Benefits Counsel

I know of several who have recently lost jobs in the computer industry due to their company’s outsourcing those tasks to India. This article in the Washington Times describes this increase in the practice of employing foreign labor in detail. The article describes the impact this is having on U.S. employee careers and occupations but also on U.S. wages. The article mentions that on April 26th, the New York Times reported that real earnings of those in the top 10 percent fell 1.4 percent over the last year. More to come on this practice and its effect in the pension arena. . .

An article in the Las Vegas Sun indicates Senators John Ensign (R-Nev.) and Barbara Boxer (D-Calif.) have announced plans to introduce the 2003 Broad-Based Stock Option Plan Transparency Act which would take aim at FASB‘s recent decision to expense stock options. The bill will call for better disclosure of company employee stock option plans on corporate financial statements and would prohibit SEC recognition of any new accounting standard on stock options. Here is a critical response by Bill Mann of the Motley Fool to the upcoming proposed legislation. Another article by Bill Fleckenstein at MSN.com recommends expensing at the time the options are exercised.

An article at Plansponsor.com discusses a 401(k) plan’s ability to limit frequent trading practices of participants who are engaging in “market timing” techniques. Certain participants under the Prudential Employee Savings Plan had developed a strategy of moving large sums of money in and out of investment funds several times a month. When the Administrative Committee took action to restrict such transfers, the participants sued. Both the Plan and the Summary Plan Description contained language stating that “in certain situations there may be limitations regarding transfers.” Also, the Administrative Committee was given discretion to decline to implement investment instructions “where appropriate.” The case provides some helpful examples of plan language which could be used to provide such restrictions.

The U.S. House of Representatives is scheduled to debate and vote on family time legislation?H.R. 1119, the Family Time Flexibility Act, introduced by Rep. Biggert (R-Ill.). The vote is scheduled to take place the 1st or 2nd week of May.

A report by the S&P 500 indicates 2002 pension figures show that continuing bear markets have resulted in pension shortfalls for 308 companies. Only 35 reported surpluses, among which are AT&T Corp., General Mills, Prudential Financial, and Verizon Communications. The 2002 S&P’s Core Earnings bore the impact of the bear market with pension adjustments taking $8/share of earnings.

In connection with a hearing scheduled by the House Committee on Ways and Means for April 30, the Joint Committee on Taxation has issued a report entitled Present Law and Background Relating to the Funding Rules for Employer-Sponsored Defined Benefits Plans and the Financial Position of the Pension Benefit Guaranty Corporation (“PBGC”). The Committee will be addressing the underfunding issues related to defined benefit plans which is currently causing such great concern for so many companies.

Providian Financial announced that it has settled a class action lawsuit which contends that the Plan should not have purchased or held company stock during 2001 and challenges the accuracy and completeness of information provided to Plan participants about company stock. Providian has consistently denied the allegations as factually untrue and legally without merit. The settlement, which is subject to court approval, provides for a payment of $8.6 million, including attorney fees and will be funded by Providian’s insurance carrier. Lynn Sarko of Keller Rohrback and Jane Stranch of Branstetter, Kilgore, Stranch & Jennings represented the plaintiffs.

An article by Plan Sponsor.com highlights how litigation in the pension plan arena will continue to be on the rise. A Dow Jones Report indicates the Center for Economic and Policy Research did a study, commissioned by the United Steelworkers of America, which criticizes pension fund managers for continuing to invest in equities during the late 1990’s. The study analyzes Federal Reserve Board data and estimates that public and private pension lost more than $1 trillion since 1997. The study accuses pension fund managers of failing to monitor investments closely enough.

The Ways & Means Committee of the House of Representative will be meeting today to address the pension funding issues which many companies are facing.

The Wall Street Journal reports in an article that, even though many qualified pension trusts are underfunded due to the weak stock market and low interest rates, a number of companies are funding their nonqualified pension trusts for executives.