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SOA 2010 Annual Meeting _ Exhibit - Session 78 PD_ Late Breaking


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									     SOA 2010 Annual Meeting & Exhibit
              Oct. 17-20, 2010

Session 78 PD, Late Breaking Developments for
                Pension Plans

    Donald J. Segal, FSA, EA, FCA, MAAA

         Eric A. Keener, FSA, EA, MAAA
     Donald J. Segal, FSA, EA, FCA, MAAA
                   Session 78
  Late-Breaking Developments for Pension Plans

                                                                   Presented by

              Eric A. Keener, FSA, EA                     Ethan E. Kra, FSA, FCA, EA                      Donald J. Segal, FSA, FCA, EA
                      Principal                     Senior Partner & Chief Actuary-Retirement                     Vice President
                     Aon Hewitt                                      Mercer                                         Aon Hewitt
                  45 Glover Avenue                        1166 Avenue of the Americas                           199 Water Street
                 Norwalk, CT 06850                            New York, NY 10036                              New York, NY 10038

                                                          2010 SOA Annual Meeting
                                                          Tuesday, October 19, 2010

            Retirement Plan Developments from October 2009 through September 2010

                                                                 IRS Releases
     Item          Issue date                                                      Summary
Notice            9/10          August 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the
2010-61                         August 30-year Treasury securities rate (3.80%), composite corporate bond rate (5.16%), corporate bond
                                yield curve, and PPA funding and lump sum segmented yield-curve rates.
IRS Memo          8/10Read      IRS explains how agency may serve tax levies on retirement plans. The IRS can serve two types of tax
201022015                       levies on a delinquent taxpayer’s vested retirement benefits, an internal agency memo explains. If benefits
                                are currently being paid out or the participant has a right to future benefit payments, the IRS may levy the
                                benefit payments using Form 668-W, and the levy stays in effect until released. Alternatively, if a participant
                                is not in pay status but is entitled to make a lump sum withdrawal, the IRS may levy the accumulated
                                retirement plan benefits using Form 668-A.
Notice            8/10 Read     July 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the July 30-
2010-57                         year Treasury securities rate (3.99 percent), composite corporate bond rate (5.44 percent), corporate bond
                                yield curve, and PPA funding and lump sum segmented yield-curve rates.
Notices           7/10          Timely Form 5500 filing does not preclude later funding relief election. Pension plan sponsors weighing
2010-55,                        funding relief options still should file Form 5500 (with Schedule SB or MB) when due (reflecting any
2010-56                         extension), IRS announced July 30 (Notices 2010-55 and 2010-56). For plan years ending before IRS issues
                                guidance on the pension relief act, sponsors can elect relief even if they already filed Form 5500. IRS
                                expects to offer guidance on a range of funding relief issues, including election procedures, contribution
                                calculations, implications for multiemployer plan status certifications, participant notices and reporting
                                requirements (if the 5500 was already filed).
Employee          7/10 Read     Retirement plan determination letter fees to increase. IRS user fees for most retirement plan
Plan News –                     determination letter applications will increase on Feb.1, 2011, just after the close of EGTRRA Cycle E. The
Special                         higher fees will more accurately reflect the actual cost of processing determination letter filings, according to
Edition July                    an IRS newsletter. The IRS intends to announce the new fees in Rev. Proc. 2011-8, which should be
2010                            published in January 2011.
Notice            7/10 Read     June 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the June
2010-52                         30-year Treasury securities rate (4.13 percent), composite corporate bond rate (5.56 percent), corporate
                                bond yield curve, and PPA funding and lump sum segmented yield-curve rates.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                 Page 2 of 23
                                                                 IRS Releases
     Item          Issue date                                                       Summary
Final Regs.       7/10Read      IRS finalizes tax-shelter rules for benefit plans. Final IRS regulations define who is a "party" to a
§§1.6033-5;                     prohibited tax-shelter transaction and set disclosure timing rules for benefit plans and other tax-exempt
53.4965-1                       entities. Legislation enacted in 2006 targets tax-motivated transactions and imposes excise taxes and
through 9;                      reporting penalties on managers of health savings accounts and most other tax-favored benefit plans who
                                approve these transactions (but not on the plans themselves). Excise taxes also may be imposed at the
                                entity (trust) level in the case of VEBAs and other Section 501(c) organizations.
Notice            6/10          Preapproved DC plan adopters granted disaster relief. Adopters of master and prototype and volume
2010-48                         submitter defined contribution retirement plans affected by recent federally declared disasters have until July
                                30 to sign EGTRRA restatements and file determination letter requests. Notice 2010-48 extends the April 30
                                deadline for employers affected by storms in the Alabama, Connecticut, Massachusetts, Mississippi, New
                                Jersey, Rhode Island, Tennessee and West Virginia counties declared presidential disaster areas from
                                March 1 to May 31. Notice 2010-48 also extends the remedial amendment period for these plans to July 30.
Notice            6/10          May 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the May 30-
2010-47                         year Treasury securities rate (4.29 percent), composite corporate bond rate (5.67 percent), corporate bond
                                yield curve, and PPA funding and lump sum segmented yield-curve rates.
Notice            6/10          IRS explains small-employer health coverage tax credit. IRS Notice 2010-44 explains how employers
2010-44                         with fewer than 25 full-time equivalent employees (FTEs) can receive tax credits for offering employees
                                medical, dental, vision, long-term care or supplemental coverage. Employees in all locations generally count
                                toward the FTE limit. The IRS guidance also outlines how to meet other eligibility factors – average wages
                                less than $50,000 per FTE and uniform employer premium contributions of at least 50 percent – and
                                calculate credit amounts. The credit is effective in tax years after Dec. 31, 2009; a transition rule applies for
                                credits in 2010.
Final Regs.       5/10          IRS releases final rules on company stock diversification in DC plans. Final IRS regulations address
§1.401(a)                       PPA’s diversification requirements for 401(k) and other defined contribution plans holding company stock.
(35)–1                          IRS has clarified several issues relating to stable-value funds, qualified default investment alternatives,
                                frozen funds, pooled funds and multiemployer plans. Anti-cutback relief is available for ESOPs eliminating
                                certain in-service distributions at age 55. The final regulations take effect for the 2011 plan year. Until then,
                                employers may rely on the proposed rules, earlier guidance or these new rules.

