the aspa journal - november/december 2002 · tirement planning. encourage an abc member or other...

by Brian H. Graff, Esq.

Nov–Dec 2002Vol. 32, No. 6

ASPA’s Bi-monthly Newsletter for Actuaries, Consultants, Administrators, and Other Retirement Plan Professionals

THE ASPA JOURNAL

WASHINGTON UPDATE

© 2002 PhotoDisc, Inc.

Contents

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❆Limitation of Liability Provisionsin Service Provider Contracts

By Joseph C. Faucher

A recent Department of Labor (DOL) advisory opin-ion addresses one of the ways in which service busi-nesses may seek to reduce their exposure to claimsand lawsuits—including a “limitation of liability” pro-vision in the service agreement.

Limitation of liability clauses are apparently in increas-ingly wide use among service providers, especiallylarge, national employee benefit consulting firms. Continued on page 8

IF YOUR COMPANY PROVIDES SERVICES FOR EMPLOYEE BENEFIT PLANS, AND YOU HAVE BEEN IN BUSINESS FOR ANYAPPRECIABLE LENGTH OF TIME, YOU MAY HAVE EXPERIENCED THAT GUT WRENCHING FEELING THAT COMES WHENYOU OPEN YOUR ERRORS AND OMISSIONS INSURANCE RENEWAL NOTICE. YOU FIND OUT THAT YOUR ANNUAL PRE-MIUM HAS GONE UP 50%, OR FIND THE EVEN MORE DEPRESSING REALIZATION THAT “DEFENDANT” HAS BEEN ADDEDTO YOUR LIST OF TITLES WHEN THE PROCESS SERVER SHOWS UP WITH A MALPRACTICE COMPLAINT.

(This article refers collectively to service providers,including third party administrators, actuaries, andconsultants, as “Consultants.”) Most often, these pro-visions put a cap, or limit, on the amount of damagesthat a plan or plan sponsor may recover in connectionwith the Consultant’s services. Typical provisions limit

Election Special—Outlookfor the New Congress

NEEDLESS TO SAY, THE RESULTS OF THIS YEAR’S ELECTION SURPRISED MANY OF US. FOR MANY REPUBLICANS, THERESULTS, FRANKLY, EXCEEDED EVEN THEIR MOST OPTIMISTIC EXPECTATIONS. FOR DEMOCRATS, THE HANGOVER OFTHE MORNING AFTER WILL UNDOUBTEDLY LAST FOR A WHILE. FROM A PURELY POLITICAL STANDPOINT, THE NEWCONGRESS WILL OBVIOUSLY OPERATE QUITE DIFFERENTLY FROM THE WAY THE PREVIOUS CONGRESS OPERATED.HOWEVER, IN TERMS OF PENSION POLICY, IT IS QUITE LIKELY THE DEBATE OVER PENSION LEGISLATION WILL LOOKMORE OLD THAN NEW. THIS IS BECAUSE—AND THIS MAY SURPRISE SOME OF YOU—THE PROSPECTS FOR ENACTING“PENSION REFORM” LEGISLATION IN RESPONSE TO ENRON WAS ACTUALLY ENHANCED BY THE ELECTION RESULTS.

ENRON PENSION BILL

Already, in several speeches since the election, the Presi-dent has indicated that he wants to complete the rest ofhis pension reform proposals (e.g., quarterly benefitstatements and the right to diversify employer stock),in addition to the proposals included in Sarbanes-OxleyAct (i.e., blackout notice and insider trading restric-tions during a blackout). He is also probably going tomention these proposals in his upcoming State of theUnion address. Given that these proposals have alreadybeen drafted and passed the House last Congress, it islikely that pension legislation will be brought to thelegislative forefront fairly early during the next Con-

gress. Of course, with Republicans in control of bothhouses of Congress, the legislative process will natu-rally look different.

As a practical matter, the somewhat larger Republicanmargin of control in the House of Representativesmatters very little. In the House, the party in controlpretty much controls everything. The larger marginmay have some impact on more controversial issues—health care, for example—but for pension legislation,it is basically status quo. This means that the startingpoint for the House will be last year’s Enron pension

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ASPA WishesYou Happy

Holidays anda Prosperous

New Year

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From the Editor

How PlanAdministrators Need toReview QualifiedDomestic RelationsOrders (QDROs)

Message from theEnrolled ActuariesMeeting Committee

Time to Renew YourMembership!

11 Available WebcastRecordings

12 A Special Thanks forMaking the 2002 ASPAAnnual Conference aHuge Success!

14 Scenes from the 2002ASPA Annual Conference

17 Welcome New Members

18 ASPA Expands OnlineTesting!

20 Eidson Founder’s AwardRecipient, Curt Hamilton,Reflects on His Tenure atASPA

23 Help Wanted

24 Focus onTechnology

24 2003 Los AngelesBenefits Conference

25 ASPA Benefits CouncilsCalendar of Events

26 FUN-da-MENTALs

28 Calendar of Events

THE ASPA JOURNAL

NOVEMBER–DECEMBER 20022

THE ASPA JOURNAL


From the Editor

THE ASPAJOURNAL

Editor in ChiefBrian H. Graff, Esq.

The ASPA JournalCommitteeRobert M. Richter, APM, ChairAmy L. Cavanaugh, CPC, QPA,

QKAConstance E. King, CPC, QPABarry Kozak, MSPASheila L. Parker, QPAErin D. Patton, QPA, QKAChris L. Stroud, MSPAKim L. Szatkowski, CPC, QKA

EditorsChris L. Stroud, MSPAJane S. Grimm

Associate EditorsJolynne M. FloresTroy L. Cornett

Technical Review BoardLawrence Deutsch, MSPABarry Kozak, MSPAMarjorie R. Martin, MSPADuane L. Mayer, MSPANicholas L. Saakvitne, APM

Layout and DesignTamora L. Martin

ASPAOFFICERS

PresidentScott D. Miller, FSPA, CPC

President-ElectBruce L. Ashton, APM

Vice PresidentsCathy M. Green, CPC, QPACurtis E. Huntington, APMSarah E. Simoneaux, CPC

SecretaryChris L. Stroud, MSPA

TreasurerStephen H. Rosen, MSPA, CPC

Immediate Past PresidentCraig P. Hoffman, APM

Ex Officio Members ofthe Executive CommitteeMichael L. Bain, MSPAR. Bradford Huss, APM

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ASPA4245 North Fairfax Drive

Suite 750

Arlington, Virginia 22203

Phone: (703) 516-9300

Fax: (703) 516-9308

E-mail: [email protected]

Web: www.aspa.org

The ASPA Journal is produced by The ASPA Journal Committee andthe Executive Director of ASPA. Statements of fact and opinion inthis publication, including editorials and letters to the editor, arethe sole responsibility of the authors and do not necessarily rep-resent the position of ASPA or the editors of The ASPA Journal.

The purpose of ASPA is to educate pension actuaries, consultants,administrators, and other benefits professionals, and to preserveand enhance the private pension system as part of the develop-ment of a cohesive and coherent national retirement income policy.

ASPA members are retirement plan professionals in a highly diversi-fied, technical, and regulated industry. ASPA is made up of indi-viduals who have chosen to be among the most dedicated practicingin the profession, and who view retirement plan work as a career.

© ASPA 2002. All rights reserved. ASPA is a non-profit professionalsociety. The materials contained herein are intended for instruc-tion only and are not a substitute for professional advice.

To submit comments or suggestions, send an e-mail [email protected].


THE ASPA JOURNAL

It’s Time to Make Your List of NewYear’s “ASPA-rations”!

AT THE BEGINNING OF EACH NEW YEAR, MOST OF US GET AMBITIOUS AND COMPILE OUR LIST OF NEW YEAR’SRESOLUTIONS. WE VOW TO LOSE WEIGHT, EXERCISE MORE, SPEND MORE TIME WITH FAMILY AND FRIENDS, PRIORI-TIZE OUR LIVES, ETC. I WOULD LIKE TO PROPOSE THAT AS YOU SIT DOWN THIS YEAR TO MAKE YOUR LIST OF NEWYEAR’S RESOLUTIONS, THAT YOU MAKE AN ADDITIONAL LIST WITH A FOCUS ON ASPA. ACTUALLY, MAYBE IF YOUCALL THEM NEW YEAR’S “ASPA-RATIONS” INSTEAD OF RESOLUTIONS, YOU WILL “ASPIRE” TO KEEP THEM AND NOTBREAK THEM!

ASPA, as an organization, offers many benefits to itsmembers, and selecting a few “ASPA-rations” to carryout over the coming year can be your way of capital-izing on those benefits and also giving back to theorganization. Here are some sample New Year’s“ASPA-rations” that you could put on your list:

■■■■■ Lose wait! Register online for your next ASPAfunction. Get immediate up-to-date informationfrom the Web site about the event and receive yourconfirmation electronically.

■■■■■ Exercise your options! If you need CE credits,try something different. Take the online quiz fromeach issue of The ASPA Journal or try out a liveASPA webcast (or a recorded one, for added con-venience). Refer to the list of webcast recordingson page 11.

■■■■■ Prioritize! It is always important, first and fore-most, to recognize the value of family and friendsand give them highest priority. ASPA shouldalso be high on your priority list. If you are read-ing this publication, most likely you have cho-sen a career involving retirement planning. Toenhance and preserve your career, you need thesupport of ASPA’s influence in education andgovernment affairs—and ASPA needs your sup-port to remain effective. Make your ASPA in-volvement a priority!

■■■■■ Make a difference! If you are an ASPA member,join the ASPA PAC (Political Action Committee).No matter how small your contribution is, you in-crease the PAC team’s count by one more mem-

ber. There’s strength in numbers, so by contribut-ing and joining forces with the ASPA PAC, youhelp to strengthen and empower our PAC.

■■■■■ Volunteer your time! Find out more aboutASPA’s many committees, identify one that in-terests you, and volunteer! ASPA is an organiza-tion of diverse individuals, and our committeesthrive from the valuable input and time that ourmembers offer.

■■■■■ Get organized! Be sure to update your indicativedata for the upcoming ASPA yearbook. If yoursituation changes during the coming year, updateyour information online on the ASPA Web site byaccessing the Members Only section.

■■■■■ Spend more time with your peers! Join a localABC (if one is available near you). Besides earn-ing CE credits, you will enjoy the company ofpeople who share common interests regarding re-tirement planning. Encourage an ABC member orother peer to join ASPA and tell them about themany benefits you receive as an ASPA member.

Hopefully, you’ll adopt a few of these “ASPA-rations”and maybe even add a few of your own to the list. Asthe holiday season approaches and you bid farewellto 2002, get ready to hit the deck running in 2003with your increased ASPA involvement. Focusing ona few of these constructive, easily attainable goals in2003 will provide you with a feeling of accomplish-ment and will enhance your overall ASPA experience.

