The stock market’s decline has already ravaged your 401(k) plan. Now it could hurt your pension, too,” wrote reporter Todd Wallack in The Boston Globe in March 2009. “Under a law that took effect last year, underfunded pension plans may be forced to limit lump-sum payments and suspend cost-of-living increases for retirees. In addition, some plans could be frozen, preventing current employees from earning credit for additional years on the job.”
Peter Austin, executive director of BNY Mellon Pension Services, which advises businesses on retirement plans, said: “Companies are going to have to make drastic decisions about their pension plans.”
Pension funds are typically invested in a mix of stocks, bonds, and other securities, most of which have fallen sharply, Wallack explains. “By some estimates, thousands of pension plans could be affected by the law because their funds have become so depleted. Watson Wyatt Worldwide, a consulting firm, estimated pension assets declined 26 percent in 2008. The firm also reported the 100 largest US pensions were just 79 percent funded in 2008, compared with 109 percent funded at the end of 2007. That means they have 79 cents set aside for every dollar owed to current and future retirees.”
Following is an explanation of pension plan services available:
401(K) Profit Sharing Plans
• Completion of an annual valuation to determine the required and/or maximum permissible contributions.
• Completion of one or more valuations per year allocating contributions, forfeitures, investment earnings, and plan expenses among the eligible employees.
• Preparation of a valuation report for each valuation presenting the results of the valuation, a statement of assets and liabilities, a statement of receipts and disbursements, and pertinent information regarding the participants in the plan and their accounts.
• Furnishing each participant with a Statement of Account for each valuation.
• Completion of the average deferral percentage and average contribution percentage tests specified in Internal Revenue Code Sections 401(k) and 401(m).
• Preparation of required annual reports to the Internal Revenue Service and Department of Labor.
• Preparation of a Summary Annual Report for distribution to the participants.
• Calculation of amounts payable to participants who terminate employment, become disabled, die or retire, and preparation of forms so that payments may commence.
• Preparation of papers for loans to participants and hardship distributions.
• Maintenance of historical records for each participant including terminated and retired participants.
• General supervision of the operation of the plan and availability at all times to answer questions regarding the plan.
Defined Contribution Plans Other Than 401(K) Plans
• Completion of an annual valuation to determine the required and/or maximum permissible contributions.
• Allocation of contributions, forfeitures, investment earnings, and plan expenses among eligible employees.
• Preparation of a valuation report presenting the results of each valuation, a statement of assets and liabilities, a statement of receipts and disbursements, and pertinent information regarding the participants in the plan and their accounts.
• Furnishing each participant with a Statement of Account for each valuation.
• Preparation of required annual reports to the Internal Revenue Service and Department of Labor.
• Preparation of a Summary Annual Report for distribution to the participants.
• Calculation of amounts payable to participants who terminate employment, become disabled, die or retire, and preparation of forms so that payments may commence.
• Preparation of papers for loans to participants.
• Maintenance of historical records for each participant including terminated and retired participants.
• General supervision of the operation of the plan and availability at all times to answer questions regarding the plan.
Defined Benefit Plans
• Completion of an annual actuarial valuation to determine the maximum deductible, minimum required, and recommended contributions.
• Preparation of a valuation report presenting the results of the valuation, trust fund financial statements, and pertinent information regarding the participants in the plan.
• Preparation of all required annual reports to the Internal Revenue Service, Department of Labor, and Pension Benefit Guaranty Corporation.
• Furnishing each participant with a Statement of Benefits and a Summary Annual Report.
• Completion of calculations required for the preparation of audited financial statements including those required by Financial Accounting Standards Board Rule Number 87.
• Calculations to determine if the plan meets the non-discrimination requirements of Section 401(a)(4) of the Internal Revenue Code.
• Calculation of benefits payable to participants who terminate employment, become disabled, die or retire, and preparation of forms so that payments may commence.
• Preparation of papers for loans to participants.
• Maintenance of historical records for each participant including terminated and retired participants.
• General supervision of the operation of the plan and availability at all times to answer questions regarding the plan.
Non-Recurring Services
• Assistance with plan design or plan redesigns including discussions and recommendations with respect to eligibility requirements, level of contribution, vesting schedule, and alternative plans.
• Preparation for review by company counsel of documents establishing or modifying the plan, e.g., plan and trust agreements and Board of Directors’ meeting materials.
• Preparation of ancillary papers including Summary Plan Description or Summary of Material Modifications, participant election forms and Internal Revenue Service submission.
• Attendance at employee meetings to describe the plan and answer questions.
• Assistance with establishment of administrative procedures.
• Preparation of papers in the event the plan is terminated.
• Miscellaneous consulting as required
For details, review the following Pension Related Government websites:
o Internal Revenue Service
o U.S. Department of Labor, Employee Benefits Security Administration
o Congressional Record
o FirstGov, The U.S. Government’s Official Web Portal
o Social Security Administration
Retirement Savings Calculators:
o USAToday Retirement Calculator
o 401Kalculator
General Pension Information Sites:
o American Society of Pension Professionals & Actuaries
o Benefitslink.com
o FreeERISA.com
o The 401(k) Wire
o Employee Benefit Research Institute
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