Category: Benefits

Reuters has this report–“House-Senate Panel OKs Pension Relief“:

U.S. House and Senate negotiators agreed on a massive pension relief bill for U.S. companies on Thursday, but a lack of Democratic support made final passage uncertain. The lawmakers, reconciling rival House and Senate bills, agreed to provide about $80 billion in relief for U.S. companies struggling to fund traditional pensions and added $1.6 billion in extra aid for pension plans of major airlines and steel companies.

ERIC issued this statement in response–“ERIC Warns Government Over Roadblocks on Pension Rate Relief Crippling Pension System“:

Conferees meeting today on H.R.3108 accepted a final position that divided conferees along party lines, indicating that it will be very difficult to pass the agreement and forward it to the President.

You can access the Outline of the H.R. 3108 Conference Report here via the American Benefits Council website.

Finally, the Committee on Education and the Workforce has issued this press release–“Short-Term Pension Bill Approved by Conferees; Proposal Ready for House Floor Action“–stating as follows:

House and Senate conferees today adopted a responsible, stopgap pension proposal that employers and workers say Congress desperately needs to pass and send to President Bush before the end of the week. The vote came at the final meeting of a House-Senate conference, chaired by U.S. Rep. John Boehner (R-OH), which has been racing the clock to send a bill to the President before a crucial deadline for employers and employees is reached later this month. Employers must make their quarterly contributions by April 15th. The House is scheduled to adjourn at the end of this week, meaning action on the pension relief bill must be completed this week. “This urgently needed pension relief legislation is now on its way to the House and Senate floor, and that’s encouraging news for American workers,” Boehner said. “The proposal adopted by conferees today is a fair and responsible proposal that meets the goal that conferees agreed upon, which was to target multiemployer relief only to those plans most in need. Most importantly, I believe this compromise is a proposal the President will sign.”

Thanks to RIA for a pointer to this case–Donahue’s Accounting and Tax Service, S.C. v. Ryno, Donahue’s Accounting and Tax Service, S.C. v. Ryno, 674 NW2d 681 (Wisc. App., 2003). Without going into all of the facts of the case, suffice it to say that the court had some humorous remarks to make about the Internal Revenue Code as follows:

Whether or not Donahue breached a duty to Ryno to file a claim for “Innocent Spouse” status prior to filing her 1999 tax returns requires reading, comprehending and applying the Internal Revenue Code (IRC). It is obvious to this court that the IRC is incomprehensible without the assistance of a qualified expert in tax law.

This conclusion is best supported by a short and snappy comment from Justice Jackson, once Chief Counsel for the IRS, in a dissenting opinion in Arrowsmith v. Commissioner of Internal Revenue, 344 U.S. 6, 12 (1952), where he referred to federal taxation as “a field beset with invisible boomerangs.“

One of America’s most respected jurists, Judge Learned Hand, offers a more thoughtful observation on the law of taxation:

In my own case the words of such an act as the Income Tax … merely dance before my eyes in a meaningless procession; cross-reference to cross-reference, exception upon exception-couched in abstract terms that offer no handle to seize hold of-leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot help recalling a saying of William James about certain passages of Hegal: that they were no doubt written with a passion of rationality; but that one cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness.

Ruth Realty Co. v. Horn, 353 P.2d 524, 526 n.2 (Or. 1960) (citing 57 Yale L.J. 167, 169 (1947)), overruled on other grounds by Parr v. DOR, 553 P.2d 1051 (Or. 1976).

Here it is tax season and the awesome Joe Kristan is still going full steam over at RothCPA.com with a friendly reminder here about complying with the tax laws. And thanks for this fascinating quotation (here) from IRS Commissioner Mark Everson testifying before the House Ways and Means Committee yesterday:

The length of time it takes us to complete the audit of a large, complex corporation is five years from the date the return is filed, which in most cases is already eight and one-half months after year end. And these figures don’t include the appeals process, which runs another two years before the matter is settled or goes to court. That means that half of our current inventory of large cases is from the mid 1990s or the early 1990s. In today’s rapidly changing world, we might as well be looking at transactions from the Civil War.