Have a wonderful holiday season and a happy andhealthy new year! ▲

THE ASPA JOURNAL


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Washington Updatebill. ASPA GAC will, once again, need to work quicklyto ensure that the legislation does not inadvertently hurtthe private pension system. For example, last year’sbill required quarterly benefit statements and invest-ment education notices for all DC plan participants,even if they did not have the right to direct investments.We now need to make sure that the use of the mostrecent valuation date is permitted for benefit statementsso that plans with assets that are not publicly tradedare not overburdened.

The political effect of the elections will be more dra-matic in the Senate where Republicans have regainedcontrol, including control of coveted committee chair-manships. Nowhere is this more significant than withthe Senate Health, Education, Labor, and PensionCommittee, which will now be chaired by SenatorJudd Gregg (R-NH) instead of Senator Ted Kennedy(D-MA). The Enron pension bill coming out of thatcommittee will most certainly not be the same as thebill reported out last year. Thus, some of the morepotentially onerous provisions that were in play lastyear are not likely to receive serious considerationthis year. These provisions included the mandatoryjoint trusteeship (i.e., equal numbers of employee andemployer representatives of DC plans), and requiredfiduciary insurance for DC plans providing “reason-able coverage.”

In no way does this mean that the Senate bill will sim-ply be identical to the President’s proposal. A slightmajority in the Senate does not mean the party in con-trol can dictate the content of legislation. Sixty votesare needed to close off debate in the Senate allowingfor a final vote on any piece of legislation. Conse-quently, if an Enron pension bill is to come out of theSenate, Republicans will have to make some compro-mises with Democrats. Right now, the political will-ingness to make such compromises appears to exist,although it is unclear how long this “window” will last.From a lobbying standpoint, ASPA GAC needs to makesure that any compromises made sense and do no harmto the private retirement system.

EGTRRA PERMANENCYThe Republican takeover of Congress does present anopportunity to get an early permanent extension of thepension reform provisions passed last year in EGTRRA,which are scheduled to expire in 2011. Since Congressuses 10-year budget windows to score all tax legislationincluding pensions, it would be easier from a revenuestandpoint to permanently extend pension reform nowrather than later since eight out of the 10 years are “al-ready paid for.” Thus, ASPA GAC has already beenrefocusing some of its lobbying efforts to try to exploit

this opportunity. One possibility is tying EGTRRA per-manence to Enron pension reform since that legislation,with the push by the President, could become law con-ceivably by this summer. The trick will be that the WhiteHouse may not want to break apart EGTRRA, and in-stead may want to keep it together and use the morepopular pension provisions to get more controversial pro-visions, like the estate tax repeal, also made permanent.We will have to watch this carefully to see if we canleverage the White House’s desire for an Enron pensionbill to obtain EGTRRA permanency.

ECONOMIC STIMULUS BILLThe White House is also likely to push an economicstimulus bill to respond to the current economic slow-down. The centerpiece of such a bill will most cer-tainly be a package of tax cuts, which are expected toinclude some pension proposals. The Republican take-over significantly increases the probability that sucha bill could become law. Most likely it will be con-sidered as part of a budget reconciliation package nextyear. The acceleration of some of the limit increasespassed in EGTRRA [e.g., immediate increase of the401(k) limit to $15,000 and the IRA limit to $5,000]and an increase in the required beginning date for mini-mum required distributions (e.g., 70½ to 75) are someof the pension proposals currently being consideredfor this package.

OTHER ITEMSCongress will also need to deal with the problem ofthe 30-year Treasury bond rate. Finding a sensiblereplacement interest rate benchmark for DB plan fund-ing and for purposes of calculating lump sum distri-butions will need to be a priority. In preparation fornext year, ASPA GAC has already had several meet-ings with congressional staff on this issue. In addi-tion to finding a replacement interest rate benchmark,ASPA GAC is also pushing to fix the interest rate usedfor calculating the Section 415 limit for lump sums,as it was prior to GATT. Just imagine actually beingable to tell your clients exactly what they can expectat retirement—what a concept!

And if that is not enough, do not forget the next gen-eration of pension reform. ASPA GAC continues towork on a series of proposals, including the DB/Kproposal, many of which are expected to be introducednext year. The coming year will not be boring, incase you were worried. ▲

Brian H. Graff, Esq., is Executive Director of ASPA.Before joining ASPA, Brian was legislation counsel tothe US Congress Joint Committee on Taxation.

THE ASPA JOURNAL


How Plan Administrators Need to ReviewQualified Domestic Relations Orders (QDROs)

Under ERISA §206(d) and IRC §401(a)(13), the re-tirement benefits promised to an employee through aqualified plan cannot be assigned or alienated. Thisprovision of the original law not only prohibited as-signments to an employee’s personal creditors, but italso prohibited assignments to an employee’s formerspouse or children upon a divorce. In 1984, throughthe Retirement Equity Act (REA), Congress addedthe QDRO rules and thus allowed the alienation andassignment of retirement benefits between a plan par-ticipant and his or her former spouse or children upona divorce.

A state court issues a domestic relations order upon adivorce, which dissolves the marriage, divides themarital property, and provides for the support of theformer spouse(s) and children. However, if some ofthe marital property to be divided or paid as supportrepresents an employee’s retirement benefits in hisor her employer-sponsored qualified retirement plan,a separate document must meet the statutory Quali-fied Domestic Relation Order rules [basically, iden-tical provisions are at ERISA §206(d)(3) and at IRC§414(p)]. An “Alternate Payee” thus becomes anyformer spouse or child who gets a property right in aqualified plan through a QDRO.

However, until a document satisfies all of the statutoryrules, is executed by a state court with proper jurisdic-tion, and is delivered to and accepted by the Plan Ad-ministrator, it has no legal effect on the plan. Thediscretion to accept or deny a document as satisfyingthe QDRO requirements lies solely with the Plan Ad-ministrator (and not with the state court judge or ei-ther party’s attorney). Therefore, the Plan must adoptreasonable written procedures to determine the quali-fied status of domestic relations orders and to admin-ister distributions under such qualified orders.According to the Department of Labor, a Plan Ad-ministrator does not need to be an authority on statelaw and must accept an order if it ostensibly complieswith state laws; however, the Plan Administrator can-not ignore evidence that indicates that the order is notvalid. Plan Administrators are authorized to seek ad-vice from attorneys, actuaries, and other employeebenefits professionals in making such determinations.

Unfortunately, unless an ERISA attorney drafts theproposed QDRO, there is a good chance that the pro-posed document will not meet the statutory require-ments. A proposed QDRO might need several roundsof revisions before it complies. Although there is notime limit for the perfection of a QDRO, Congressincluded an 18-month period, beginning on the datethe first document purporting to be a QDRO is deliv-ered to the Plan Administrator, during which the PlanAdministrator must act in good faith and must segre-gate any benefits that might potentially be paid to anAlternate Payee, if the failed order is perfected withinthe 18-month period.

Once a QDRO is accepted by the Plan Administrator,the Alternate Payee immediately receives all ERISArights that any plan participant or beneficiary is en-titled to, which includes all rights and privileges pro-vided under the plan document, the receipt of allnotices and communications that go from the Plan toall plan participants and beneficiaries, and the right tosue the Plan Administrator for the statutory ERISAcauses of action. Once all benefits have been paid tothe Alternate Payee pursuant to the QDRO, the Alter-nate Payee ceases to have any additional ERISA rights.An individual who is indicated as a potential Alter-nate Payee in a proposed QDRO will generally havestanding as a plaintiff to have a federal court deter-mine whether the Plan Administrator has properlydenied the QDRO or whether it has either willfully orarbitrarily denied it. Similarly, an Alternate Payeeclaiming that the Plan Administrator prematurely cutoff his or her ERISA rights will generally have stand-ing as a plaintiff to dispute such a decision.

Therefore, although not required by the law, it is highlyrecommended that the attorneys drafting the proposedQDRO send the document, in draft form, to the PlanAdministrator. Therefore, if there are any problems,they can be rectified before appearing in front of a statecourt judge. Otherwise, if the judge has already signedthe failed document, then multiple appearances by theattorney would be necessary. It is advisable for all plansto develop a model QDRO that, if used by the partici-pant and his or her spouse upon divorce, will automati-cally be accepted by the Plan Administrator.

by Barry Kozak, MSPA

I. WHAT IS A QUALIFIED DOMESTIC RELATIONSORDER?

THE ASPA JOURNAL


II. WHAT ARE THE STATUTORYREQUIREMENTS OF A QDRO?Following are some basic “dos” and“don’ts” of a proper QDRO:

First, the order must be a domesticrelations order, which is defined as“any judgment, decree, or order (in-cluding approval of a property settle-ment agreement) which: (1) relatesto the provision of child support,alimony payments, or marital prop-erty rights to a spouse, child, or other

dependent of a participant, and (2) is made pursuantto a state domestic relations law (including a com-munity property law).” As previously stated, the PlanAdministrator does not need to be an expert on statedivorce laws, and should accept anything that ap-pears to be a proper court document unless the PlanAdministrator has specific knowledge that places thedocument’s authenticity in jeopardy.

Next, the order must clearly specify the parties’ namesand addresses, the amount or percentage of the ben-efit payable to the Alternate Payee (or the manner ofdetermining such amount or percentage), the numberor period of payments, and the plan to which the or-der applies. As explained below, most proposedQDROs fail because they are not clear enough for thePlan Administrator.

Finally, the order must not require the plan to: (1)provide any type or form of benefit or option to theAlternate Payee that is not otherwise provided underthe plan; (2) give more than 100% of the participant’sbenefits to the Alternate Payee; and (3) requireamounts to be paid to this Alternate Payee that arealready due to be paid to another Alternate Payeethrough a prior QDRO.

III. WHY DO MOST PROPOSED QDROS FAIL TOCOMPLY?As stated above, most Plan Administrators deny or-ders that fail to clearly state the amount, term, andmechanics of the benefits assigned to the AlternatePayee. Other than the obvious ambiguities, the mainreasons an order that is drafted by a non-ERISA at-torney is not clear to a Plan Administrator or to itsERISA counsel are as follows: (1) the order fails toacknowledge the plan type, (2) the order fails to in-dicate the method of assigning benefits, (3) the or-der fails to instruct the Plan Administrator on themechanics of the desired distribution, or (4) the or-der fails to take into account all possible contingen-cies for the deaths of either the plan participant orhis or her Alternate Payee.

This section of the article provides some of the mainreasons that a proposed QDRO should be rejected.The main point is that the Plan Administrator should

accept any proposed QDRO that can be followed. Ifthere is any doubt, then that doubt must be clarifiedbefore the QDRO is accepted; otherwise, there can beunexpected litigation against the Plan in the future byeither party. There is nothing wrong with the PlanAdministrator sending a letter to both parties of thedivorce, in advance of formally accepting the proposedQDRO, stating exactly how he or she interprets theQDRO, or, if ambiguous, what provision needs clari-fication. The author cautions, however, that any suchcommunication must be absolutely neutral becausethe participant and the former-spouse negotiate allterms of the divorce, and the job of the Plan Adminis-trator is to mechanically alienate a portion of theparticipant’s qualified retirement benefits, regardlessof how the parties agreed to such a division. Pleasenote that although QDROs are usually legal documentsseparate from a settlement agreement, divorce settle-ment, or judgement, they do not legally need to be.Some courts have recently held that substantial com-pliance with the IRC §414(p) rules, rather than abso-lute compliance, may be enough to deem a documenta valid QDRO.

