Comment Calls

CUNA
October 26, 2006

This week there is one Comment Call and One final rule of interest to credit union management. If your credit union offers a 401(k) plan you will want to read the comment call and send your comments to the CUNA office before Friday, November 3, 2006. This is unusually short notice for a commment call. To make your response easier there are a series of questions at the end of the comment call. You can respond to the questions that affect your credit union and your answers will be used to compose CUNA's official response to the Department of Labor. The attached comment call pertaining to 401(k) Plans and the Final IRS Rule on Electronic Notices will be of interest to you and your colleagues. You may want to refer them to others in your credit union.

Default Investments for Automatic Enrollment in 401(k) Plans

Comments are due at CUNA by Friday, November 3rd

• The U.S. Department of Labor’s (DOL’s) Employee Benefits Security Administration has issued proposed regulations implementing the provisions of the Pension Protection Act of 2006 (Act) that would make it easier for fiduciaries of 401(k) plans and other participant-directed defined contribution (retirement) plans to adopt automatic enrollment and default investment plan design features. This proposal would apply to credit union sponsors of 401(k) plans.

• Under the proposed regulation, a fiduciary would not be liable for any loss as a result of automatically investing a participant’s account in a qualified default investment alternative (QDIA is defined in the proposal), provided certain conditions are met. The fiduciary, however, would remain liable for the selection and monitoring of a QDIA.

• These rules will apply not only in situations involving 401(k) plans with automatic enrollment features, but also in cases where investments are added or eliminated in conjunction with a change in service provider.

• The aim of the Act and the proposal is to boost participation in retirement savings plans. DOL estimates that the proposal will increase aggregate 401(k) plan account balances by between $45 billion and $90 billion.

The complete text of this comment call can be found at: http://www.cuna.org/reg_advocacy/reg_call/rcc_102506.html

October 23, 2006

IRS Regulations Set Standards for Plans That Use - Electronic Notices

The final rule is effective as of October 20, 2006. The new rules apply to notices, consents and elections made on or after January 1, 2007.

EXECUTIVE SUMMARY

• The Internal Revenue Service (IRS) has released final rules establishing standards for retirement plans, employee benefit arrangements or individual retirement plans that offer electronic benefit elections, consents and notices to participants. The final rules add to the Treasury regulations on standards for the use of an electronic medium to provide written notices and to allow for written participant elections.

• The regulations affect credit unions that sponsor certain retirement plans, employee benefit arrangements, and individual retirement plans. This rule is applicable for those notices, elections or consents that must be in writing. Example of notices, elections or consents that are required to be in writing under the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA) include: notices explaining the rights participants have to rollover their plan distributions to qualified retirement plans or IRAs; notices describing a participant’s benefit commencement rights; spousal consent elections relating to joint and survivor annuities; and notices to participants detailing a significant reduction in the rate of future benefit accrual.

• These regulations reflect the relevant provisions of the Electronic Signatures in Global and National Commerce (E-SIGN) Act.

The complete text of this final rule can be found at: http://www.cuna.org/reg_advocacy/member/analysis/irs_102006.html