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									                            Late Breaking Developments

                                                            Presented by

          Ethan E. Kra                  James E. Holland, Jr.              Max J. Schwartz, Esq.           Donald J. Segal
    Chief Actuary-Retirement         Manager, Actuarial Group                     Partner          Senior Vice President & Actuary
Mercer Human Resource Consulting      Internal Revenue Service             Sullivan & Cromwell           The Segal Company
  1166 Avenue of the Americas      1111 Constitution Avenue, NW              125 Broad Street             One Park Avenue
      New York, NY 10036               Washington, DC 20224                New York, NY 10004           New York, NY 10016

                                             2002 Society of Actuaries Spring Meeting
                                                            Session #95
                      Retirement Plan Developments from May 2001 through April 2002

                                                           IRS RELEASES
Item                    Issue date   Summary
Prop. Reg.              4/02         IRS regulations address disclosure of amendments reducing future accruals: The IRS
§54.4980F-1                          issued proposed regulations addressing the participant notice requirement for amendments that
                                     significantly reduce the rate of future benefit accrual (or early retirement benefits or retirement-
                                     type subsidies) in defined benefit or money purchase plans. The regulations implement
                                     EGTRRA’s provisions governing the content, timing, and electronic delivery of the notice, as
                                     well as the applicable sanctions under Code section 4980F (excise tax) and ERISA section
                                     204(h) (voiding the amendment for egregious failures).
Final Regs.             4/02         New minimum distribution rules: The IRS issued final regulations governing minimum
§§1.401(a)(9),                       required distributions from qualified plans, 403(b) plans, and IRAs under Code section
1.403(b)-3 and                       401(a)(9), effective in 2003. The regulations retain the simplified rules for individual account
1.408-8                              plans that were proposed in 2001, with some modifications. The IRS adopted updated mortality
                                     tables that will allow distributions to occur over a longer period than previous tables, and also
                                     prescribed temporary rules affecting defined benefit plans.
Rev. Proc.              3/02         Taxation of Income Accruing in Canadian Plans: In Revenue Procedure 2002-23, the IRS
2002-23                              describes tax relief available to US citizens or residents who are beneficiaries of Canadian
                                     retirement plans. The guidance states that, if income accruing in the Canadian plan would
                                     otherwise be subject to current US income tax, the individual may file an election to defer US
                                     income tax until the income is distributed. The guidance applies only to income accruing in a
                                     plan, not contributions to the plan.
Notice 2002-26          3/02         30-Year Treasury Rate for February is 5.40%: IRS announced that the interest rate on 30-
                                     year Treasury securities for February is 5.40% (Notice 2002-26). The Notice also updates
                                     current liability permissible interest rate ranges for plan years beginning in January – March
                                     2002 to reflect the Job Creation and Worker Assistance Act of 2002 (PL 107-147), which
                                     allows employers to use up to 120% of the four-year weighted average of the 30-year Treasury
                                     bond rates for determining gateway and RPA ’94 current liability valuations for funding
                                     purposes for plan years 2002 and 2003.

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                                                          IRS RELEASES
Item                    Issue date   Summary
Final Reg.              3/02         Final Regulations Reject Hedging NQDC: Final “hedging” regulations provide the IRS’s first
§1.1221-2                            formal guidance on hedging employers’ liabilities under nonqualified deferred compensation
                                     (NQDC) plans. Under the regulations, an employer’s purchase of securities mirroring
                                     employees’ hypothetical NQDC plan investments isn’t a hedging transaction, even if the
                                     transaction reduces an employer’s financial risk.
Final Reg.              3/02         IRS Seeks Comments on FICA Rules for NQDC Plans: The IRS is soliciting public
§31.3121 (v)(2)-1                    comments on a final regulation regarding FICA taxation of amounts under certain employee
                                     benefit plans. The regulation provides guidance as to when amounts deferred under or paid from
                                     a nonqualified deferred compensation plan are taken into account as wages for purposes of
                                     FICA employment taxes.
Announcement            3/02         IRS Extends Comment Period on Determination Letter Program Revisions: In
2002-36                              Announcement 2002-36, the IRS extended the deadline for comments on long-term changes to
                                     the employee plans determination letter program from March 31 to July 1, 2002. Last year, the
                                     agency released Announcement 2001-83, inviting public comments on alternatives to the
                                     current program. Any changes will not affect GUST filings but could affect determination
                                     letters addressing subsequent changes in the law, including EGTRRA.
Notice 2002-3           3/02         Corrected 402(f) Rollover Notices from IRS: The IRS published corrected versions of the
                                     safe harbor explanations that plan administrators may provide to recipients of eligible rollover
                                     distributions to satisfy the notice requirements of Code section 402(f). The IRS initially released
                                     the safe harbor explanations in December 2001 to reflect EGTRRA changes. When the IRS
                                     later published the safe harbor explanations in the Internal Revenue Bulletin, some minor
                                     changes were made.
Revised Form            3/02         IRS Issues Revised Form 8717: The IRS issued a revised version of Form 8717, User Fee for
8717                                 Employee Plan Determination Letter Request. The revised form includes a certification for use
                                     by certain employers who are eligible for an exemption from the usual user fee, as permitted by
                                     the enactment of EGTRRA.

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                                                          IRS RELEASES
Item                    Issue date   Summary
Treasury Report         3/02         Treasury Says 401(k) Caps Would Be Disruptive: A Treasury Department report says that
                                     placing arbitrary caps on individual 401(k) account holdings in employer stock would have a
                                     widespread impact on 401(k) plan participants and potentially severe disruptive effects on the
                                     stock prices of several major corporations. The report says that as many as one in five 401(k)
                                     participants would be forced to change their investment allocations if employer stock holdings
                                     were limited to 20%.
Form 1099-R,            2/02         IRS Issues Revised Employee Plan Forms : The IRS issued revised versions of a number of
Form 5500-EZ                         employee benefit plan forms: (i) Form 1099-R, Distributions from Pensions, Annuities, Profit
and Form 5300,                       Sharing Plans, and Insurance Contracts; (ii) Form 5500-EZ, Annual Return of One-Participant
Schedule Q                           Retirement Plan; and (iii) Form 5300, Schedule Q, Elective Determination Requests.

Employee Plan      2/02              IRS’s “Employee Plan News” Focuses on GUST Applications: With the deadline for the
News (Special                        GUST Remedial Amendment Period fast approaching, the IRS published a special edition of
Edition - February                   Employee Plan News devoted entirely to the issue.
P.L. 107-134 and        1/02         Disaster Relief Bill Expands Relief to Employee Benefit Plans : President Bush signed into
Notice 2002-7                        law the Victims of Terrorism Tax Relief Act of 2001. The Act grants the IRS authority to delay
                                     pension funding and other benefit plan deadlines for up to one year in response to any terrorist
                                     act. The IRS quickly responded in Notice 2002-07, extending for all plans the September 15,
                                     2001, pension funding deadline to September 24, 2001, and providing an additional extension
                                     for plans directly affected by the terrorist attacks.
Treasury                1/02         Treasury to Discontinue 30-Year Constant Maturity Rate: The Treasury Department
Announcement                         announced it will stop supplying the 30-year constant maturity rate to the Federal Reserve
                                     Board for publication. Defined benefit plans are required to use that rate for a variety of
                                     purposes. The rate is determined by the Treasury, which initially said it would extrapolate a 30-
                                     year bond rate even though it no longer issues 30- year bonds. As of February 18, Treasury will
                                     instead supply a long-term yield based on all Treasury securities with 25 or more years to
                                     maturity, plus an extrapolation factor for estimating a 30- year yield.

