COMMON SENSE

Final Warning: Adopt Those PPA Amendments by Year-End

by

Dave Seitter

For calendar-year plans, this PPA amendment deadline is December 31, 2009. (Governmental plans have an additional two years, and certain collectively bargained plans may enjoy an extension, as well.) As reported in our August 2009 article, tax-qualified retirement plans must be amended by the end of the 2009 plan year to reflect the mandatory changes enacted as part of the 2006 Pension Protection Act (“PPA”). … Modified assumptions

for converting annuities into lump-sum payments (even small, lump-sum cashouts); Benefit restrictions based on a plan’s funding status; Expansion of the direct rollover rules (e.g., allowing such rollovers to Roth IRAs, of after-tax …

The consequences of missing any of these amendment deadlines could be quite severe. The plan would lose its tax-qualified status. We therefore strongly recommend that retirement plan sponsors review the terms of their plans to ensure that all PPA-related and discretionary changes have been reflected in appropriate plan amendments. Due to the number and variety of PPA changes, this will not be a simple task.

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Technorati Tags: 2006 Pension Protection Act, 401k and Retirement, business, Compensation and Benefits, Human Resources, investing, law, pension

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This is just the beginning of massive law suits which will be filed by pension plans participants.  The government has imposed rules and changes to pension plan sponsors by the Pension Protection Act 2006.   You have to understand the difference between defined benefit plans and defined contribution plans.  In the roaring days of spectacular stock market gains, everyone wanted to participate in the the gains.  Even the employers, who by unburdening themselves of a “defined benefit plane”, switched to a defined contribution plans.

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Under the defined benefit plan rules, employees are guaranteed a specific dollar amount upon retiring.  Unfortunately, 75% of the SP500 companies that have these types of plans, have not contributed the minimum to their employees accounts.  So, when the opportunities comes along to switch, ie. mergers, the company dumps the defined benefit plan and switches the employees to a “defined contribution” plan.  The defined contribution plan has not such benefit guarantee, only what the employees themselves contribute.  Therefor the burden of providing  a “secure, guaranteed retirement” is placed squarely on the shoulders of the employees and not the company.   Currently there is an estimated 100 trillion unfunded liabilities!

Telephone company retirees have filed a complaint for proposed class action relief under the Employee Retirement Income Security Act (ERISA) charging that they and over two thousand others were involuntarily switched in November 2006, post-retirement, from the financially secure Verizon Communication Inc. (NYSE: VZ) pension plans to pension plans sponsored by a newly spun-off company, Idearc Inc. (OTC: IDARQ).

Less than two years after Verizon transferred the retirees, Idearc encountered financial problems and began cutting back various earned retiree benefits. These benefit reductions were not experienced by retirees remaining in Verizon’s pension plans. In March 2009, Idearc filed for Chapter 11 bankruptcy.

Therefore, Plaintiffs filed a proposed class action on November 25, 2009 in the U.S. District Court for the Northern District of Texas, Dallas Division. The Complaint filed in Civil Action No. 3: 09-CV-2262 charges pension plan administrators with numerous ERISA violations including:

• – Failure to provide requested plan documents;
• – Breach of fiduciary duty for refusal to disclose pension related plan
• information;
• – Breach of fiduciary duty for failure to comply with pension plan
• document rules;
• – Various other ERISA violations justifying court ordered declaratory,
• injunctive and other equitable relief;
• – Unlawful refusal to make payment of Verizon pension plan benefits;
• and
• – Unlawful interference with retirees’ rights to receive Verizon retiree
• pension and welfare benefits.

FinancialWire™ – http://www.financialwire.net/

Technorati Tags: business, Chapter 11 Title 11 United States Code, Employee Retirement Income Security Act, ERISA, Human Resources, law, Lawsuit, pension, Verizon Communications

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It’s Not a “Wonderful Life”, as posted by

Monty Pelerin’s World , Economics, Finance and Politics Through The Prism of Classical Liberalism

The overhang to any economic recovery is the banking system. There is no way to know how bad the banking problems really are, given the accounting or lack thereof. Banks, with an encouraging wink and a nod from regulators, have refused to realistically value their assets. In some cases, these values may not even be determinable, other than to say they are currently grossly overvalued.

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US Banks & The FDIC, Are Delaying Their Losses

Posted by Larry Doyle on December 3, 2009

Postponing losses in hopes that one can trade out of them is a game very rarely won. In similar fashion, not acknowledging losses in hopes that the situation improves and the loss is mitigated is also a recipe for disaster. All one needs to do is look eastward to Japan to realize that. Ultimately, a loss not only must be realized, but paid.

Technorati Tags: Asset, bank, Banking Services, Banks and Institutions, business, Federal Deposit Insurance Corporation, financial services, government, Larry Doyle

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Biggest banks loan money to commercial real estate developers are a leading the way to troubled bank list by the FDIC.  The FDIC trouble bank list now has over 500 banks which could collapse any day! Unless President Barack Obama addresses the structural problems that caused the recession–bad loans and securities on the balance sheets of regional banks and huge trade deficits on oil and with China–the recovery will not be strong … Regional banks labor under the weight of commercial real estate failures. Meanwhile the Chief Community organizer AKA Barack Obama, should be heading back to his home town to help put out the fires he createt through his bronw shirt organization ACORN, to rescue 39 Chicago Banks with bad real estate loans!

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Rod Dreher from Crunchycon , a conservative blog about politics and religion,  says

“A year from now, the landscape of America will be forever changed. The office and retail markets will be vastly different than they look today. Not much of it will be good. Five years from now, will empty shopping centers and auto dealerships remain shuttered or will they be rebuilt or torn down and their use converted to something more productive? Will our politicians cease their meddling in the market and allow the market to heal itself? These are questions that will haunt our economy for the next decade.”

There have been 124 bank failures this year as toxic assets, including mortgages and construction loans gone bad, have mounted on lenders’ balance sheets.

Technorati Tags: Barack Obama, business, China, Commercial property, FDIC, Federal Deposit Insurance Corporation, politics, Real estate, Real Estate Loans

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