2010 SOA Annual Meeting                                                                              Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                  Page 3 of 23

                                                                 IRS Releases
     Item          Issue date                                                       Summary
IRS               5/10          IRS releases 401(k) questionnaire for upcoming compliance checks. A random sample of about 1,200
questionnaire                   employers sponsoring 401(k) plans soon will receive a questionnaire as part of an IRS initiative to identify
                                potential compliance issues and better understand reasons for noncompliance. The 69-question, web-based
                                survey focuses on the 2006 – 2008 plan years and requests detailed information about plan design and
                                operation. Though some of this data may not be readily available to plan sponsors or recordkeepers, failure
                                to respond within 90 days will result in enforcement actions, which may include a plan audit.
Notice 2010-      5/10          Employers soon must extend children’s health coverage, adjust tax treatment. The health care reform
38; Final                       law requires employers offering dependent health coverage to extend eligibility for employees’ children to
Regs.                           age 26 for plan years beginning after Sept. 23, 2010. Just-released interim final regulations explain many
§54.9815-                       provisions of the law and address issues around implementation, including changes to employer plans and
2714T                           practices necessary to meet compliance obligations.
Notice            5/10          April 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the April 30-
2010-40                         year Treasury securities rate (4.69 percent), composite corporate bond rate (5.84 percent), corporate bond
                                yield curve, and PPA funding and lump sum segmented yield-curve rates.
Notice            4/10          IRS explains tax treatment of extended coverage for adult children. New IRS guidance clarifies the
2010-38                         health care reform law’s extension of tax-free, employer-provided health coverage to an employee’s child
                                through the end of the calendar year in which the child turns age 26. Effective March 30, 2010, both costs for
                                and reimbursements from employer health plans for this coverage are free of income, FICA and FUTA taxes,
                                regardless of the IRS’s dependency tests. Employers may immediately permit employees to elect pretax
                                salary reductions for the extended coverage but must retroactively amend cafeteria plans by year-end to
                                reflect the change.
Notice            4/10          March 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the March
2010-36                         30-year Treasury securities rate (4.65 percent), composite corporate bond rate (5.90 percent), corporate
                                bond yield curve, and PPA funding and lump sum segmented yield-curve rates.
Announce-         3/10          Adoption, filing deadlines set for preapproved DB plans. IRS has set adoption and filing deadlines for
ment 2010-                      master-and-prototype and volume-submitter defined benefit (DB) plans. Sponsors of preapproved DB plans
20                              will soon receive opinion and advisory letters on their plan documents as restated for EGTRRA and other
                                changes. Adopting employers must sign the preapproved DB plan documents during the roughly two-year
                                period ending April 30, 2012, and may opt to apply for individual determination letters starting May 1, 2010.
                                For preapproved defined contribution plans, the adoption deadline is April 30, 2010.
Notice            3/10          February 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the
2010-24                         February 30-year Treasury securities rate (4.62 percent), composite corporate bond rate (6.01 percent),
                                corporate bond yield curve, and PPA funding and lump sum segmented yield-curve rates.
2010 SOA Annual Meeting                                                                              Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                  Page 4 of 23
                                                                 IRS Releases
     Item          Issue date                                                      Summary
IR-2010-025       3/10          IRS to honor FICA refund claims for some medical residents. IRS will honor FICA refund claims based
                                on medical residents’ “student” status before April 1, 2005, when new IRS regulations took effect. IRS will
                                soon advise hospitals and others with pending claims how to get refunds, but new claims can’t be filed for
                                the relevant years because the statute of limitations has expired. The 2005 regulations deny student status
                                to medical residents who work 40 or more hours a week. Those rules remain in effect for now, bolstered by
                                an IRS win in the Eighth US Circuit Court of Appeals, but employers continue to challenge the rules in other
Notice            3/10          IRS delays some foreign account reporting to 2011. Pension and benefit plan officials and others with
2010-23;                        signatory authority over – but no financial interest in – foreign accounts do not have to file a Report of
Announce-                       Foreign Bank and Financial Accounts (FBAR) until June 30, 2011. Reporting for 2010 and earlier years
ment 2010-                      should follow guidance in effect when the FBAR is filed. For 2009 and earlier years, IRS has reverted to its
16                              prior definition of “commingled investments,” which covers mutual funds but excludes foreign hedge and
                                private equity funds. Announcement 2010-16 suspends reporting by non-US persons for 2009 and earlier.
Final Regs.       3/10          Disclosure rules for multiemployer pension plans effective April 1. Final disclosure rules for
§§2520.101-6;                   multiemployer pension plans take effect April 1, implementing a PPA mandate in force since 2008. Within 30
2520.104b-30                    days of a written request, plan administrators must furnish certain funding-related documents to any
                                participant, beneficiary in pay status, employee representative or contributing employer. The Labor
                                Department has expanded the types of actuarial reports that must be disclosed but carved out an exception
                                for dated documents. Administrators may need to modify processes for responding to information requests
                                and update summary plan descriptions.
PLR               2/10          Longevity insurance in 401(k)-type plans raises complex issues. A recent IRS analysis of a variable
200951039                       annuity contract providing longevity insurance for 401(k) plan participants focuses on the Code’s minimum
                                distribution and spousal benefit requirements. The private letter ruling leaves many questions unanswered
                                but has drawn media attention as part of the growing national dialogue about lifetime income options in
                                401(k) plans. One bright spot for defined contribution and defined benefit plans with variable annuities is the
                                IRS’s conclusion that spousal annuity payments can vary with investment performance.
Notice            2/10          January 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the
2010-20                         January 30-year Treasury securities rate (4.6 percent), composite corporate bond rate (5.88 percent),
                                corporate bond yield curve, and PPA funding and lump sum segmented yield-curve rates.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                 Page 5 of 23