From the WashingtonPost.com: “Companies Ask Congress to End Impasse Over Pensions“:

Corporations that operate traditional pension plans pleaded with Congress yesterday to resolve the dispute that has prevented passage of legislation that would reduce the amount of money most companies would have to pay into their pension funds. . . Staff members from both parties have said the conferees are close to agreeing on the overall funding formula and on the special relief, but are hung up over how much to assist troubled multi-employer pensions, which are common in the trucking and construction industries.

From the Mercury News, “OK, change the world, but protect my 401(k)“:

The workers of the world have awakened to find they own big portions of corporate America through stock in their pension funds, and now they’re rising in righteous anger to set things straight. . .This is proxy season, when shareholders vote on directors, executive pay and other corporate matters. The number of initiatives from dissident stock owners figures to hit a record, and union and government pension funds are leading the parade.

From Kilpatrick Stockton LLP, “HSAs and the HIPAA Privacy Rules: The Clash of the Acronyms“:

The focus of this legal alert will be on an issue that has received little discussion—the impact of the HIPAA privacy rules on the operation and design of HSAs. . . If an HSA satisfies the definition of a “health plan” under the HIPAA privacy rules, then the HSA is considered a “covered entity” and would need to comply with the applicable HIPAA privacy rules.

From the Rocky Mountain News, “Mutual funds wary of SEC plan: Firms say disclosing policies could help traders fool system“:

The SEC is considering a rule that would require mutual funds to say in prospectuses how they value holdings and what they do to detect market timing, rapid trades that exploit gaps in values of underlying investments. . . In comment letters to the SEC about the rule proposal, mutual fund companies said disclosure of their fair-value policies would alert market-timers to how best to make their rapid trades.

From SFGate.com, “Employers audit workers’ health claims“:

Looking to bring down soaring health-care costs anywhere they can, more employers are scouring their health plans for fraud, abuse and simple mistakes by employees or administrators. Audit programs often find that between 10 percent and 15 percent of employees had an illegible dependent on a company health plan.

From Business Insurance.com, “IRS, Treasury resolve key HSA issues“:

Joint Internal Revenue Service and Treasury Department guidance issued Tuesday resolves several key questions that employers and others have raised about health savings accounts. . . Treasury Benefits Tax Counsel William Sweetnam said additional guidance will be provided in a few months dealing with the interaction of HSAs with flexible spending accounts and health reimbursement accounts.

Get well wishes and prayers for lawyer/blogger Stuart Buck who had a stroke over the weekend and is now recuperating and blogging from his hospital bed.

From the Dow Jones Newswire via Morningstar.com: “IRS Increasing Audits Of Largest U.S. Pension Plans“:

The agency [IRS] is stepping up a new program of intensive audits it will conduct on 60 or so of the largest pensions each year, from traditional retirement plans to 401(k)s. Designed to probe whether companies and endowments are administering these tax-exempt vehicles properly, the scrutiny is directed at funding levels, vesting, benefit payments and other aspects of plans. Big plans are the focus. The Internal Revenue Service is looking at pensions with 2,500 or more participants, as well as employers with multiple plans that together cover 2,500 or more.

From the Washington Post, “House Opposition To Expensing of Options Increases: Bill Would Block Accounting Oversight Board’s New Rule“:

In recent weeks, a House bill that would block a new rule by the Financial Accounting Standards Board to count options as an expense has picked up key support from the Republican and Democratic leadership. House Speaker J. Dennis Hastert (R-Ill.) and Minority Leader Nancy Pelosi (D-Calif.) have signed on as co-sponsors, according to aides and lobbyists. The FASB is expected to release a draft of the rule for comment tomorrow, giving companies a choice on how to value options.

