Friday, October 30, 2009

A Better Way to Cut Costs

McKinsey Quarterly just released this study. It makes too many salient points for me to summarize it here. Effective cost-cutting starts by rejecting the thought that cuts have to be across-the-board.

"[Companies should start any cost-cutting initiative by thinking through whether they could restructure the business to take advantage of current and projected marketplace trends (for instance, by exiting relatively low-profit or low-growth businesses) or to mitigate threats, such as consolidating competitors."

Carbonflow-The for Carbon Offset Transactions

Semantic Seed
on Thursday, 29 October 2009
by Janice Williams Oliver

“The World Bank, says Neal Dikeman, co-founder/CEO and Chairman of the Board for Carbonflow™, reports approximately $126 billion dollars in carbon offset transactions have occurred, of that only $500 million were in the USA.”  Carbon offset trading is very active internationally and at some point will gain greater traction in the USA because this year, [both the House and Senate are considering bills to reduce global warming pollution and transition to a clean energy economy].  …
The United Nations Framework Convention on Climate Change (UNFCCC) says “the central feature of the Kyoto Protocol is its requirement that countries limit or reduce their greenhouse gas emissions. … To help countries meet their emission targets, and to encourage the private sector and developing countries to contribute to emission reduction efforts, negotiators of the Protocol included three market-based mechanisms – Emissions Trading, the Clean Development Mechanism (CDM) and Joint Implementation.”
“CDM offsets comprise 90% of all carbon offsets traded worldwide,” says Richard Barber, Chief Technical Officer/VP of Engineering at Carbonflow™.   The UNFCCC further states, “CDM allows emission-reduction (or emission removal) projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2.  These CERs can be traded, sold, and used by industrialized countries to meet a part of their emission reduction targets under the Kyoto Protocol.  The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction limitation targets.”  …
“The projects must qualify through a rigorous, public registration and issuance process designed to ensure real, measurable and verifiable emission reductions that are additional to what would have occurred without the project.  … It is the first global, environmental investment and credit scheme of its kind, providing a standardized emissions offset instrument, CERs,” says the UNFCCC.
CDM uses three auditing companies in its approval process.  They are Det Norske Veritas (DNV) of Norway, SGS United Kingdom Limited and TÜV SÜD in Germany.  …
“Carbonflow™ provides unique browser-based products and services that empower any organization to manage and monitor greenhouse gas reduction projects on a secure multi-party platform. Employing HOpE™ (Hybrid Operating Environment) principles, Carbonflow™’s solution provides accessible technology to everyone – including those in developing countries with limited online access.”  … It takes 2 years for a project to receive approval using the current CDM process; Carbonflow™ predicts that using their software will cut the CDM process down by six months to a year.
Why does the future for Carbonflow™ look bright?  It is the only company working with CDM’s auditors to automate their process. It is likely the CDM system will be expanded to include the USA.  Or, the USA will create a separate CDM system.  In both instances, the CDM auditors will be consulted/used and Carbonflow™ will definitely benefit.
At first I thought Carbonflow™ was an enterprise carbon accounting company like … Verisae who includes Walmart as one of its customers.  There are over 40 carbon software companies in the marketplace today.  Large companies like SAP and Microsoft are purchasing them to get into the carbon accounting business.  Carbonflow™ appears to be ahead of the curve.  Neal says “Carbonflow™ has no competition.”  The existing carbon accounting software companies are used in-house for carbon measurement purposes.  Carbonflow™ provides a multi-party platform that coordinates CDM activities internationally.
What are the opportunities for entrepreneurs specifically in carbon software management/accounting and/or Cleantech?  “Cap and Trade will put a new cost in everyone’s supply chain.  It will be a 10 year exercise,” says Neal.  Multiple green jobs and opportunities will be created to satisfy this demand. …

