Japan's Employees' Pension Funds are expected to be freed from onerous investment rules sometime early next year, at least one year earlier than expected.
A decision on exactly when the so-called 5-3-3-2 rules for EPFs should be scrapped is expected by the end of the year, said Ryu Jubishi, director of the pension and welfare department in New York of the Japan External Trade Organization.
However, EPFs - typically the larger corporate funds in Japan - still will have to use trust banks and insurance companies in Japan to run at least half of their assets until April 1999; investment advisers will be able to handle the other half.
Starting last year, some EPF sponsors were allowed to apply for dispensations from the 5-3-3-2 rules. Under the rules, funds must keep at least 50% of assets in principal-guaranteed investments, while only up to 30% can be in Japanese equities, 30% in foreign securities and 20% in real estate.
The PBGC made it easier for companies to close out fully funded pension plans that are insured by the agency.
Plan administrators will have 180 days after the proposed termination date, as opposed to 120 days, to file notice with the PBGC. Administrators also will have 120 days, up from 60 days, to distribute plan assets after getting clearance from the IRS. The changes take effect for pension plans that begin the standard termination process beginning Jan. 1.
The changes were made because the old rules caused some plan sponsors to miss deadlines and then to restart the procedure, thus adding to costs and delaying payments to plan participants, a PBGC statement says.
The PBGC also provided model notices for companies to use when informing employees of plan termination.
The U.S. Supreme Court will hear oral arguments Monday on a lower court ruling that the Bay Area Laundry Pension Trust Fund, Alameda, Calif., waited too long to collect withdrawal liability from Ferbar Corp.
The U.S. District Court for the Northern District of California ruled - and was later upheld by the 9th Circuit Court of Appeals -that the pension fund's request for payment was filed more than three years after it learned of Ferbar's withdrawal from the pension fund, and thus the statute of limitations had expired.
The pension fund argues ERISA sets the statute of limitations to collect withdrawal liability at six years from the date of complete withdrawal from the fund.
Eighty-six percent of employers provide investment education to their 401(k) plan participants but only 44% believe it is working, according to a survey by Sedgwick Noble Lowndes.
Another 36% of plan sponsors indicated they did not know if their investment education programs were working. Of those employers that believe investment education is working, 78% used plan participation rates as indicator.