Products June 10, 2010

Tennessee Provider Adds Enrollment Meeting Service

First Mercantile, a Memphis, Tennessee, provider of 401(k) plans, has unveiled a customizable enrollment meeting service.
Reported by

A news release said the meetings can be delivered either by the plan’s investment professional or by one of 50 professional enrollment meeting specialists.

The presentations can be customized to address specific goals— to increase plan participation, boost savings rates, or improve investment diversification—and tailored to employees’ varied levels of understanding.

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Presentations are available in English or Spanish.

Compliance June 10, 2010

Alliant Tagged for Pre-PPA Whipsaw Calculation

Alliant Energy Corp. improperly used a 30-year Treasury rate for whipsaw calculations for lump-sum distributions from its cash balance plan to employees younger than the retirement age, a judge ruled.
Reported by

U.S. Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin asserted that the company ran afoul of the Employee Retirement Income Security Act (ERISA) with the calculations, but said she could not determine the correct rate the company should have used before the Pension Protection Act of 2006 (PPA). The PPA amended ERISA to provide that cash balance plans are no longer required to make whipsaw calculations.

Crabb found that from 1998 to 2006, Alliant’s method of calculating lump-sum distributions violated ERISA because the interest rates used by Alliant did not result in a whipsaw calculation as required by ERISA at that time. The 30-year Treasury bond rate did not fairly represent the interest rates promised in the plan, she said.

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Crabb rebuffed Alliant’s contention that participants would receive a windfall if cash balance plans project future benefits at a rate higher than the rate used to discount those benefits back to “present value.”

Alliant Energy Corp. converted its traditional defined benefit plan to a cash balance plan in 1998. Under the plan, participants accrued a “benefit credit” equal to 5% of their salary, together with the right to an interest credit that is equal to the greater of 4% or 75% of the rate of return generated by the plan for the calendar year.

The case is Ruppert v. Alliant Energy Cash Balance Pension Plan, W.D. Wis., No. 08-cv-127-BBC.

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