Author: jfortenberry@fortenberrylaw.com

The Biddle Law Library at the University of Pennsylvania Law School has a very nice page on their website devoted to blogs which you can access here. Here’s what they have to say about blogs:

A Blog is an online journal or chat-log that provides web users with information that is typically updated daily. A blog’s subject can range from the day to day happenings of individuals to news sources to the most recent events in the world. Writers of blogs are called bloggers and the writing act itself is called blogging.

The Internet is home to large numbers of blogs. . . Blawgs are web logs (blogs) that specifically pertain to the legal field. The Blawgs below generally tend to provide legal news and items of interest to scholars.

Thanks to the University of Pennsylvania Law Library for listing Benefitsblog in its Electronic Resources section entitled “Law on the Web.”

Thanks to Matt Hutcheson and Rick Meigs for inviting me to be a guest on the Retirement Hour last night! I enjoyed it very much. They have a great show, by the way, and you can listen in here on the East Coast at 7:00 p.m. every Thursday by accessing a link here. I will add a permanent link for the Retirement Hour over in the right-hand column in the near future.

(Access a previous post on the Retirement Hour here.)

UPDATE: Thanks to Carolyn Elefant at MyShingle.com for her kind comments here.

In a previous post here, I discussed how, in FASB’s meeting on Wednesday, February 11, 2004, it was decided that “companies should book the amount of federal subsidy they expect to receive under the Medicare Act as a reduction of future benefit costs — instead of as a stream of income from continuing operations.” A friend who understands more than I do all of what is really going on in the accounting world with all of these recent developments has written:

Minor observation on the FASB meeting on Wednesday: I’m not sure that it yet has any practical effect. In January FASB had decided (FAS 106-1) that employers could elect either immediate implementation of accounting for the Medicare Part D special subsidy or else await the final conclusions of FASB’s project to determine the correct accounting for that element. Any employer that elected immediate implementation must of course know that when FASB concludes its current project, then reversal or adjustment of the earlier accounting might be required; but I’m not sure FASB intends that an employer who moved with early adoption must change anything based on interim decisions within that FASB project. Thus, if an employer elected early adoption, then even if the employer and its accountant felt (as some may have) that the subsidy was outside the scope of SFAS 106, the most that this first step in FASB’s follow-through project would do would be to put the employer on early alert of a change that will be necessary upon completion of the FASB project, which might not occur for another year or so.

Also, this from AccountingWeb.com: “FASB Sets New Rules for Cash-Balance Benefits.” As stated in the article, last week FASB also adopted a definition for cash-benefit pension plans:

A cash-balance pension plan is a defined-benefit pension plan (as defined in the Glossary of Statement 87) that defines the promised employee benefit by reference to a notional account balance. An employees’ notional account balance is increased with periodic notional principal credits and notional fixed or variable interest or investment credits, and may be increased for other notional ad hoc credits. Upon separation of employment, for any reason, by a fully vested employee, the employee is entitled to the notional account balance as either a lump sum or an actuarially equivalent annuity either immediately or at a future date. Subject to the terms of the pan or regulatory requirements, an employee may be entitled to a settlement amount greater than the notional account balance due to the crediting of future interest (or investment) credits that are not conditioned upon future service.

FASB is formally reviewing rules governing the way companies measure cash-balance benefits.

Also, businesses that follow international accounting standards will have to start treating stock options as an expense, under a new rule issued today by the International Accounting Standards Board. You can access the press release issued by the IASB here entitled “IASB Issues Standard on Share-based Payment.” Articles on the development:

• SFGate.com: “Accounting body requires firms to treat stock options as an expense.”
• Mercury News: “Global Rules Set for Stock Options.”

(More on the stock option expensing debate here.)

Finally, Tech Central Station has this op-ed: “Green Eyeshade Killers.” James Glassman writes:

Candidates are obsessed with “outsourcing,” the alleged loss of tech jobs overseas. . . There’s a far, far more dangerous threat to our global preeminence in technology. It involves an accounting change. Don’t touch that dial! Accounting is boring, but this is important. Your job may depend on it.”

There are two press releases of great interest today:

• One from the Department of Labor announcing “Guidance on Fiduciary Duties in Response to Mutual Fund Abuses.” An important part of the guidance is as follows:
  

  In considering appropriate courses of action, plan sponsors and fiduciaries have raised questions as to the steps that can be taken at the plan level to address identified market-timing problems. In particular, questions have been raised as to whether a plan’s offering of mutual fund or similar investments that impose reasonable redemption fees on sales of their shares would, in and of itself, affect the availability of relief under section 404(c) of ERISA./1/ Similarly, questions have been raised as to whether reasonable plan or investment fund limits on the number of times a participant can move in and out of a particular investment within a particular period would, in and of itself, affect the availability of relief under section 404(c).