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                                                          IRS RELEASES
Item                    Issue date   Summary
2001 Form 5500          1/02         IRS Releases 2001 Form 5500, Related Schedules: The IRS has posted the 2001 Form 5500
                                     (Annual Return/Report of Employee Benefit Plan) and related schedules and instructions on its
                                     web site. These forms, however, are for informational purposes only and should not be
                                     downloaded and filed. Under the new ERISA filing acceptance system (EFAST), filers may
                                     choose between two computer-scannable versions to complete and file 2001 Form 5500.
Rev. Procs.             1/02         Advance Copies of IRS Determination Letter Procedures: The IRS issued advance copies of
2002-8 and                           two determination letter procedures: Revenue Procedures 2002-6 (Employee Plans
2002-6                               Determination Letter Procedures) and 2002-8 (User Fees for Employee Plans and Exempt
                                     Organizations). Rev. Proc. 2002-6 sets forth IRS procedures for issuing determination letters on
                                     the qualified status of pension, profit-sharing, stock bonus, annuity, and employee stock
                                     ownership plans. Rev. Proc. 2002-8 provides guidance for compliance with the IRS user fee
                                     program, including a determination letter fee schedule.
Form W4-P               1/02         IRS Releases Updated Form W-4P: The IRS issued an updated Form W-4P for year 2002,
                                     Withholding Certificate for Pension or Annuity Payments. The form should be completed by
                                     recipients of pension plan payments, annuities, and other deferred compensation plans to
                                     indicate the amount of federal income tax to be withheld. The amount depends on whether the
                                     plan payment is periodic, nonperiodic, or an eligible rollover distribution
Announcement            1/02         Waiver of Determination Letter Fees for Small Employers: Under certain conditions,
2002-1 and                           EGTRRA eliminated the user fee for small employers requesting determination letters about the
Notice 2002-1                        qualified status of pension, profit-sharing, or other plans. In Notice 2002-1 and Announcement
                                     2002-1, the IRS explains which employers are eligible for waiver of the fee and other
                                     requirements of the waiver.
Rev. Proc.              1/02         IRS Guidance on Required Amendments to IRAs, SEPs, and SIMPLEs: The IRS issued
2002-10                              Rev. Proc. 2002-10, providing guidance on required amendments to IRAs, SEPs, and SIMPLEs.
                                     The guidance addresses changes made by EGTRRA and the proposed required minimum
                                     distribution regulations issued last year.

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                                                          IRS RELEASES
Item                    Issue date   Summary
IRS Fact Sheet          1/02         Fact Sheet on Tax Law Changes Affecting Retirement Plans: The IRS issued a Fact Sheet
2002-05                              summarizing some of the major changes affecting retirement plans in 2002 as a result of the
                                     enactment of EGTRRA. The Fact Sheet provides information about the new Saver’s Tax Credit;
                                     higher employee contribution limits for 401(k) plans, 403(b) annuities, 457 plans, and SEPs;
                                     “catch-up” contributions for plan participants age 50 and over; and faster vesting for matching
                                     contributions from employers.
Notice 2002-4           12/01        Plan Amendments and the Repeal of the “Same Desk” Rule: A plan sponsor that wants to
                                     take advantage of EGTRRA’s repeal of the “same desk” rule may amend its plan to provide for
                                     severance- from-employment distributions on or after January 1, 2002, regardless of whether the
                                     severance from employment occurred before, on, or after that date. The IRS clarified how plans
                                     may be amended accordingly in Notice 2002-4.
                                     Applying the 402(g) Limit After Hardship Withdrawals: In Notice 2002-4, the IRS
                                     announced that participants who make hardship withdrawals from a 401(k) plan will no longer
                                     be subject to a special limit on elective contributions in the following year. This change affects
                                     401(k) plans that rely on one of the IRS safe harbors under which distributions are deemed
                                     necessary to satisfy an immediate and heavy financial need. Employers should consider
                                     adopting a good- faith EGTRRA amendment to reflect this change.
                                     IRS Clarifies Two Issues for Catch-Up Contributions: IRS Notice 2002-4 includes two
                                     exceptions to the universal availability rule for catch- up contributions in the proposed
                                     regulations issued in December. Under one exception in Notice 2002-4, an employer won’t
                                     violate the universal availability rule in 2002 merely because it begins offering catch- up
                                     contributions at different times under separate plans — as long as it offers the opportunity under
                                     all plans by no later than October 1, 2002. The Notice also creates an exception for Puerto Rico

Mercer Human Resource Consulting                                5                                       2002 Society of Actuaries Spring Meeting
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                                                          IRS RELEASES
Item                    Issue date   Summary
Notice 2002-3           12/01        IRS Issues Model 402(f) Notices for Plan Distributions: Code section 402(f) requires plan
                                     administrators to provide recipients of eligible rollover distributions a current, written
                                     explanation of the rollover rules, the withholding requirements, and the tax treatment of
                                     amounts not rolled over. IRS Notice 2002-3 contains two safe harbor notices for recipients of
                                     distributions from qualified plans, 403(a) annuities, 403(b) annuities, and governmental 457
                                     plans. The safe harbors incorporate EGTRRA changes and will meet the section 402(f)
                                     requirements for distributions on or after January 1, 2002, if they are provided within a
                                     reasonable time before the distribution is made.
Notice 2002-2           12/01        IRS Issues Guidance on ESOP Dividend Deductions: The IRS issued Notice 2002-02,
                                     providing guidance on the deductibility of dividends paid on employer stock held by an
                                     employee stock ownership plan (ESOP). Under Code section 404(k), as amended by EGTRRA,
                                     employers may claim a corporate income tax deduction for ESOP dividends if participants are
                                     offered the choice between taking the dividends in cash or reinvesting them in employer stock.
Rev. Rul. 2001-62 12/01              New Mortality Table for Lump Sum and 415 Calculations: The mortality table used by
                                     defined benefit plans to determine minimum lump sums and maximum benefits is changing
                                     from 83 GAM to 94 GAR (Rev. Rul. 2001-62). Plans are required to use the new table for
                                     distributions with annuity starting dates on or after December 31, 2002, although they may
                                     implement the change on any earlier date during the 2002 calendar year. The IRS published
                                     model amendments that plan sponsors may adopt to comply with these rules.
News Release            12/01        IRS Issues Plan Limits for 2002: The IRS released the 2002 dollar limitations applicable to
2001-115                             qualified retirement plans (News Release 2001-115). The new limits reflect statutory changes
                                     made by EGTRRA, as well as the IRS’s annual cost-of- living adjustments. EGTRRA changed
                                     many qualified plan limits: the 2002 limit for 401(k) and 403(b) salary deferral contributions
                                     increased from $10,500 to $11,000. And the deferral limit for 457 plans sponsored by state and
                                     local governments and tax-exempt employers increased to $11,000. The defined benefit section
                                     415 limit rose to $160,000, the defined contribution section 415 limit increased to $40,000, and
                                     the annual compensation limit increased to $200,000.

