Category: Benefits

Today’s Washington Post has this interesting article on blogs: “Add ‘Blog’ To the Campaign Lexicon.”

The Tax Guru-Ker$tetter Letter has this.

The following articles discuss reaction to the agreement made by Congressional conferees to adopt the Harkin’s Amendment relating to cash balance plans (discussed here and here):

• New York Times: “Employers Denounce Move on Pensions“
• Washington Post: “Pension Regulation Advances On Hill: Compromise Would Curb Conversions”
• LA Times: “Congress Derails New Rules on Pensions”
• Reuters via Forbes: ” US employers mad at blow to cash balance pension plan“

Also, from the Wall Street Journal:

• “Cash-Balance Plans Appear To Face a Regulatory Limbo” and
• “IBM Blasts Congress On Pension Inaction”

From Plan Sponsor: “Cash Balance Regs “On” Again – But…“

From the American Benefits Council: “Council Condemns Inclusion of Cash Balance Provision in Appropriations Bill“

From ERIC: “ERIC Statement on Passage of Harkin Cash Balance Amendment“

For those of you who have been following the General Dynamics case before the U.S. Supreme Court (oral arguments were heard Wednesday in the case which you can read about here), the following article highlights a great many of the issues which could arise should the Supreme Court rule that the ADEA allows reverse age-discrimination claims: “United Kingdom: Age Discrimination And Pensions.” Granted, the article deals with Europe, but many of the issues would apply in the U.S. if the employees (age 40-50 group) prevail in the General Dynamics case.

The Philadelphia Inquirer today has a good “how-to” article on calculating required minimum distributions for IRAs: “How to calculate your minimum IRA withdrawals.”

Also, another good article from the Philadelphia Inquirer today on the continuing mutual fund saga: “Fees may be next on fund investigators’ list.”

Thanks to Mike O’Sullivan at Corp Law Blog for informing us about a California Court of Appeals case which held that it is illegal for California employers to award a traditional profits-based bonus to non-exempt employees (see Ralphs Grocery Co. v. Superior Court (Swanson) (Cal. App., Oct. 23, 2003) due to certain California laws which prohibit employers from taking into account certain expenses of the company in determining those profits. You can access his post on the case here.

By the way, the result in this case reminds me of what is going on in the cash balance plan arena. By holding that the bonus plan in this case is unlawful, employers will be discouraged from offering such plans in the first place since requiring them to offer ones which do not take into account legitimate expenses seems unreasonable. It is the same in the cash balance plan arena. With the recent pronouncement by a federal district court that such plans violate ERISA and with the ongoing chaos brewing in Congress over the issue with little resolution in sight, employers will decide that the economically rational thing to do is to “cease and desist” with these plans since they are not required to offer them in the first place. Employees may then be left with their 401(k) plans where employees must bear the burden of providing much of their own retirement. Thus, the irony of it all is that what is termed a “great victory” for employees will in the end hurt employees.

(By the way, I have added a new category over on the right entitled “California and 9th Circuit Legal Developments” to keep track of all of the “fun” stuff going on in California and the 9th Circuit.)

Milliman USA has posted a very good “Client Action Bulletin” entitled “New disclosures for Pensions and Other Benefits.” The Bulletin highlights what was decided by the FASB Board day before yesterday concerning financial statement disclosures for sponsors of pensions and postretirement benefits. For employers with calendar fiscal years, most of the new requirements will apply to the upcoming December 31, 2003 year-end financial statements.

According to the Bulletin:

After reviewing comments from companies, financial statement preparers, and financial statement users, the Board has affirmed its intention to change the disclosure rules, with most of the changes set to take effect as early as the end of 2003.

The Bulletin notes that the decisions made by the FASB Board incorporate several key modifications to the proposal issued this past September, “notably the elimination of a requirement that sponsors disclose expected rates of return segregated by major asset classes.” The Bulletin states further that “the added disclosures could necessitate new calculations and may influence management decisions about pensions and other post-employment benefits.”

Other articles on the subject:

• The Wall Street Journal: “FASB Keeps Existing Format For Corporate Pension Data”
• Plan Sponsor: “FASB Retreats From Partial Pension Accounting Rule”

(An unofficial source tells me that the latter articles could be a bit misleading for plan sponsors since the articles do not appear to discuss the fact that many of the changes will apply to the upcoming December 31, 2003 year-end financial statements.)