                                                                 IRS Releases
     Item          Issue date                                                      Summary
Notice            2/10          IRS clarifies reservists’ HEART Act rights in pension, 401(k)-type plans. New IRS guidance on the
2010-15                         HEART Act addresses how sponsors of pension, 401(k), 403(b) and similar retirement plans should
                                administer certain rights afforded to military reservists. In light of clarifications in Notice 2010-15 affecting
                                death benefits, service crediting rules, plan distribution options and the treatment of “differential pay,” plan
                                sponsors should revise plan operations as needed to comply. Conforming plan amendments may be
                                required – generally by 2010 year-end – even if no participants in the employer’s current workforce serve in
                                the military.
Notice            1/10          Fixing 409A violations in NQDC plan documents. To spare employees harsh tax penalties under Code
2010-6                          Section 409A for certain nonqualified deferred compensation plan document flaws, employers can take
                                specific correction steps described in IRS Notice 2010-6. The availability and magnitude of relief depends on
                                what type of document violation is involved, how quickly it is corrected, and in some cases, whether an
                                affected payment event occurs within one year after correction.
IRS FAQs;         1/10          IRS clarifies timing of COBRA subsidy payroll tax credits. Employers receiving a COBRA beneficiary’s
Form 941                        35 percent premium payment in 2010 for subsidized COBRA coverage provided in 2009 must take a payroll
                                tax credit in 2010, not 2009, IRS has confirmed. Employers can claim the 65 percent COBRA subsidy on the
                                quarterly payroll tax return (Form 941) for the quarter in which the premium is received or later in the same
                                calendar year. On the other hand, if an employer chooses to reduce its payroll tax deposits in the quarter
                                when the 35 percent COBRA premium payment is received, that quarter’s Form 941 filing must reflect the
Winter 2010       1/10          IRS addresses 2009 minimum DC plan distributions paid in Q1 2010. An IRS newsletter clarifies rollover
Employee                        and withholding rules for defined contribution plans – including 401(k), 403(b) and governmental 457(b)
Plan News                       plans – paying 2009 required minimum distributions (RMDs) in early 2010 (for example, to participants who
(IRS)                           reached age 70-1/2 in 2009). Many plans continue to pay 2009 RMDs despite a waiver prompted by the
                                recession. If paid between Jan. 1 and April 1, 2010, 2009 RMDs are treated as eligible rollover distributions,
                                assuming they otherwise qualify for rollover. Mandatory 20 percent withholding applies if participants decline
                                the rollover.
Notice            1/10          December 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the
2010-14                         December 30-year Treasury securities rate (4.49 percent), composite corporate bond rate (5.88 percent),
                                corporate bond yield curve, and PPA funding and lump sum segmented yield-curve rates.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                 Page 6 of 23
                                                                IRS Releases
     Item          Issue date                                                      Summary
Rev. Procs.       1/10          IRS releases 2010 revenue procedures for employee plans. The IRS has updated its annual revenue
2010-4,                         procedures for employee plans as follows: Rev. Proc. 2010-4 addresses procedures for furnishing rulings
2010-6;                         and information letters; Rev. Proc. 2010-5 discusses the process of providing technical advice on employee
2010-5,                         plan issues to IRS area managers and appeals offices; Rev. Proc. 2010-6 updates procedures for issuing
2010-8                          determination letters on a retirement plan’s qualified status; and Rev. Proc. 2010-8 lists related user fees for
                                employee plans and exempt organizations.
IRS Memo-         12/09         IRS memo discusses bonus features affecting year of employer’s deduction. When bonuses for
randum                          services performed in one year are paid shortly after year-end, limiting awards to employees still employed
200949040                       on the payment date may impair an employer’s ability to deduct the bonuses in the year earned, a recent
                                internal IRS memorandum notes. While the memo isn’t binding on either IRS or taxpayers, some employers
                                may find it at odds with their practices. Though altering the terms of bonuses payable in early 2010 may not
                                be possible, employers should consider whether to make design changes to bonus arrangements for
                                services performed in 2010 and later years.
Announce-         12/09         IRS approves changes in DB pension actuary or valuation software. IRS has automatically approved
ment 2010-3                     certain changes in defined benefit (DB) pension plan funding methods related to changes in actuarial service
                                providers or valuation software. The new approvals in Announcement 2010-3 are effective for plan years
                                beginning on or after Jan. 1, 2009, subject to certain conditions. But the new guidance doesn’t cover 2009
                                plan mergers, so sponsors merging plans midyear or plans with different years may need to request IRS
                                approval of associated method changes within 2-1/2 months after plan year-end.
Notice            12/09         IRS publishes 2009 cumulative list for Cycle E retirement plans. IRS’s 2009 cumulative list of changes
2009-98                         for qualified retirement plans serves as a guide to help Cycle E filers prepare determination letter
                                applications for filing during the 12-month period starting Feb. 1, 2010. Cycle E filers include individually
                                designed single-employer plans if the employer’s EIN ends with 5 or 0, as well as certain Cycle C or D filers
                                that deferred filings to Cycle E.
Notice            12/09         IRS delays deadline for amendments implementing some PPA provisions. A just-granted, one-year
2009-97                         deadline extension gives retirement plan sponsors until the end of the 2010 plan year to adopt amendments
                                implementing certain Pension Protection Act (PPA) provisions. The IRS relief covers company stock
                                diversification in DC plans, benefit restrictions in pension plans, and special rules for cash balance and other
                                hybrid plans (other than amendments eliminating lump sum whipsaw). Other PPA amendments still must be
                                adopted by 2009 year-end.
Notice            12/09         November 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the
2009-96                         November 30-year Treasury securities rate (4.31 percent), composite corporate bond rate (5.79 percent),
                                corporate bond yield curve, and PPA funding and lump sum segmented yield-curve rates.

2010 SOA Annual Meeting                                                                            Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 7 of 23

                                                                IRS Releases
     Item          Issue date                                                      Summary
Notice            12/09         Treasury issues 409A relief to comply with TARP pay master’s opinions. Changing the time or form of
2009-92                         nonqualified deferred compensation (NQDC) payments to comply with an advisory opinion from the TARP
                                special pay master will not cause a plan to violate Code Section 409A, Treasury guidance provides. The
                                relief permits, among other things, the timing of NQDC payments to be contingent on repayment of a
                                company’s TARP obligations. Notice 2009-92 applies only to employees of TARP companies whose pay is
                                addressed in an advisory opinion issued after Sept. 30, 2009, and is subject to several conditions.
Announce-         12/09         IRS announces 403(b) plan remedial amendment period. 403(b) plan sponsors that adopt a written plan
ment 2009-                      by Dec. 31, 2009, can qualify for a remedial amendment period to correct any form defects, IRS
89                              Announcement 2009-89 confirms. To take advantage of this relief, employers must meet yet-to-be-
                                announced deadlines to adopt a preapproved plan or to apply for an individual determination letter. Doing so
                                will assure employers that their plans meet IRS regulations that took effect in 2009. The announcement
                                underscores the importance of adopting a written plan by 2009 year-end.
Rev. Rul.         12/09         IRS releases 2010 covered compensation tables for pension plans. The IRS has published rounded and
2009-40                         unrounded covered compensation tables for the 2010 plan year (Rev. Rul. 2009-40). Covered compensation
                                is used to determine “permitted disparity” for safe harbor DB plans under Section 401(l) and “imputed
                                disparity” for DB plans subject to the general test under Section 401(a)(4). The 2010 covered compensation
                                tables – determined from the 2010 Social Security taxable wage base of $106,800 – are identical to the 2009
                                tables because the taxable wage base did not change from 2009 to 2010.
Notice            11/09         IRS pilot permits use of partial SSNs on Form 1099 payee statements. Partial Social Security numbers
2009-93                         (SSNs) may be used on certain paper payee statements for the 2009 and 2010 calendar years, under an
                                IRS pilot program aimed at curbing identity theft. According to Notice 2009-93, filers of Forms 1099 (income
                                other than wages), 5498 (IRA contributions) and 1098 (mortgage interest) may use an “X” or asterisk for the
                                first five digits of a payee’s SSN or taxpayer identification number. The notice doesn’t apply to returns filed
                                with IRS or address state laws that limit SSNs on mailed items. IRS seeks comments on expanding or
                                mandating the program.
Final Regs.       11/09         IRS finalizes 204(h) notice rules for pension plans’ PPA-related changes. Final IRS regulations address
§§1.411(d)-3;                   DB plan sponsors’ duty to notify participants before conforming plan operations to various PPA
54.4980F-1                      requirements. The final rules – which are similar to 2008 proposed rules – offer guidance for determining
                                whether PPA-related amendments trigger a “204(h) notice” and, if so, when it is due. The regulations also
                                explain how to coordinate 204(h) notices with other statutory notices for single-employer and multiemployer
                                plans, including the notice required when a plan becomes subject to PPA benefit restrictions.

