Senate Finance Committee Version of Stimulus Legislation Released

You can access the Senate Finance Committee’s version of the stimulus bill here. The text of the bill was released today.

Lilly Ledbetter Fair Pay Act of 2009 Passes: Benefits Impacted

The Lilly Ledbetter Fair Pay Act of 2009 has passed the House, and the President says he will sign it.

Here is language from the bill:

`(3)(A) For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits or other compensation is paid, resulting in whole or in part from such a decision or other practice.

This language applies in cases of discrimination in compensation because of race, color, religion, gender, national origin or age.

Scotusblog has a post about the legislation here. Excerpt:

The key provision says that “an unlawful employment practice occurs” not only when a compensation policy or practice is adopted, but also when a worker becomes subject to the policy, or when the policy is applied to any worker “each time wages, benefits, or other compensation is paid,” resulting from the discriminatory policy.

In referring to benefits, as well as wages, the new Act might be interpreted to mean that a workers’ entitlement to something other than wages or salary may be covered, so long as it is tied to the discriminatory pay scale. Thus, pension benefits linked to wage or salary levels perhaps also are covered.

The bill has a retroactive effective date of May 28, 2007.

Query as to whether benefits were always really protected under Title VII of the Civil Rights Act of 1964 and whether this new law will simply mean that the payment of a benefit can extend the time frame for filing a claim under the Act. Since pension plans and retiree medical plans many times pay benefits long after a person retires, does this language mean that claims could still be filed based upon the payment of these pension or retiree medical benefits? That is a scary thought for employers, and one that would likely contribute to the further demise of these plans.

UPDATE: The Heritage Foundation discusses the legislation here. Excerpt:

The bill would adopt [Supreme Court Justice] Ginsburg’s view, amending a variety of anti-discrimination laws to the effect that a violation occurs “each time wages, benefits, or other compensation is paid” that is affected by any discriminatory practice. In this way, the law would simply eliminate the limitations period as applied to many cases.

Under the Ledbetter Act, employees could sue at any time after alleged discrimination occurred, so long as they have received any compensation affected by it in the preceding 180 days. While this would certainly reverse Ledbetter, it goes much further by removing any time limitation on suing in pay-related cases, even limitations relating to the employee’s learning of the discrimination–an approach that is known in other contexts, such as fraud, as a “discovery rule.” This new rule is also broader in that it would apply to any (alleged) discrimination that has had an (alleged) effect on pay, such as an adverse promotion decision. In addition, retirees could bring suits alleging pay-related discrimination that occurred decades ago if they are presently receiving benefits, such as pensions or health care, arguably effected by the long-ago discrimination.

Additional query as to what this legislation will do to releases that employees are often asked to sign upon receiving severance pay.

UPDATE: The President has now signed the bill.

IRS Penalties Come Under Scrutiny

From the Wall Street Journal:

Federal officials are considering easing a 2004 law that requires the IRS to set mandatory heavy penalties on companies and individuals who purchase certain illegal tax shelters.

The law imposes penalties for making use of so-called listed tax shelters, or ones the Internal Revenue Service places on a list of the most-abusive transactions. Currently, there are 34 different types of tax shelters on the IRS list. . .

Robert Mathew, who owns a small Indiana asphalt-paving company. . . purchased a type of life-insurance policy known as a “springing cash value” plan as an alternative to a straightforward pension plan for his employees. Two years later, the IRS added this type of plan to its list of abusive tax shelters, and Mr. Mathew should have disclosed his purchase to the IRS. But he says the financial adviser who sold him the insurance plan at no point told him he needed to make such a disclosure.

Now, Mr. Mathew says, the IRS is demanding taxes and interest totaling $60,000. On top of that, the IRS has set penalties in the amount of $600,000, but has so far granted him several extensions, he says.

“I trusted people, my adviser, to take care of this. Then the IRS came and said, ‘Here’s $600,000 you’re going to have to pay.’ If I had to pay these fees, I would actually have to go bankrupt,” Mr. Mathew said. . .