(A) THE ORDER FAILS TO ACKNOWLEDGE THE PLANTYPEUnder ERISA, there are two mutually exclusive typesof retirement plans, each with their own propertiesand rules. A plan must either be classified as a “de-fined contribution plan” or a “defined benefit plan.”Similarly, a QDRO must be drafted to assign an Al-ternate Payee the right to receive all or a portion ofthe benefits payable to a participant from either a de-fined contribution plan or from a defined benefit plan.

A defined contribution plan “provides for an indi-vidual account for each participant and for benefitsbased solely on the amount contributed to theparticipant’s account, any income, expenses, gains andlosses, and any forfeitures of accounts from other par-ticipants....” Money purchase plans, profit sharingplans, 401(k) plans, Employee Stock Ownership Plans(ESOPs), thrift savings plans, and target benefit plansare all examples of defined contribution plans. Basi-cally, the participant has an “account balance” thatgets valued from time to time and can be dividedthrough a QDRO. Generally, the Plan Administratorinvests the plan assets, but some plans, like 401(k)s,might allow the participants to self-direct their respec-tive accounts.

Some of the more common problems with failedQDROs are when: (1) an order defines a valuationdate that is not authorized under the controlling plandocument; (2) an order for assignment from a self-directed plan fails to indicate how the Plan Adminis-trator collects the total benefits payable to the AlternatePayee and how they should be invested for the Alter-nate Payee if there is not an immediate distribution;

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(3) and an order fails to indicate whether the Alter-nate Payee is entitled to employer contributions orforfeitures accrued as of the intended assignment date,but not yet paid into the plan.

A defined benefit plan, on the other hand, is definedas “any plan that is not a defined contribution plan.”Defined benefit plans, cash balance plans, pensionequity plans, and any plan called a “pension plan”—other than a money purchase plan—are examples ofdefined benefit plans. Basically, the plan documentdefines a benefit annuity at retirement, which accruesover the working life of the employee. Therefore, atany point in time, the plan participant has an “accruedbenefit,” which can never be reduced, and a “projectednormal retirement benefit” which will be payable ifthe employee continues working until his or her nor-mal retirement date (assuming that the plan documentis not amended before then). In most cases, a portionof the participant-spouse’s “accrued benefit” is as-signed to an Alternate Payee.

Some of the more common problems with failedQDROs are when: (1) an order uses the term “ac-count balance” rather than “accrued benefit;” (2) anorder fails to specify the exact date that the accruedbenefit is to be calculated; (3) an order does not specifywhat salaries will be used to calculate the accruedbenefit if the benefit is based on a percentage of sal-ary and the employee’s salary continues to grow after

assignment, but before the benefits are distributed tothe Alternate Payee; (4) an order fails to specifywhether the Alternate Payee’s share of benefits in-creases if the participant’s accrued benefit increasesdue to amendments to the plan document, early re-tirement subsidies, ad hoc cost-of-living adjustments,or changes in the federal laws that limit plan ben-efits; (5) or an order allows the Alternate Payee totake his or her benefits earlier than or in a mannerdifferent than the plan document allows.

(B) THE ORDER FAILS TO INDICATE THE METHOD OFASSIGNING BENEFITSThe IRS and the DOL classify the assignment of re-tirement benefits through QDROs into two mutuallyexclusive methods: a “shared interest” and a “sepa-rate interest.” These distinctions were developedbased on the differences between post-marital sup-port and division of marital property, respectively.However, for purposes of a valid QDRO, the methodneed not match the intention.1

Under the shared interest approach, the AlternatePayee only receives a portion of the payments thatthe plan actually pays to the participant-spouse.Under this method, the Alternate Payee gets abso-lutely no timing or type of benefit distribution

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Message from the EnrolledActuaries Meeting Committee

The 2003 Enrolled Actuaries Meeting is March 17–19, at the Marriott Wardman Park Hotel inWashington, DC. As always, you will be able to satisfy half of your EA continuing educationrequirements for this three-year cycle by attending this one meeting!

Panelists at the 2003 General Sessions will explore how actuaries can and should protect them-selves from liability; the new paradigm in setting actuarial assumptions for determining pensionliabilities, and the impending retirement crisis in theUnited States. A strong slate of concurrent sessions,including sessions on any new legislation that might be-come law prior to the meeting, is planned, and of coursethe IRS and PBGC will be well represented. We arepleased to have Mark Shields, a nationally known po-litical commentator (CNN’s The Capital Gang) and col-umnist (The Washington Post), as our Monday luncheonspeaker.

Register early and come to DC in March to hear howother pension professionals are handling the issues wemust all address in our actuarial practices.

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the damages that may be recovered in a lawsuit orarbitration to one year’s fees, or to the greater of oneyear’s fees or a specific sum, for instance, $10,000.

For those Consultants who have never been sued, orhad a liability claim asserted against them by one oftheir clients, this might seem like a mundane,“boilerplate” provision that has little relevance in thereal world. To those who have been sued, and to thelitigation attorneys who sue and defend them, these kindof provisions are often more important to the outcomeof the claim than to the question of whether the Con-sultant did anything wrong in the first place. Why?

CONSIDER THIS EXAMPLE:A Consultant prepares an amended and restated de-fined benefit plan. (The Consultant did not draft theoriginal plan document.) The old plan includes a pro-vision excluding those employees who are coveredby a plan through a collective bargaining agreementfrom participating in the company plan. The companyowner—who responds to the Consultant’s informa-tion requests—has always responded by indicatingthat the company has only one employee. In fact, thecompany has numerous employees, but all but one(the owner) are covered by a separate plan through acollective bargaining agreement. When the Consult-ant prepares the amended and restated plan document,he neglects to review the prior plan document andomits any provision excluding union employees fromthe plan. The client looks to the Consultant to makethe contributions to the plan for the benefit of the par-ticipants who would have been excluded from par-ticipating but for the Consultant’s oversight. Thedamages are claimed to be more than $300,000. (Thesewere the facts of an actual lawsuit.)

If the Consultant used an engagement agreement, andif the engagement agreement included an enforceablelimitation of liability clause, the damages that the plansponsor might recover from the Consultant could belimited to the amount of the Consultant’s fees. In theexample above, that could mean that despite the factthat the client has a funding obligation of $300,000,the Consultant’s liability could be limited to less than$10,000 (depending upon the exact terms of the limi-tation of liability provision).

Consultants who are considering using a limitationof liability provision have several issues to address.The first question, and the one that the DOL addressed,is whether a plan fiduciary violates his fiduciary duty

to the plan by agreeing to a limitation of liability pro-vision in favor of a Consultant. In DOL AdvisoryOpinion 2002-08A, the DOL noted that “…limita-tion of liability and indemnification provisions maybe becoming increasingly popular with actuarial firms,according to press and other reports.” Consequently,the DOL was responding to a request for an AdvisoryOpinion regarding “...whether inclusion of certainindemnification and hold-harmless provisions in aplan’s service provider contract would violate the fi-duciary provisions of ERISA.”

The DOL first noted that ERISA §404(a)(1) requiresfiduciaries to discharge their duties solely in the in-terest of participants and beneficiaries, and with thecare, skill, prudence, and diligence that a personacting in a like capacity would use under the samecircumstances. The DOL also referred to ERISA’sprohibited transaction provisions, noting that a planfiduciary shall not cause the plan to engage in a trans-action if he or she knows that the transaction consti-tutes a direct or indirect furnishing of servicesbetween the plan and a party in interest, or transferof any plan assets to a party in interest. [ERISA§406(a)(1)(C) and (D).] ERISA provides a statu-tory exemption to these prohibited transactions whenone is contracting or making reasonable arrange-ments with a party in interest for services related tothe establishment or operation of the plan, providedthat no more than reasonable compensation is paid.[ERISA §408(b)(2).]

The DOL instructed that “…the responsible plan fi-duciary must engage in an objective process designedto elicit information necessary to assess the qualifi-cations of the provider, the quality of services offered,and the reasonableness of the fees charged in light ofthe services provided. In addition, such process shouldbe designed to avoid self-dealing, conflicts of inter-est, or other improper influence.”

The DOL concluded “[t]he Department does not be-lieve that, in and of themselves, most limitation ofliability and indemnification provisions in a serviceprovider contract are either per se imprudent underERISA §404(a)(1)(B) or per se unreasonable underERISA §408(b)(2). The Department believes, how-ever, that provisions that purport to apply to fraud orwillful misconduct by the service provider are againstpublic policy and void. It would not be prudent orreasonable to agree to such provisions. Other limita-tions of liability and indemnification provisions,

Limitation of Liability Provisionsin Service Provider Contracts

Continued from page 1

THE ASPA JOURNAL


applying to negligence and unintentional malpractice,may be consistent with §§404(a)(1) and 408(b)(2) ofERISA when considered in connection with the rea-sonableness of the arrangement as a whole and thepotential risks to participants and beneficiaries. At aminimum, compliance with these standards wouldrequire that a fiduciary assess the plan’s ability toobtain comparable services at comparable costs ei-ther from service providers, without having to agreeto such provisions, or from service providers who haveprovisions that provide greater protection to the plan.”

In addition, the DOL stated that compliance withERISA’s fiduciary provisions would also require thatthe fiduciary assess the following: (1) the potentialrisk of loss that might result from a service provider’sact or omission subject to a proposed limitation ofliability provision, (2) the outside limits of potentialloss, and (3) other actions that may be available tothe plan to minimize such a loss.

Therefore, the only “sure thing,” according to the DOLAdvisory Opinion, is that a fiduciary will breach hisor her duties to the plan by agreeing to a limitation ofliability provision that purports to limit liability aris-ing out of the Consultant’s “fraud or willful miscon-duct.” Whether a fiduciary violates his or her fiduciaryduty in agreeing to other limitations of liability willbe decided on a case-by-case basis.

Presumably, this DOL opinion could result in morewidespread use of limitation of liability provisions inConsultant service agreements. If the courts followthe DOL analysis, plan fiduciaries will not automati-cally be found to have breached their fiduciary dutiesin agreeing to such provisions, as long as they en-gage in “procedural prudence” in deciding whetherto execute agreements with these provisions.

So, should Consultants routinely require these provi-sions as part of their agreements with their clients? Thatis a more complicated question, the answer to whichdepends on a complex weave of risk management, in-surance strategies, and marketing considerations.