Thursday, October 29, 2009

5 Tips on How to Emphasize Action Over Inertia

American Express OPEN Forum
Behance Team
Oct 28, 2009 -
… Not surprisingly, actually doing things seems to be more effective than thinking or talking about doing things. In the spirit of doing, here’s five quick tips on how to emphasize action in your work environment:
1. Act without conviction.
…We’ve found that the most successful professionals tend to take action even if everything about a project isn’t clearly defined.  The next time you’re stuck in a planning rut, unable to envision the “perfect solution,” try to go ahead take action in any way you can. The information that you gather by acting, as well as the momentum you gain, will help you refine your objectives and keep moving forward.
2. Prototype your ideas.
We rarely (if ever) strike upon the best solution right out of the gates. …Writing and rewriting a proposal is prototyping, running and refining a social media marketing campaign is prototyping, and so on. In essence, prototyping just means trying something out, and then making a better version based on what you learned. The sooner we experiment, the more information we have to take further action.
3. Get out of your own way.
The problem with creating hard-and-fast plans is that we often get unduly attached to them, so much so that even when an unexpected opportunity emerges, we are loathe to deviate from the agreed-upon plan. …
4. Replace update meetings with “huddles.”
… Yet, when everyone remains standing for a meeting, the gathering automatically gains a certain urgency that encourages speedy updates and efficient decision-making. …
5. Create testaments to progress.
… While it’s not constructive to rest on your laurels, it can be helpful to integrate testaments to past progress into your work environment – whether it’s a wall of “to-dones,” or an oversized project board that tracks phases of completion as you develop a new product or feature. We are emboldened to take action when we remind ourselves that every little step makes a difference.
***This post by J.K. Glei is based on research by the Behance team. Behance runs the Behance Creative Network, the 99% productivity think thank, the Action Method project management application, and the Creative Jobs List.

Point-and-click productivity

Research finds Web 2.0 social media are infiltrating the workplace, can add to employee effectiveness
Employee Benefit News
By Lydell C. Bridgeford
June 15, 2009
…Social media pundits argue that more employers need to make employees' interest in Web 2.0 tools work for them by investing in technology that allows workers to engage in social media conversations.
Social networks, blogs, microblogs (Twitter), text messaging, wikis and gaming technology all have the potential to improve workers' productivity and the marketing of benefits programs. And, keeping in mind that cost is a particular concern for employers right now, observers also point out that employees do not have to be tech-savvy to use social media tools, and the technology does not eat away at the IT budget.
Research confirms that workers are using social media tools at home to access information that they desire. Therefore, employers should be able to leverage those tools in their communication strategies, says Ken Groh, vice president of Human Capital at Aon Consulting.
Social media footprint
Aon recently studied how workers used Web 2.0 media at home and at work. Researchers surveyed more than 8,000 employers in the private and public sectors.
Aon analysts find that, despite employers' belief that Web 2.0 media may detract from productivity, workers — both millennials (born 1980 and later) and nonmillennials — are leveraging the technology to perform their jobs.
For example, 65% of nonmillennials and 72% of millennials report using their company's intranet for their job duties, while 25% of nonmillennials and 38% of millennials utilize text messaging for work purposes.
In addition, 46% of nonmillennials and 48% of millennials use instant messaging as part of their job assignments, while 13% of nonmillennials and 20% of millennials belong to job-related social networks. About 8% of nonmillennials and 13% of millennials use blogs in a work-related context. …
"Web 2.0 is still a relatively unknown quantity for many companies," says Michael Rudnick, senior technology consultant at Watson Wyatt. "However, the move toward Web 2.0 is an inevitable shift."
Watson Wyatt finds that companies are using a variety of Web 2.0 technologies, such as social networking (23%), podcasts (19%), blogs (21%) or wikis (15%) to communicate internally with their employees. …
An information-centered society
Web 2.0 social media offers great opportunity to tap into new markets, reach new customers and create a more seamless working environment — if employees are given the tools and training to use them effectively, says Dr. Jennifer Bott, a marketing and management associate professor at Ball State University. "The technology will become a critical partner in achieving success in the leaner marketplace," she adds.
Bott and her team find that some employers are willing to pay higher salaries to new hires skilled in Web. 2.0 technologies.
About 67% of companies are inclined to add a 1% to 4% increase to salaries for applicants who possess those skills. Of the 229 employers polled, 23% are willing to ante up 5% to 8% more.
"[B]usinesses place a high value on employees who are comfortable in working with communication technologies that are rapidly changing," says Bott, a co-author of the study, "Emerging Media: Prevalence and Impact in the Workplace."
Overall, the survey reveals that 93% of employers believe it is somewhat or very important for employees to have knowledge about e-mail software, mobile computing, podcasts, digital audio or media players, mobile communication devices, instant messaging and interactive Web pages and blogs.
Training, monitoring is essential
The social media spectrum creates a workplace where employees have access to a constant stream of timely information about the company's benefits programs and business objectives. They can also provide instant feedback about those programs and objectives. …
As the use of new digital and media devices begins to dominate the workplace, companies have found it necessary to implement policies to control e-mail use (adapted by 89% of respondents) and Internet surfing (79%), while 67% said they monitor privacy abuse, and 60% expressed concerns about security, according to the survey by Ball State University.
Despite the demand for employees with social media skills, 77% of those polled provide little or no media training to current employees. …
"One of the pitfalls in rolling out social media tools in the workplace is that employers will just drop it on employees and expect them to use it," says Groh.
Companies will need to help workers to understand, first of all, how to use the technology and how to apply it within the context of their job duties, Groh explains.
For example, "if you roll out instant messaging, people will pretty much learn how to use it on their own, but will they understand how to use the full power of the technology?"