You can view the IRS’s list of Abusive Tax Shelters and Transactions here. A number of them involve benefits-related transactions. You can access a benefits-related list here.

See also: Abusive Transactions That Affect Availability of Programs under EPCRS.

(These links are helpful for practitioners whose clients unfortunately meander into these types of transactions.)

Notes from Senate Banking Committee Hearing on Madoff

From Bruce Carton at Compliance Week: Notes from Today’s Senate Banking Committee Madoff Hearing.

Interesting excerpts:

  • Thomsen–Ponzis hard to detect because nobody complains until money stops flowing out. Hard to detect before it stops.
  • Harbeck–Experts say Lehman Bros. and Madoff are cases that should occur every 5,000 years and they occurred in a one year period.
  • Thomsen–we have huge amounts of information. Need to find best ways to mine it.
  • Thomsen says SEC gets 100,000 unsolicited tips/complaints per year.
  • Prof. Coffee say no mutual fund has ever failed because of a Ponzi scheme because an independent custodian holds funds.

  • A link to Hearing testimony is here.

    Supreme Court Issues Opinion in Dupont Case

    The Supreme Court released its opinion today in the case of Kennedy v. Plan Administrators for Dupont Savings (07-636). Justice Souter wrote the opinion for a unanimous Court. The opinion is available here.

    The Hoboken Revolt

    The Tax Foundation writes about the City of Hoboken’s 47% property tax hike here. Hoboken homeowners are outraged and have organized a taxpayer advocacy group calling it the Hoboken Revolt.

    Ways and Means Passes H.R. 598

    Last Thursday, the House Committee on Ways and Means voted to support the “economic recovery” package contained in H.R. 598. The legislation passed “by a party-line vote of 24 to 13.” The legislation will now be combined with other components of the recovery package from other House Committees into H.R. 1, the American Recovery and Reinvestment Act for consideration by the full House of Representatives this coming week.

    The Tax Prof Blog has all the relevant links here, including:

    Text of the Bill
    Joint Committee on Taxation Description of Bill
    Joint Committee on Taxation description of Chairman’s Amendment

    White House Memo Regarding Regulations

    The White House has asked in a Memo that any new or pending regulation “should not be sent to the Federal Register for publication unless and until it has been reviewed and approved by a department or agency head appointed or designated by the President. . .” The White House has also indicated that all “proposed or final regulations that have not been published in the Federal Register” be withdrawn until review. Finally, for the regulations that have been published, but that have not taken effect (which would include these regulations), the White House is urging extension of the effective date for another 60 days.

    Senate Passes Lilly Ledbetter Fair Pay Act of 2009

    Yesterday, the Senate passed the Lilly Ledbetter Fair Pay Act of 2009. It is a bill to “amend Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, and to modify the operation of the Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973, to clarify that a discriminatory compensation decision or other practice that is unlawful under such Acts occurs each time compensation is paid pursuant to the discriminatory compensation decision or other practice, and for other purposes.”

    From this article here:

    The Lilly Ledbetter Fair Pay Act reverses a 2007 Supreme Court ruling that had narrowed to 180 days the time period during which an employee can file a claim of wage discrimination after the original pay-setting decision.

    Under the proposed legislation, employees would have 180 days from receiving a discriminatory paycheck to file their claim. . .

    The House of Representatives approved the bill on January 9 during the first week of the new session of Congress, along with other labor rights legislation. The bill must return to the House for a second approval because the House had combined the bill with a measure the Senate did not consider.

    On another front, what is the status of the Employee Free Choice Act? Some speculation going on here.

    DOL's Final Investment Advice Regulations in Today's Federal Register

    The DOL has issued their final regulations relating to the provision of investment advice by a fiduciary adviser to participants and beneficiaries in participant-directed individual account plans, such as 401(k) plans, and beneficiaries of individual retirement accounts (and certain similar plans). Read about the controversy surrounding these regulations here.