Category: Benefits

BusinessWeek Online last week launched two new blogs: The Tech Beat which will cover “innovations, trends, and dustups in the world of tech” and the Deal Flow which will discuss developments in the “world of venture capital and startups.”

(Source: Micro Persuasion and Real Lawyers Have Blogs.)

Interesting article here authored by Maria O’Brien Hylton: “The Changing World of Employee Benefits.” Opening excerpt:

When I graduated from law school in 1985, there were no courses offered in employee benefits law. Nor, as near as I can recall, was ERISA ever discussed in any of the labor and employment classes I took. There was no mention in the introductory labor law course or in other classes about employment discrimination, union organizing, and employment arbitration. Now, in contrast, many law schools include a course on employee benefits and ERISA, and students hoping to work in the labor and employment area frequently find that ERISA work is plentiful, and traditional NLRA work is not. This, of course, reflects larger changes in the market for legal services. . .

At the end of her article, the author makes a recommendation that willing employers and employees be allowed to bargain for “compensation arrangements that are now impermissible because of minimum wage and overtime laws” so that “employees who wanted to could ‘purchase’ health insurance with a specified number of hours of uncompensated overtime or with a lower hourly wage.” She suggests that such “arrangements would be attractive to dual earner households; in effect one might work for wages and the other for benefits.”

Of course, it goes without saying that the outlook of the single earner household (and of many today who must pay more and more of their income to cover the skyrocketing costs of health insurance) is rather bleak–presenting a choice of either having enough to live on or or having adequate medical care.

For those of you who may share my fascination with space exploration, the international Cassini-Huygens space mission to Titan, Saturn’s largest moon, is sending back pictures. Don’t miss this great one here from SaturnToday.com. There are more pictures here.

Bruce Carton, author of the Securities Litigation Watch, has an interesting post here about the tentative $54 million settlement reached January 5th with 10 former members of WorldCom’s board in the massive securities class action attacking the financial fraud at WorldCom. Here’s what he had to say about the settlement:

Although $54 million is not itself an extraordinary amount in the context of the hundreds of billions of dollars lost in the WorldCom case, the fact that $18 million will be paid by the directors themselves is a watershed event in the securities class action world. It is virtually unheard of for directors to be personally responsible in class action settlements, as such settlements are routinely covered by the company’s D&O insurance. In a highly unusual move, however, the New York State Common Retirement Fund reportedly insisted from the beginning of negotiations that there would be no settlement with the WorldCom directors without their agreement to personally pay a significant portion of the proceeds. Indeed, the $18 million dollars reportedly will come in varying amounts from the directors, with each individual payment accounting for a full 20 percent of that director’s aggregate net worth excluding their primary residences and retirement accounts.

He goes on to say that “coming on the heels of the SEC’s recent proclamations that the penalties it imposes must be paid by individual wrongdoers rather than their employer or insurance company” it is likely that the settlement with members of the WorldCom board will “have a jarring effect on anyone serving, or considering serving, on the board of a public company”:

Never before has it been so apparent that the consequences of failing in your duties as a board member may well include a significant loss of your own personal wealth. In the WorldCom case, for instance, directors who were compensated approximately $35,000 per year are now responsible, due to their alleged failings, for the payment of millions of dollars.

The Wall Street Journal had more on this in an article yesterday: “Directors Are Getting the Jitters.” The article states that public pension funds “have begun offering higher contingency fees if their attorneys win personal payments from individual officials, too.”

The WSJ article also states:

Timothy Burns, an attorney with Neal Gerber & Eisenberg LLP in Chicago and a co-chairman of the American Bar Association’s insurance-coverage litigation committee, thinks insurance policies could be rewritten so that coverage vanishes if a settlement or judgment requires individual directors to put up personal assets. Given the choice of either collecting more money from insurers or less directly from board members, investors might think twice before targeting personal assets, Mr. Burns believes.

The CorporateCounsel.net blog is reporting that the NYSE has posted updated FAQs regarding Section 303A.08, which requires shareholder approval for equity compensation plans. The updated FAQs discuss whether amendments to equity compensation plans to comply with Section 409A of the Internal Revenue Code require shareholder approval (C-15).