Associate Editor Kathleen Koster contributed to this report.

Wednesday, October 28, 2009

Pitfalls await employers adopting partner benefits - Articles - Employee Benefit News

Employee Benefit News
By Kathleen Koster
June 15, 2009
Employers avowing equal benefits for same-sex couples and their families should tread carefully down the aisle in order to sidestep potential tax and legal snags, experts advise.
The concerns might be fewer for self-insured employers generally bound only by federal statutes that do not automatically apply to domestic partners, but all benefit sponsors would do well to stay apprised of related legislative developments in states where they conduct business, where their employees live, and where their insurance provider is based. …
Employers offering benefits for domestic partners must ensure taxation and imputed income issues are handled properly, that plan documents and employee communications reflect the benefit, and have administrative procedures in place for enrollment, certification and termination of coverage, advises Carol Tavella, senior manager of compensation and benefits at SMART Business Advisory & Consulting.
"We would advise any employer considering offering benefits to domestic partners to check with their insurers, including the stop-loss carriers, because technically they're creating a new eligible class of individuals that is atypical," Tavella explains. …

Tax considerations

If employers operate in states that require them to provide equal benefits, or they voluntarily choose to expand their definitions of spouse and dependent, they must address the tax implications of changing their plans — the most pressing issue when making the switch, experts say.
Because the same-sex spouse or partner of an employee is not considered a spouse for federal tax purposes under the Defense of Marriage Act, employers must withhold taxes from the employee based on the fair market value of the coverage for the domestic partner and their dependents unless the domestic partner or his or her dependents are dependents of the employee under federal tax law. …
"Unless you have a true tax dependent, the coverage of the domestic partner is going to be taxable income to the employee. Also, the domestic partner can't be covered under a flex spending account," explains [Susan Stoffer, a partner in the employee benefits and executive compensation practice of Seyfarth Shaw LLP]. …
Other offerings to consider besides health benefits that are important to domestic partners are the Family and Medical Leave Act, bereavement leave, relocation and travel assistance, education and tuition assistance, adoption assistance, credit union membership, disability and life insurance, and employee discounts.

Retirement plan considerations

For 2010, the Pension Protection Act provides nonspousal beneficiaries the same rollover rights that spousal beneficiaries have.
Until then, businesses must study applicable state laws to figure out whether the domestic partner will be recognized as the de facto beneficiary or whether the company must amend their plan documents and/or beneficiary election forms to have them recognized as such, explains Stoffer. …
Most employers offering domestic partner benefits require some sort of substantiation of the relationship, such as an affidavit signed by the employee. Affidavits generally state that the partners are not related, they are both mentally competent, that they live together and that they have not been in any other domestic partnership in at least the past six months.
Many employers also require additional substantiation of the "financial interdependence, such as a joint bank account, a joint lease, joint mortgage or joint car ownership," says Tavella. …

Preparing plan documents

In preparation for all the above modifications, employers should create enrollment forms and develop attestations forms and procedures, says Stoffer.
These documents should be rewritten to redefine the company's definition of a spouse and a dependent, as more often than not employers will include coverage for dependents of domestic partners. …
If employers decide to expand their definition of spouse to include same-sex spouses as well as domestic partners, this should be reflected in all aspects of the company, including work events.
Communicating these changes is imperative if the employer wants to be sure that affected employees are using the benefit correctly and that other workers fully appreciate the equalized workspace the employer is attempting to foster.