2010 SOA Annual Meeting                                                                            Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 8 of 23
                                                                IRS Releases
     Item          Issue date                                                     Summary
IRS Form          11/09         IRS revises instructions for pension plans’ 2008 Form 5500 schedules. IRS has issued supplemental
5500 (2008)                     instructions for pension plans’ 2008 Form 5500 Schedules MB, SB and R. The new instructions clarify
                                entries for plans that have not filed; sponsors that already filed Form 5500 do not need to file revised forms.
                                The revisions generally relate to funding rule changes made by the Worker, Retiree and Employer Recovery
                                Act and effective in 2008. The new instructions also clarify that single-employer plans could use the full yield
                                curve for a lookback month in 2008 and need not attach an explanation of 2008 method changes to comply
                                with PPA.
Final Regs.       11/09         IRS issues final rules on employee stock purchase plans, reporting requirements. Final IRS
§§1.421-1;                      regulations on Section 423 employee stock purchase plans (ESPPs) provide guidance on complying with
1.422-2;                        statutory provisions and generally apply as of Jan. 1, 2010. Related regulations for ESPPs and incentive
1.423-1, 2;                     stock options under Section 6039 address information returns to file with the IRS and statements to give
                                employees. Employers may have to provide information statements as early as Jan. 31, 2010.
1.6039-1 &
Announce-         11/09         IRS grants amendment timing, 204(h) notice relief for cash balance plans. New IRS guidance gives
ment 2009-                      cash balance (and other hybrid) plan sponsors until 2010 plan year-end to reduce their plans’ interest-
82                              crediting rates to comply with PPA market-rate standards. Sponsors opting to amend plans by 2009 plan
                                year-end also get more time (until Jan. 30, 2010, for calendar-year plans) to notify participants of reductions
                                in future benefits due to the interest rate change. This relief gives much-needed breathing room to sponsors
                                that faced a mid-November deadline for notifying participants of lower interest-crediting rates.
Notice            11/09         October 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the
2009-88                         October 30-year Treasury securities rate (4.19 percent), composite corporate bond rate (5.76 percent),
                                corporate bond yield curve, and PPA funding and lump sum segmented yield-curve rates.
IRS               11/09         403(b) compliance checks to include more public schools, private universities. To ensure 403(b) plans
compliance                      satisfy universal availability rules, IRS will expand its compliance checks to cover more public schools and
check for                       private universities, Tax Analysts reports. An IRS official announced the initiative at a Nov. 2 ASPPA
§403(b)                         meeting, emphasizing that if an employer lets any employee defer salary to a 403(b) plan, all employees
plans                           must be allowed to defer (with limited exceptions). Under an earlier pilot, IRS contacted 5,000 public schools
                                and found 20 percent violated universal availability (for example, by misclassifying workers as contractors or

2010 SOA Annual Meeting                                                                            Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 9 of 23

                                                                IRS Releases
     Item          Issue date                                                     Summary
Notice            10/09         ‘Normal retirement age’ rules for governmental pensions delayed to 2013. New IRS guidance gives
2009-86                         governmental pension plans two more years to comply with 2007 final regulations defining “normal
                                retirement age.” For governmental plans, the regulations were set to take effect as soon as Jan. 1, 2009, but
                                Notice 2008-98 extended that deadline to plan years beginning on or after Jan. 1, 2011. Now, Notice 2009-
                                86 further extends the deadline to plan years beginning on or after Jan. 1, 2013, which is beyond the Cycle E
                                determination letter filing deadline applicable to some governmental plans.
Rev. Rul.         10/09         IRS offers roadmap for converting unused leave to retirement savings. Unused paid time off (PTO) that
2009-32;                        would otherwise be cashed out or forfeited can be converted to 401(k) plan contributions, using a roadmap
Rev. Rul.                       laid out in two recent IRS rulings. The guidance sheds some light on IRS’s current thinking, but the process
2009-31                         of converting PTO to retirement savings still involves many technical requirements and potential hurdles.
Final Regs.       10/09         Pension funding, benefit restriction regulations finalized by IRS. Sponsors of calendar-year pension
§§1.430(d)–1;                   plans should immediately review 2008 credit balance elections in light of an Oct. 15, 2009, deadline in just-
1.430(f)–1;                     released final rules on pension funding target calculations, credit balance elections and benefit restrictions.
1.430(g)–1;                     As expected, IRS has granted automatic approval of new discount rate elections, as well as any other 2010
                                method changes. The rules also clarify what benefits are subject to accelerated payment restrictions and
1.436–0;                        require new actuarial certifications after benefit-enhancing amendments or unpredictable contingent events.
Notice            10/09         September 30-year Treasury, corporate bond and PPA yield curve rates. The IRS has announced the
2009-76                         September 30-year Treasury securities rate (4.19 percent), composite corporate bond rate (5.79 percent),
                                corporate bond yield curve, and PPA funding and lump sum segmented yield-curve rates.
EP Team           10/09         IRS audit tools may help employers address retirement plan internal controls. New IRS audit tools for
Audit (EPTA)                    retirement plan administration can help employers review and strengthen their plans’ internal controls. Four
Program -                       questionnaires on plan administration and several documentation guides may prove useful when sponsors of
Internal                        pension, 401(k) and other retirement plans need to prepare for IRS audits. Beyond audits, the tools may
Control                         enhance routine reviews of plan operations and document retention policies as part of employers’ and
Question-                       fiduciaries’ ongoing plan governance efforts.

2010 SOA Annual Meeting                                                                            Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                               Page 10 of 23
                                                                 IRS Releases
     Item          Issue date                                                      Summary
Final Regs.       10/09         IRS finalizes COBRA, HIPAA and HSA rules. Final IRS rules require filing Form 8928 to report and pay
§§54.4980B–0;                   excise taxes for HIPAA portability and COBRA violations and to report violations of comparability rules for
54.4980D–1;                     employer contributions to health savings accounts (HSA) outside of a cafeteria plan or to Archer medical
54.4980E–1;                     savings accounts. The regulations also clarify certain HSA comparability rules, including the allowance for
54.4980G–1;                     some higher-paid employees and contributions for midyear plan entrants. The new requirements and
54.4980G–3;                     clarifications apply to filings due and employer HSA contributions made on or after Jan. 1, 2010.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 11 of 23