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                                                          IRS RELEASES
Item                    Issue date   Summary
Cont'd. from            12/01        HCE Threshold Increasing to $90,000: The dollar threshold used to identify highly
previous page                        compensated employees (HCEs) increased from $85,000 to $90,000, effective January 1, 2002.
                                     The higher threshold affects all plans that use the HCE definition in Code section 414(q),
                                     including retirement plans and certain welfare plans, such as dependent care assistance plans.
                                     For most plans, the new $90,000 threshold will not affect discrimination testing until the 2003
                                     plan year. However, the $90,000 threshold will take effect earlier for non-calendar-year plans if
                                     the employer chooses to make the calendar-year data election; in such cases, the $90,000
                                     threshold will be used to determine HCE status when testing the plan year beginning in 2002.
Notice 2001-73          12/01        Proposed Rules on ISO and ESPP Employment Tax and Withholding Obligations:
and                                  Proposed rules issued by the IRS would relieve employers from any obligation to withhold
Notice 2001-72                       income tax when employees dispose of the stock issued under incentive stock option plan and
                                     employee stock purchase plan options (statutory options), although certain reporting
                                     requirements would apply. But FICA and FUTA taxes would have to be paid upon exercise of
                                     the options. Compliance will not be required until final rules are issued. In addition, FICA and
                                     FUTA obligations under any final rules will apply only to statutory options exercised on or after
                                     January 1, 2003. Until then, employers may rely on a “non-enforcement” policy announced by
                                     the IRS in January 2001.
Announcement            11/01        IRS Will Accept Old Determination Letter Forms for an Additional Three Months: Plan
2001-122                             sponsors may submit determination letter applications on the 1998 versions of Form 5300
                                     (Application for Determination for Employee Benefit Plan), Schedule Q (Nondiscrimination
                                     Requirements), and related Forms 5307 and 6406 until March 31, 2002. Ann. 2001-122 gives
                                     plan sponsors the option to use the 1998 versions of the forms — instead of the 2001 versions
                                     — in light of the extension of the GUST remedial amendment period. Note: Ann. 2001-122
                                     relates only to forms and does not further extend the GUST remedial amendment period.

Mercer Human Resource Consulting                               7                                       2002 Society of Actuaries Spring Meeting
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                                                          IRS RELEASES
Item                    Issue date   Summary
Rev. Rul. 2001-55 11/01              IRS Issues 2002 Covered Compensation Tables: The IRS published the covered
                                     compensation tables (rounded and unrounded) for the 2002 plan year (Rev. Rul. 2001-55).
                                     Covered compensation under Code section 401(l) is used by defined benefit plans to determine
                                     benefits based on “permitted disparity.” For purposes of determining covered compensation for
                                     the year 2002, the taxable wage base is $84,900.
IRS FAQs                11/01        IRS Publishes FAQs on Extension of GUST Remedial Amendment Period: Following the
                                     release of Rev. Proc. 2001-55, which extended the GUST remedial amendment period for
                                     qualified retirement plans, the IRS published frequently asked questions (FAQs) about the
                                     extension on its web site. Questions and answers address the length of the extension, the reasons
                                     for the extension, the types of plans affected, and the additional hardship extension for plans
                                     affected by the events of September 11.
Rev. Proc.              11/01        IRS Extends GUST Remedial Amendment Period: The IRS extended the GUST remedial
2001-55                              amendment period for qualified retirement plans in Rev. Proc. 2001-55, which provides: (1) a
                                     general extension of the GUST remedial amendment period for all plans to February 28, 2002,
                                     if the period would otherwise end before then; (2) an additional extension to June 30, 2002, for
                                     plans that were directly affected by the September 11 terrorist attacks; and (3) further
                                     extensions up to December 31, 2002, at the IRS’s discretion, to particular plans in cases of
                                     substantial hardship resulting from the terrorist attacks.
Forms 1099-DIV,         11/01        IRS Issues Updated Retirement Plan Reporting Forms: The IRS issued three updated
4972 and 5329                        reporting forms for qualified retirement plans: 2002 Form 1099-DIV (Dividends and
                                     Distributions); Form 4972 (Tax on Lump-Sum Distributions (From Qualified Plans of
                                     Participants Born Before 1936)); and Form 5329 (Additional Taxes on Qualified Plans
                                     (Including IRAs) and Other Tax-Favored Accounts).

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                                                          IRS RELEASES
Item                    Issue date   Summary
News Release            11/01        IRS Reminder on Individual Saver’s Tax Credit: The IRS issued News Release 2001-107,
2001-107                             reminding employers and employees about EGTRRA’s tax credit for ind ividuals with adjusted
                                     gross incomes not exceeding $50,000 who contribute to traditional or Roth IRAs or employer-
                                     sponsored plans, including 401(k), 403(b), and governmental 457 plans. If available, the
                                     nonrefundable “saver’s credit” equals a specified percentage (10, 20, or 50) of the first $2,000
                                     in pre-tax salary reduction or voluntary after-tax contributions. The IRS “encourages”
                                     employers to notify their employees of the availability of the credit; previous IRS guidance
                                     (Announcement 2001-106) included a sample notice.
Notice 2001-68          11/01        IRS Issues Supplemental Disaster Relief: The IRS issued Notice 2001-68 and Rev. Proc.
and Rev. Proc.                       2001-53, providing supplemental tax relief to certain taxpayers affected by the September 11
2001-53                              terrorist attacks. Among other things, the IRS has granted a 120-day postponement for certain
                                     deadlines associated with benefit plans. However, this postponement does not provide any
                                     further extension of the Form 5500 filing deadline.
Status of IRS           11/01        IRS Publishes GUST Status of Master and Prototype Plans: The IRS published on its web
Master and                           site a list of the master and prototype (M&P) and volume submitter plans that were timely
Prototype Plans                      submitted for GUST opinion and advisory letters by December 31, 2000. The list includes the
                                     dates on which favorable letters were issued or the applications were withdrawn, and will be
                                     periodically updated as this information changes. The IRS expects to complete the issuance of
                                     GUST letters for M&P plans and volume submitter plans in the first quarter of the 2002
                                     calendar year.
Proposed Reg.           11/01        Catching Up on 401(k) Catch-Ups: Beginning January 1, 2002, sponsors of 401(k), 403(b),
§1.414(v)-1                          and governmental 457 plans may offer participants who have reached age 50 the opportunity to
                                     make annual “catch- up” contributions, over and above any other limits imposed by the plan
                                     provisions or applicable law. The IRS issued a comprehensive set of proposed regulations that
                                     sponsors may rely on if they choose to provide this opportunity in 2002. Because of complexity
                                     of the rules, many employers may have found it difficult to make the necessary payroll and
                                     recordkeeping changes in time to implement catch-up contributions by January 1, 2002.