Monday, October 26, 2009

How to Mitigate the Urgent to Focus on the Important

Conversation Starter -
1:38 PM Wednesday February 18, 2009
by Gina Trapani
Busy people have two options when they decide how their workdays will go: they can choose to be reactive to urgent demands on their time, or proactive about focusing on what they decide is important. The only way to actually get things done is to mitigate the urgent to work on the important. …
… More often than not "the urgent" is putting out fires, or busywork, or tasks that you'd rather do first because they're less intimidating than your current project list.
Urgent tasks are usually short-term and we're drawn to them because they keep us busy and make us feel needed. (If we're busy people, we must be important people.)
But dealing with a constant stream of urgent tasks leaves you wrung out at the end of the day, wondering where all the time went, staring at the undone actual work you've got to complete.
On the flip side, important work moves you and your business towards your goals. … On a personal level, important stuff may include making time to get to the gym every day. On a business level, important stuff may be devising your yearly plan, breaking it down into quarterly and monthly deliverables, and evaluating your current performance against last year's plan. (Doesn't the mere thought of going to the gym and deciding on this year's goals make you want to check your email? Still, that's the work that will help you meet your goals.)
If your workplace encourages that frantic vibe of headless-chicken running and constant urgency, it can feel impossible to focus on what's important versus what's urgent. Still, an awareness of the difference and a few simple techniques can help.
Choose three important tasks to complete each day. Write them down on a slip of paper and keep it visible on your desk. …Keep the list to just three, and see how many you can complete.
Turn off your email client. …[Do] whatever you have to do to muffle the interruption of email. When you decide to work on one of your important tasks, give yourself an hour at least of uninterrupted time to complete it. …
Set up a weekly 20-minute meeting with yourself. Put it on your calendar, and don't book over it — treat it with the same respect you'd treat a meeting with your boss. … Bring your project list, to-do list, and calendar, and spend the time reviewing what you finished that past week, and what you want to get done the following week. This is a great time to choose your daily three important tasks. Productivity author David Allen refers to this as the "weekly review," and it's one of the most effective ways to be mindful about how you're spending your time.
Gina Trapani is the founding editor of personal productivity blog, and the author of Upgrade Your Life: The Lifehacker Guide to Working Smarter, Faster, Better (Wiley 2008). She lives in San Diego, California.

Should You Use a 401(k) to Buy an Annuity?
Published October 22, 2009
by Aleksandra Todorova
…About a quarter of all companies these days offer their employees the option to purchase annuities with their 401(k) money, according to the Profit Sharing/ 401(k) Council of America, an industry group for plan sponsors. But these are lump-sum purchases that typically happen at the brink of retirement and aren’t too popular with employees, says David Wray, president of the PSCA.
What insurers have been working on during the past several years are specially-designed guaranteed-income products that can be purchased in small chunks with each paycheck, just like shares of a fund. ...

So far, sales of the products have been slow, according to Robyn Credico, the national director of defined contribution consulting at Watson Wyatt, a benefits consulting firm. But the products are being refined and improved, so industry representatives are hopeful that the tide is starting to change. …
If your employer offers any of the three guaranteed-income solutions – the option to annuitize at retirement, the ability to purchase annuity shares with each paycheck or invest in a mutual fund with an income guarantee – you should make sure it's the right solution for you. The three most important questions to ask:
1. What is the investment risk?
The much-touted guarantee is only there as long as the insurance provider behind it is healthy. … One solution the industry is considering is pairing up two or more insurance companies to back a product. In the meantime, employees can do their own research into the insurance providers’ financial health. …
2. What are the costs?
Adding an insurance aspect to any investment leads to higher costs – but how much of a premium you pay depends on the annuity provider. … “The quest right now for plan sponsors is to drive down costs as low as possible for their participants,” [Tom Idzorek, chief investment officer of Ibbotson Associates, a Morningstar company], says.
3. What is my exit strategy?
Another important question to ask your employer or 401(k) plan administrator before you start contributing: What happens to your investment if you change jobs? The insurance company will likely allow you to leave the investment in the plan, let you roll it over in an IRA, or will issue a certificate for you have accumulated so far. Make sure there are no penalties and you’ll keep the investment guarantee, Credico says.

