has a total of 19 memberships and even more members. We have programs every quarter throughout the year. Each program is normally held in the Gateway Center building in downtown Pittsburgh. A catered lunch buffet is served before the speaker begins, which gives everyone a chance to mingle and network. The chapter hosted several well-received speakers during 2005. In April, we had Brian Every year, we plan a “Members Only” event where our members get H. Graff, Esq., APM, present his Washington & together for an evening outside the retirement plan environment. In August, Government Affairs Update. Brian is a favorite our “Members Only” event involved attending a Pittsburgh Pirates game speaker of our group and we would like him to along with a couple of hours of pre-game tailgating. Even though the Pirates return. The attendance is always excellent when lost (as usual…at least we have the Steelers!), everyone enjoyed the food at the Brian speaks! tailgate, the beautiful evening and scenery of PNC Park and getting to know Once a year, we try to bring in a local speaker the other retirement professionals outside of a work atmosphere. to present a topic. In June, we were fortunate to We are looking forward to 2006 and hosting a variety of both national have two local speakers at our meeting. Michael E. and local speakers. We encourage input into designing our quarterly programs Lloyd of Williams Coulson spoke on non-qualified from our ABC members, as well as other ASPPA members, before our agenda plans, and David M. Lipkin, MSPA, informed us on is set for the new year. issues regarding DOL orphan plans. In September, For more information about the ABC of Western PA, including we were eager to hear Gary S. Lesser, of GSL membership registration for 2006, please contact Jackie Albee, CPC, QPA, Galactic Consulting in Indianapolis, IN, discuss membership chair, at 412.263.0102 or [email protected]. ▲ SEP, SIMPLE and Roth 401(k) plans. We were excited to try something new for our Michael W. Steve, QPA, is currently a senior pension analyst for Metro December 2005 meeting. Sal L. Tripodi, APM, Benefits, Inc., where he has been an employee for almost six years. Michael came to speak to our group, and it was an all-day has been involved with the ABC board since 2003. seminar! Sal spoke on a variety of topics, including plan design, non-discrimination testing and his always popular “What’s New?” JANUARY-FEBRUARY 2006 :: 35

ASPPA Welcomes a New ABC— The ASPPA Beneﬁts Council of New England

ASPPA’s newest ABC, the ASPPA Benefits Council of New England, was approved on November 4, 2005. The Council is planning their first meeting and is currently looking for new members. For Great Nor information on becoming a thwest Ne w England member of the ASPPA Benefits Ne Chicago w York Clev We Del Council of New England, aw Nor elandstern P are ther Va please contact: Cincinnatn Indiana ennsyl lle y vani i Ellen S. Houston, QKA Dallas/Ft Atlant i a a Sentinel Benefits Group, Inc. . W Central Florid or th 601 Edgewater Drive, Suite 250 th Nor th Flor a Wakefield, MA 01880-6237 Te xas Gulf Coast id 781.914.1297 xas Gulf Coast South Florida [email protected] a

There are currently 15 ASPPA Beneﬁts Councils providing continuing education and networking opportunities to pension professionals on a local level. For information on ASPPA Beneﬁts Councils, visit the Local Council section of ASPPA’s Web site at www.asppa.org.

New for 2006! the advanced actuarial conference

June 9-10, 2006 The Colonnade Boston Boston, MA