From the Wall Street Journal (subscription required), “Justices to Hear A Pay Dispute Of Older Workers“:

The Supreme Court, taking up a police pay dispute in Jackson, Miss., will try to resolve whether a class of older workers can use a federal law barring workplace age discrimination to fight job policies favoring younger workers. . . The lawsuit [argues] the 1967 Age Discrimination in Employment Act allowed them to bring a “disparate impact” claim alleging the department’s pay policy discriminated against them as a class. . . The issue has vexed federal appeals courts, which have issued conflicting decisions. The Supreme Court tried to resolve the conflict two years ago, but dismissed the appeal before issuing an opinion.”

(Comment: The Supreme Court will also settle whether attorney contingency fees paid from legal settlements must be counted as taxable income. Roth CPA.com has the issue covered here.)

From blogger Robert Ambrogi, “West, Lexis CEOs square off on the future“:

At ABA TechShow, the keynote had Louis Andreozzi, president and chief executive officer of LexisNexis North American Legal Markets, and Mike Wilens, president of West, square off in a joint presentation in which they were slated to share their visions of the future role of legal technology. . . As to the future, the more compelling comments came from Wilens. He predicted that certain “disruptive technologies” will play ever more central roles in law practice over the next few years. He expressly mentioned blogs and instant messaging as two of the most important.

(Hmm, “disruptive technologies” . . . )

And, by the way, Canada joins the U.S. today in the corporate governance arena with its own version of Sarbanes-Oxley. I suppose Canadians will soon be singing their own rendition of this. (Thanks to Mike O’Sullivan at Corp Law Blog, words to the song can be found here.)

Even though the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (which includes new tax provisions allowing the establishment of Health Savings Accounts (“HSAs”) starting in 2004) was only signed into law on December 8, 2003, the Treasury and IRS have already so far issued a fairly good round of guidance pertaining to the new HSAs. As you may recall, the first guidance that was issued regarding HSAs was Notice 2004-2. As predicted, the Treasury and IRS have issued some additional guidance pertaining to HSAs today. The Treasury Department has issued its press release regarding the guidance here. You can read Secretary of Treasury John Snow’s prepared remarks regarding HSAs here in which he states:

An individual can only make a contribution to a HSA if the individual is covered by a High Deductible Health Plan and no other coverage. Generally a High Deductible Health Plan only pays for benefits after the deductible is met. Our guidance states that this deductible applies to prescription drug coverage as well as other types of health coverage. Therefore, a plan that provides first-dollar benefit coverage for prescription drugs by either a flat dollar amount or percentage co payment for all prescription drug expenses, even those underneath the deductible will not be considered a high deductible plan and a person covered by such a plan could not make a contribution to an HSA.

However, we understand that some have been selling such policies to individuals thinking that the individuals could make contributions to an HSA. We have provided transition relief so that those people who purchase a high deductible health plan with a separate lower deductible prescription drug policy will be able to contribute to contribute to an HSA in 2004 and 2005. We do not want to penalize those people who bought products thinking that they could contribute to an HSA.

The guidance issued by the Treasury and the IRS is as follows:

• Notice 2004-23: HSAs can only be established by eligible individuals, who must have coverage by a high deductible health plan (“HDHP”). Generally, an HDHP cannot provide benefits before the deductible is satisfied, but there is an exception for benefits for preventive care. The guidance provides a safe harbor list of benefits that can be provided by an HDHP, generally clarifying that traditional preventive care benefits – such as annual physicals, immunizations and screening services – are preventive care for purposes of HSAs, as well as routine prenatal and well-child care, tobacco cessation programs and obesity weight-loss programs. The guidance also clarifies that preventive care generally does not include treatment of existing conditions.
• Notice 2004-25: Prior guidance provided that HSAs may only reimburse medical expenses incurred after the HSA is established. However, many individuals eligible to establish HSAs have been unable to locate trustees or custodians will and able to open HSAs at this time. The guidance provides that for 2004, an HSA established by an eligible individual on or before April 15, 2005 may reimburse expenses incurred on or after the later of January 1, 2004 or the first day of the first month that the individual became an eligible individual.
• Revenue Ruling 2004-38: Prior guidance noted that an eligible individual must be covered by an HDHP and generally no other health plan that is not an HDHP. This guidance clarifies that individuals covered by a health plan that provides prescription drug benefits before the minimum annual deductible of an HDHP has been satisfied may not make contributions to an HSA.
  
