Month: July 2003

$374 billion in wages not matched with workers in the Social Security system?–that is what this article has to say about the Social Security system “bookkeeping nightmare”: “Mismatches That Could Be Sending Your Benefits Into Limbo” by Rita Zeidner.

Today’s Federal Register.

You can read about a report, published by the Economic and Social Research Council, which describes the pension crisis facing Britain as taking a particularly harsh toll on women, in an article entitled: “Babies or Pension choice for women.”

Mark Schwanhausser for the Mercury News has this article–“Market rally breathes new life into stock options.”

“Tax Cut Benefits: Fuzzy–It’s not yet clear whether President Bush’s $330-billion tax cut will stimulate the economy — or drag it down. Plus: The IRS shutters a stock option tax shelter“: Marie Leone and Kris Frieswick for CFO.com report. Also, at CFO.com–“ ESOPs: Split Personality: An ESOP is a retirement plan. No, it’s an ownership investment. Wait — it’s neither one” by Kris Frieswick.

The front page of today’s edition of the Wall Street Journal has this report by Kelly Greene: “As Fed Cuts Rates, Retirees are Forced to Pinch Pennies.” The article discusses the “dark side of falling interest rates” and details how those retirees relying on interest income to make ends meet are really hurting financially. The article states: “These are the people who tried to do everything conservatively with their money. For the most part, they didn’t chase Internet stocks, and they didn’t load up on debt. They sacrificed to pay off the mortgage while building nest eggs to leave their kids.”

Today’s Wall Street Journal also contains the 2003 Quarterly Review for Mutual Funds.

Happy 4th of July to everyone! Hope you like the new look here. I spent the good part of last night tinkering with the Movable Type CSS default stylesheet which I had become tired of and came up with this while watching the Phillies game last night. I have plans for ERISAblog as well. Have a good weekend!

Update: By the way, according to Web Trends, yesterday was the best day ever for this website with over 3,500 visits in one day. (A small number compared to Howard’s 35, 818 he received in one day, but after less than 3 months of blogging, I find that encouraging.) Thanks to my readers . . .and thanks to CorpLawBlog’s kind comments here.

Today’s Federal Register is here.

Ronald Fink has this article for CFO.com–“Pigging Out? Special retirement plans for top executives are becoming a target for other stakeholders.”

BenefitNews.com provides this report: “Capitol Hill proposal includes LTC in cafeteria plan or FSA.” Democrat Bob Graham of Florida and Republican Charles Grassley of Iowa last week introduced the Long-Term Care and Retirement Security Act of 2003 which would authorize tax deductions on long term care insurance premiums and tax credits to individuals and their caregivers and let employers offer the insurance on a pre-tax basis as part of a cafeteria plan or flexible spending account. The bill gives companionship to a House version proposed by Reps. Nancy Johnson (R-Conn.) and Earl Pomeroy (D-N.D.).

“Can Our Company’s Health FSA Reimburse Claims for Physician Retainer Fees?”: EBIA Weekly seeks to answer the question here.

Today’s edition of the Wall Street Journal has this report: “Ernst to Pay $15 Million In IRS Tax-Shelter Case.” The Journal also carries this article–“Judge Jeers at Stock-Hype Case”–which provides background information behind the Merrill Lynch decision reported on yesterday in this post and gives us a glimpse of the character and personality of the the 96-year-old federal judge who wrote the “scathingly critical ruilng.”

The IRS just released Notice 2003-48, containing the weighted average interest rate update for plan years beginning in July 2003.

PlanSponsor.com provides this article–“IRS Limits Combined Small Business COBRA Exemption”–regarding Revenue Ruling 2003-70 reported on here this week.

John Caher for the New York Law Journal via Law.com provides this article: “N.Y. Court First to Rule on Telecommuting: Unemployment benefits available in state where employee is physically present.”

CorpLawBlog and 10b-5 Daily have both written about this case–In Re Merrill Lynch & Col., Inc. Research Reports Securities Litigation (June 30, 2003)–which you can read about in today’s edition of the Wall Street Journal and here at FindLaw.com. The following paragraphs from the opinion written by Judge Milton Pollack of the Southern District of New York reveal his low opinion of the claims being brought:

At the times here involved, the stock markets were in the throes of a colossal “bubble” of panic proportions. Speculators abounded to capitalize on the opportunities presented by this bubble.

The market “bubble” burst intervened before plaintiffs got out of their holdings and their holdings lost value. The plaintiffs, learning of the subsequent actions of the regulators concerning the conflicts mentioned above, rushed to the courts in these cases seeking to recover the losses they experienced due to the intervening cause, the burst of the bubble. . .