Will a blog entry ever make it into a U.S. Supreme Court case? It already has, as discussed here at the TaxProfBlog. While the blog doesn’t appear to be mentioned by name, at least the URL address made it in. The entry was referenced by Justice Stevens in his dissent (at p. 7, n.4) in yesterday’s U.S. v. Booker decision on the constitutionality of the federal sentencing guidelines. Congratulations to Douglas Berman (Ohio State), author of Sentencing Law and Policy Blog, for reaching such a milestone for the blawgosphere.

Today, leadership of Congress’ tax writing panels provided more detail in a news release about the legislative intent governing the implementation of H.R. 241, the Indian Ocean Tsunami Relief Act. The measure which passed the Senate and House on January 7, 2005 and was signed by the President last Friday is discussed in this previous post here. Excerpt from the news release:

• The Act applies only to charitable contributions of cash, whether by an individual or a corporation. Marketable securities and other property are excluded from the Act. Contributions made by credit card generally are treated as contributions of cash made at the time of the charge.
• Under the Act, taxpayers may choose whether to treat a contribution made in January 2005 as made on December 31, 2004, or as made in January of 2005. However, the deduction may be claimed only with respect to one taxable year. Taxpayers taking advantage of the Act are advised to make a notation to that effect on their 2004 tax return.
• The Act does not change any other present law rules with respect to charitable contributions. For example, the contribution must be a charitable contribution as defined in the Internal Revenue Code. Thus, the contribution must be made to an eligible organization, which, as under present law, generally does not include contributions to foreign organizations.
• The Act does not change the percentage limitations and carryover rules of present law. If a taxpayer takes advantage of the Act, the 2004 percentage limitations of a taxpayer apply to such contribution and any excess amount is treated as a carryover of a contribution made in 2004.
• Under the Act, contributions must be made for the Indian Ocean tsumami-related disaster relief. The taxpayer must substantiate that the contribution is made for such purpose.
• Taxpayers are not permitted under the Act to allocate a portion of a contribution to more than one taxable year. Thus, taxpayers are required to treat the entire contribution as made in January 2005 or as made on December 31, 2004. A taxpayer who makes multiple contributions may treat each contribution separately. For example, a taxpayer making three separate gifts of $100 each may treat two gifts as made on December 31, 2004, and one gift as made on the actual date of gift (in January 2005).

The news release makes some interesting points about substantiation of the tax deduction. For example, a receipt from a charity acknowledging that a contribution is intended to be used for tsumami-related purposes generally would be sufficient. Other forms of substantiation could include a taxpayer making a notation on the taxpayer’s check of the intended use of the contribution. While writing a notation on the check is acceptable, the news release makes it clear that, if the donee organization is not involved in assisting victims of the disaster, a notation on the check would not be sufficient in that case–in other words, one can’t turn a charitable contribution made in January of 2005 into a a 2004 charitable deduction by simply writing “tsunami” on the check.

An article here from NWAnews.com is reporting that a “bill filed with the Arkansas Legislature on Tuesday would prohibit managed care networks from practices that “discriminate” against doctors and hospitals, a move the bill’s sponsor says will put an “any willing provider” law into effect.” According to the article:

Senate Bill 43 is intended to open closed insurance networks such as those of Arkansas Blue Cross and Blue Shield, allowing health-care providers who are willing to meet an insurer’s terms to see patients at in-network rate . . .

A second bill filed by Faris, SB44, says individuals can sue over violations of SB43 and receive a court order requiring compliance with the law and an award of at least $1,000. . .

SB43 says insurers cannot “discriminate against any provider” who is willing to meet the “terms and conditions for participation.” The bill is the latest in Arkansas’ decade-long fight over “any willing provider,” a term used to describe laws that force insurance companies to extend network membership to any doctor or hospital willing and able to meet the network’s terms.