Given the DOL’s opinion, if the number of Consult-ants that require these agreements increases dramati-cally, it may very well decrease the chances that a planfiduciary will be found to have breached his or her fi-duciary duty by agreeing to limit the Consultant’s li-ability. After all, to overcome a fiduciary breach claim,according to the DOL, a fiduciary should “...assess theplan’s ability to obtain comparable services at compa-rable costs either from service providers without hav-ing to agree to such provisions.” If every Consultantrequired a limitation of liability provision, it would beimpossible for a plan fiduciary to obtain professionalservices for the plan without agreeing to a limitation ofliability provision. In that circumstance, it may also beimpossible to successfully argue that the fiduciarybreached his or her duty by agreeing to the provision.

On the other hand, if only relatively few Consultantsrequire these provisions as a condition of performingservices, plan fiduciaries could presumably secure simi-lar services without having to agree to limit their Con-sultants’ liability. That could prompt some Consultantsto simply obtain insurance against large malpracticeclaims and to attempt to set themselves apart from otherConsultants by emphasizing their willingness to workwithout requiring limitation of liability provisions.

While the DOL has indicated that use of limitation ofliability provisions does not per se give rise to a breachof fiduciary duty, another issue is whether these provi-sions are enforceable under the laws of the state in whichthe Consultant practices—or more precisely, the state

It’s Time To Renew Your Membership!

Don’t let your ASPA membership or your designation lapse. 2003 ASPA dues renewal notices weremailed to all members in November.

During the last year, ASPA has continued to implement new programs and services to enhance thevalue of your membership. Online education/exam programs, additional conference programs, andinteractive Web site enhancements are just some of the new member services that have been added.We hope you have taken advantage of these new benefits; if not, we encourage you to do so in theyear to come. It is a good business decision to continue to support the efforts of your nationalorganization and to renew your membership today!

Pay your annual membership dues prior to February 28, 2003, to avoid late fees. If you did notreceive a 2003 dues notice, contact ASPA’s Membership Department at (703) 516-9300.

THE ASPA JOURNAL


in which a Consultant gets sued. This issue may be themost significant that a Consultant considers in decid-ing whether to use a limitation of liability clause in itscontracts. After all, most courts that have consideredthe question have decided that state negligence andmalpractice laws apply to claims against Consultantswho are alleged to have committed negligence in pro-viding their regular, non-fiduciary professional services.{See, e.g., Berlin City Ford, Inc. v. Roberts PlanningGroup, 864 F.Supp. 292, 295 (D.NH 1994); Coyne &Delany Co. v. Selman, 98 F.3d 1457 (4th Cir. 1996):[holding that “garden-variety” state law professionalmalpractice claims are not preempted by ERISA].}

In California, for instance, the courts will consider ahost of factors in deciding whether a limitation of li-ability provision violates public policy or is otherwiseunenforceable. Among other things, the courts con-sider whether the services being performed are a prac-tical necessity for some consumers, whether the partyseeking the limitation possesses a “decisive advan-tage of bargaining strength” over those who seek theirservices, and whether the party seeking the limitationuses a standardized contract that does not allow a cus-tomer to pay additional reasonable fees and obtainprotection against negligence.

A thorough analysis (and comparison) of the variousstate laws regarding limitation of liability provisions isbeyond the scope of this article. However, consider this:if it is questionable whether a limitation of liability pro-vision is enforceable under state law, it may make littlebusiness sense to use them. Discriminating clients mayquestion the provisions, negotiate their limits, or in theworst case, hire another Consultant altogether if theyfeel the proposed provision is overreaching.

Meanwhile, Consultants should be able to insureagainst claims that arise due to simple negligence ormalpractice. While errors and omissions insurancepremiums for benefit plan Consultants have seen sig-nificant increases, Consultants may be able to softenthe blow by relatively modest increases in their fees.Assuming that you are able to obtain errors and omis-sions insurance, and thus, your insurance carrier bearsmost of the risk of a lawsuit, you should ask yourselfwhether you are really receiving any benefit from alimitation of liability provision that trumps the poten-tial loss of goodwill that may follow. ▲

Joe Faucher is a partner with the Los Angeles firm ofReish Luftman McDaniel & Reicher and chair of the firm'sERISA Litigation Department. His practice focuses onrepresentation of benefit plan fiduciaries and serviceproviders. He is a regular columnist on 401(k) planinvestments for the Journal of Pension Benefits and isa frequent speaker on ERISA matters and risk manage-ment issues for plan service providers.

PLEASE PLACE

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AD HERE. PLACE AD

AGAINST LEFT MARGIN.THIS AD DOES NOT

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15.5%

13.5%29%

5.1%

24.5%

12.4%

Stretch Your Advertising DollarsReach Your Target Market by Advertising in Each Issue of The ASPA Journal

The ASPA Journal, published bi-monthly, reaches beyond ASPA’s membership to many government (IRS,DOL, Treasury) employees, investment advisors, and retirement plan professionals.

The ASPA Journal is mailed to all ASPA members and distributed at industry-wide conferences and re-gional meetings of the ASPA Benefits Councils (ABCs).

ASPA’s membership, nearly 5,000 strong, is comprised ofactuaries, retirement plan professionals who have earnedASPA’s credentials, associated professional memberssuch as attorneys, CPAs, CLUs, ChFCs, and affiliatemembers. The chart represents ASPA’s membershipcomposition.

Put your advertisingdollars to work!For rates and production schedules, contact:Jonathan WatsonExhibits and Advertising Sales ManagerPhone: (703) 516-9300Fax: (703) 516-9308EEEEE-mail: [email protected] the Journal prospectus online athththththttp://www.asptp://www.asptp://www.asptp://www.asptp://www.aspa.org/pdf_files/journal_prospectus.pdfa.org/pdf_files/journal_prospectus.pdfa.org/pdf_files/journal_prospectus.pdfa.org/pdf_files/journal_prospectus.pdfa.org/pdf_files/journal_prospectus.pdf

The following webcasts are currently available:

2001 Form 5500 and RelatedCompliance IssuesJanice M. Wegesin, CPC, QPAAvailable until March 30, 2003

DC Plan MergersCheryl L. Morgan, CPCAvailable until May 31, 2003

Top Heavy Under EGTRRACheryl L. Morgan, CFCAvailable until June 30, 2003

Practical Tips on DistributionProceduresCheryl L. Morgan, CPCAvailable until July 31, 2003

Controlled Groups, AffiliatedService Groups, and Issues ofCommon ControlS. Derrin WatsonAvailable until July 31, 2003

Practical Tips on Participant LoansCheryl L. Morgan, CPCAvailable until August 30, 2003

The Latest in Plan DesignJoan Gucciardi, MSPA, CPCAvailable until August 30, 2003

Top 15 Pitfalls in Plan AdministrationIlene H. Ferenczy, CPCAvailable until November 30, 2003

Available Webcast Recordings

Missed a recent ASPA webcast? Need two extra ASPA CE credits? Checkout the list of webcast recordings that are available on the Internet athttp://www.aspa.org/webcast/. These archives are available for accessing atyour convenience, any day, any time. Each webcast runs approximately 100minutes in length. Visit the Web page identified above to find out more!

Cost$125 for Members, $225 for Non-members

THE ASPA JOURNAL


A Special Thanks for Making the 2002

401kASP

Accudraft, Inc.

Administrative Systems, Inc.

American Skandia

Aspen Publishers, Inc.

Benefit Insights, Inc.

Benefit Street

BISYS Retirement Services

BLAZE SSI Corporation

BNA, Inc.

Business Consultants Group,LLC

CCHKnowledgePoint

Charles Schwab CorporateServices

Circle Trust Company

CJA & Associates, Inc.

Colonial Surety Company

CyberData

DATAIR Employee BenefitSystems, Inc.

Daybridge

Dietrich & Associates

Federated Investors

Financial Advisor Magazine

Firmani Pension Services, Inc.

GoldK

INTAC Actuarial Services, Inc.

Inernational Foundation ofEmployee Benefit Plans

Investlink Technologies, Inc.

IRS TE/GE Employer Plans

Janus

Judy Diamond Associates

Liberty Funds

Lorraine Dorsa and Associates,Inc.

Lynchval Systems Worldwide, Inc.

Manulife Financial

Matrix Settlement and Clearance,LLC

MetLife

National Institute of PensionAdministrators

National Partners Group

PFPC, Inc.

Pension Benefit GuaranteeCorporation

Prudential Financial

Sharp Benefits

Social Security Administration

TeamVest Retirement PlanServices, Inc.

Terminal Funding Company

Travelers Life and Annuity

TRUSTlynx/Fiserv Trust Services

Unified Trust Company, NA

Vitech Systems Group, Inc.

Wilmington Trust Company

Winklevoss Technologies

ABC RABC RABC RABC RABC ReceptioneceptioneceptioneceptioneceptionFidelity Investments Institutional Brokerage Group

LLLLLunch Enterunch Enterunch Enterunch Enterunch EntertttttainmentainmentainmentainmentainmentPenChecks, Inc.

LLLLLanyanyanyanyanyardsardsardsardsardsQualified Annuity Services, Inc.

SignageSignageSignageSignageSignage

Reish Luftman McDaniel and Reicher

TTTTTitititititaniumaniumaniumaniumaniumLLLLLevelevelevelevelevel

PlaPlaPlaPlaPlatinumtinumtinumtinumtinumLLLLLevelevelevelevelevel

GoldGoldGoldGoldGoldLLLLLevelevelevelevelevel

SilSilSilSilSilverververververLLLLLevelevelevelevelevel

BronzeBronzeBronzeBronzeBronzeLLLLLevelevelevelevelevel

The Principal Financial Group

ING

The Hartford

Actuarial Systems Corporation

Cal-Surance Associates, Inc.

Newkirk/McKay Hochmann Company, Inc.

SunGard Corbel

Lincoln Retirement Financial Services

Nationwide Financial

TransAmerica Retirement Services

Spon

sors

Spon

sors

Exhi

bito

rsEx

hibi

tors

THE ASPA JOURNAL


ASPA Annual Conference a Huge Success!Sp

eake

rsSp

eake

rsJoann Albrecht, CPC, QPA

William N. Anspach, Jr., CPC

Robert J. Architect

Bruce L. Ashton, APM

Michael L. Bain, MSPA

Mary Beth Bentz

Lauren Bloom

Alex M. Brucker, APM

Edward E. Burrows, MSPA

Christine J. Burwell-Woo, CPC, QPA

Michael E. Callahan, FSPA, CPC

Mero J. Capo

Amy L. Cavanaugh, CPC, QPA, QKA

Jeffrey C. Chang, APM

Ann L. Combs

Susan E. Curtis

Lawrence Deutsch, MSPA

Kevin J. Donovan, MSPA

Lorraine Dorsa, MSPA

John M. Doyle, MSPA

Ilene H. Ferenczy, JD, CPC

Michael J. Finch, CPC

Thomas J. Finnegan, MSPA, CPC, QPA

James Flannery

Stephen W. Forbes, APM

Maria Freese

Carol D. Gold

Brian H. Graff

Robert E. Guarnera, MSPA, CPC

Joan A. Gucciardi, MSPA, CPC

Beverly B. Haslauer, CPC, QPA

Mark Heller

Martin M. Heming, APM

Richard A. Hochman, APM

Craig P. Hoffman, APM

James E. Holland, Jr.

