Changes to note:

Loan Regulations Effective 1/1/04: The regs clarify treatment for leave of absence. A military LOA extends the 5 year repayment term for the length of the military service, but interest still accrues, and the extra interest must also be repaid by the extended maturity date, either by increased monthly payments or by balloon. Nonmilitary LOA does not extend the 5 year limit. Multiple loans and refinancing are not prohibited, but they can not have the effect of extending the repayment period past the 5 year mark (except for residence loans), and borrowing after a default can be permitted, with adequate collateral in addition to the participant’s vested benefit.

Common failures for multiemployer plans: IRS EP Group cites failure to adjust a participant’s benefit when commencement is delayed beyond "normal retirement date", and not commencing benefits by required beginning date (generally age 70 1/2 ). IRS says that plans that use their own personnel to calculate benefits are more likely to exclude an adjustment for delayed commencement of the normal retirement benefit, often because worksheets or computer programs do not include this adjustment. Some plans improperly limit retroactive payments for the missed months. If this sounds like your plan...

Mutual Fund Fallout: Ann Combs, asst. Labor Secretary, said in October, "Allegations of improper mutual fund practices where a plan is invested must be factored into the fiduciary’s determination of the continued appropriateness of that investment. The plan fiduciary may need to contact the mutual find’s management for information regarding the trading practices and take appropriate action." She also reminded fiduciaries have to decide whether and how to participate in lawsuits or settlements arising from improper mutual fund activities"... and "must weight the cost of participating in a lawsuit against the likelihood and amount of potential recovery." My comment: Whatever you decide, you should document your consideration of these issues.

Sarbanes-Oxley Fallout: The California Public Employees' Retirement System (CalPERS) says it withheld votes for directors on Microsoft's three-member audit committee because the company authorized its auditor, Deloitte & Touche LLP, to perform other services. My comment: For public companies, the audit of your company’s pension plan is a nonaudit service under Sarbanes-Oxley. If your financial statement auditor provides such nonaudit services, the arrangement must be approved by the audit committee, and disclosed to shareholders. A better idea-- limit the financial statement auditors to just the financials. You don’t need a "Big 4" firm for your pension audit.

I have 25 years experience with ERISA audits. I teach ERISA courses. I wrote CPE’s textbook, "Preparing Form 5500".