Mercer Human Resource Consulting                               9                                       2002 Society of Actuaries Spring Meeting
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                                                          IRS RELEASES
Item                    Issue date   Summary
Announcement            10/01        IRS Permits Use of Estimated Tax Overpayments to Satisfy Employment Tax Deposits:
2001-112                             The IRS announced procedures that business taxpayers may use to redesignate their estimated
                                     income tax overpayments as employment tax deposits, so that their overpayments can be used
                                     to pay their current employment tax obligations. The Announcement addresses the situation
                                     where taxpayers have already paid estimated tax payments that equal or exceed their income tax
                                     liability for the year. This could be due to unanticipated losses as a result of the September 11
                                     attacks. Businesses with projected income that was reduced as a result of the attacks will be
                                     allowed to apply previous estimated tax payments to cover their current employment tax
Rev. Rul. 2001-51 10/01              Implementing the New 415 Limits for DB Plans: The IRS issued Rev. Rul. 2001-51,
                                     providing guidance to plan sponsors seeking to implement the higher 415 limits enacted as part
                                     of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).
Announcement            10/01        IRS Form 5306-A is Available: Form 5306-A (Application for Approval of Prototype
2001-109                             Simplified Employee Pension (SEPs) or Savings Incentive Match Plan for Employees of Small
                                     Employers (SIMPLE IRA Plan)) is now available. The new form is available for immediate use
                                     and replaces Form 5306-SEP.
Announcement            10/01        IRS Issues M&P GUST Determination Letters: The IRS announced that it started issuing
2001-104                             GUST determination letters to sponsors of master and prototype (M&P) plans that submitted
                                     applications by December 31, 2000. Generally, an employer that, by the end of the 2001 plan
                                     year, either adopts or certifies its intent to adopt a timely submitted M&P plan or volume
                                     submitter specimen plan will have until the later of December 31, 2002, or 12 months after the
                                     date of the last opinion or advisory letter issued to the M&P plan sponsor or volume submitter
                                     practitioner to adopt the GUST-approved plan.

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                                                          IRS RELEASES
Item                    Issue date   Summary
Revised Form            10/01        IRS Issues Revised Determination Letter Forms: The IRS issued revised Form 5300
5300, etc.                           (Application for Determination for Employee Benefit Plan), Schedule Q (Elective
                                     Determination Requests), and related Forms 5307 and 6406. The revised forms incorporate
                                     changes to the determination letter procedures that the IRS announced last summer — under
                                     which plan sponsors now have the option to request a determination letter that considers the
                                     plan document only, without submitting Schedule-Q demonstrations of how the plan satisfies
                                     nondiscrimination and minimum coverage requirements.
Announcement            10/01        Disaster Relief for Pension Plan Contributions: Because of disruption in the financial
2001-103                             markets following the September 11 attacks, the IRS, DOL, and PBGC provided government
                                     form reporting penalty relief for pension plan sponsors that were not able to make required
                                     contributions by September 15, 2001. The relief in Announcement 2001-103 applies to defined
                                     benefit plans (and, where applicable, money purchase plans) with a plan year ending on or after
                                     December 27, 2000, and on or before January 8, 2001. The relief appears to apply to all such
                                     plans, regardless of whether the plan or employer was directly affected by the September 11
                                     events. The relief is limited to certain reporting obligations.
Announcement            10/01        IRS Issues Guidance on W-2 Reporting for Catch-Up Contributions: For 2002, employers
2001-93                              are required to report participants’ elective deferrals on Form W-2 in box 12, using Codes D
                                     through H and S. IRS Announcement 2001-93 provides that employee catch-up contributions
                                     after 2001 should be included in the totals reported for those codes.
PLR 200136024           9/01         Demutualization Distributions under Section 415: IRS confirmed that demutualization
                                     distributions allocated to participants in a defined contribution plan are not subject to the
                                     contribution limits of Code section 415.
Notice 2001-61          9/01         Filing Extensions for Taxpayers Affected by Terrorist Attacks: IRS provided taxpayer relief
                                     in the aftermath of the terrorist attacks. The administrative relief applies to individuals and
                                     businesses that are unable to meet certain federal tax obligations because they were affected by
                                     the attacks. This includes certain taxpayers located in the disaster areas, maintaining records in
                                     the disaster areas, or employing workers in the disaster areas. (09/14/2001)

Mercer Human Resource Consulting                               11                                        2002 Society of Actuaries Spring Meeting
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                                                          IRS RELEASES
Item                    Issue date   Summary
Revised Forms           9/01         IRS Issues Updated Forms: IRS issued updated versions of Form 5306-A (Application for
5306-A and 5309                      Approval of Prototype Simplified Employee Pension or Savings Incentive Match for Employees
                                     of Small Employers) and Form 5309 (Application for Determination of Employee Stock
                                     Ownership Plan).
Notice 2001-56          8/01         IRS Issues EGTRRA Effective Date Guidance: IRS provided guidance on effective dates for
                                     three changes under the Economic Growth and Tax Relief Reconciliation Act of 2001
                                     (EGTRRA): (1) the increase in the compensation limit under Code section 401(a)(17) from
                                     $170,000 to $200,000; (2) changes to the top-heavy plan rules under Code section 416; and (3)
                                     the reduced suspension period for safe harbor hardship distributions.
Notice 2001-57          8/01         IRS Issues Sample EGTRRA Amendments: IRS provided sample amendments for certain
                                     mandatory and optional changes under the Economic Growth and Tax Relief Reconciliation Act
                                     of 2001 (EGTRRA). Employers may adopt the sample amendments or may use them as the
                                     basis for drafting individualized amendments. The sample amendments follow guidance issued
                                     in June (Notice 2001-42). The IRS is not yet ready to review these amendments as part of the
                                     determination letter process; however, for employers adopting these “good faith” EGTRRA
                                     amendments, the EGTRRA remedial amendment period will remain open at least until the end
                                     of the 2005 plan year.
IRS Final Regs.         8/01         Certain Pension and Benefit Trusts to Qualify for Domestic Trust Treatment: IRS issued
66 Fed. Reg.                         final regulations adding group trusts consisting of qualified plan trusts, VEBAs, IRA trusts, and
41778                                certain investment trusts to the categories of trusts that may use the safe harbor under tax Code
                                     section 7701(a)(30)(E). Witho ut changing proposed regulations issued last year, the final
                                     regulations stipulate that certain employee benefit trusts and investment trusts satisfy the control
                                     test for a domestic trust if US trustees control all substantial decisions made by the trustees of
                                     the trusts.