Diann Howland

R. Bradford Huss, APM

Steven Kandarian

William G. Karbon, MSPA, CPC, QPA

Charles J. Klose, FSPA, CPC

Shahira Knight

Gary S. Lesser

Norman Levinrad, FSPA, CPC

Charles Lockwood

Jeff Mandell

G. Neff McGhie, III, MSPA

Cheryl L. Morgan, CPC

Gwen S. O’Connell, CPC, QPA

Kurt F. Piper, MSPA

David A. Pratt, APM

Cheryl Press

Michael B. Preston, MSPA

C. Fred Reish, APM

Stephen H. Rosen, MSPA, CPC

Carol R. Sears, FSPA, CPC

Paul T. Shultz

Lawrence C. Starr, CPC

Valeri L. Stevens, APM

Michael B. Stuber, QPA

Mark D. Swedelson, QPA

William F. Sweetnam, Jr.

Robert J. Toth, Jr.

Sal L. Tripodi, APM

Ian D. Volner

Lance Wallach

S. Derrin Watson

Janice M. Wegesin, CPC, QPA

Richard J. Wickersham

Mildeen Worrell

THE ASPA JOURNAL


WOW! A new home, a great Conference agenda, the largest

ASPA Exhibit Hall ever, and more than 1,530 attendees added

up to the biggest and best ASPA Annual Conference to date!all photographs by Bill Petros

Karen Jordan, CPC, QPA, 2002 Chair of ASPA’s Political Action Committee; StephenDobrow, CPC, QPA, QKA, 2003 Chair of ASPA’s Political Action Committee; SalTripodi, APM, ASPA Board member; and Brian Graff, ASPA’s Executive Director, atthe closing general session where Sal gave his ever-popular Keeping Current andupdated the ERISA Love Story.

Through this entranceway pass some of the best and the brightestretirement plan professionals in America.

Cathy Green, CPC, QPA, Chair ofthis year’s Annual Conference, willserve as Conferences General Chairin 2003.

Chris Stroud, MSPA, 2002 Chair of TheASPA Journal Committee, and KarenJordan, CPC, QPA, Chair of the ASPAPolitical Action Committee, admire MikeBain’s, MSPA, Co-Chair of the Educationand Examination Committee, patrioticnecktie prior to the Opening GeneralSession.

The Annual Conference is an event that getsALL the ASPA staff involved. Chip Chabot,Webmaster/Multi-media Manager; JanetMcFadden, Meetings Coordinator; JonathanWatson, Exhibit and Sales Manager; R.C. Smith,Joanne’s fiancé; Joanne Lawrence, Director ofMeetings; and Julie Thomas, MeetingsCoordinator, gathered at the Gala for a briefpause before starting up again at 6:00 a.m.

2002 ASPA President Craig Hoffman, APM,passes the gavel to the 2003 ASPA President,Scott Miller, FSPA, CPC, and wishes him a greatyear.

One of the most popular features of our new home was classroomstyle seating!

THE ASPA JOURNAL


A Few of the Many WonderfulSpeakers at the AnnualConference…

C. Fred Reish, APM, is one of theGovernment Affairs Committee’sSenior Advisors;

The hilarious Derrin Watson alwaysgets the audience involved;

Joan Gucciardi, MSPA, CPC, isASPA’s 2002 Educator’s Awardrecipient; and

Bob Guarnera, MSPA, ASPA’s 1993President, informed the attendeesabout QDROs.

Lorraine Dorsa, MSPA, is a frequentspeaker at ASPA’s conferences;

The Exhibit Hall was packed with more vendor/partnersthan ever before. And there’s still room to grow!

The Monday morning session is very popular and features speakersfrom the government agencies as well as our own ExecutiveDirector. Stephen Kandarian, PBGC; Carol Gold, IRS; Brian Graff,ASPA; Ann Compbs DOL/PWBA; William Sweetnam, Treasury

See you next year at the Washington Hilton

for the 2003 ASPA Annual Conference,

October 26–29, 2003!

THE ASPA JOURNAL


choices. Although not limited to cases where theretirement benefit represents support or alimony, thismethod generally works best if used for such pur-poses, especially if the participant of a defined ben-efit plan is already receiving monthly retirementbenefits.

Example: Assume a participant’s accrued benefit froma defined benefit plan is $1,000 per month, startingat age 65 and continuing for the rest of his life, andhe is already in pay status when he gets a divorce atage 70. If the QDRO is drafted to give his formerspouse a “shared interest” of 60% of his benefits, thenthe Plan would write one check for $400 to the Par-ticipant and a second check to the Alternate Payeefor $600. Both checks would be paid monthly for therest of the Participant’s life. However, once the Planstopped paying the Participant his share of accruedbenefits (i.e., upon the Participant’s death), the Planwould stop paying the Alternate Payee her share ofaccrued benefits at that point in time as well. Al-though it is clear that in this example the AlternatePayee has no further rights in plan benefits if she sur-vives the participant, courts are divided as to whetherthe Alternate Payee’s rights to future benefits can betransferred to her beneficiary upon her death if shedies before the participant.

Under the separate interest approach, the AlternatePayee becomes a true beneficiary of the Plan, entitledto his or her own accrued benefit. Under this method,the Alternate Payee gets the same timing or type ofbenefit distribution choices that the participants areoffered. Although not limited to cases where the re-tirement benefit represents division of marital prop-erty, this method generally works best if used for suchpurposes, especially if the participant of a definedbenefit plan is still working and will accrue furtherbenefits, or if the participant of a defined contribu-tion plan is still working and will receive further con-tribution and forfeiture allocations.

Example: Assume a Participant’s accrued benefit froma defined benefit plan is $1,000 per month, startingat age 65 and continuing for the rest of his life, andhe is still working when he gets a divorce at age 50.If the QDRO is drafted to give his former spouse a“separate interest” of 60% of his benefits, then thePlan Administrator would consider the participant’saccrued benefit to be $400 per month, starting at hisage 65 and continuing for the remainder of his life,

and would consider the Alternate Payee a plan ben-eficiary with an accrued benefit of $600 per month,starting at the participant’s age 65, and continuing forthe remainder of her life. (The plan document willhave actuarial factors to calculate a mathematicallyequivalent benefit for her if her age is different andshe starts distributions at a different date.) Unless theQDRO affirmatively provides for increases, the Al-ternate Payee’s accrued benefit is thereafter locked inand will not increase. However, the participant’s ac-crued benefit can increase as he continues workingand accrues further benefits in accordance with theplan document.

(C) THE ORDER FAILS TO INSTRUCT THE PLANADMINISTRATOR ON THE MECHANICS OF THE DESIREDDISTRIBUTIONThe most common mechanism for dividing retirementbenefits, especially those from a defined benefit plan,is to include a fraction that represents the portionof total benefits that are deemed “marital prop-erty.” The most common description of the fractionis that the numerator is to equal the period of totalplan service credited to the participant during the mar-riage and for the denominator is to equal the periodof total plan service credited to the participant for allyears as an employee.

Another common problem with QDROs drafted bynon-ERISA attorneys is the lack of understandingof when payments may begin. Most defined con-tribution plans allow for an immediate distributionof benefits; however, most defined benefit plans of-fer annuities starting at a certain age and lump sumsonly in certain circumstances. The earliest date thatan Alternate Payee can receive a distribution if theparticipant-spouse is still working is known as the“earliest retirement age,” which is the earlier of thedate that the participant could receive a benefit fromthe plan or the participant’s 50th birthday. Althoughmost QDROs have a statement that the order pur-ports to be a valid QDRO and that all non-confirming provisions are ignored, most PlanAdministrators should deny a proposed QDRO thatmandates a distribution to start earlier than, or bein a form of, a benefit that is not provided for in theplan document.

As mentioned, some of the problems with a QDROassigning benefits from a defined contribution plan,

How Plan Administrators Need to ReviewQualified Domestic Relations Orders (QDROs)

Continued from page 7

THE ASPA JOURNAL


especially a 401(k) plan, involves the participant’sself-direction of investment options. By default, ifthe QDRO is silent, the Plan Administrator will sim-ply take proportionate amounts from all of theparticipant’s current diversification of funds.

Example: If the participant has an account balanceof $100,000, where $20,000 is invested in a riskyoverseas fund, $20,000 is in employer stock, $40,000is in a growth fund, and $20,000 is in governmentsecurities, and if the QDRO assigns his Alternate

Payee 60% of his current account and provides noinstructions for the Plan Administrator, the AlternatePayee will receive $12,000 from the overseas fund,$12,000 in employer stock (converted to cash in ac-cordance with the plan document), $24,000 from thegrowth fund, and $12,000 from the government fund.This may not be the most desirable way of gettingfunds to the Alternate Payee because the fees chargedby the various funds and lost opportunity costs mightbe very high. Therefore, the QDRO might specify

MSPADavid P. Friedlander

Paula M. Hauck

CPC

John W. Hollopetre

QPA

Susan J. BonawitzJohn W. Hollopetre

June E. KightJeff P. Kunkel

David S. LeGatesSharon Camille Matlack

Scott D. McCarthyRaymond J. Monhart

Robin L. Snyder

QKA

Sally P. AlagonaLinda M. Baker

Susan J. BonawitzMaryann D. ClarkJane R. FreemanPaulette J. GillumJohn A. Harlan

John W. HollopetreNorman T. Holmberg

Ellen S. HoustonBeryl J. King

Onetta LandersPamela M. Lawrie

Jay N. LuberJulie J. MagnusonScott D. McCarthy

Alana R. McClenathanCarol A. Milmine

Raymond J. MonhartAlice E. Nash

Shirleen Noble

Welcome New MembersWelcome and congratulations to ASPA’s new members and recent designees.