Here are the events leading up to the introduction of this legislation:

(1) An Arkansas any willing provider law (“AWP law”) called the “Arkansas Patient Protection Act” was passed in 1995, but had been barred from being enforced in Arkansas after a federal district court issued an injunction, holding that the AWP law was subject to preemption under ERISA. The injunction was affirmed by the 8th Circuit, in the case of of Prudential Insurance Company of America, et al. v.National Park Medical Center, Inc.

(2) The U.S. Supreme Court in the case of Kentucky Association of Health Plans v. Miller decided in April of 2003 that an AWP law in Kentucky was not preempted by ERISA (discussed in previous posts which you can access here.)

(3) After the Miller case was decided, a case was filed in federal district court in Arkansas asking for “a judicial determination” on how the Miller case impacted the old Arkansas AWP law.

(4) The injunction issued in 1998 was lifted on February 12, 2004 by a federal district court in Arkansas, based on the Miller case, but the decision lifting the injunction was appealed to the 8th Circuit. According to the Gazette article, oral arguments in the case–Prudential Ins. Co. v. HMO Partners–were heard in November of last year. You can read about the oral arguments in this article here, or even listen to the oral arguments as well as read the briefs filed in the case here.

According to the article, supporters of the proposed legislation don’t want to wait for the 8th Circuit to rule, and have introduced the legislation, modeling it after the Kentucky AWP law (which was upheld by the Supreme Court), in hopes that it will be enacted, thus bypassing the legal battle that has ensued in the courts.

Read about the legal issues pertaining to AWP laws in this article: “Kentucky’s “Any Willing Provider” Law and ERISA: Implications of the Supreme Court’s Decision for State Health Insurance Regulation” by Patricia A. Butler, JD, DrPH.

(Thanks to Benefitslink.com for the link to the article.)

Elaine L. Chao, U.S. Secretary of Labor and Chairman of the Board of the Pension Benefit Guaranty Corp.(PBGC), today announced the Bush Administration’s plan for strengthening the retirement security of workers and retirees covered by private, single employer defined benefit pension plans. Chao states, in the announcement, that the Administration has become “increasingly concerned as the number of terminated plans grows and the PBGC is forced to assume ever larger liabilities” and that “[i]f nothing is done, the financial integrity of the federal insurance system will be compromised and the pension security of 34 million workers and retirees will be more at risk.”

The announcement provides that the Administration’s plan is based on three main principles:

• Reforming the funding rules for private defined benefit pension plans to ensure full funding;
• Reforming PBGC premiums “to better reflect the real risks and costs”; and
• Increasing “disclosure of information about private defined benefit pension plans to workers, investors and regulators.”

There is a Fact Sheet summarizing the proposal and entitled “The Bush Administration’s Plan for Strengthening Retirement Security.” Two interesting aspects of the proposal:

(1) The proposal includes a change to the PBGC premium structure so that it would include a “risk-based premium” which would be based on “plan underfunding relative to the appropriate funding target.” The Fact Sheet notes that all underfunded plans would pay risk-based premiums.

(2) The proposal would allow “plan sponsors to make additional deductible contributions during good economic times.” (It’s about time!)

Today, the President signed into law H.R. 241, which accelerates income tax benefits for charitable cash contributions for relief of Indian Ocean tsunami victims.

The legislation provides as follows:

“SECTION 1. ACCELERATION OF INCOME TAX BENEFITS FOR CHARITABLE CASH CONTRIBUTIONS FOR RELIEF OF INDIAN OCEAN TSUNAMI VICTIMS.

(a) IN GENERAL- For purposes of section 170 of the Internal Revenue Code of 1986, a taxpayer may treat any contribution described in subsection (b) made in January 2005 as if such contribution was made on December 31, 2004, and not in January 2005.

(b) CONTRIBUTION DESCRIBED- A contribution is described in this subsection if such contribution is a cash contribution made for the relief of victims in areas affected by the December 26, 2004, Indian Ocean tsunami for which a charitable contribution deduction is allowable under section 170 of the Internal Revenue Code of 1986.”

Tax Analysts has more here.

HR.BLR.com reports that “Employers of All Sizes Are Providing Tsunami Relief.”