Monday, October 19, 2009

Voice of the Customer

Pay close attention to the voice of the customer to get clued into what otherwise might have been a missed opportunity.
    …Today especially, with companies' intense focus on retention, getting a deeper understanding the needs and wants of active, engaged customers could provide the answers that lead to survival and prosperity.
    "Consumer needs shift a lot during a recession, so the companies that can't stay focused on the needs of their customers aren't going to do well," says Bruce Temkin, principal analyst at Forrester Research. "Those who are going to do well will cut out everything that isn't important to their customers, and increase investment in areas where there are more opportunities-and to do that well requires a very clear picture of who your customers are."
    Ask me anything
    Being customer focused does not simplify difficult business decisions. But it does help businesses look through the magnifying glass of customer value to make more profitable decisions. Pragmatically, many companies are listening harder to their customers not just to learn how to delight and enhance their experiences, but to learn how to curtail costs without inciting rebellion. One hotelier, for example, needed to cut costs but didn't want to negatively impact the customer experience of its most valuable customers. By analyzing survey responses gathered through its Clarabridge survey tool, the hotel operator made an interesting discovery. "It had been spending this money on lobby Internet kiosks to attract and retain customers, but it turned out that their premiere customers could care less, because they bring their own laptops," says Clarabridge CEO Sid Banerjee. "So they're not worrying about spending money on Internet kiosks anymore."…
    When the entire organization listens to customer input, it can find new ways to improve customer experience. InterContinental Hotels Group (IHG) uses its online customer communities … to solicit customer feedback for business units that might otherwise be abstracted from the customer experience. "Some members were saying they were frustrated at having to carry a lot of cards for each loyalty program, and the idea arose that it would be great to have everything in one place," says Cassandra Jeyaram, IHG global social marketing manager. So the company started offering custom-printed cards that reproduce the membership numbers for the customer's other relationships, such as airline and rental car programs. "That certainly wasn't an opportunity we had identified on our own." So far customers in 85 countries have availed themselves of the custom cards.
    True dedication to customer insight means a willingness to dig for clues to unspoken preferences. … What it needed was to uncover opportunities to build customer value. …
    Detailed survey data revealed that Gaylord's guests have extremely high baseline requirements, leaving little room for error and little room to genuinely exceed expectations. Restaurant quality proved to be an area with available upside but limited reward.
    It was in front desk and bellhop experience that the company found both upside potential and significant ability to affect the customer experience by making relatively minor changes, such as slightly speeding the check-in process and encouraging bellmen to offer stories about the building. "We had seen some of these things in survey data before, but we only had loose correlations, and no way to establish baselines for satisfaction or to identify upside," says Tony Bodoh, manager of operations analysis for Gaylord Entertainment. "Now, we can focus on narrow areas that impact our customers' emotional investment, in a very targeted way." The tight statistical links between feedback, customer profiles, and business history, as well as the more timely processing of survey data, make each new piece of insight more relevant, and easier to act on.
    Just over a year into its voice of the customer revamp, Gaylord's Bodoh says many of the company's locations are logging record customer satisfaction scores, despite flat spending. "Our results have challenged the belief that increased customer satisfaction has diminishing returns compared to the cost of implementing changes."
    Balancing people and technology
    Hearing customers isn't just about what they're saying; it's also about how well you're listening. VOC programs that only focus on automation and the discovery of common keywords can easily miss out on important contributions. "Voice of the customer [technology] does not eliminate the need for smart people in your company who can apply context and insight," Forrester's Temkin says.
    Dell knows that well. The PC maker's IdeaStorm site is widely regarded as an important pioneer of direct customer engagement, and has been responsible for numerous improvements in Dell's product line. … To ensure that quality ideas with wider impact are not lost, the IdeaStorm manager and several department heads review each and every concept submitted.
    "We have had several business units get involved in reading detailed reports [that list] more than just the most popular ideas, and are looking into launching more sites aimed at specific customer segments," says Caroline Dietz, Dell spokesperson and former IdeaStorm manager. "We don't expect a Fortune 50 CIO is going to be posting on IdeaStorm."
    Sometimes a single pair of eyes can spot what the crowd misses. Xactware, a software developer for the construction industry, gets most of its insights from one-off commentary. … "We lost control of where the feedback was going, whether it was being responded to, or even if it was going to the right people," says David Nelson, Xactware marketing project manager. "Our experience hasn't been that 500 customers all say the same thing. Lots of our changes have been implemented based on one person saying something."
    Working with enterprise feedback management company Allegiance, Xactware has made it a priority to close the loop on every relevant piece of customer feedback, and has implemented countless minor but valuable adjustments to its products and business processes as a result. … Says Nelson: "It blows our customers' minds when we tell them we're acting on their feedback."
    Listening Through the Keyhole
    If you have something to say about InterContinental Hotels Group (IHG), chances are that someone there will hear about it. The company has invested heavily in a multipronged voice of the customer initiative, including operating both public and private online customer communities, as well as a comprehensive third-party monitoring strategy.
    IHG began with private, invitation-only communities for select members-generally, those with highly valuable relationships or key demographics. These communities incubate new ideas for the company through solicited research and surveys, as well as unmoderated discussion and member blog posting. "It is absolutely critical to be transparent, and to allow dissenting voices to be heard," says Jenni Kolshak, Priority Club Connect community manager at IHG. "We don't delete posts, even if they are negative about our hotels and brands. You have to have the good and the bad if you want to be believed by your customers."
    Part of IHG's community team actively combs and analyzes online discussions on travel sites and blogs, as well as Twitter feeds. …
    After two years of experience with private communities, IHG recently "soft launched" a public community powered by Jive Software, drawing on some of its more outspoken advocates from the private sites to seed content and discussion. IHG plans to make its executives available to offer video responses to customer questions and input, and liberally used customer-submitted designs and media in the design of the new site. "We've had a positive lift from using photos shared by our customers in our campaigns and Web designs," says Cassandra Jeyaram, IHG, global social marketing manager.
    Listening to customers is not a feel-good enterprise for IHG. "The goal is to make money for the company, and if people want to participate and comment, they have to join [the loyalty program] and be logged in, which we hope will promote both participation and more room nights," Kolshak says. "This will help us create more brand affinity and identify people who are brand advocates but we haven't identified yet."