Kevin J. PlymyerNorae L. ReynoldsSharra L. Sadler

Michele L. SantosJenny C. SerafiniBonnie E. SextonPaul J. ShortierNina A. Smith

Jennifer L. SorrellKeith Edward WilliamsWilliam Jeffrey Zobell

Grace B. Zontini

APM

Todd J. BerghuisNancy Harms

John R. NelsonLisa S. Weaver

Affiliate

Valerie J. AnnangMichael S. BermanChristian Betke

Gary CharlesRonald A. ChaseLisa S. CromptonLori Donnelly

Donald A. Dulaney Jr.Laura DurkinKyle English

Linda R. EvansLori Farrington

Susan FeitRichard S. FieldMark H. FischerDavid FlinchumRobin S. Gantz

Brian Scott GlaserJordan Glass

Jeanette K. Goodman

Benjamin D. GortonDeborah A. Heflin

Maria T. HurdLouann IrbyReem Janho

Delmar R. JohnsonKatharine A. Jungkind

Yvonne J. KorlochJanine M. Laverdiere

Steven LidwinJeffrey P. MahonDian McDonald

Francis J. McKennaMary H. McLeod

Gary E. MinzenmeyerJim Mosher

Jonathan M. NicholsonMichael Norman

Leah PaceJill C. PalmoreDavid R. Patch

Karen PickeringCynthia M. Pritchard

Karen PritchardRhonda PritchettEdward Repper

Melanie A. RomeroJoanne RonceLeila B. RossFaith Sabat

Maria T. SalazarRenee B. SkinnerBrian L. Smith

Scott A. StewartBarbara F. TaylorJames C. Vaughan

Lori J. WattsJane White

Milton A. WillnerdGregory T. WoodJeannie L. Wood

Diane F. Zona

THE ASPA JOURNAL


(assuming that both parties agree) that the AlternatePayee gets the entire growth fund and the entire gov-ernment fund, thus still providing an aggregate as-signment of $60,000 (i.e., 60% of the participant’saccount balance), yet leaving the overseas fund andemployer stock in tact for the participant. If theQDRO or the plan document does not allow an im-mediate distribution to the Alternate Payee, then atleast this method would provide conservative invest-ments for the Alternate Payee until he or she has anopportunity to choose a different investment strategy.

(D) THE ORDER FAILS TO TAKE INTO ACCOUNT ALLPOSSIBLE CONTINGENCIES FOR THE DEATHS OF EITHERTHE PLAN PARTICIPANT OR HIS OR HER ALTERNATEPAYEE

Another way that QDROs typically fail is that theymight not clearly indicate what the Plan Adminis-trator should do upon the deaths of either the Par-ticipant or the Alternate Payee. Therefore, a PlanAdministrator generally looks to see if the QDROaddresses the following four contingencies: (1) TheParticipant has not yet reached his “earliest retire-ment age” and he dies but the Alternate Payee sur-vives; (2) The Participant has not yet reached his“earliest retirement age” and the Alternate Payee diesbut the Participant survives; (3) The Participant hasreached his “earliest retirement age” and he dies butthe Alternate Payee survives; and (4) The Partici-pant has reached his “earliest retirement age” andthe Alternate Payee dies but the Participant survives.Again, the Plan Administrator has no reason to ques-tion the goals and understanding of the parties go-ing through a divorce, but the Plan Administratormust have clear instructions in the QDRO whichanticipate all contingencies and which will not besubsequently challenged through litigation.

At the same time Congress added the QDRO rules toERISA and to the Internal Revenue Code, they alsoadded “qualified joint and survivor” rules to protectthe surviving spouses of married participants upontheir death. Basically, the rules provide that a surviv-ing spouse will always get at least 50% of theparticipant’s accrued benefit, and that if the partici-pant wants to elect a different type of benefit, then thespouse must consent to that election in writing (andbe notarized). Congress included these provisions toprotect a widowed spouse from the participant elect-ing, while still alive, an irrevocable optional form ofbenefit or named beneficiary that provides nothing tothe surviving spouse. Congress included a provisionin the law that similarly protects former spouses aftera divorce. Therefore, a QDRO may contain an affir-mative provision that treats a former spouse as a “sur-viving spouse” for purposes of a QualifiedPre-Retirement Survivor Annuity and/or for purposesof a Qualified Joint and Survivor Annuity. Again, itis up to the parties to determine what is in their col-lective best interests and to memorialize a QDRO thataccomplishes those intentions.

IV. CONCLUSION

The tension with QDROs is that state laws governthe dissolution of marriages and the division of mari-tal property; whereas federal laws govern the me-chanical and procedural aspects of a QDRO.Unfortunately, many attorneys who draft QDROdocuments are family attorneys who are very knowl-edgeable about state marital laws, but not very knowl-edgeable about ERISA. Therefore, it is up to ERISAspecialists to help their Plan Administrator clients toreview a document which is supposed to be a QDROand accept it if and only if it satisfies all of the statu-tory requirements.

ASPA Expands Online Testing!The Daily Valuation, PA-1(A), and PA-1(B) exams can now be taken online. There areno Scantron forms to complete and you will receive your grade and feedback instantly!

To take the exam online, just go to the eASPA section of ASPA’s Web site at www.aspa.organd complete the login and registration procedures. Once registered, you are ready totake the exam!

Immediately after completing the exam, you will receive a score and feedback report. Ifyou pass the online exam, you will receive a certificate in the mail within a few weeks oftaking the exam.

In an ongoing effort to use the most up-to-date technology and meet the need forconvenience, speed, and reduced expense, ASPA will continue to expand online educa-tional opportunities in the future.We hope you will take advantage of this e-learning opportunity! If you have anyquestions, contact our education department at (703) 516-9300 or e-mail us [email protected].

© 2001 B

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THE ASPA JOURNAL


ERISA governs the division of marital propertythrough a qualified retirement plan. Although ERISAgenerally preempts all state laws that relate to em-ployee benefit plans, courts have been trying to fig-ure out how state marriage and divorce laws affectERISA governance (especially those states that havecommunity property law). Only attorneys, after re-searching relevant state and federal case law, can of-fer legal advice to the parties or the Plan Administratoras to how the legal rights of each of the divorcingspouses, granted through a valid QDRO, can be pro-tected or divested upon their respective deaths. ThePlan Administrator, however, does not need to be con-cerned with the minutia of state laws and ERISA pre-emption; rather, a Plan Administrator needs only tomake certain that a proposed QDRO satisfies all ofthe requirements of IRC §414(p).

Further insight is provided through two recent USSupreme Court cases, Boggs v. Boggs (1997) andEgelhoff v. Egelhoff (2001), even though QDROs werenot specifically at issue in either case. Both casesheld that ERISA preempts state law. In Boggs, thesons of a participant’s first wife filed suit against theparticipant’s second wife and used the congressionalintent for implementing the QDRO rules as supportfor their argument that they, rather than theparticipant’s second wife, were entitled to theparticipant’s Plan benefits. In his majority opinion,Justice Kennedy looked at the Congressional intentand powerfully stated “The QDRO provisions … re-inforce the conclusion that ERISA is concerned withproviding for the living. The QDRO provisions pro-tect those persons who, often as a result of divorce,might not receive the benefits they otherwise wouldhave had available during their retirement as a meansof income. In the case of a predeceased spouse, thisconcern is not implicated.” In Boggs, the Court heldthat ERISA’s protection for the participant’s livingsecond spouse upon the participant’s death is moreimportant than, and is preemptive of, a Louisiana statecommunity property law that allows the participant’sfirst spouse to leave her share of the Plan benefits toher children through her will. In Egelhoff, the Courtheld that ERISA’s rules for valid beneficiary desig-nations are more important than, and are preemptiveto, a Washington state law that automatically revokesa former spouse’s rights to take any benefits from apension plan upon a divorce. Therefore, even thoughQDROs are not specifically at issue in either Boggsor Egelhoff, great insight is provided for family lawattorneys who need to understand the intersection be-tween state laws governing divorce and the federalERISA law governing the use of qualified retirementplans as marital property to be divided upon divorce.

In a clear case of how the federal QDRO rules andstate marriage laws intersect, a 2002 Second CircuitCourt of Appeals case pits a father of a deceased

participant against the daughters of the same de-ceased participant (i.e., grandfather against grand-daughters). In Metropolitan Life Insurance Co. v.Bigelow, the Plan Administrator does not knowwhether to pay the father (who claims that the“Judgement” at issue was not a QDRO, and there-fore, New York State law dictates that he is entitledto his son’s benefits) or the daughters (who claimthat the “Judgement,” entered when their father di-vorced their mother, satisfied all of the rules of IRC§414(p), and, therefore, they are entitled to theirfather’s benefits). The Plan Administrator agrees thatit will follow the Court’s decision. The Court’s opin-ion states that “This, then, is the nub of the presentdispute: if the Judgment is a qualified domestic re-lations order (QDRO), ERISA does not preempt it,and the Daughters are the proper beneficiaries; if,however, the Judgment is not a QDRO, then ERISApreempts, and the Father is the proper beneficiary.”The Second Circuit Court of Appeals ultimately de-termined that although the “Judgement” was not aseparate document purporting to be a QDRO, basedon some of the provisions and terms in the “Judge-ment,” it substantially complied with the QDROrules. Therefore, substantial compliance, rather thanabsolute compliance, might be enough to deem adomestic relations order a Qualified Domestic Re-lations Order. Based on this recent holding, the au-thor cautions that although it is stated several timesin this article that generally a QDRO is a separatedocument from the actual settlement agreement orthe overall domestic relations order itself, courts canapply the IRC §414(p) requirements to any legaldocument or judicial order to determine if a validQDRO has been agreed to by the divorcing parties.

In reviewing the QDRO, care must be taken so thatthe review is purely objective. If the participant andthe Alternate Payee have negotiated fairly and agreedto the terms of a QDRO, the Plan Administrator mustaccept it, even if it favors one of the parties over theother. On the other hand, if a document fails to be aQDRO, the Plan Administrator must give objectiveadvice to both parties as to what is causing the docu-ment to fail and neutral suggestions on how the fail-ure can be cured. ▲

1See IRS Notice 97-11 and QDRO Guidance, is-sued in 1997 by the Pension Welfare Benefit Admin-istration of the Department of Labor and availableonline at http://www.dol.gov/dol/pwba.

Barry Kozak, JD, LL.M., EA, MSPA, ChFC, is the Directorof Academic Development for the Graduate Tax Law andEmployee Benefits Programs at the John Marshall LawSchool, and is an adjunct professor of law. Addition-ally, Barry is employed as a Legal Consultant at ChicagoConsulting Actuaries, LLC.

THE ASPA JOURNAL


Eidson Founder’s Award Recipient, Curt Hamilton,Reflects on His Tenure at ASPA

by Amy E. Iliffe, Director of Marketing and Development

CURTIS D. HAMILTON, MSPA, CPC, IS THE 2002 HARRY T. EIDSON FOUNDER’S AWARD RECIPIENT. CURT, AS HIS FRIENDS KNOW HIM,JOINED ASPA IN 1975 AND HAS MADE SIGNIFICANT CONTRIBUTIONS TO ASPA AND TO THE PENSION PROFESSION SINCE THAT TIME.

Curt was presented with the Eidson Founder’s Awardat the 2002 ASPA Annual Conference. The award isgiven in honor of ASPA’s late founder, Harry T.Eidson, FSPA, CPC, and recognizes exceptional ac-complishments that contribute to ASPA, the privatepension system, or both. Ed Burrows, MSPA, 1986President of ASPA and someone who has first handknowledge of Curt’s achievements, presented Curtwith the award. Also during the 2002 Annual Confer-ence, I had the pleasure of sitting down with Curt todiscuss his contributions and the highlights of hismany years of involvement with ASPA.

