Category: Benefits

From Reuters: “Northern Trust Pension Suit an Eye-Opener.” The article quotes Eli Gottesdiener, a lawyer representing Enron employees, as saying that the decision made clear the responsibly that trustees have in protecting pension funds, even if they are told what to do by the companies that employ them. “This is huge in terms of precedent,” he said. “It establishes that even directed trustees have fiduciary obligations and cannot blindly follow orders.”

Additional Quote of Note: “The court’s decision could put more of an onus on trustees, said Scott Henderson, a lawyer who specializes in investment management and matters of pension funds for Boston-based law firm Bingham McCutchen LLP. While directed trustees have no discretion on investments, Henderson said they might have to start assessing the risk of including company stock in pension investments. “Pension funds are already nervous about the role company stock plays in their investment line-up,” he said. “Now they could be responsible for assessing the quality of company stock.”

Links to the Enron case and other articles at this previous post today.

Lyle Roberts at the 10b-5 Daily blog has a post on the Enron case as well.

The Wall Street Journal today reports: “Tax Wins Become Rare for Insurers.” (Subscr. required.) The article discusses how the Senate Finance Committee has been taking aim at corporate-owned life insurance, which allows companies to receive proceeds tax-free from policies on workers, even if they are no longer employed by the company. The article notes that Senator Jeff Bingaman (D., N.M.) had tacked on an amendment to pension legislation last month to require companies to pay taxes on proceeds from certain COLI policies and how following heavy industry lobbying, the Senate panel Wednesday took the unusual step of rewriting the Bingaman proposal. According to the article:

The COLI tax proposal originally was set to take effect Sept. 17, but now it won’t kick in until the pension legislation becomes law — and there is no guarantee of that happening this year. That opens the door for more COLI sales in the interim.

Also, this from the HoustonChronicle.com on the Bingaman amendment: “Death benefit crackdown put on hold.”

“House defies Bush on overtime regs: Joins Senate in opposing Labor Dept. rule changes“: CBSMarketWatch.com is reporting that twenty-one Republicans broke ranks, joining most Democrats to give House Republican leaders a rare defeat in a 221-203 vote on a measure which would instruct House negotiators to accept Senate language in an appropriations bill that would prevent the Labor Department from implementing the proposed FLSA overtime regulations.

Bill Virgin for the Seattle Times writes this important op-ed: “Boomers, Gen-Xers headed for showdown.”

A federal district court for the Northern District of Ohio, Eastern Division, ruled that about 2,500 former employees of the defunct Republic Technologies International are eligible for $96 million in plant shut-down benefits from the PBGC. You can access the case of Pension Benefit Guaranty Corporation v. Republic Technologies International, LLC, et al. here. Articles on the case:

• Associated Press via the New York Times: “Steelworkers Win Plant Closing Benefits”
• the Philadelphia Inquirer: “Court rules in favor of ex-workers.“

The PBGC said yesterday that it would appeal the decision. The agency had argued it was not obligated to pay up to $2,000 in monthly shutdown payments for workers who lost their Republic Technologies jobs but were too young for regular pensions because it had terminated the company’s underfunded pension plans two months earlier. The article quotes Steven A. Kandarian, the agency’s executive director, as stating: “By forcing the [agency] to pay nearly $100 million in unfunded severance benefits, this ruling will further weaken a pension insurance system that is already billions of dollars in the red.”

This LA Times article published by the Foundation for Taxpayers & Consumer Rights indicates California Governor Davis will probably sign SB 2, the Health Insurance Act of 2003: “Governor Expected to Sign Health Bill; Measure would require more employers to provide insurance.”

This just in from the Wall Street Journal: “Ruling Lets Enron Workers Sue Lay, Northern Trust Over Lost Savings.” (Subscription required.) More articles:

• “Banks Cut From Suit by Enron Pensions“: the New York Times
• “Deepest pockets out of case: Some banks freed from Enron suit“: the HoustonChronicle.com
• “Judge: Enron pension suit can go forward“: the Seattle Post-Intelligencer
• “Enron class-action suit may proceed: Judge says lawsuit over squandered pensions to go forward“: MSNBC News
• “Judge: Enron Workers Can Sue Lay: Says ex-CEO can be held liable for pension losses“: Newsday.com

You can read more about the Enron litigation at this link from ERISAblog. (For those who do not know, ERISAblog is a companion blog to Benefitsblog which is limited to posts regarding ERISA.) Also there are links over on the right under “401(k) Litigation Links” which contain additional information regarding the case.

UPDATE: Link to the federal district court for the Southern District of Texas Notable Cases page which contains the link to the Memorandum and Order re: Tittle Defendants’ Motions to Dismiss in the case of Tittle, et al v. Enron Corporation, et al, Civil No. 4:01-CV-3913 is here. It is a 331-page document which the court’s website says may take 11 minutes to download. Link to the actual Memorandum and Order is here.

Much more on this later . . .

The following articles imply that ERISA fiduciaries of retirement plans may find it necessary to replace some of the mutual funds implicated in the current mutual fund scrutiny in order to avoid the possibility of violating fiduciary obligations under ERISA:

• “Fund scandals can impact 401(k)“: from Insurance Newsnet.com
  
• “Mutual Fund Scrutiny Expands“: from USAToday.com

Deloitte & Touche has posted a great article via Benefitslink regarding the Health Insurance Act of 2003 (SB 2) passed by the California legislature: “California Legislature Approves Bill Mandating Employer-Provided Health Coverage.” The bill has not yet been signed by Governor Davis. Interestingly enough, the article makes the point discussed here before, that the bill faces legal challenge under ERISA and that the issue will be decided by the “unpredictable Ninth Circuit.” The article also discusses the fact that the bill may face a legal challenge under the California state constitution that the bill in fact imposes a “fee” or tax on employers. Under the California constitution, a new tax must be approved by a two-thirds majority of the California Assembly and Senate – a level of support SB 2 did not achieve.

“Business’s Killer I.O.U.: New factories? More workers? They’ll have to wait. Pension shortfalls are costing corporations billions“: Keith Naughton for Newsweek via MSNBC reports how huge pension funding deficits are preventing business expansion and delaying economic recovery.