Mercer Human Resource Consulting                               12                                        2002 Society of Actuaries Spring Meeting
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                                                          IRS RELEASES
Item                    Issue date   Summary
Announcement            8/01         IRS Seeks Input on Determination Letter Program: IRS sought public comments on its
2001-83                              intention to overhaul the Employee Plans Determination Letter Program for qualified plans. As
                                     a preliminary step in the overhaul process, the IRS prepared a white paper describing the project
                                     and outlining several possible alternatives to the present determination letter program. Plan
                                     sponsors, participants, and employee benefit professionals are encouraged to submit comments
                                     by March 31, 2002.
GAR 94                  7/01         IRS Adopts GAR 94 for Insurance Reserves; DB Plans Next: In updating the schedule of
                                     prevailing commissioners’ standard tables of mortality and morbidity, the IRS has adopted
                                     GAR 94 for group annuities and pure endowments. This means that GAR 94 could soon replace
                                     GAM 83 as the section 417(e) "applicable mortality table" for determining lump sums and
                                     section 415 limits under qualified defined benefit plans.
PLR 200120024           7/01         One-Time Choice Among Benefit Options Not Taxable Under Constructive Receipt
                                     Doctrine: IRS ruled that a choice between two different benefit packages — one with less cash
                                     and more benefits, and the other with more cash and fewer benefits — does not cause
                                     employees to be taxed on the richer cash package under the constructive receipt doctrine. Nor
                                     does the choice constitute a cash or deferred election governed by section 401(k). The ruling
                                     suggests that the IRS may be retreating from some of its long-standing views in this area.
Rev. Ruling             7/01         IRS "Standardizes" 417(e) Mortality Table for Nondiscrimination Purposes: As part of the
2001-38, 2001-33                     final cross-testing regulations, the IRS amended the section 401(a)(4) regulations to include the
                                     section 417(e)(3) mortality table as a standard mortality table. Under the regulations, a plan
                                     must use a standard mortality table for certain purposes (e.g., cross-testing). In addition, for
                                     certain purposes, a plan must use a reasonable mortality table (e.g., normalizing benefits under
                                     the general test for DB plans). A standard mortality is deemed to be reasonable.
Notice 2001-46          7/01         Church and Governmental Plans Get Further Nondiscrimination Relief: In Notice 2001-
                                     46, the IRS extended until 2003 (or beyond) the nondiscrimination compliance deadline for
                                     qualified retirement plans maintained by "nonelecting" churches and certain governmental
                                     entities (e.g., federal agencies and international organizations). This Notice does not extend the
                                     GUST remedial amendment period for any plans.

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                                                                                                                                    Session #95
                                                          IRS RELEASES
Item                    Issue date   Summary
Announcement            7/01         IRS Issues New Model Amendment for Required Minimum Distributions: IRS provided
2001-82                              additional guidance to employers seeking to implement the proposed regulations governing
                                     required minimum distributions after retirement, death, or attainment of age 70-1/2. The
                                     announcement contains a new model amendment for use by employers that want to rely on the
                                     new regulations for some (but not all) minimum distributions made from a qualified plan for the
                                     2001 calendar year.
IRS Audit Manual 7/01                IRS Issues Final Multiemployer Examination Guidelines: IRS included final multiemployer
                                     examination guidelines in its audit manual to assist IRS field personnel and technical staff who
                                     examine multiemployer plans or work with multiemployer plan issues. The guidelines finalize
                                     and update those proposed in 1996. Although the guidance is targeted toward multiemployer
                                     plans, many of the rules also apply to single-employer collectively bargained plans. And agents
                                     are not expected to confine themselves to what is contained in these guidelines — they are
                                     expected to consider matters that arise in all qualified plans.
Final Regs.             7/01         IRS Issues Final Regs on Using Pension Assets for Retiree Health: IRS issued final
§1.420-1                             regulations under Code section 420 that limit an employer’s ability to significantly reduce
                                     retiree health coverage. The rules apply if an employer transfers surplus pension assets to a
                                     separate account to pay for current retiree coverage. While similar to the proposed rules issued
                                     in January, the final regulations afford some new flexibility in situations involving sales of
                                     subsidiaries and other business transactions. The regs are generally effective after December 17,
                                     1999. However, certain provisions have later effective dates.
Announcement            6/01         IRS simplifies determination letter application process: The IRS announced major changes
2001-77                              to its determination letter procedures in an effort to make GUST applications easier to file and
                                     process. Notably, plan sponsors will now have the option to request a determinatio n letter that
                                     considers the plan document only, without submitting Schedule Q demonstrations on how the
                                     plan satisfies nondiscrimination and minimum coverage requirements. The modified procedures
                                     affect virtually all plans, with special rules applicable to multiple employer plans, master and
                                     prototype (M&P) plans, and cross-tested plans.

Mercer Human Resource Consulting                               14                                      2002 Society of Actuaries Spring Meeting
                                                                                                                                   Session #95
                                                          IRS RELEASES
Item                    Issue date   Summary
Notice 2001-42          6/01         IRS issues guidance on plan amendments and new tax law: The IRS issued guidance
                                     addressing qualified plan amendments relating to the enactment of the Economic Growth and
                                     Tax Relief Reconciliation Act of 2001 (EGTRRA). Generally, the IRS is requiring employers to
                                     adopt “good faith” plan amendments in order to implement higher contribution limits and other
                                     EGTRRA provisions. For this purpose, employers may choose to adopt IRS sample
                                     amendments to be issued later this year. The IRS is not yet ready to review these amendments
                                     as part of the determination letter process; however, the EGTRRA remedial amendment period
                                     will remain open at least until the end of the 2005 plan year. The GUST remedial amendment
                                     period is not affected by these changes.
66 Fed. Reg.            6/01         IRS finalizes cross-testing regulations: The IRS issued final regulations restricting the extent
34535                                to which a DC plan (or aggregated DC/DB plan) may rely on cross-testing to show compliance
                                     with the nondiscrimination requirements based on benefits rather than contributions. The
                                     regulations will require changes to aggressive “new comparability” designs — which capitalize
                                     on the cross-testing arithme tic to heavily skew contributions in favor of HCEs — but also could
                                     affect a variety of other plan designs. The rules take effect in 2002.
66 Fed. Reg.            6/01         IRS issues final regs on using pension assets for retiree health: The IRS issued final
32897                                regulations under Code section 420, that limit an employer’s ability to significantly reduce
                                     retiree health coverage after using pension assets for current year retiree health benefits. While
                                     similar to the proposed rules issued in January, the final regulatio ns afford some new flexibility
                                     in situations involving sales of subsidiaries and other business transactions. The regs are
                                     generally effective after December 17, 1999, however, certain provisions have later effective
Notice 2001-37          6/01         Retirement plan changes required to reflect pre -tax transportation fringes: The IRS issued
                                     a notice requiring qualified plan sponsors to amend their “compensation” definitions to address
                                     the treatment of pre-tax amounts used to purchase qualified transportation fringe benefits.
                                     Generally, these plan amendments must be adopted by the end of the 2001 plan year, and the
                                     IRS has issued model amendments to facilitate compliance. In addition, the Notice provides
                                     guidance to 403(b) plan sponsors that offer transportation benefits on a salary reduction basis.

