Author: jfortenberry@fortenberrylaw.com

As an answer to the U.K. pension crises, Britains were urged to go forth and multiply according to this report by the U.K. Guardian: “Pensions crisis? Just have babies.” Also, the BBC News reports: “Tories fear ‘birth dearth.'” According to the articles, shadow work and pensions secretary David Willetts gave a speech on Tuesday to launch a pamphlet for the Centre for European Reform called “Old Europe? Demographic Change and Pensions Reform.” He argued that the European Union would see in the next half-century an extra 40 million people aged over 60, along with a reduction of 40 million in those aged 15-60. Quote of Note: “Europe faces a birth dearth. Nobody wants to force women to have more children than they wish. . . But we have created an environment in which people are having fewer children than they aspire to.”

The Wall Street Journal is reporting today that the “Financial Accounting Standards Board has voted today to review the rules on how companies measure benefit obligations in cash-balance pension plans” in this article: “FASB to Review Regulations On Cash-Balance Pensions.” (Subscription required.) According to the article, this cash balance plan review by FASB is separate from a wider-ranging pension initiative currently under way by the board to increase the amount of information companies report about their traditional pension plans. The board earlier this month issued a set of draft rules for increasing disclosure, and has said it wants to put them into place by the end of the year.

Today’s Journal also has a great article: “Choosing a College-Savings Plan.” Unfortunately if you want a copy of the nifty chart featuring the different kinds of college savings plans (that comes with the article) you will have to buy a hard copy of today’s issue, i.e. the online version does not have the chart.

“State treasurers and pension fund leaders urged the New York Stock Exchange to make sweeping changes in governance Wednesday following a pay scandal that forced the resignation of chairman Dick Grasso last week”: The Seattle Post-Intelligencer is reporting in this article entitled “Pension funds want big changes at NYSE.” In a related article, Newsday.com reports: “Pension Fund Managers Urge NYSE Reforms.”

More later . . .

I have added the following to the Cash Balance Plan Litigation Links over on the right:

Buck Consultants: Court Rulings Question the Legality of Cash Balance and Pension Equity Plans

Watson Wyatt: Court Rules That Cash Balance and PEP Plans Are Age Discriminatory

No posts here last Friday due to Isabel and a power outage . . .

The Wall Street Journal reports on the growing power of public pension funds: “Pension Funds’ Growing Power Is Evident in Grasso Departure.”

“Pa. Court Abolishes Common-Law Marriage“: Law.com discusses this case which was reported on here at Benefitsblog in this post and at How Appealing in this post. Quote of Note:

“It is the view of many public interest law centers that common-law marriage is a long-standing practice in Pennsylvania, and the concern with elimination is the potential impact on the ability of poor individuals to obtain certain types of services and benefits based on their marriages,” said Joseph Sullivan, director of the pro bono program at Schnader Harrison Segal & Lewis and co-chair of the Philadelphia Bar Association’s delivery of legal services committee. “Many of us are also concerned that certain individuals married under common law will not become aware of the change in the law and suffer as a result.”

Slate had this interesting article late last week: “Take Your Money and Leave: The growing war between public pension funds and private equity firms.” (Thanks to a reader for alerting me.)

“Retirement Plan Loans“: The Motley Fool discusses the pitfalls of taking out a retirement plan loan.

“Health care bill poses legal thicket“: The Sacramento Bee reports on the ERISA implications of the new California health care bill and how the controversy is expected to reach the U.S. Supreme Court. The article also reports:

Gov. Davis has not decided whether he will sign the bill, said his health care adviser, Daniel Zingale. Davis first needs to determine just how much SB 2 will cost companies and how many uninsured Californians will get coverage, Zingale said.

BenefitsNext has this as well: “Bill Requiring Health-Care Insurance Before CA’s Davis.”

Benefitslink.com has posted a Press Release today entitled “Labor Department Announces Proposed Effective Date of COBRA Regulations Will Be Delayed” which states:

In response to questions about complying with the department’s proposed COBRA notice rules, Assistant Secretary of EBSA Ann L. Combs said, “The department intends to give group health plans six months after adoption of final rules to implement administrative changes required by the new rules. Allowing sufficient time for orderly and efficient implementation of the new requirements will help ensure compliance,” added Combs. The final rules are expected to be issued early next year, according to Combs. “In the interim, plan administrators may use the model notices contained in the proposed regulation to satisfy their COBRA notice obligations, although they are not required to do so,” said Combs.

The proposed COBRA regulations which were issued May 28, 2003, were supposed to take effect January 1, 2004, and the DOL had also announced in the regulations that any old COBRA notices which were modeled after the one issued in ERISA Technical Release 86-2 (June 26, 1986) would no longer satisfy good-faith compliance requirements beginning May 28, 2003. Presumably using the model notice provided by the DOL in the proposed regulations was to constitute good-faith compliance. However, this statement by Combs indicates that EBSA has decided that there should be a later effective date and has backed off from requiring employers to immediately begin using the new model notice as provided in the proposed regulations. As many of you may recall, many of the comments received by the DOL regarding the proposed COBRA regulations requested a more reasonable effective date (as discussed in this post).