    Benchmarking as a Part of a Prudent Process

    Reish & Reicher Adviser Report
    By Fred Reish
    It is commonly accepted that 401(k) fiduciaries must prudently select and monitor both investments and service providers. It is also understood that, in order to fulfill their selection and monitoring responsibilities, 401(k) fiduciaries must engage in a prudent process. However, … many plan fiduciaries and advisers do not understand the specific requirements for a prudent process. This article focuses on those requirements.
    Basically stated, there are several steps to a prudent process, which are:
    1. Identify the particular issue to be considered. …
    2. Determine the information that is relevant to making an informed decision about that issue. …
    3. Gather and evaluate the information. …
    4. Implement the decision.
    5. At reasonable intervals thereafter, monitor the decision.
    When evaluating the relevant data, the fiduciaries should compare it to comparable information from the marketplace. In other words, fiduciaries have to “benchmark” the investments and services in order to evaluate their quality, cost, effectiveness and other attributes. This requirement applies to all fiduciary decisions, regardless of whether they are about recordkeepers, investments, investment advice, participation, and so on. In other words, benchmarking is an inherent part of a prudent process—and fiduciaries must engage in a prudent process for every decision they make.
    Here is what the DOL says about the process for selecting a service provider (which applies to all fiduciary decisions): “...the responsible plan fiduciary must engage in an objective process designed to elicit information necessary to assess the qualification of the service provider, the quality of the work product, and the reasonableness of fees charged in light of the services provided.”
    The DOL goes on to say: “What constitutes an appropriate method of selecting a service provider, however, will depend on the particular facts and circumstances. Soliciting bids among service providers at the outset is a means by which the fiduciary can obtain the necessary information relevant to the decision-making process.”
    In this case, the DOL is saying that, by soliciting bids, the fiduciary can obtain information about the individual provider... and can also obtain comparative, or benchmarking, information about other providers of these services.
    The DOL continues: “Whether such a process is appropriate in subsequent years may depend, among other things, upon...the fiduciary’s knowledge of prevailing rates for the services...Regardless of the method used, however, the fiduciary must be able to demonstrate compliance with ERISA’s fiduciary standards.”
    In other words, regardless of how the fiduciary obtains the comparative information, the fiduciary must be able to demonstrate that he engaged in a process to evaluate both micro information (related to a single service provider) and macro information (comparative data from the industry).
    The point of this article is that, in order to engage in a prudent process, fiduciaries must do more than analyze a particular service provider or a particular investment. Instead, they must also compare that information to comparable data about other similar plans, services or investments. …

    Any U.S. federal income tax advice contained in this communication (including any attachments) is neither intended nor written to be used, and cannot be used, to avoid penalties under the Internal Revenue Code or to promote, market or recommend to anyone a transaction or matter addressed herein.

    © 2009 Reish & Reicher, A Professional Corporation. All rights reserved. The ADVISER REPORT is published as a general informational source. Articles are general in nature and are not intended to constitute legal advice in any particular matter. Transmission of this report does not create an attorney-client relationship. Reish & Reicher does not warrant and is not responsible for errors or omissions in the content of this report.
    Learn more about R&R related practice areas:
    Employee Benefits

    IRS Creates Retirement Plan Tool for Small Business

    Washington, D.C.
    (October 13, 2009)
    By WebCPA Staff
    The Internal Revenue Service has created a new Web-based tool to help small-business owners determine which tax-favored pension plan best suits their needs and how to keep their plans in compliance.
    The IRS Retirement Plan Navigator aims to provide employers with an online guide for choosing, maintaining and correcting a plan. The navigator does not suggest which plan may be best for a specific employer, but instead lays out the options to allow small-business owners to choose a plan that best fits their situation. Options include 401(k) plans, plans with individual retirement accounts, defined-benefit plans and tax-exempt plans. …
    The navigator also provides a checklist and suggested resources for maintaining compliance. It offers suggested options to employers seeking to correct errors and bring their plans back into compliance. …
    The IRS said the Web-based guide will be kept up to date as pension laws and regulations change.