• Revenue Procedure 2004-22: The guidance provides transition relief to those individuals covered by both an HDHP and by a separate health plan or rider that provides prescription drug benefits before the deductible of the HDHP is satisfied. Under the relief, such individuals continue to be eligible to contribute to HSAs before 2006.

For those with questions regarding HSAs, the IRS has set up an e-mail address – hsainfo@do.treas.gov – as well as a voice mailbox at 202-622-4HSA. You can also access information on their website regarding HSAs here.

(Access an earlier post regarding HSAs here.)

You will recall DOL proposed regulations issued earlier this month providing guidance and establishing a safe harbor pursuant to which a fiduciary of a pension plan subject to Title I of ERISA will be deemed to have satisfied his or her fiduciary responsibilities in connection with the automatic rollover provisions. You can access a previous post on the subject here.

Please note the following law firm publications providing analysis and discussion of the regulations as follows:

• Davis Wright Tremaine LLP: “Automatic Rollover Safe Harbor Guidance: DOL Rolls Out New Proposed Regulation.”
• Oppenheimer Wolff & Donnelly LLP: “Fiduciary Safe Harbor for Automatic Rollovers of Forced Distributions.”
• Seyfarth Shaw LLP: “Automatic Rollovers: DOL Proposes Safe Harbor.”

A good article from Cooley Godward LLP on a different subject–“Reduction or Cancellation of “Underwater” Note Results in Income to Employee.”

From the LA Times, “Boards Heeding Investor Activists“:

Inspired by their success at Walt Disney Co., activist shareholders have jolted corporate America with a flurry of challenges led by increasingly aggressive institutional investors. In the most recent uprising, a group of large public pension funds in effect declared war on Safeway Inc., announcing their goal of overhauling the board, getting rid of the chief executive and setting the company on a drastically new course.

From the Star Telegram.com, “Senior Notes“:

Tensions are rising among couples in which the husband retires and the wife continues to work. A Cornell University study of 534 retirement-age men and women found that working women whose husbands were retired or disabled were the least happy with their marriage. Working men whose wives stayed home were the most happy.

From the Miami Herald.com, “Health Savings Accounts Are Tax-Free Way to Save for Medical Expenses.”

From Bloomberg.com, “Most Financial Advisers Wrong on Retirement Targets“:

When you ask your financial adviser–“How much will I need to retire?”–the chances are you’ll get a wrong answer. The problem is that financial planning has become a moving target largely because funding for Social Security, Medicare and employee retirement and health benefits are in doubt.

From the Houston Chronicle.com, “30 years later, IRAs still crucial plank in retirement strategy“:

Happy 30th birthday to the Individual Retirement Account Created by Congress in 1974, the IRA has become a useful tool for workers to save for retirement, especially those who don’t have company-sponsored plans.

(Comment: The article mentions a helpful tool on Fidelity’s website which is a calculator to determine whether a traditional IRA or a Roth would be better. It is called the IRA Evaluator and you can access it here. )

A press release from Yahoo.com–“Recent Cash Balance Conversions Have Actually Increased Company Costs, Watson Wyatt Study Finds“:

Most companies that converted to cash balance and other hybrid pension plans in recent years saw total retirement plan costs increase – not decrease, as hybrid plan critics argue – according to a comprehensive new study by Watson Wyatt Worldwide. In addition, the vast majority of companies provided generous transition benefits to protect workers during conversions.

American Lawyer Media has started a great new website devoted to items of interest pertaining to solos and small firms. The site entitled “Small Firm Business” also features a listing of blawgs. Many thanks to American Lawyer Media for recognizing blawgs as an important resource and for listing Benefitsblog.