                                                                 DOL Releases
    Item          Issue Date                                                       Summary
Prop. Regs.      8/10           DOL to revise prohibited transaction exemption process. The process for obtaining an exemption from
§§2570.30 –                     ERISA's prohibited transaction rules would change under new Department of Labor (DOL) proposed
2570.52                         regulations. ERISA bars plan fiduciaries from engaging in certain transactions with employers, service
                                providers and others unless an exemption applies. The proposal would consolidate and update prior guidance,
                                clarifying what's required for a complete filing and requiring certain applicants to prepare a plain-language
                                summary for participants. The proposal would take effect 60 days after publication of final rules. DOL invites
                                public comment by Oct. 14.
EFAST2           8/10           DOL answers more EFAST2 questions for Form 5500 filers. To help ERISA plan administrators e-filing
FAQs                            Form 5500, DOL has updated the list of frequently asked questions on its EFAST2 website. DOL explains how
                                filers can meet the requirement to submit separate attachments for actuarial information when the plan's
                                actuary sends a single electronic file. Similar procedures apply if the accountant sends a single file combining
                                the auditor's report with other financial information. Other updates address the use of digital IDs (instead of
                                password-protected PDFs) and limitations on the use of certain typographical characters.
Final Regs.      7/10           DOL mandates fee disclosures for retirement plan service providers. Retirement plan service providers
§2550.408b-                     will have to make detailed fee disclosures to ERISA plan fiduciaries under a Department of Labor (DOL)
2(c)                            interim final rule. The measure covers defined benefit and defined contribution plans; DOL will address welfare
                                plans later. Consultants, recordkeepers, investment advisers and others will have to disclose direct and
                                indirect compensation. Fiduciaries to some investment vehicles also will have new disclosure obligations. The
                                rule, intended to help plan fiduciaries evaluate contracts, will apply to new and existing contracts starting July
                                16, 2011.
Proposed         6/10           DOL to revise ERISA exemption for in-house asset managers. An ERISA class exemption for large in-
Amendment                       house asset managers may soon be updated. The exemption lets plans engage in certain transactions with
to PTE 96–                      service providers and others without delegating decision-making authority to an independent qualified plan
23                              asset manager. A Labor Department proposal would let 80-percent-owned subsidiaries serve as in-house
                                asset managers, require in-house asset managers to have at least $85 million in assets under management,
                                and clarify the relationship between in-house and qualified plan asset managers. Comments on the proposal
                                are due Aug. 13.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 12 of 23
                                                                 DOL Releases
    Item          Issue Date                                                        Summary
Final Regs.      6/10          DOL issues final rules for splitting pensions in divorce. Retirement plan administrators may want to
§2530.206                      confirm their process for determining whether domestic relations orders dividing participants’ benefits meet
                               ERISA requirements. Recently finalized DOL regulations clarify how plan administrators should handle
                               sequential orders involving the same participant, as well as orders issued after a participant’s death, divorce or
                               benefit commencement date. Effective Aug. 9, the final rules are largely the same as interim final rules issued
                               in 2007.
Form 5500        5/10          DOL now lets service providers e-sign Form 5500 EFAST2 filings. A new DOL policy lets service
EFAST2                         providers electronically sign clients’ Form 5500 filings, if plan administrators give written authorization to do so.
                               Under this change to the ERISA Filing Acceptance System II (EFAST2), a PDF of the first two pages of Form
                               5500 (or 5500-SF), hand-signed by the plan administrator, must be attached to the filing and will be posted on
                               DOL’s website. Plan administrators using this e-signing option must rely on service providers to monitor the
                               EFAST2 website and pass on error messages or communications from DOL, IRS or PBGC.
DOL Bulletin     5/10          Guide for target-date fund investors released by DOL, SEC. New educational materials from the DOL and
10-640-NAT                     SEC are designed to help 401(k) plan participants and other investors understand the operations and risks of
                               target-date funds. Investor Bulletin: Target Date Retirement Plans advises investors to consider a fund’s asset
                               allocation over the whole life of the fund and at its most conservative investment mix, noting some funds may
                               not reach that mix until 20 or 30 years after the target date. Other considerations include a fund’s risk level,
                               performance and fees, as well as an investor’s goals, investment style and risk tolerance.
COBRA            4/10          DOL updates COBRA notices for subsidy’s extension to May 31. Updated model COBRA notices from the
Model                          Labor Department reflect the subsidy program’s extension through May 31. The extension allows individuals
Notices                        eligible for COBRA due to involuntary employment termination from Sept. 1, 2008, through May 31, 2010, to
                               qualify for up to 15 months of reduced premiums. Eligibility extends to individuals involuntarily terminated from
                               March 2, 2010, through May 31, 2010, who first qualified for COBRA because of a reduction in work hours
                               between Sept. 1, 2008, and May 31, 2010. A revised fact sheet about the subsidy program is available as well.
DOL              4/10          DOL uploads Form 5500 penalty data to new website. Information about penalties assessed for missing,
Enforce-                       delinquent or incomplete Form 5500 filings is available on a new DOL website with enforcement data. The site
ment Data                      is searchable by state and lists basic plan information, Form 5500 deficiency and penalty amount for each
web site                       closed enforcement case. DOL expects to update the database quarterly and upgrade the website’s
                               functionality over time. The site links to other DOL programs, including the Delinquent Filer Voluntary
                               Compliance Program, designed to encourage administrators to voluntarily file overdue Forms 5500.

2010 SOA Annual Meeting                                                                              Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                 Page 13 of 23

                                                                 DOL Releases
    Item          Issue Date                                                        Summary
EFAST2           3/10          DOL updates EFAST2 guidance for 2009 Form 5500 filings. To guide ERISA plan administrators on 2009
FAQs                           Form 5500 filings, the Department of Labor (DOL) has made a few additions to the list of frequently asked
                               questions about EFAST2. New entries clarify that the filing due date’s midnight deadline uses the time zone at
                               the plan administrator’s address, and small plans cannot use Form 5500-SF for late or amended filings. DOL
                               advises those who register for EFAST2 credentials but do not receive a confirmation e-mail to check their
                               spam filters before calling the EFAST2 help desk. (See 8/10 update.)
Final Regs.      3/10          DOL finalizes funding penalties for multiemployer pension plan sponsors. Trustees of multiemployer
§2560.502c–                    pension plans in endangered or critical status may owe penalties of up to $1,100 a day for failing to adopt a
8; 2570.160 –                  funding improvement or rehabilitation plan, under final Labor Department rules effective March 29. Similar
2570.171                       penalties apply when endangered plans don’t meet funding benchmarks. Penalties cannot be paid from plan
                               assets and instead must be paid by the plan sponsor – typically a board of trustees. Each board member is
                               jointly and severally liable for the entire penalty without regard to the relative degree of fault attributable to
                               individual trustees.
Prop. Regs.      3/10          Closer look at DOL’s investment advice proposal for 401(k)-type plans. Newly proposed investment
§2550.408g–1;                  advice rules mark the latest effort to give participants in 401(k)-type plans greater access to professional
                               expertise in managing their assets. The DOL proposal includes level-fee requirements and computer-modeling
                               options similar to final rules withdrawn in 2009, but some changes could stir debate. Notably, DOL scrapped a
                               contentious class exemption that would have given advisers more leeway to offer individualized “off model”
                               advice. The proposal would not affect advice arrangements relying on pre-PPA guidance.
Field            2/10          2009 funding notices due April 30 for calendar-year DB pension plans. The DOL hasn’t issued official
Assistance                     guidance since publishing a field assistance bulletin and model notices a year ago, but plan administrators
Bulletin                       may want to consider informal comments offered by agency representatives at the 2009 Enrolled Actuaries
2009-01                        Meeting. In addition, administrators using DOL models may want to tweak the text to avoid giving participants
                               the mistaken impression that their plan is terminating.
Field            2/10          DOL clarifies key 403(b) issues as Form 5500 deadline nears. New DOL guidance sheds light on the
Assistance                     expanded 2009 Form 5500 reporting obligations for tax-exempt organizations’ ERISA-covered 403(b) plans.
Bulletin                       Field Assistance Bulletin 2010-01 responds to questions raised about prior transition relief that eases the
2010-01                        burden of obtaining financial information for inactive contracts and accounts. The bulletin also adds new gloss
                               to a long-standing DOL safe harbor exempting salary deferral plans from ERISA coverage if the employer’s
                               role is limited. Employers may want to re-evaluate their plans’ ERISA status in light of this guidance.