    Significance of November 30th in New RMD Waiver Rules

    SunGard Relius
    In Notice 2009-82, the IRS provides transition relief and other guidance relating to the WRERA waiver of required minimum distributions under Code §401(a)(9). … November 30, 2009 figures prominently in this relief, however, there is substantial confusion about the significance of that date. This Technical Update will discuss what distribution recipients and retirement plan sponsors must do by that date.
    Notice 2009-82 recognizes that some recipients of 2009 retirement plan or IRA distributions might have been confused about whether 2009 RMDs (distributions which would have been RMDs if Congress hadn’t passed WRERA) were eligible for rollover. The Notice also provides transition rules which allow plan participants to roll over certain distributions (extended 2009 RMDs) which would otherwise be ineligible for rollover.
    The Notice gives recipients of 2009 RMDs (whether distributed from a plan or an IRA) until November 30, 2009 to roll over the distribution, even though the normal 60-day rollover period may have expired. It provides a similar extension for recipients of extended 2009 RMDs from retirement plans. This extension only affects distributions received prior to October 1, 2009. Distributions after September 30 continue to have their normal 60-day rollover period (which will expire on or after November 30).
    Plan amendments
    WRERA’s RMD relief and Notice 2009-82 force plan sponsors to address several issues, including:
    1. Will the plan make 2009 distributions which would be 2009 RMDs or extended 2009 RMDs?
    2. Will the plan give participants the option to take or not take such a distribution? If so, what will be the default if the participant does not select?
    3. Will the plan cooperate in direct rollovers involved 2009 RMDs or extended 2009 RMDs?
    In most cases, the employer’s decision will require a plan amendment. (A future Technical Update will discuss the specifics of those amendments.) Plan sponsors must adopt the amendment no later than the last day of the 2011 plan year (2012 for governmental plans). …
    Recognizing this difficulty, the IRS provided transition relief. The IRS will not treat a plan as failing to comply with its terms, during the period from January 1, 2009 to November 30, 2009, with regard to those three questions. …
    What does this mean for the future? It means that although the employer has until 2011 to adopt its RMD amendment (unless the plan terminates before then), beginning December 1, 2009 the plan must operate in conformance with the amendment it ultimate adopts. In other words, now is the time for decision and implementation. Documentation can wait.
    For most participants, this decision will affect distributions of 2009 RMDs and extended 2009 RMDs distributed during December, 2009. For participants with an April 1, 2010 required beginning date (such as participants turning 70½ during 2009), this decision will affect distributions from December 1, 2009 to April 1, 2010.

    Tuesday, October 6, 2009

    Poll Finds Strong DB Support

    September 1, 2009 ( – Fifty-four percent of employees in a new Watson Wyatt survey say they are satisfied with their company’s retirement program.
    A Watson Wyatt news release said the poll also found 61% of employees view their company's retirement program as the primary vehicle to save for retirement, and 29% indicated they would not save for retirement without it.
    The survey found more employees with defined benefit (DB) plans (62%) are satisfied with their retirement program compared with those with only defined contribution (DC) plans (51%). Some 46% of employees said they would be willing to pay a higher amount out of their paycheck to ensure a guaranteed benefit in retirement….
    More than half (52%) of workers covered by a DB plan said their company's retirement program is a key reason they continue to work for their employer compared to 33% of those with only a DC plan. Workers with a DB plan are also more likely to want to stay with their employer until retirement (67% versus 54% of those with only a DC plan).
    Other preferences of DB plans over DC plans that workers cited include having benefits distributed as guaranteed monthly payments over retirement years (39%) and guaranteed payouts with no opportunity for higher returns, but also no chance of lower returns (25%. …
    The Watson Wyatt survey was conducted in February 2009 and includes responses from more than 2,200 full-time workers.
    More information is available at
    Fred Schneyer

    Monday, October 5, 2009

    New twist on annuities in 401(k)s - Pensions & Investments

    Investment-only shops create income guarantees, but clients aren't biting yet

    Pensions & Investments

    By Jeff Nash October 5, 2009, 12:01 AM ET

    Lacking: Sue Walton believes more details are needed on income solutions.

    Several money managers are scrambling to design investment options embedded with annuities or income guarantees in what they hope will be the next major evolution in defined contribution plans.