Mercer Human Resource Consulting                               15                                        2002 Society of Actuaries Spring Meeting
                                                                                                                                     Session #95
                                                          IRS RELEASES
Item                    Issue date   Summary
Announcement            6/01         Section 415 relief for M&P plans: The IRS issued an announcement providing master and
2001-63                              prototype (M&P) plans with more flexibility in complying with GATT changes to the section
                                     415 limits. For M&P plans that choose not to apply the Section 415 changes to “old- law”
                                     benefits (i.e., benefits that accrued before the RPA ‘94 freeze date), the new guidance
                                     liberalizes the rules by: (i) allowing any one of three methods in applying the section 415(b)
                                     limits to old- law benefits; and (ii) indicating that the RPA ‘94 freeze date need not be the same
                                     date as the plan’s effective date for implementing GATT lump sums under section 417(e)(3).
IRS Guidelines          5/01         Multiemployer examination guideline s released: The IRS included final multiemployer
IRM 4.72.14                          examination guidelines in its audit manual. The guidelines provide assistance to IRS field
                                     personnel and technical staff who examine multiemployer plans or work with multiemployer
                                     plan issues. The guidelines finalize and update those proposed in 1996. Although the guidance
                                     is targeted toward multiemployer plans, many of the rules also apply to single-employer
                                     collectively bargained plans. And agents are not expected to confine themselves to what is
                                     contained in these guidelines — they are expected to consider matters that arise in all qualified

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                                                                                                                                    Session #95
                                                         DOL R ELEASES
Item                    Issue date   Summary
Proposed                4/02         DOL Proposes Simplification to Expedited PTE Program. The Department of Labor is
Amendment to                         proposing a change that would make it easier to obtain routine prohibited transaction
PTE 96-62                            exemptions. Prohibited Transaction Exemption (PTE) 96-62 provides for expedited DOL
                                     review if the proposed exemption is substantially similar to at least two individua l exemptions
                                     granted within the previous 60 months. Because the number of requests for individual
                                     exemptions has decreased, DOL is concerned that parties will soon have difficulty meeting that
                                     requirement and has proposed a change that provides an alternate method for complying.
Final Reg.              4/02         DOL expands electronic delivery safe harbor. DOL released final rules expanding the safe
§2520.107-1                          harbor for electronic delivery of ERISA-required disclosures. Effective October 9, 2002, the
                                     safe harbor will cover most documents required under Title I of ERISA — not just SPDs,
                                     SMMs, and SARs and will apply to individuals beyond participants at the worksite. Also, the
                                     plan administrator must ensure that the system protects the confidentiality of personal
                                     information relating to an individual's accounts and benefits.
Notice of               3/02         DOL Improves Voluntary Fiduciary Correction Program: The DOL released a notice and a
Adoption of                          proposed prohibited transaction class exemption intended to make the Voluntary Fiduciary
Voluntary                            Correction Program more appealing to plan sponsors. The improvements include elimination of
Fiduciary                            the requirement to notify participants of fiduciary breaches and the IRS’s agreement to forgo
Correction                           the excise tax on certain prohibited transactions, such as delinquent contributions of salary
Program                              deferrals.
Final Regs.             3/02         Lower Penalties Under Revised Delinquent Filer Program: The DOL released a notice
Delinquent Filer                     updating its Delinquent Filer Voluntary Compliance Program. The revised program is designed
Voluntary                            to encourage plan sponsors to file delinquent Forms 5500 by significantly reducing the DOL
Compliance                           penalties and eliminating the IRS and PBGC penalties for those that meet the program
Program                              requirements. The revised program is effective March 28, 2002.

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                                                                                                                                  Session #95
                                                         DOL R ELEASES
Item                    Issue date   Summary
GAO Report              3/02         PWBA Urged to Improve its Enforcement Programs: According to a new GAO report, the
02-232                               DOL’s Pension and Welfare Benefits Administration (PWBA) needs to step up its efforts in
                                     enforcing ERISA’s employee benefit plan provisions. In the report, GAO “identifies
                                     weaknesses in PWBA’s enforcement strategy and investigative process, in its overall human
                                     capital management, and in its measures for addressing program performance.” The GAO
                                     report also notes that, within the next five years, more than half of PWBA’s senior management
                                     will be eligible to retire.
Final Regs. 29          3/02         Final Rules On Requested Documents, Outdated Regulations: The DOL issued a final
CFR Parts 2520,                      regulation tha t implements certain changes enacted under the Taxpayer Relief Act of 1997
2560, and 2570                       (TRA 97), including rules eliminating the filing requirement for summary plan descriptions),
                                     summaries of material modifications, and plan descriptions. The final regulation also addresses
                                     a plan administrator’s duty to provide documents to the DOL upon request and the civil
                                     penalties for failure or refusal to do so. The final regulation is effective March 8, 2002.
Adoption of             3/02         PWBA Finalized Class Exemptions Clarification; “Employee Benefit Plan” to Include
Amendment to                         IRAs and Keoghs : The PWBA finalized an amendment to 12 prohibited transaction class
Certain Class                        exemptions to include IRAs and Keogh plans within the definitions of “employee benefit plan”
Exemptions                           and “plan.” The amendment is intended to address the uncertainty arising under the class
§4975(e)(1)                          exemptions, which currently do not define the term “employee benefit plan” or “plan.”
Amendment to            3/02         DOL Amends PTE 80-26 to Allow Loans to Benefit Plans: The DOL has amended
PTE 80-26                            Prohibited Transaction Exemption 80-26, expanding the provision that allows employers to
                                     make loans to employee benefit plans without violating the prohibited transaction rules. PTE
                                     80-26 already allowed employers to make interest- free loans to plans for the purpose of paying
                                     benefits or insurance premiums, but loans made for any other purpose qualified for relief only if
                                     they were limited to three days. Now, in response to the events of September 11, 2001, the DOL
                                     is permitting interest- free loans for up to 120 days.

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                                                                                                                                   Session #95
                                                         DOL R ELEASES
Item                    Issue date   Summary
PTE 2002-12             2/02         Exemption for Plans Engaging in Securities Cross-Trades: The DOL issued a final class
                                     exemption allowing investment management firms to cross-trade securities held by clients’
                                     employee benefit plans with other accounts managed by the firms. The exemption applies only
                                     to passive cross-trading among index and model-driven funds under the control of the same
                                     investment manager, where at least one of the funds holds plan assets subject to ERISA. The
                                     exemption, which will take effect April 15, 2002, is expected to save retirement plans hundreds
                                     of millions of dollars in transaction costs.
                        2/02         DOL Announces Toll-Free Benefit Advice Hotline: The DOL unveiled a new toll- free
                                     telephone number (1-866-275-7922) to help workers and employers get answers to their
                                     questions about retirement and health benefits plan issues. Advisors are now available to
                                     respond to questions, assist workers in understanding their rights or obtaining a benefit, and
                                     help employers understand and meet their obligations under the law. The call center is equipped
                                     to accommodate English-, Spanish-, and Mandarin-speaking individuals.
29 CFR                  1/02         Technical Clarifications in DOL Claims Procedure Q&As: The questions and answers the
2560.503-1                           DOL recently issued on the new claims procedure rules for ERISA plans offer little new
                                     information; most simply restate provisions in the final rules. This article summarizes several
                                     key clarifications, including how sponsors can satisfy the requireme nt that all plans have
                                     procedures to ensure and verify consistent claims decisions, as well as a variety of technical
                                     issues for administrators implementing the special rules for health plans and plans providing
                                     disability benefits.
Final Regs. 29          1/02         Plan Administrators Must Provide Documents Upon Request: The DOL issued a final rule
CFR 2520, 2560,                      that would implement the Taxpayer Relief Act of 1997 (TRA 97) provisions regarding a plan
and 2570                             administrator’s duty to supply documents to the DOL upon request. The proposed rule also
                                     addresses the civil penalties imposed for failure or refusal to provide the requested documents.
                                     Also, the DOL issued a final rule that would remove certain regulations — governing the filing
                                     of summary plan descriptions, summaries of material modifications, and plan descriptions —
                                     that were superseded by TRA 97.