2010 SOA Annual Meeting                                                                              Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                 Page 14 of 23
                                                                DOL Releases
    Item          Issue Date                                                      Summary
Final Regs.      1/10          DOL adopts safe harbor for transmitting contributions to small ERISA plans. An optional safe harbor
§2510.3-102                    now allows seven business days for transmitting employee contributions and loan repayments to small
                               retirement and welfare plans – those with fewer than 100 participants at a plan year’s start. Effective Jan. 14,
                               amounts deposited within the safe-harbor period meet the ERISA requirement to transmit contributions or
                               repayments as soon as they can reasonably be segregated from employer assets. The Department of Labor
                               has not extended the safe harbor to larger plans but has confirmed the final rule does not affect unfunded
                               welfare plans of any size.
DOL              12/09         Underlying assets of target-date funds not regulated by ERISA, DOL says. When a target-date or life-
Advisory                       cycle fund consists of shares of affiliated mutual funds, the underlying mutual fund assets are not ERISA “plan
Opinion                        assets,” the Department of Labor (DOL) has concluded in Advisory Opinion 2009-04A. Nor are investment
2009-04A                       advisers to such mutual funds considered fiduciaries of an investing employee benefit plan, in DOL’s view. A
                               money manager had suggested that plans suffer large losses due to the “self dealing inherent in such mutual
                               funds.” But DOL noted that mutual fund operations are regulated by the Investment Company Act, not ERISA.
DOL              10/09         DOL issues more Form 5500 FAQs on reporting service provider fees. To clarify the 2009 Form 5500
Supplement                     rules for disclosing service provider fees on Schedule C, DOL has posted a new set of 25 FAQs on ERISA
and FAQ’s                      plans’ reporting obligations and transition relief. The FAQs address hedge fund, redemption and 12b-1 fees,
                               along with other topics, such as gifts. For 2009, DOL will not reject an incomplete Form 5500 or impose
                               penalties if service providers made good-faith efforts to comply but could not supply all needed information to
                               the plan administrator. Administrators should begin working with service providers early in 2010 to ensure
Field            10/09         DB pension plans lack guidance on providing benefit statements. Lacking DOL guidance, DB plan
Assistance                     sponsors required under PPA to provide benefit statements “for 2009” must grapple with a variety of difficult
Bulletin                       issues: What is the deadline for providing statements for the 2009 plan year? Must total and vested accrued
2006-03                        benefits be determined as of plan year-end, or is an earlier date acceptable? May cash balance plan
                               statements show total and vested account balances, or must sponsors convert these values to life annuities at
                               normal retirement age?

2010 SOA Annual Meeting                                                                            Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                               Page 15 of 23

                                                               PBGC RELEASES
Item                 Issue date   Summary
PBGC notice          9/10         PBGC released notification about 2011 premium filings. The PBGC expects to post the 2011 premium
                                  instructions (including illustrative forms) on its Web site December 2010. The filing requirements for 2011
                                  are almost identical to the filing requirements are the key items to note for 2011.
Prop. Regs.          8/10         PBGC proposes notice, liability and recordkeeping rules for facility closings. Employers would have
§§ 4062.1;                        less wiggle room in assessing whether a facility closure causing termination of more than 20 percent of
4062.3;                           active participants ("4062(e) event") has occurred, under an Aug. 9 PBGC proposal. The proposal defines
4062.7-10;                        key terms that determine whether and when a 4062(e) event occurs, triggering notice to PBGC within 60
4062.21-35;                       days and a potential liability assessment. The proposed regulation also explains how 4062(e) liability is
4063.1                            calculated and satisfied (including waiver rules), sets forth recordkeeping requirements, and describes
                                  PBGC's investigation program. Comments are due Oct. 12.
PBGC                 7/10         Simplified withdrawal liability for critical status multiemployer plans. Critical-status multiemployer
Technical                         pension plans may use a method described in new PBGC guidance to calculate unfunded vested benefits
Update 10-3                       when determining a contributing employer's withdrawal liability. Technical Update 10-3 outlines a simplified
                                  method that disregards reductions in adjustable benefits, as required by the Pension Protection Act (PPA).
                                  PBGC notes that the methodology described is not intended as the exclusive means for satisfying the PPA
                                  requirement and that the guidance may be superseded by future regulations.
PBGC                 6/10         Employers have until July 16 to repair premium election filings. Administrators of single-employer
Technical                         pension plans that used the alternative premium funding target (APFT) to determine variable-rate PBGC
Update 10-2                       premiums but failed to check the box on line 5 of their comprehensive premium filings may validate their
                                  APFT election by sending PBGC written notice by July 16. The validation process in Technical Update 10-2
                                  is welcome news to sponsors facing much higher premiums solely because an administrative oversight left
                                  the box on line 5 unchecked. But the relief isn’t as broad as some employers had hoped, as it doesn’t cover
                                  late filings.
PBGC                 6/10         Form 5500 reporting clarified for multiemployer plans. Multiemployer pension plans completing Form
Technical                         5500 Schedule R should report on line 14 only inactive vested participants whose last employer withdrew
Update 10-1                       from the plan before the plan year began (PBGC Tech. Update 10-1). Plans need not review the status of
                                  these participants’ prior employers. Alternatively, plans may compile a list of all current contributing
                                  employers and count only inactive participants who had no covered service with any employers on the list.
                                  For the 2009 plan year, administrators may estimate the number of such participants using sampling

2010 SOA Annual Meeting                                                                            Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                               Page 16 of 23
                                                                PBGC RELEASES
Item                 Issue date   Summary
Employee Plan        3/10         PBGC rejects 2009 premium filings with flawed elections. PBGC is rejecting single-employer pension
News (Spring                      plans’ 2009 premium filings with improperly documented or late elections of the alternative method for
2010/Volume                       calculating variable-rate premiums. A rejected filing could mean higher premiums, interest and late-payment
10)                               penalties. Plan sponsors should review their 2009 premium filings for potential election problems. Sponsors
                                  finding problems may wish to self-correct to reduce late-payment penalties. (See PBGC Technical Update
PBGC web site        1/10         PBGC accepting 2010 premium filings. Pension plan sponsors may file their 2010 estimated flat-rate and
                                  comprehensive (variable- and final flat-rate) PBGC premiums using the agency’s My Plan Administration
                                  Account (My PAA) e-filing application. Calendar plans generally must make estimated flat-rate premium
                                  filings by March 1 (if 500 or more participants reported in 2009) and comprehensive filings by Oct. 15. But
                                  plans reporting fewer than 100 participants in 2009 have until May 2, 2011, to make 2010 premium filings.
                                  The PBGC website includes FAQs, e-filing tips, My PAA demos, payment instructions and illustrative forms.
Final Regs.          11/09        Valuing early retirement benefits in 2010 distress or involuntary terminations. PBGC has published a
§§4044.1-4044.4;                  2010 table for use in valuing early retirement benefits in distress or involuntary single-employer plan
                                  terminations and, optionally, in plan spinoffs. The “Selection of Retirement Rate Category” table, which is
4044.30; 4044.41;
4044.51-4044.57;                  updated annually for cost-of-living increases, is used to determine whether a participant has a low, medium
4044.71-4044.75                   or high probability of retiring early. The retirement rate category is then used together with the plan’s early
                                  and normal retirement provisions to determine the participant’s expected retirement age.
PBGC web site        11/09        PBGC updates table for partial lump sum restrictions. The PBGC has issued a table that DB plans
                                  need to administer partial restrictions on 2010 lump sums and other accelerated distributions. For plans at
                                  least 60 percent but less than 80 percent funded, PPA limits lump sums (or other accelerated distributions)
                                  to the lesser of (i) 50 percent of the present value of the benefit otherwise payable or (ii) the present value
                                  of a participant’s PBGC maximum guarantee. Plans subject to the restrictions must use the 2010 present
                                  value of PBGC maximum guarantee table for participants with annuity starting dates in 2010, regardless of
                                  the plan year.
Technical            11/09        PBGC clarifies pension plans’ reportable-event obligations for 2010. Interim PBGC guidance clarifies
Update 09-4                       pension plans’ reportable-event obligations for the 2010 plan year. Until final regulations reflecting PPA
                                  changes take effect – expected “sometime after the beginning of 2010” – plan sponsors may rely on
                                  Technical Update 09-4, which extends PBGC’s earlier relief for reportable events occurring in 2009. The
                                  guidance addresses reporting waivers, extensions, the threshold test for advance reporting and missed
                                  contributions for small plans.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 17 of 23