A couple of the significant changes to be brought about by the proposed regulations would be the additional notice requirements for plan administrators:

• The proposed regulations would require a notice be given to employees and qualified beneficiaries, who notify the plan administrator of a “qualifying event” but who are not otherwise entitled to COBRA coverage, of the reason such coverage is unavailable. The plan administrator would have to provide this information within 14 days of receiving notice of the “qualifying event.”
• The proposed regulations would also require that a qualified beneficiary be sent notice of termination of COBRA coverage when that termination occurs before the end of the maximum period of COBRA coverage.

RothCPA.com discusses an interesting 8th Circuit Court of Appeals case which allowed an employer to deduct certain expenses associated with employee fishing outings. According to the case, in order to deduct these expenses, the company must show:

• it had ‘more than a general expectation of deriving some income or other specific trade or business benefit’ from the fishing trips;
• that active business discussions, meetings, negotiations or other business transactions were conducted on the fishing trips;
• that the ‘principal character or aspect’ of the fishing trips was the active conduct of business, although it is not necessary that more time was devoted to business than to entertainment; and
• the expenditures were allocable to the employees’ conduct of business and the other people on the fishing trip with which business was conducted.

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Today, the Senate Finance Committee unanimously passed the National Employee Savings and Trust Equity Guarantee (“NESTEG”) Act introduced by Senator Charles Grassley of Iowa. You can access the Press Release from the U.S. Senate Committee herewhich states:

The committee pasesd Grassley’s legislation, the National Employee Savings and Trust Equity Guarantee (NESTEG) Act, which tightens protections for retirement plan participants in the future in light of the collapse of the Enron Corp., WorldCom, Global Crossing and other similarly situated companies. The committee passed the bill last year, but the then-Democratic Senate leadership never allowed the full Senate to vote on the legislation. . . The NESTEG Act includes new diversification rights for company stock in plans; new disclosure requirements for transaction suspension periods, or black-outs; and new disclosure through periodic benefit statement and retirement savings information. . . .Grassley’s legislation also includes a series of reforms to rein in executives’ ability to defer payment of tax on their compensation. . . [and] includes his proposal to replace the 30-year Treasury bond rate formerly used in calculating pension plan contributions.

You can read the Description of the Senate Finance Committee Chairman’s Mark of the “National Employee Savings and Trust Equity Guarantee Act” here and the Blue Book here.

Also, this from the House Education and the Workforce Committee: “Boehner Introduces Bill to Address 30-Year Treasury Interest Rate, Enhance Retirement Security for Workers in Defined Benefit Pension Plans.” Ways & Means Committee Chairman Bill Thomas (R-CA), Education & the Workforce Committee ranking Democrat George Miller (D-CA), Ways & Means Committee ranking Democrat Charlie Rangel (D-NY), Employer-Employee Relations Subcommittee Chairman Sam Johnson (R-TX), and Rep. Rob Portman (R-OH) are original cosponsors of the bill.

More on the bills from these articles:

• Reuters: “U.S. Senate panel backs temporary pension relief”
• The New York Times: “House, Senate Work on Pension Plan Relief”
• FT.com: “Senators try to square pensions circle”

The Securities Industry Association issued this statement today opposing certain provisions of NESTEG.

CCH also reports: “Grassley Unveils Pension Reform Mark.”

Mike O’Sullivan at Corp Law Blog has a great post today discussing the details of Microsoft’s plan (announced some time ago and reported on here) that would permit its employees to sell their underwater stock options to JP Morgan.

The following recent posts at Corp Law Blog on these unrelated topics may also be of interest to readers:

• Searching for SOX Sources
• PCAOB Considers Banning Auditors from Tax Shelter Work
• Attorney Conduct Rules: Preemption Isn’t Meant to Be Easy

At 9:16 AM today, the Commonwealth Court of Pennsylvania issued a decision, in a workers compensation case, purporting to prospectively abolish common law marriage but upholding the finding of marriage in the case before it. The case is PNC Banc Corporation v. Workers Compensation Appeal Board. Undoubtedly, the decision will have an impact in the benefits arena in Pennsylvania for those plans which depend on state law to determine whether or not an employee is “married.”

At 9:16 AM today, the Commonwealth Court of Pennsylvania issued a decision, in a workers compensation case, purporting to prospectively abolish common law marriage but upholding the finding of marriage in the case before it. The case is PNC Banc Corporation v. Workers Compensation Appeal Board. Undoubtedly, the decision will have an impact in the benefits arena in Pennsylvania for those plans which depend on state law to determine whether or not an employee is “married.”