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                                                                                                                                  Session #95
                                                          DOL R ELEASES
Item                    Issue date   Summary
Advisory Opinion        1/02         DOL Says Investment Advice Program Won’t Violate ERISA: The DOL issued “important
2001-09A                             guidance for the provision of much- needed asset allocation advice to plan participants,”
                                     according to PWBA Assistant Secretary Ann Combs. The guidance, in the form of an advisory
                                     opinion issued to SunAmerica Retirement Markets, Inc., explains how financial service
                                     providers can offer independent investment advice to plan participants without running afoul of
                                     ERISA’s prohibited transaction rules.
29 CFR                  12/01        DOL Releases Q&As on Claims Procedure Rules: The DOL posted on its web site answers
2560.503-1                           to frequently asked questions on the new claims and appeal procedure rules for ERISA plans.
                                     Many of the Q&As focus on the rules for group health plans. However, there is also some
                                     important guidance on the rules for disability, retirement, and other ERISA benefits. January 1,
                                     2002, was the compliance date fo r ERISA plans other than health plans. One of the key issues
                                     addressed by the Q&As is whether disability retirement benefits are subject to the special DOL
                                     rules for disability claims.
66 Fed. Reg.            11/01        PWBA Proposes Class Exemptions Clarification; “Employee Benefit Plan” to Include
54541                                IRAs and Keoghs: The PWBA proposed an amendment to 12 prohibited-transaction class
                                     exemptions to include IRAs and Keogh plans in the definitions of “employee benefit plan” and
                                     “plan.” The proposed amendment is intended to address the uncertainty arising under the class
                                     exemptions, which currently do not define those terms.
PWBA FAQs on            10/01        DOL Issues Q&As on Impact of 9/11 Attacks: The DOL’s Pension and Welfare Benefits
9/11                                 Administration issued Q&As to address emplo yee benefits issues facing participants,
                                     beneficiaries, plan sponsors, and service providers following the September 11 attacks. The
                                     Q&As include information on health benefits and pension/retirement savings issues, USERRA
                                     rights for activated reservists, and various administrative and fiduciary issues relating to lost
                                     records, delayed payments, proof of death, and potential difficulty in meeting SPD/SMM

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                                                                                                                                    Session #95
                                                          DOL R ELEASES
Item                    Issue date   Summary
DOL PWBA                10/01        DOL Publishes Information to Help Jobless Workers Preserve Their Benefits: The Labor
publications for                     Department’s Pension and Welfare Benefits Administration posted two items to its web site to
dislocated                           help workers understand their options when faced with a job loss: a fact sheet entitled “Job
workers                              Loss: Important Informatio n Workers Need to Know to Protect Their Health Coverage” and a
                                     booklet entitled “Pension and Health Care Coverage...Questions and Answers for Dislocated
Form 5500               9/01         DOL’s Disaster Relief for Form 5500 Filings: DOL, IRS, and the PBGC extended the
Deadline                             deadline for filing Form 5500 for plan administrators and employers located in federal disaster
Extensions                           areas as a result of the September 11 terrorist attacks. The extension also applies to filers that
                                     are unable to obtain the information needed to file from service providers, banks, or insurance
                                     companies affected by the disasters. Those with filings originally due between September 11,
                                     2001, and November 30, 2001, will be allowed an additional six months plus 120 days to file.
                                     Filers currently on an extension that expires between September 11 and November 30, 2001,
                                     will be allowed an additional 120 days to file.
PWBA                    9/01         PWBA Enforcement Manual: The PWBA enforcement manual is available on the DOL Web
Enforcement                          site. This manual provides guidance to internal PWBA employees regarding the enforcement
Manual                               responsibilities of the agency, including civil and criminal investigations of employee benefit
                                     plans. The manual is helpful because it identifies some of the issues the agency considers while
                                     performing these investigations.

Mercer Human Resource Consulting                               21                                        2002 Society of Actuaries Spring Meeting
                                                                                                                                     Session #95
                                                         PBGC R ELEASES
Item                    Issue date   Summary
Final Regs. 29          4/02         PBGC final rule defines “earliest PBGC retirement date”. A new final rule clarifies how the
CFR Parts 4022,                      Pension Benefit Guaranty Corporation will determine when a plan participant is first eligible to
4022B, and 4044                      retire. That date affects whether the benefit is given priority under ERISA’s asset allocation
                                     scheme, when the participant is first eligible to start payments, and the participant’s “e xpected
                                     retirement age,” used by PBGC to value the benefit. The new rule also provides new annuity
                                     choices to participants in PBGC-trusteed plans, and clarifies who will receive PBGC benefits
                                     owed to a deceased participant.
PBGC                    3/02         PBGC Delays Variable Premium Rate: Because Treasury suspended issuance of 30- year
Announcement                         Treasury securities and, effective February 18, 2002, ceased supplying the Federal Reserve
                                     Board with an estimate of the annual yield on 30-year Treasury securities, the PBGC is unable
                                     to provide the required interest rate for determining the variable rate premium amount for
                                     premium payment years commencing in March 2002. According to the PBGC, the agency is
                                     consulting with Treasury and will announce the rate before the variable rate premium for
                                     premium payment years beginning in March 2002 is due.
PBGC Premium            3/02         PBGC Releases 2002 Premium Forms and Instructions: The PBGC released its premium
Forms                                payment package of forms for the 2002 plan year, including Form 1, Schedule A, Form 1-EZ,
                                     and instructions for each. To obtain copies of the forms, contact the PBGC at 1-800-736-2444
                                     or visit the agency’s web site at
Form 1-ES and           1/02         PBGC Issues 2002 Estimated Premium Package; Some Disaster Relief Available : The 2002
Instructions                         Estimated Premium Package (Form 1-ES and Instructions) is now available on the PBGC web
                                     site. The instructions reiterate the disaster relief issued by the PBGC, which is available to plans
                                     with a Form 5500 disaster extension date for the 2000 year that is later than February 12, 2002.
                                     A calendar-year plan that received a Form 5500 disaster extension to February 12, 2002, is not
                                     eligible for penalty relief for the 2002 Form 1-ES filing.
                        1/02         PBGC Releases 2002 Premium Instructions and Forms: The PBGC issued year 2002
                                     premium instructions and Form 1-ES for plans with 500 or more participants in the prior filing
                                     year. In addition to the required Form 1 or Form 1- EZ (whichever applies to the plan), Form 1-
                                     ES is filed by large plans to make estimated flat-rate premium payments.