While serving as President of ASPA in 1983, Curtwas instrumental in the development of ASPA’s State-ment of Purpose, which has been a critical factor inthe success of the organization. The statement remainsunchanged to this day and reads as follows:

The purpose of the American Society of Pension Ac-tuaries is to educate pension actuaries, consultants,administrators and other benefits professionals, andto preserve and enhance the private pension systemas part of the development of a cohesive and coher-ent national retirement income policy.

Curt provided me with some history behind the devel-opment of this statement. The Tax Equity and FiscalResponsibility Act of 1982 (TEFRA) had passed inAugust and Curt was going to assume the ASPA presi-dency in 1983—the year that a great number ofTEFRA’s provisions would become effective. This wassignificant because TEFRA was so punitive and provedto be the first in a series of subsequent laws that broughtpersistent attacks on qualified plans, in general, anddefined benefit plans in particular. TEFRA presentedASPA and the actuarial professional with some majorchallenges. This change in climate was a call to actionfor ASPA’s Board of Directors. ASPA had made val-iant efforts to defuse some of TEFRA’s onerous provi-sions but without too much success. ASPA’s leadershipwanted to have greater influence in Washington. To doso would require ASPA to become larger, stronger, andmore recognized. It was a daunting challenge, but onethey believed could be accomplished. The first step to-ward achieving this goal, the leaders felt, was to have aclear and concise core purpose around which all ourother activities could be built.

Accordingly, in late 1982, Curt gathered a group ofASPA’s past Presidents together for a two-day meet-ing at the Westgate Plaza in San Diego, CA. It did nottake long to decide on the core purpose since (believeit or not!) those participating were in agreement aboutwhat the purpose should be. Most of the time was spent“word-smithing” the message. They knew that ASPA’scommitment to education would continue to be ofparamount importance and wanted to broaden the edu-cation from just pension actuaries to consultants andother practitioners. In addition, they wanted ASPA toattain national recognition and prominence so that theirprofessional opinions and suggestions would have agreater impact on legislators and the direction of ourcountry’s retirement policy.

“This meeting not only resulted in the developmentof ASPA’s Statement of Purpose, but was also the be-ginning of ASPA’s Long Range Planning Committee(LRPC).” Curt, who served as the first chair of thiscommittee, explained that, “the purpose of the LRPCwas to provide long-term vision of what ASPA was,what we wanted to become, how we were going toget there, and what steps needed to be implementedto achieve the goals.”

Past President, Ed Burrows, MSPA, presents Curt Hamilton, MSPA, CPC, withthe 2002 Harry T. Eidson Founder’s Award at the opening session of the 2002ASPA Annual Conference.

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The LRPC established several goals that first year. Itwas clear at that time that ASPA’s leadership wantedASPA to become the voice of the retirement plan pro-fession. As Curt recalls, “We attempted to have a pub-lic relations campaign to gain this recognition, butthe task was compounded because we were so starvedfor resources in those days. We were trying to allo-cate our nearly non-existent cash reserves as effec-tively as we could to gain increasing visibility andprestige. With TEFRA’s passage and retirement planscoming under attack, we knew how vital it was forthe private pension system that we make our voiceheard. Another of our desired outcomes was to haveASPA become recognized as offering the most pres-tigious credentials to the retirement plan community,creating market value for both our actuarial designa-tions and our CPCs.” Several additional goals wereto educate actuaries, increase the number of peopleentering the profession who were taking the actuarialexams, and establish a vibrant Government AffairsCommittee. Increasing the scope and effectiveness ofASPA’s government affairs activities were criticallyimportant so that ASPA would have a voice in thediscussion about the direction of the country’s retire-ment program. ASPA’s leadership wanted to be heardas an objective educational body and hoped to havecompelling input on pinpointing the problems withthe retirement system.

Curt reflected back on the goals established by theLRPC at that time and how well he thought ASPAhas succeeded in their achievement. In his opinion,ASPA has accomplished the goal of gaining nationalrecognition through its widely recognized educationprogram and prestigious credentials. Curt wonders ifperhaps ASPA should expand its scope to includebenefit plans other than just retirement plans. Accord-ing to Curt, “Many of us run firms that provide con-sulting and administration for retirement plans,Section 125 or flex plans, and other employee benefitprograms. By confining itself to the retirement planfield, ASPA narrows its candidacy base, which in some

ways also reduces services to our members’ firms. Thatsaid, however, businesses and organizations must fo-cus on their core competencies.” One of his disap-pointments is that while ASPA has gained ground inits total membership because of the addition of otherdesignations, ASPA has not been as successful in ma-triculating actuaries—ASPA has actually seen attri-tion in the number of actuaries because of the numberof retirees. And last but not least, with regard to theestablishment of a vibrant Government Affairs Com-mittee—this goal was met over and above all expec-tations, thanks in large part to the early efforts ofAndrew (Andy) J. Fair, APM, 1998 recipient of theEidson award.

During his presidency, Curt initiated the developmentof the National Retirement Income Papers (NRIP)project—a project that made a significant contribu-tion to the development of a cohesive and coherentNational Retirement Income Policy. As Curt ex-plained, despite the increasing concern about the fu-ture of Social Security, consistent attacks on definedbenefit pension plans and qualified retirement planscontinued. Tax policy was clearly overwhelming re-tirement income policy. ASPA’s leadership felt thatthe country needed a long term, comprehensive inte-gration of benefit programs.

Those involved in the project started working on a state-ment of retirement income policy. According to Curt,“We needed to establish a realistic and affordable pri-vate pension system, so that as the Social Security sys-tem confronted its future problems, private industrywould be encouraged to become the primary providerof retirement benefits. We were trying to develop acoherent and integrated balance between the three-legged stool—private savings, corporate sponsoredplans, and government mandated programs.” Curt ad-mits that the group was putting themselves at risk bystepping forward with a policy statement. “We knewthat by taking the initiative we were opening ourselvesup to a great deal of criticism because others would

THE ASPA JOURNAL


have very different ideas about how the system shouldbe structured. But at least we were setting forth a pro-gram that seemed to be coherent.”

Another of Curt’s activities was his representationof ASPA on the Strengthening of the Profession TaskForce. This task force was formed by member repre-sentatives from ASPA and the other actuarial orga-nizations: the American Academy of Actuaries,Society of Actuaries, Casualty Actuarial Society,Conference of Consulting Actuaries, and CanadianInstitute of Actuaries (CIA). The stated objective wasto tackle the challenge of how to make the actuarialprofession stronger, more visible, and more soughtafter. It was generally conceded that this was morelikely to be accomplished by all of the organizationsworking together rather than competing with oneanother. There was a concern among all the actu-arial organizations that the profession was not grow-ing as rapidly as it should and that they were losingqualified people to other vocations. Many of the can-didates they were vying for were obtaining masters’degrees or investment advisory expertise and choos-ing to work on Wall Street, for example, rather thanentering the actuarial profession.

Beyond the broad accomplishments of the task forcein general, the most significant individual benefit forASPA was that it requested and received a positionon the Council of Presidents (COP)—a forum to pro-

mote cooperation and coordination among the lead-ership of each actuarial organization. According toCurt, “Until that time, ASPA had always been a pa-riah to some of the actuarial bodies, and other actu-arial organizations knew little or nothing about us.They began learning more about ASPA through thetask force activities and soon realized we were doingmore for pension professionals than anyone else.”Curt, Brian Kruse, FSPA, CPC, and later Ed Burrows,MSPA, were ASPA’s representatives on the task force.Their efforts led to greater recognition and gave ASPAa stronger voice in the profession.

Another of the outcomes of the Strengthening TaskForce was the collective agreement by all the actu-arial bodies (excluding the CIA because of Canada’sgovernance) to create the Actuarial Board for Coun-seling and Discipline (ABCD). Along with Joe Leube,FSPA, CPC, Curt was selected as one of ASPA’s rep-resentatives and founding members, and served in thatcapacity for three years as the Board developed itsOperating Principles, coordinated with all the orga-nizations, and began implementing the processes andprocedures to provide guidance for actuaries.

Curt and I also discussed his active involvement inASPA’s conferences program. As a Conference Com-mittee Chair and committee member in the 80’s, heworked to conceptualize and establish what is cur-rently known as the Business Leadership Conference.

THE ASPA JOURNAL


Curt explained that ASPA had established BusinessTechniques Seminars, but that what was needed wasa forum for business owners to discuss issues withone another that might not be appropriate for the tech-niques seminars. He and Brendan O’Farrell, FSPA,CPC, decided to start the Business Owners Confer-ence, which included topics such as developing cor-porate visions and values, growing our businesses,investing in and training our people, developing suc-cession leadership within our firms, and other sub-jects to help business owners.

At the end of our interview, I asked Curt to reflect backand compare ASPA today to what it was when he firstbecame involved. He is delighted with ASPA’s success.Curt stated that ASPA now has presence and momen-tum. That is, its progress is self-sustaining. ASPA haswide recognition, more revenue, more active participa-tion, and has been successful carrying out its mission.

He hopes that ASPA will never lose sight of the goalsof being an educational body and of speaking objec-tively about retirement plans (perhaps including otheremployee benefits) and the national retirement incomestrategy. Curt admits that this is a balancing act whenyou have a vested interest in preserving a certain struc-ture or status quo (i.e., the complicated private pensionsystem). “This is part of the challenge. How does ASPAdetermine and do what’s best for our US society and atthe same time do what is best for the membership?”

Curt added that he has truly enjoyed watching the or-ganization grow as new leaders become involved. Oneof the criteria ASPA had originally set was that it wouldonly allow actuaries to be presidents.

“Making the transition to accept CPCs as leaders wasa major step. I was one of those who supported therationale of changing our name to embrace our chang-ing constituencies. Now we are accepting APMs andeven had an APM as president this year. There arevery talented people in all aspects of our professionand perhaps we need to broaden our scope.

Certainly, there are perpetual issues. Every organiza-tion needs to reevaluate who they are every now andthen. The profession and the industry are changing.We need to adapt to the marketplace, as circumstancesrequire, so that we continue to stay strong and grow.”

Curt expressed his gratitude to ASPA and appreci-ates being able to participate and watch the organi-zation grow. He remembers how difficult it was inthe early years.

“We had such dedicated volunteers who were also busybuilding their own businesses. Most of the leaders thenhad their own firms. It was difficult to run your ownbusiness, stay involved with your family, and still findtime to make a meaningful contribution to ASPA. It’srewarding to see what ASPA has become today andhow much it’s grown. I was fortunate that I found ASPA.

The organization gave me guidance, access to people,and helped me enhance my business and career. It hasbeen an incredible journey and I am confident that Ihave received far more from ASPA than I could haveever given. I am deeply honored to receive this award.To be recognized by ones’ peers is, for me, the ultimatecompliment. Thank you.”

It is ASPA’s privilege to honor Curt by presenting himwith the prestigious Harry T. Eidson Founder’s Award.Through his years of dedication and hard work Curthas helped ASPA and the profession thrive and gainnational recognition. ASPA extends its appreciationto Curt and is pleased to present him with this well-deserved award.