    … With 401(k) and other DC plans now the main retirement vehicle for many workers, the industry has been shifting away from focusing on asset accumulation to retirement income and the distribution phase. Plus, last year's market collapse further highlighted the need for plans to better protect assets, particularly for those participants at or near retirement.

    As a result, several investment-only DC service providers … have launched or are developing strategies within investment plan options such as target-date funds that annuitize or guarantee a portion of participants' assets to provide steady income. …

    But industry experts say DC plan executives, along with their consultants and some large record keepers, are reluctant to get behind such solutions, citing legal and fiduciary hurdles and cost concerns. Some even wonder if there is participant demand for such strategies.

    “Adding income solutions to DC plans makes perfect sense, but the details are the biggest challenge,” said Sue Walton, senior investment consultant at Watson Wyatt Worldwide in Chicago. …

    Keith Overly, executive director of the $6.8 billion Ohio Public Employees Deferred Compensation Program, Columbus, agreed the idea of adding a guaranteed income option to target-date funds or other investment options is “good in theory,” but “there are certainly many details to consider, including fees, how the product is structured, and whatever terms and conditions apply if a plan wishes to terminate a manager and discontinue the guaranteed income product.”

    Tobi Davis, retirement plans and cash manager at Playboy Enterprises Inc., Chicago, which has an $87 million 401(k) plan, said “it's a bit early” for DC plan sponsors to adopt guaranteed income solutions. …

    2 strategies

    There are two basic strategies for offering income guarantees. In one approach, an investment manager designs a target-date fund (or other qualified default option) that includes an income guarantee from one or more insurers. The participant begins accumulating future income by buying slivers of a traditional deferred fixed annuity as he or she approaches retirement. At retirement, the participant continues to receive income from the annuity, and the rest of the plan's assets are invested.

    In the second strategy, the investment manager and the insurer design a “guaranteed lifetime withdrawal benefit,” which is offered as part of a target-date fund or balanced fund. The participant chooses to transfer assets in that fund to the guaranteed benefit, or is automatically enrolled in the feature as he or she nears retirement. The design allows participants to remain invested in a balanced portfolio “wrapped” by an insurance guarantee, permitting the participant to withdraw a set percentage of the “high-water” value of the account each year in retirement, even if the market value of the account is tapped out.

    Philip Suess, a Chicago-based principal at Mercer, said the complexity of such investments could initially put off some plan executives and participants. “But I think there is a place for these types of solutions,” he said. …

    One major hurdle, explained David L. Wray, president of the Profit Sharing/401(k) Council of America, Chicago, is that such solutions “currently don't have the blessing of the federal government.” Congress, he said, would have to repeal the joint and survivor annuity laws, which give a non-employee spouse the right to choose a survivorship annuity as the way in which benefits are distributed from the plan. …

    Another issue, said Tom Idzorek, chief investment officer and director of research and product development with Chicago-based Ibbotson Associates Inc., is plan sponsors are worried about the fiduciary risk of choosing a new, untested strategy. “This is something all plan sponsors are talking about, but very few want to be the first movers,” he said. “Plan sponsors have a very strong desire to not be sued.” …

    Plan executives might receive a nudge from Washington. Late last month, Phyllis C. Borzi, assistant labor secretary, told the Profit Sharing/401k Council of America's annual conference that she is planning to ask plan executives, consultants and vendors what regulatory or statutory changes would “encourage” employers to offer a lifetime income stream option, such as an annuity, in their DC plans.

    Safe-harbor designation

    Thomas J. Fontaine, global head of AllianceBernstein Defined Contribution Investments, New York, said if Washington were to classify DC investment options with lifetime income guarantees as “safe harbor” investments, “it would ignite the adoption” of such investments. “Nothing changed quicker than the adoption of target-date funds after it was designated a safe harbor, thus protecting plan sponsors from lawsuits.” …

    BGI spokesman Lance Berg said the company hasn't “quantified” the success of the program yet, but did say company officials have had “hundreds” of meeting with plan sponsors about the program.

    Drew Carrington, UBS Global Asset Management's managing director and head of defined contribution and retirement solutions, Chicago, … said record keepers and consultants have been reluctant to recommend these products to plan sponsor clients. (Fidelity Investments, for example, has no plans to add a guaranteed income to their lifecycle funds, said spokeswoman Sophie Launay.)

    “Record keepers are concerned about record keeping these investments and portability,” Mr. Carrington explained. “Consultants tend to stick traditional, marketable investments. It's really important that we get both consultants and large record keepers on our side on this one.”

    Contact Jeff Nash at