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                                                                                                                                     Session #95
                                                         PBGC R ELEASES
Item                    Issue date   Summary
PBGC News               11/01        PBGC Sets 2002 Maximum Guarantee: The Pension Benefit Guaranty Corporation (PBGC)
Release                              increased the maximum benefit that it will guarantee for retirees in underfunded pensions that
                                     terminate next year. The maximum monthly benefit increased from $3,392.05 in 2001 to
                                     $3,579.55 in 2002. The new yearly maximum for 2002 totals $42,954.60.
PBGC Penalty            10/01        PBGC Provides Filing Relief: The Pension Benefit Guaranty Corporation (PBGC) provided
Filing Relief                        penalty relief for late premiums and extended deadlines for various plan terminations and other
                                     filings for companies and individuals affected by the September 11 terrorist attacks. The PBGC
                                     is waiving penalties through February 12, 2002, for any premium payment with a due date
                                     between September 11, 2001, and February 12, 2002, if the pension plan administrator is
                                     located in an area for which the Department of Labor is providing disaster relief for Form 5500
                                     filings. The relief also applies if the plan administrator cannot reasonably obtain information or
                                     other assistance from a person whose operations are directly affected by the disaster.
PBGC Disaster           10/01        PBGC Issues Disaster Relief: The PBGC issued a notice providing disaster relief to plan
Relief                               sponsors and administrators that are having difficulty meeting their deadlines in the aftermath of
                                     the September 11 terrorist attacks. The relief applies to PBGC premium filings, plan termination
                                     notices and filings, participant notices for plans paying variable premiums, post-event notices
                                     for reportable events, annual financial and actuarial information reporting, requests for
                                     reconsideration or appeal of PBGC determinations, and various multiemployer plan filing and
                                     notices. The PBGC will consider other types of relief on a case-by-case basis.
PBGC Pension            8/01         PBGC Publishes Updated Data Book: PBGC issued the latest edition of its annual statistical
Insurance Data                       reference book, which provides detailed statistics for PBGC’s two separate insurance programs
Book 2000                            covering, respectively, single-employer and multiemployer plans. The book, Pension Insurance
                                     Data Book 2000, tracks the experience of PBGC’s two insurance programs and the defined
                                     benefit pension plans they protect. The new edition also features graphs that illustrate current
                                     data and trends, both in PBGC operations and in the universe of private pension plans insured
                                     by PBGC.

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                                                                                                                                    Session #95
                                                       PBGC R ELEASES
Item                    Issue date   Summary
PBGC Form 500           8/01         PBGC Issues New Form 500 Package: PBGC issued new forms for processing defined benefit
                                     plan terminations, including new Form 500 filing packages for standard plan terminations.
                                     Based on a quick review, it does not appear that the content of the forms — Form 500, Form
                                     EA-S, Schedule REP-S, and Form 501 — is different, just the appearance. The model notices
                                     included in the forms package also appear unchanged.

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                                                                                                                              Session #95
                                                        M ISCELLANEOUS
Item                    Issue date   Summary
2002 OASDI              3/02         Solvency of Social Security and Medicare Extended: The Social Security trustees reported
Annual Report                        that the program’s solvency has been extended by three years, from 2038 to 2041. Also,
                                     Medicare’s life expectancy has been extended to 2030, one year longer than estimated last year.
2001 U.S. App.          3/02         Supreme Court OKs Ruling Rejecting IRS Position on Partial Terminations : The US
LEXIS 19786                          Supreme Court denied an appeal from a Seventh Circuit ruling that found only non- vested
                                     participants should be counted in determining whether a retirement plan has undergone a partial
                                     termination (Matz v. Household International Tax Reduction Investment Plan). The IRS
                                     position is that both vested and non-vested participants should be taken into account when
                                     calculating the reduction in plan participants. The Seventh Circuit, however, did not follow the
                                     IRS’s position.
P.L. 107-147            3/02         Short-Term Pens ion Funding Relief Issues: The Job Creation and Worker Assistance Act of
                                     2002 provides relief to defined benefit plan sponsors facing higher 2002 and 2003 pension
                                     funding and PBGC premium obligations. The Act permits higher interest rates for calculating
                                     key funding liability measures and a higher required interest rate for calculating unfunded
                                     vested benefits for PBGC variable-rate premium purposes. The WRG has prepared an analysis
                                     of the Act’s funding relief, variable-rate premium relief, and the effect on distribution
                                     restrictions that limit lump sum payments to the 25 highest-paid employees.
                        3/02         Congress Fixes Some of EGTRRA’s Technical “Glitches”: President Bush signed into law
                                     the Job Creation and Worker Assistance Act of 2002 (PL 107-147), which contains EGTRRA
                                     technical corrections affecting defined benefit plans, defined contribution plans, ESOPs, 403(b)
                                     annuities, and eligible 457 plans. The measure, approved by Congress last week as part of
                                     economic stimulus legislation, includes numerous changes relating to (among other things) 415
                                     limits, plan valuations, catch-up contributions, deduction limits, and rollover rules.

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                                                                                                                                  Session #95
                                                        M ISCELLANEOUS
Item                    Issue date   Summary
SSA                     12/01        Social Security Expands Electronic Filing of W-2s: The Social Security Administration
Announcement                         (SSA) announced the availability of a new service for employers to submit annual wage reports
                                     electronically using the Internet. Beginning on January 7, 2002, the service became available to
                                     the nation’s 6.5 million employers and third-party preparers responsible for submitting Copy A
                                     of Forms W-2, “Wage and Tax Statements” to SSA. Employers may now register to use this
                                     service at the agency’s web site. The service began in 2000 on a trial basis, and more than
                                     22,000 companies submitted 25 million Forms W-2.
2002 Social             10/01        2002 Social Security, Medicare Changes Announced: The Social Security Administration
Security and                         announced that benefits would increase 2.6% in 2002, raising the average monthly benefit for
Medicare                             retired workers from $852 to $874. The maximum amount of earnings subject to the Social
Increases                            Security payroll tax would increase from $80,400 to $84,900. HHS announced that the monthly
                                     Medicare Part B premium for the year 2002 would will increase from $50 to $54; the Part B
                                     annual deductible would remain at $100; and the Part A hospital deductible would increase by
                                     $20 to $812.
Treasury Press          10/01        Treasury to Stop Issuing 30-Year Bonds: The Treasury Department announced that it is
Release PO-749                       suspending issuance of the 30- year bond. The announcement applies to both nominal and
                                     inflation-adjusted bonds. Treasury explained that it no longer needs the 30-year bond to meet
                                     the government’s “current financing needs, nor those that we expect to face in coming years.”
                                     Treasury indicated that it expects the temporary setback to the government’s fiscal condition
                                     resulting from the attacks of September 11 to be short-lived. If the government’s future
                                     financing needs are higher than anticipated, however, Treasury could reinstate the 30- year bond
                                     without incurring any cost.

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                                                                                                                                   Session #95
                                                                        M ISCELLANEOUS
Item                                    Issue date   Summary
P.L. 107-42                             9/01         Airline Relief Law Caps Executive Pay Raises, Severance Payments: The emergency
                                                     airline-bailout package signed by President Bush September 22 restricts pay raises and
                                                     severance payments to certain highly compensated airline employees. Prior to September 11,
                                                     2003, airlines receiving financial help from the government are barred from giving raises to
                                                     employees whose “total compensation” — defined by the law as salary, bonuses, awards of
                                                     stock, and other “financial benefits” — exceeded $300,000 in 2000. Severance payments to
                                                     these employees are limited to $600,000. The law does not apply to employees whose
                                                     compensation is set through a collective bargaining agreement.
P.L. 107-16                             6/01         EGTRRA’s effect on pension and retirement savings plans: The Economic Growth and Tax
                                                     Relief Reconciliation Act of 2001 signed into law by President Bush includes significant
                                                     changes relating to pension and retirement savings plans, including increased annual dollar
                                                     limits on pension and 401(k) contributions, enhanced pension portability, faster vesting, and
                                                     “catch up” contributions for older workers.

Mercer Human Resource Consulting                                              27                                      2002 Society of Actuaries Spring Meeting
                                                                                                                                                  Session #95

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