The award is given in honor of ASPA’s late founder,Harry T. Eidson, FSPA, CPC. Previous winners of theEidson award are as follows: Ruth F. Frew, FSPA, CPC,in 2001, Leslie S. Shapiro, J.D., in 2000, Howard J.Johnson, MSPA, in 1999, Andrew J. Fair, APM, in 1998,Chester J. Salkind in 1997, John N. Erlenborn in 1996,and Edward E. Burrows, MSPA, in 1995. ▲

Amy E. Iliffe, ASPA’s Director of Marketing and Devel-opment, has been working at ASPA for six years. Shehas held a variety of positions at ASPA, includingDirector of Membership, Director of Human Resources,and Education Services Coordinator. Amy lives with herhusband and son in Ashburn, VA.

Are You a PensionExpert and a Teacherat Heart?If so, ASPA has unlimited opportunities for you! ASPA is look-ing for instructors for webcasts and Web courses. Proposalsfor webcasts can be any “timely” or “timeless” topic of yourchoosing that you think would be important to ASPA membersand to the retirement plan industry. Webcasts are 100 minutesin length.

ASPA is actively pursuing instructors who are familiar withASPA’s education program to teach one or more topic(s) cov-ered by one of the exams. An easy way to begin thinkingabout ways you can participate is to look at the table of con-tents for one of the study guides, choose a subject, and startan outline. Web courses should be divided into 10 to 13 100-minute segments.

ASPA takes care of the webcast/Web course set-up and offersa small honorarium for instructors who are chosen to partici-pate. For more information, or to submit your outline ofideas, contact Jane Grimm, Managing Director at (703) 516-9300 x106 or [email protected].

THE ASPA JOURNAL


2003 LOS ANGELES

BENEFITS CONFERENCE

UNIVERSAL CITY, CALIFORNIA

JANUARY 30–31, 2003Mark Your Calendar! 2003 Los Angeles Benefits Conference.January 30–31, 2003. Hilton Universal City and Towers.

The Los Angeles Benefits Conference (LABC) is a unique confer-ence, featuring high-level government speakers on every session’sagenda! The LABC is an essential learning and interactive experi-ence for serious retirement plan professionals.

Topics include:

■ Washington Update

■ IRS/DOL Q&A Sessions

■ Aggressive Tax Practices

■ How Do We Protect 401(k) Plan Participants in the Future?

For more information, contact ASPA’s Meeting Depar tment at(703) 516-9300 or [email protected], or visit our Web site atwww.aspa.org.

Focus on Technology

Over the past several months, ASPA’s TechnologyCommittee and the ASPA staff have been working ona redesign of ASPA’s Web site. To date, they have

created new menus,completed basic for-matting, constructedhome pages for six ma-jor sections, imple-mented directory levelnavigation for each sec-tion, and have started tocomplete the static con-tent for various sec-tions. Over the next fewmonths, they will be

converting the existing Web pages to the new lay-out, redesigning the eSeries modules (i.e., “onlineregistration” and “members only” sections), andediting the content of the new site. Once these stepsare complete, we will be doing testing, testing,and more testing!

As you can imagine, this is a time consuming pro-cess. Chip Chabot, ASPA’s Webmaster and Mul-timedia Manager, has been hard at work. We areexcited about the new design and improved func-tionality and hope to roll out the new design onJanuary 1. If you are interested in checking outthe progress of the new site, go to http://asparedesign.org.

ASPA Web Site Redesign Underway

THE ASPA JOURNAL


Focus on ABCs

ASPA Benefits Councils Calendar of EventsDate Location Event Speakers

December 12 Western PA One-on-One with the Experts TBA

December 12 Cleveland Time and Stress Management Karl Dustman, Dustman& Associates

February 20 Cleveland DOL Correction Program TBA

April 17 Cleveland Legislative Update TBA

June 26 Cleveland Successfully Negotiating with IRS/DOL TBA

ASPA . . . A A A A Advdvdvdvdvancingancingancingancingancing the Profession. Enhancing the Professional.

2003 Version of QKA Kit Now Available at http://www.aspa.org/qkaYou asked for it! The 2003 version of ASPA’s Qualified 401(k) Administrator (QKA) kit is now available. Find QKAinformation, register for exams, order publications, and get all of your questions answered with the click of a button!

You no longer have to search ASPA’s Web site or the Education & Examination Program Catalog for QKA informationand forms—all applicable forms and information can be found in one convenient location. ASPA’s QKA kit contains anexam registration form, a publications order form, exam information, deadlines, fees, and a list of the most frequentlyasked questions about the Qualified 401(k) Administrator (QKA) designation. To download the QKA online kit, visithttp://www.aspa.org/qka.

Now Available . . . Presentation Tool for Trainers and Managers!

Are you a trainer or manager interested in ASPA’s programs and need an easy way to present information about ASPA toothers in your company? ASPA recently released a QKA promotional CD-ROM. This CD-ROM is designed specifically fortrainers and other key decision makers who want more information about ASPA’s QKA [Qualified 401(k) Administrator]credentialing program. As a source of valuable information about QKA, the CD-ROM serves as a comprehensive tool forpresenting ASPA’s program to others in your company.

The CD-ROM includes an outline of the advantages of the QKA, a program overview with detailed information about therequired exams, information about exam administration, frequently asked questions, and testimonials from trainers andQKAs. It is also a source of information about additional designations, the benefits of ASPA membership, and continuingeducation requirements. Additionally, you can use the CD-ROM to access a Publications Order Form, an ExaminationRegistration Form, and a Deadlines and Fees Schedule.

If you are interested in receiving a CD-ROM, please contact Amy Iliffe at the ASPA office at (703) 516-9300 or [email protected].

Unscramble these four puzzles – one letter to each space – to revealfour pension-related words. Answers will be posted on the eASPAportion of ASPA’s Web site at https://router.aspa.org. Login, go toMembers Only>Newsletter, and look near the bottom.

LARGE UTE � � __ __ __ __ __ �

CAB LANES __ __ � � � __ __ �

ROVER NUT __ � __ __ __ � __ __

CUT POEM __ __ __ � __ � �

BONUS: Arrange the circled letters to form the Mystery Answeras suggested by the cartoon.

Mystery Answer:

What is the “� � � � � � � � � � � �?”

WORD SCRAMBLE

THE ASPA JOURNAL


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On death and taxes: First, they tell you that you can’t take it with you. But then, they charge you for leavingit behind!

Did you even notice that if you put the letters “THE” and “IRS” together, it spells “THEIRS”?

Did you ever wonder why it’s called a 1040? It is because for every $50 you earn, you keep $10 and the IRSgets $40!

EVER WONDER WHY...?

There once was an Actuary named Bob,Whose worksheets were those of a slob.He could not re-writeWhatever he’d recite—And soon he was out of a job.

There was a consultant named HoraceWho was born under the sign of Taurus.His plans were in the stars—His numbers were from Mars—But never would he bore us!

—Stanley Weisleder,MSPA

EDUCATIONEDUCATIONEDUCATIONEDUCATIONEDUCATION

THE ASPA JOURNAL


You asked for it! The 2002 event was so successful,we’ve planned one for 2003!

Do you actively sell, market, support, or influencethe sale of 401(k) plans? Do you want to sell moreplans? Do you want to design better plans? Doyou want to keep your clients happy longer?The 401(k) Sales Summit is designed tohelp the best get better! Gain insight intoopportunities and meet managers whomanage your clients’ assets. Topics rangefrom trends to legislative changes toeconomic updates to proven salestechniques, all from the best in thebusiness. The 2002 Summit, nearly600 strong, was a sellout, so markyou calendar for next year andget ready to reach for your best!

401(k) Sales SummitFeb. 27 – Mar. 1, 2003

The Westin KierlandResort and Spa

Scottsdale, Arizona

Jan. 22, 2003Early BirdDeadline!

CONTINUING EDCONTINUING EDCONTINUING EDCONTINUING EDCONTINUING ED

January 8, 2003January 8, 2003January 8, 2003January 8, 2003January 8, 2003

Deadline to SubmitDeadline to SubmitDeadline to SubmitDeadline to SubmitDeadline to Submit

ASPA 2001-2002ASPA 2001-2002ASPA 2001-2002ASPA 2001-2002ASPA 2001-2002

CE Reporting FormCE Reporting FormCE Reporting FormCE Reporting FormCE Reporting Form

December 31, 2002December 31, 2002December 31, 2002December 31, 2002December 31, 2002Deadline for 2002Deadline for 2002Deadline for 2002Deadline for 2002Deadline for 2002Edition Exams for

Edition Exams forEdition Exams forEdition Exams forEdition Exams forDaily Valuation and

Daily Valuation andDaily Valuation andDaily Valuation andDaily Valuation andPA-1 (A&B)PA-1 (A&B)

PA-1 (A&B)PA-1 (A&B)PA-1 (A&B)

January 30-31, 2003

January 30-31, 2003

January 30-31, 2003

January 30-31, 2003

January 30-31, 2003Los Angeles Benefits

Los Angeles Benefits



Los Angeles BenefitsConferenceConferenceConferenceConferenceConferenceUniversal City, CA

Universal City, CA

Universal City, CA

Universal City, CA

Universal City, CA

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ASPA’s first Annual Conference was held Octo-ber 17–18, 1969 at Purdue University. Therewere 39 professionals in attendance. One yearlater, the second Annual Conference was heldin Philadelphia and about 120 people at-tended. Given that over 1,530 retirement planprofessionals attended the 2002 ASPA AnnualConference, you can certainly say ASPA hascome a long way since those early years!

Did You Know?

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2002

Dec 4 C-3, C-4, and A-4 exams *

Dec 31 Deadline for 2002 edition exams **for PA-1 (A&B)

Dec 31 Deadline for 2002 edition exams ***for Daily Valuation

2003

Jan 8 Deadline to Submit ASPA 2001–2002CE Reporting Form

Jan 30–31 Los Angeles Benefits ConferenceUniversal City, CA 16

Feb 27–Mar 1 401(k) Sales SummitScottsdale, AZ 15

Mar 1 Grades for fall 2002 exams released

May 1–2 Great Lakes Area TBDBenefits ConferenceChicago, IL

May 13–14 Mid-Atlantic Benefits Conference 16Philadelphia, PA

June 12–13 Northeast Area Employee (each) 8Benefits ConferenceBoston, MA & White Plains, NY

Jul 27–30 Summer ConferenceIrvine, CA 20

Oct 26–29 Annual Conference 20Washington, DC

* Exam candidates earn 20 hours of ASPA continuing educationcredit for passing exams, 15 hours of credit for failing an examwith a score of 5 or 6, and no credit for failing with a score lowerthan 5.

** PA-1A and B exams earn five hours of ASPA continuing educationcredits each for passing grades.

*** Daily Valuation exams earn 10 hours of ASPA continuing educa-tion credits each for passing grade.

CONFERENCESCONFERENCESCONFERENCESCONFERENCESCONFERENCES

the aspa journal - november/december 2002 · tirement planning. encourage an abc member or other...

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