                                                                PBGC RELEASES
Item                 Issue date   Summary
Prop. Regs.          11/09        PBGC proposal would align reportable-event rules with PPA. Proposed PBGC regulations would align
§§4000.53; 4001.2;                reportable events for pension plans with PPA changes. The proposed rules would create two new
4043.1-6; 4043-23;
4043.25-37;                       reportable events: one for plans less than 60 percent funded and the other for plans transferring excess
4043.61-70;                       assets to fund retiree health benefits. To strengthen its “early warning” program, PBGC also would eliminate
4043.81; 4204.12;                 most automatic waivers and filing extensions – a move that would increase plans’ reporting burdens. Before
4206.7; 4231.2;                   issuing final regulations on these and other changes, PBGC will review comments filed by Jan. 22, 2010.
Final Regs.          11/09        PBGC expands pension benefit guarantee for returning veterans. PBGC has expanded pension benefit
§§4001.2;                         guarantees for returning veterans re-employed on or after Dec. 12, 1994. Under new final rules, if a
4022.11                           participant is on military leave when a distress or involuntary plan termination occurs and is later rehired
                                  under USERRA, the PBGC guaranteed benefit will take into account vesting and accrual service credited
                                  from the start of the military leave through the plan termination date. The rules leave unclear whether
                                  employers will need to provide employment information corroborating participants’ claims to PBGC.
PBGC                 10/09        PBGC announces 2010 maximum guaranteed pension benefit. PBGC has announced the 2010
announcement                      maximum guaranteed pension benefit will remain at the 2009 level of $54,000 per year ($4,500 per month).
                                  The maximum guaranteed benefit is adjusted if benefit payments start before (or after) age 65 or are paid in
                                  a form other than a single-life annuity. Some of the guaranteed amount may be paid from the plan’s assets,
                                  and participants may receive more if the plan is better funded or if PBGC can recover other amounts from
                                  the plan sponsor. The Oct. 27 PBGC announcement confirms Mercer’s earlier projections.
PBGC                 10/09        PBGC announces 2010 flat-rate premium. PBGC has announced the 2010 per-participant flat-rate
announcement                      premium will increase from $34 to $35 for single-employer DB pension plans, while remaining unchanged at
                                  $9 for multiemployer plans. The Oct. 16 PBGC announcement confirms Mercer’s earlier projections of the
                                  2010 premium rates, which reflect the 2.3 percent increase in national average wages from 2007 to 2008,
                                  rounded to the nearest dollar.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 18 of 23
      Item           Issue date   Summary
FASB Exposure        9/10         FASB seeks more details about multiemployer plans. Employers participating in multiemployer pension
Draft (No.                        and retiree medical plans would greatly expand their disclosures under a Sept. 1 FASB proposal. By requiring
1860-100)                         more information about plan funded status, contribution trends, potential withdrawal liability, "warning zone"
                                  status, and funding improvement or rehabilitation plans, FASB aims to help financial statement users assess
                                  risks facing the employer. The proposal would take effect for public companies' fiscal years ending after Dec.
                                  15, 2010, with a one-year delay for nonpublic entities. The comment deadline is Nov. 1.
Exchange Act         8/10         SEC approves final proxy access rule. The SEC has approved a final proxy access rule giving certain
Rule §14a-11                      shareholders the right to nominate board candidates using a company's proxy statement. The rule sets a
                                  three-year, 3 percent ownership threshold for proxy access and requires shareholders seeking access to
                                  notify a company at least 120 days before the anniversary of the prior year's proxy mailing. The rule will take
                                  effect for larger companies 60 days after publication in the Federal Register and three years later for smaller
FASB Exposure        8/10         How DC plans should account for participant loans. Defined contribution (DC) plans would classify
Draft (No.                        participant loans as notes receivable rather than plan investments, under a new FASB proposal. The
EITF100C)                         receivable amount would equal the unpaid principal balance plus any accrued but unpaid interest, consistent
                                  with common practice. The Aug. 18 proposal would alleviate concern that DC plans should be measuring
                                  participant loans at fair value, reflecting market interest rates, participants' credit risk and historical default
                                  rates. FASB invites comments by Sept. 7. The change would be retrospective; its effective date will depend on
                                  comments received.
FASB Exposure        8/10         Disclosing multiemployer pension withdrawal liability. A new FASB proposal could require employers
Draft (No.                        contributing to multiemployer pension plans to disclose information about their potential liability on withdrawing
1840-100)                         from the plan -- even if the possibility of withdrawal is remote -- if that liability would severely impact the
                                  employer. The proposed changes to loss-contingency reporting standards would take effect for public
                                  companies' fiscal years ending after Dec. 15, 2010, with a one-year delay for nonpublic entities. Comments
                                  are due Aug. 20 (subsequently extended to Sept. 20). A separate proposal on disclosures about
                                  multiemployer plans is due in the third quarter. (See FASB No. 1860-100.)