  Without expressing a view as to any particular plan or particular investment options, we believe that these two examples represent approaches to limiting market-timing that do not, in and of themselves, run afoul of the “volatility” and other requirements set forth in the Department’s regulation under section 404(c), provided that any such restrictions are allowed under the terms of the plan and clearly disclosed to the plan’s participants and beneficiaries. The imposition of trading restrictions that are not contemplated under the terms of the plan raises issues concerning the application of section 404(c), as well as issues as to whether such restrictions constitute the imposition of a “blackout period” requiring advance notice to affected participants and beneficiaries.

• Another from the Foundation for Fiduciary Studies releasing a press guide to the SEC Proposed Repeal of 12b-1 Fees. The press release addresses the SEC’s proposal to repeal 12b-1 fees. (SEC Release 2004-16.)

There are some good ideas in this article for 401(k) plan design: “The (K)oncept Plan – 2004 Model.” (Article by Steve Lansing via the 401khelpcenter.com.) Quote of Note:

Employers should see their role as being a partner with the employees to help them achieve financial security in retirement. . . .There are many heuristic tools (short cuts) that can be employed to finesse participants into actions they acknowledge are desirable but seem unwilling to take. Accepting this premise is to understand that most people are not risk adverse investors (rational economic agents) but are loss adverse savers. Indeed, a recent EBRI study labels certain people as “strugglers, impulsives and deniers” when it comes to planning their financial future.”

Some additional food for thought here: “Chill descends as boomers rethink retirement plans.”

Finally, from Jagadeesh Gokhale at the Cato Institute: “The Future of Retirement in the United States.” The article offers a unique perspective on 401(k)’s:

A recent study that I co-authored analyzes the potential lifetime gains from participating in 401(k) plans and Roth IRAs. These plans are almost universally recommended for households as a way of saving on their lifetime taxes. However, the study’s surprising result is that low-earners who make substantial contributions to their 401(k) accounts and receive moderate to high rates of return on those contributions, could end up paying more in taxes on a lifetime basis. . . .

How many U.S. households actually face this jeopardy? I am currently co-writing a study on this issue using survey data from the Board of Governors of the Federal Reserve. A preliminary result from this study suggests that roughly 10 percent of participating households may suffer an increase in lifetime taxes (and a reduction in lifetime consumption) as a result of continued participation at their current levels in 401(k) plans.

Thanks to the 10b-5 Daily.com for the pointer to this interesting article: “Parmalat document order a waste of time – judge.” The law firm which represents a pension fund suing Parmalat executives and their advisers, requested a special order forbidding Parmalat from destroying documents. U.S. District Judge Lewis Kaplan said any document destruction was a criminal offense and an additional order from him would be redundant. “If anyone wants to file papers on this, God bless them,” he said. “But don’t waste my time.”

A word to the wise: “Recent Cases Confirm That Bad Tax Planning = Bad Tax Results.”

Quote of Note from the article:

In late 2003, the Tax Court issued four opinions, in sequence, all addressing the same employee fringe benefit issues with respect to four family-owned farm corporations. These four farm corporations all had essentially the same fact pattern because they were all designed by an attorney who also served as their tax preparer, as well as the taxpayers’ counsel in the Tax Court litigation. . . [t]he taxpayer losses can be explained by the poor design of these farm corporations. This means that the outcome of these cases should present little problem to the traditionally operated family farm corporation. Nevertheless, some important planning points can be gleaned from these cases.”

The four Tax Court cases are as follows: Weeldreyer v. Comm., TC Memo 2003-324; Schmidt v. Comm., TC Memo 2003-325; Tschetter v. Comm., TC Memo 2003-326; and Waterfall Farms, Inc. v. Comm. , TC Memo 2003-327.

Thanks to a reader who left a comment yesterday in this previous post and alerted me to this development: “Federal court dissolves ‘any will provider’ injunction.” In the previous post, I noted how an Arkansas any willing provider law (“AWP law”) had been barred from being enforced after a federal appeals court in 1998 issued an injunction, concluding that the law ran contrary to ERISA. However, as many of you know, the U.S. Supreme Court case of Kentucky Association of Health Plans v. Miller, decided back in April of last year, held that Kentucky’s AWP law was not preempted by ERISA (discussed in previous posts which you can access here.) After the Miller case, Arkansas Blue Cross and Blue Shield filed suit in federal court back in August asking for “a judicial determination” on how the Miller case impacted the Arkansas AWP law. Certain providers had been writing Blue Cross, demanding access to the plans’ network and citing the Supreme Court case as authority for the proposition that the Arkansas law should be enforced.

According to this recent article, the injunction has now been lifted by a federal district court in Arkansas and “Blue Cross and Blue Shield of Arkansas may soon have to open up its massive statewide managed care network to “any willing provider,” or any provider willing to abide by its network rules.”