In response to the credit market instability, the Treasury Department will make available certain funds from its Exchange Stabilization Fund, on a temporary basis, to enable money market funds to insure the amount of assets held in publicly offered money market mutual funds to maintain a stable $1.00 per share net asset value. This program will be voluntary and is a temporary program to last no more than one year (after one year, it will be evaluated to determine if an extension is warranted).

"This Notice provides administrative relief in furtherance of public policy to promote stability in the market for money market funds," the IRS wrote. "Except with respect to the administrative relief expressly provided in this Notice, no inference should be drawn from this Notice regarding any other federal tax issues affecting tax-exempt bonds, money market funds, or any other security."

Premiums for participating money market mutual funds will be assessed against the mutual fund and we understand that most, if not all, investment companies maintaining these funds are planning to participate. The amount insured will not be capped like FDIC insurance. Once a participating fund board determines the fund has "broken a buck" and decides to liquidate, any shortfall would be covered by the Treasury. The SEC has been given the responsibility of developing this program.

It is important to note that new money that comes into these funds after close of business on September 19, 2008, will NOT be covered by this program. Though details are still being worked on, it appears intermediaries and recordkeepers will find it necessary to keep data on money market mutual fund account values as of the close of business on September 19, 2008, in order to be in a position to properly allocate recoupment of Treasury insured amounts, if subsequently necessary.

For further information, please contact Jim Bartoszewicz, Executive Vice President, Cowden Advisers, Inc. Defined Contribution & Investment Advisory Services. Jim can be reached at 412-208-0481 or toll-free at 888-889-9432.
The IRS Notice is available here.

Cowden Associates survey finds significant changes in investment decision-making process

Significantly more senior executives are taking a direct role in decisions regarding their organization’s 401(k) plans than in the past, according to Cowden Associates, Inc.’s Second Annual Tri-State Defined Contribution Plan Sponsor Survey.

Of the respondents to this year’s survey, 94 percent indicated that their senior executives are involved in the investment decision-making process, compared with 30 percent in 2007.

More than 125 employers throughout the tri-state region participated in this year’s survey, which was conducted during March and April, and provided information on their location, size, total plan assets, type of organization, and eligibility for and participation in the plan.

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A recent study by EBRI (Employee Benefit Research Institute) reports that many experienced employees might delay retirement if offered the right incentives. In partnership with the HR Policy Association, EBRI interviewed employees and retirees from 11 aerospace and defense industry companies. Nearly half of those polled said that feeling needed would be enough to get them to stay as much as 2 years longer. Half also said that receiving a full pension while adopting a part-time schedule would delay their retirement. Nearly as many would be enticed by a partial pension while working part-time. An overwhelming majority say that they would look positively on an employer asking them to stay longer. Employers have a narrow window to offer incentives for working longer, though. Many employees start thinking and planning for retirement as much as 2 years before they retire.

In June, President Bush signed into law H.R. 6081: Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act), providing tax benefits and incentives to employees in qualified military service as defined by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). The provisions have varied impact on many benefits, including 403(b) plans, governmental 457(b) plans, IRAs, and health flexible spending accounts. A full summary can be found at GovTrack.us.

A useful guide from 401(k)DIRECT: 2008 Tax Update. In the document, you will find important information about 401(k) contribution and catch-up limits, income taxes, long-term care insurance, IRA limits, and more.

A survey commissioned by the AARP reports that the current downward shift in the economy is having a big effect on people age 45 and older, causing them to delay retirement and take premature withdrawals from their retirement savings. 27% of those over age 45 say they have postponed their retirement plans and over one quarter are struggling to pay mortgage or rent. The complete summary and the full survey can be found at the AARP website.

The U.S. Department of Labor (DOL) has released additional clarification of the "QDIA regulation," the final regulations governing Qualified Default Investment Alternatives (QDIA). These regulations provide plan sponsors relief from certain fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) for investments made on behalf of participants or beneficiaries who fail to direct the investment of assets in their individual accounts. The guidance has been published in the form of a Q & A that can be found at the DOL website.

The Pittsburgh Post-Gazette featured the Cowden Associates succession plan in their "Business School" column:

Jere Cowden knew a lot of lives depended on his own.

He was in his 50s with about 25 employees and all of his clients depending on his good health. That's when he came up with the idea that he was going to slowly turn his business over to his vice presidents.

"It hits you pretty early that you need the ability for life to go on if something happens to you," he said.

Now Cowden Associates, a business consulting firm, has a secure future that is no longer dependent on the well-being of one man.

"We're in the business to plan for clients. You better plan for the business, too," he said.

Over the next decade, with an outside cap of 15 years, the men who work for Mr. Cowden, 61, of Leet, will become the owners of the firm. As Elliot N. Dinkin, 48, of Squirrel Hill, and Vincent G. Wolf, 40, of Moon, the two executive vice presidents at Cowden, slowly take over, Mr. Cowden will slowly have less to do.

Read the whole article at the Pittsburgh Post-Gazette.

An update to a retiree health care case we featured last year: on March 24, 2008 the U.S. Supreme Court declined to review a 2007 federal appeals court ruling, upholding a final rule from the Equal Employment Opportunity Commission (EEOC) that allows an employer to coordinate retiree health benefits with Medicare or a similar state health benefits program without being subject to the Age Discrimination in Employment Act (ADEA). The effect of the ruling is that employers are allowed to provide a two-tier system of retiree heath care coverage, with younger retirees receiving richer benefits than Medicare-eligible retirees. The final ruling ends an eight year court battle, often referred to as the "Erie County" case.

Jim Bartoszewicz was featured in a Pittsburgh Business Times article from the March 21 -27, 2008 issue:

A recent ruling by the U.S. Supreme Court is being called a victory for millions of workers and a reminder for employers to exercise the utmost fiscal responsibility regarding their 401(k) plans.

The court ruled on Feb. 20 that individual participants in 401(k) retirement plans can sue to recover losses caused by the mismanagement of funds, reversing a decision made earlier by the 4th U.S. Circuit Court of Appeals in Richmond, Va., in the case of LaRue v. DeWolff, Boberg & Associates.

Jim Bartoszewicz, president and CEO of Cowden Advisers Inc., a Downtown investment advisory firm, said companies can take action to guard against lawsuits.

"By creating Sound practices for governing their retirement plans, sponsors will reduce the number of legitimate claims, while putting themselves in a better position to defend the frivolous suits," he said.

The full article requires a subscription.