The FASB website provides a great deal of information concerning the decisions made by the Board and you can access that information here.

Reuters is reporting on what transpired late yesterday as representatives from the House and the Senate hashed out how to go forward with the Sanders’ and the Harkin’s measures addressing cash balance plans. (Previous post on the issues here.) The article by Reuters–“U.S. lawmakers hit cash balance pension rules“–indicates the following:

Negotiators from both chambers had to reconcile the two approaches as part of the annual spending bill that funds the Treasury Department. They basically embraced the Senate provision and dropped the House language involving the court case.

The article stated further:

. . . lawmakers also said the Treasury must offer legislation within 180 days on how best to convert traditional pensions to the newer cash balance plans — giving the administration another chance to set out a regulatory framework for such changes that Congress might embrace.

You can read about the Senate provision here.

More on this later . . .

This article–“Court Looks at Age Discrimination Issue“–gives an inside look at what went on today in oral arguments before the U.S. Supreme Court in the case of General Dynamics Land Systems Inc. v. Cline. The article opens with this:

Supreme Court justices with an average age of nearly 70 wrangled Wednesday over whether workers in their 40s can sue employers for offering better benefits to older colleagues, a type of reverse age discrimination.

The case involves 41- to 50-year-old workers from General Dynamics Land Systems Inc. plants in Ohio and Pennsylvania. The workers for the General Dynamics Corp. (GD) unit lost post-retirement health benefits under a new labor contract negotiated between the company and the United Auto Workers labor union. Under the contract, workers who were over 50 were allowed to keep their health benefits. The Equal Employment Opportunity Commission and the 6th U.S. Circuit Court of Appeals have said the health benefits change violates the age discrimination law.

The article indicates that the Supreme Court justices seemed “skeptical of allowing the reverse discrimination lawsuits.” According to the article, Justice Scalia warned that if the midcareer workers win in this appeal, a law that was meant to aid older workers could end up harming them in what Justice Scalia termed “a very strange consequence of this legislation.'” The article further notes:

“Mark Biggerman, the lawyer for the workers who brought the case, said companies cannot single out gray-haired workers for better treatment than those with less gray hair. That prompted the dark-haired [Justice] Scalia, 67, to joke that senior citizens do not necessarily have gray hair.”

The Wall Street Journal also reports: “High Court Doubts Younger Workers In Discrimination Suit.”

From the WSJ article:

“Congress’ intent here was to make age a neutral factor,” said Biggerman, who said the law applies “whenever one individual loses out because of age.” Justice Sandra Day O’Connor curtly replied, “Do you think Congress really intended such a result?”

You can access a previous post discussing some of the benefits ramifications of the case here.

UPDATE 11/13: More articles:

• Law.com: “High Court Hears Age Discrimination Arguments”
• LA Times: “Supreme Court Debates Age Discrimination Issue”
• Boston Globe: “Case tests the limits of age-bias law: High court weighs defense contractor’s benefits for workers”
• New York Times: “Justices Mull Twist in Law on Age Bias”

This article from the Wall Street Journal today–“Pension Agency Warns Against Corporate Relief“–states that “Congress is likely to pass a broad relief measure, in the form of a more generous interest-rate formula for figuring basic contribution requirements” in order to provide some relief for the great number of pension plans which are underfunded. However, the article goes on to state that some companies are seeking more than that–i.e. that some companies want relief from “steep catch-up contribution requirements, under a special set of rules enacted in 1987 to protect workers and the government’s pension safety-net program run by the PBGC.” The article states that airlines “are putting intense pressure on Congress to grant struggling industries temporary relief from the catch-up rules.”

The Bush administration is on record as being opposed to this. However, the article notes that “influential congressional leaders are widely believed to be pushing relief.” The worry is that not providing this relief will dump more plans into the PBGC. The PBGC has issued a report bolstering the White House position, that estimates that eliminating catch-up contributions for seriously underfunded plans would increase its overall unfunded pension liability by $40 billion over the next three years.

This article from the New York Times highlights some of the issues involved: “Failed Pensions: A Painful Lesson in Assumptions.”