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 19 of 23

      Item           Issue date   Summary
Prop. Regs.          7/10         Proposed changes to HIPAA privacy and security rules. Proposed changes to the Health Insurance
§§160.101-105;                    Portability and Accountability Act's (HIPAA) privacy, security and enforcement rules would clarify requirements
160.300; 160.302;                 created by the HITECH provisions of the 2009 stimulus package. However, other proposed revisions would
160.304; 160.308;                 impose new restrictions designed to strengthen HIPAA's protections and effectiveness, according to an HHS
160.312; 160.316;                 news release. A 60-day comment period will open once the proposed rules appear in the Federal Register
160.401; 160.404;
160.406; 160.408;
160.410; 160.412;
160.418 and
164.102; 164.104-
106; 164.302;
164.304; 164.306;
164.308; 164.310;
164.312; 164.314;
164.316; 164.500;
164.501; 164.505;
164.506; 164.508;
164.510; 164.512;
164.514; 164.520;
164.522; 164.524;
SEC News             7/10         SEC says investment advisers can't 'pay to play' with public funds. A new SEC rule bars investment
Release 2010-                     advisers from making political contributions to win government contracts to manage assets of Section 529
116                               plans or similar public plans. If an adviser makes contributions to an official who may influence adviser
                                  selection, the adviser will be barred for two years from conducting business with the government entity for a
                                  fee. Advisers also cannot pay a placement agent other than an SEC-registered adviser or broker-dealer to
                                  solicit a government client. The rule takes effect in 60 days, with compliance required six or 12 months later
                                  for different parts.
                     7/10         IASB, FASB convergence deadline extended. IASB and FASB will extend their 2011 deadline for
                                  converging international and US accounting standards from June 30 to Dec. 31 or later for some projects,
                                  according to a joint progress report issued June 24. The modified strategy retains the June 2011 target date to
                                  complete convergence projects where "the need for improvement is most urgent." However, the boards now
                                  plan to wrap up lower-priority projects or those requiring more analysis by year-end 2011 or later in a few

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 20 of 23
      Item           Issue date   Summary
GASB report          6/10         GASB issues preliminary views on governments’ pension accounting. The Governmental Accounting
NO. 34P and                       Standards Board (GASB) has issued preliminary views on revising state and local governments’ accounting
Supplement                        and financial reporting for pension plans. If adopted, the changes would lessen governments’ flexibility in
                                  reporting expense amounts, and balance sheets would include unfunded pension liabilities. Those
                                  participating in cost-sharing multiple-employer plans would have to use single-employer accounting rules.
                                  GASB still takes a long-term view, not the market-related approach used by nongovernmental employers.
IASB FAQs            6/10         IASB issues FAQs on proposed accounting for retiree medical, pension plans. IASB has published
                                  answers to frequently asked questions (FAQs) on its proposed changes to employers’ accounting for defined
                                  benefit pension and retiree medical plans. The FAQs cover the project’s scope, relationship to other IASB and
                                  FASB activities, key elements, transition, and effective date. While most US companies do not currently report
                                  under international standards, the proposal will be important if US standards converge with the IASB proposal
                                  or the SEC lets US companies use international standards. Employers have until Sept. 6 to comment on the
FASB Exposure        6/10         FASB, IASB propose single Statement of Comprehensive Income. In a further step toward convergence
Draft (1790-                      of international and US accounting, IASB and FASB each have issued exposure drafts on income statement
100); IASB                        presentation. The proposals would combine the Statements of Profit or Loss and Other Comprehensive
Press Release                     Income (OCI) into one Statement of Comprehensive Income. Neither the classification of items between net
                                  income and OCI, such as pension plan actuarial gains and losses, nor the computation of earnings per share
                                  would change, but the familiar net income figure would no longer be the bottom line of the statement.
IASB Exposure        5/10         IASB’s proposed accounting changes for retirement plans. IASB has proposed significant accounting
Draft                             changes for defined benefit pension and retiree medical plans that would directly affect employers subject to
(ED/2010/3)                       international standards. Though most US companies currently do not use IASB’s standards, the proposal has
                                  implications in light of efforts to converge US and international standards and the potential for SEC to let US
                                  companies use international standards.
SEC News             2/10         SEC votes to continue assessing US adoption of global accounting standards. The SEC has moved
Release 2010-                     closer to US adoption of international financial reporting standards (IFRS), voting Feb. 24 to continue support
27                                and ongoing consideration of global accounting standards. With the goal of reaching a decision in 2011, the
                                  commission has asked its staff to proceed with a work plan, analyzing the steps and processes involved in
                                  changing to IFRS. SEC staff will start issuing public progress reports on the work plan by October 2010. If the
                                  SEC approves the change, the earliest companies would report under IFRS would be 2015 or 2016.

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 21 of 23

      Item           Issue date   Summary
SEC Regulation       2/10         SEC explains guidance on new pay and governance disclosures. New SEC staff guidance on executive
S-K                               pay disclosures clarifies recent rule changes that apply to 2010 proxy and registration statements filed on or
                                  after Feb. 28. Issued as Compliance & Disclosure Interpretations, the guidance addresses disclosure of
                                  director qualifications, equity awards, pay policies and related risks, consultant fees, and the rules’ effective
Final Regs.          1/10         SEC finalizes TARP say-on-pay rules. Final SEC rules implement the requirement that firms receiving
§240.14a-20                       assistance under the Troubled Assets Relief Program (TARP) give shareholders a separate advisory vote on
                                  executive compensation, as disclosed in proxy statements. The “say on pay” rules, which largely mirror the
                                  July 2009 proposal, clarify that TARP firms need not file preliminary proxy statements. The SEC estimates that
                                  about 275 companies will be subject to the final say-on-pay rules, which apply only while a firm has
                                  outstanding TARP obligations.
FASB Exposure        12/09        FASB proposes equity treatment for options with exercise price in foreign currency. A FASB proposal
Draft (No.                        would permit equity treatment for stock options with an exercise price in the currency of a market where a
EITF090J)                         substantial portion of the company’s shares trade. The proposal, which arose from FASB’s Emerging Issues
                                  Task Force, would resolve accounting uncertainty over whether to treat such options as equity or liability
                                  under ASC Topic 718 (formerly FAS 123(R)).
IFRS Press           12/09        IASB clarifies accounting for prepaid pension contributions. IASB has relaxed restrictions on employers’
Release (26                       recognition of balance-sheet assets for prepaying minimum required pension contributions. The amendment to
November                          IFRIC 14 – which interprets IAS 19, Employee Benefits – is effective for fiscal years beginning on or after Jan.
2009)                             1, 2011, and may be applied early to 2009 year-end financial statements. However, the amendment is not
                                  expected to have a significant impact on accounting for US pension plans under IAS 19.
                     10/09        IASB rescinds discount rate proposal for post-retirement benefits. IASB has rescinded planned
                                  amendments to IAS 19, Employee benefits, that would have required all companies to determine discount
                                  rates for valuing pension, retiree health and other post-employment benefits from high-quality corporate bond
                                  yields. Companies in countries without deep corporate bond markets currently use government bond yields,
                                  resulting in reporting inconsistencies. The board halted the project after weighing the positives (improved
                                  global consistency) against the negatives (subjectively determined discount rates due to lack of country-
                                  specific data points).

2010 SOA Annual Meeting                                                                             Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                                Page 22 of 23
      Item           Issue date   Summary
SEC Staff Legal      10/09        SEC eases policy on shareholder proposals related to risk, succession. More shareholder proposals
Bulletin No.                      related to risk evaluation and CEO succession planning may make it onto corporate proxies because of an
14E (CF)                          SEC shift on the standard for exclusions. The SEC now will evaluate whether these proposals raise significant
                                  policy issues transcending “day-to-day business matters.” Given the importance of governance issues in
                                  today’s economic climate, SEC believes its earlier approach – allowing proxies to omit such proposals under
                                  the “ordinary business operations” exclusion – may have improperly denied shareholders a vote on key

2010 SOA Annual Meeting                                                                          Session 78 – Late-Breaking Developments for Pension Plans
                                                                                                                                             Page 23 of 23

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