The record clearly reveals that plaintiffs were among the high-risk speculators who, knowing full well or being properly chargeable with appreciation of the unjustifiable risks they were undertaking in the extremely volatile and highly untested stocks at issue, now hope to twist the federal securities laws into a scheme of cost-free speculators’ insurance. Seeking to lay the blame for the enormous Internet Bubble solely at the feet of a single actor, Merrill Lynch, plaintiffs would have this Court conclude that the federal securities laws were meant to underwrite, subsidize, and encourage their rash speculation in joining a freewheeling casino that lured thousands obsessed with the fantasy of Olympian riches, but which delivered such riches to only a scant handful of lucky winners. Those few lucky winners, who are not before the Court, now hold the monies that the unlucky plaintiffs have lost — fair and square — and they will never return those monies to plaintiffs. Had plaintiffs themselves won the game instead of losing, they would have owed not a single penny of their winnings to those they left to hold the bag (or to defendants).

(Coincidentally, another New York federal judge, Harold Baer Jr., also dismissed class-action claims Tuesday against three other Wall Street firms by investors alleging losses on the stock of Covad Communications Co. Those firms were Goldman Sachs Group Inc., the Credit Suisse First Boston unit of Credit Suisse Group, and Morgan Stanley. The Wall Street Journal reports that Judge Baer’s ruling was made on narrower procedural grounds, didn’t include such fiery criticism of the plaintiffs, and wasn’t considered as likely to affect other cases.)

What’s the impact of this case on other litigation, including the post-Enron ERISA litigation which is going on in the courts and which has been discussed here frequently?

The Wall Street Journal reports John Coffee, a Columbia University professor who specializes in securities law, as saying that the ruling was “a significant victory for Merrill Lynch” and that it might well set a precedent in other similar cases. However, he said it might not apply to other situations where the analysts were so close to the management of companies they followed that they may have known about adverse information that they did not include in their reports.

It seems that the case should have little impact on the post-Enron 401(k) litigation involving company stock since those cases will focus on whether the ERISA fiduciaries involved were fulfilling or breaching their fiduciary duties under ERISA by continuing to invest in company stock and/or offer the company stock as an investment for participants. Many times the complaints have alleged fiduciaries had inside information which they had a duty to disclose to other fiduciaries and to the participants of the plans involved. It is doubtful that “the burst of the bubble” theory, in those cases, would be deemed to relieve ERISA fiduciaries from liability for losses incurred by participants where the fiduciaries had inside information and/or failed to act with “procedural prudence.”

The front page of today’s edition of the Wall Street Journal provides this article: “‘Do Not Call’ Registry Is Pushing Telemarketers to Plan New Pitches.” The article discusses how millions of people have been signing up to stop receiving telemarketing calls at http://www.donotcall.gov. The article says that, in an attempt to overcome the prospect of losing a direct line to prospective customers, marketers are planning “to flood mailboxes and computers with an avalanche of solicitations” and will also make consumers who call companies on other business have to “navigate an earful of annoying sales pitches.” Sounds like we’re in for a never-ending battle that just can’t be won. . .

Robert Samuelson for the Washington Post provides some sobering thoughts on who will end up paying for all the baby boomer benefits: ” Burdening Our Children.”

Today’s Federal Register contains temporary and proposed regulations which provide rules governing transfers of certain compensatory stock options (nonstatutory stock options). In addition, there are final regulations amending the anti-abuse rule under Regulation Sec. 1.367(e)-2(d) (pertaining to outbound liquidations of domestic corporations) by narrowing the scope of the rule to apply only to outbound transfers to a foreign corporation in a complete liquidation of a domestic corporation in which a principal purpose of the liquidation is the avoidance of U.S. tax. The regulations also clarify the application of the anti-abuse rule.

What’s the PBGC doing these days and how is this agency handling all of the retirees which are receiving pensions under the purview of the agency due to so many bankrupt pension plans? Read this very interesting article from the WashingtonPost by Kirstin Downey: “Federal Pension Provider Overwhelmed.” The article reports the PBGC as saying that it takes an average of three years to receive a final determination of benefits (an improvement over a 2000 report which said it took from 6 to 20 years to receive a final determination of benefits.) The delay is due, apparently, to corporate bankruptcy proceedings which can drag out for years and figuring out how much the agency can collect as a creditor of the failed enterprise. In addition, the article quotes Mary Ellen Signorile, an AARP lawyer specializing in employee benefits, as saying that the agency sometimes confronts a “paperwork nightmare” when it takes over a pension plan so that the agency has to reconstruct participant records.

France is just waking up to the idea of providing tax breaks for private pensions as reported by Bloomberg.com: “France May Pass Law Granting Tax Breaks for Pensions.” The article discusses how this is all part of a solution to “prevent the state pension system from buckling under the burden of an aging population and shrinking workforce” and to avoid more of this as discussed in a previous post here.

The Society of Human Resource Management has this helpful article: Departure Plans: Educating employees about retirement planning is an area where you need high touch more than high tech.” The article states that helping employees plan for retirement will increasingly become “a hot topic” for employers because of the mass of baby boomers retiring in the next 10 to 20 years. The article remarks that health coverage is the most “frightening aspect” of those considering retirement now.