Category: Benefits

Many thanks to the Edward Bennett Williams Law Library of the Georgetown University Law Center for listing Benefitsblog and ERISAblog in its research guide devoted to Employee Benefits. You can access the Employee Benefits Research Guide here. There are a number of other guides on a variety of topics which you can access here, including such topics as the Bluebook, Briefs and Oral Arguments, Business & Company Research, Health Law, Labor and Employment Law, Legal Ethics, Legal Forms, Small Business, Supreme Court Research, and Tax Research – Federal.

The Department of Labor has issued a press release regarding the settlement reached earlier this week and discussed in a previous post–“Secretary of Labor Elaine L. Chao Announces Settlements Restoring at Least $66.5 Million to Enron Retirement Plans“:

U.S. Secretary of Labor Elaine L. Chao today announced the filing of settlements to restore at least $66.5 million to the Enron 401(k) and employee stock ownership plans. The proposed settlements, which must be approved by the court, cover agreements in both the Department’s litigation and the private class action lawsuit brought on behalf of the plans’ participants. Neither settlement applies to Enron Corporation and its former executives and inside directors, Kenneth L. Lay and Jeffrey K. Skilling . . .

The Labor Department’s agreement covers the former outside directors of Enron’s Board. The private settlement also covers the plans’ administrative committee and others. In addition to monetary recoveries, the outside directors are barred from knowingly assuming fiduciary responsibility with respect to ERISA-covered plans for five years unless agreed to by the department. Absent settlement, the department will continue its litigation against the plans’ administrative committee and will seek additional monetary recoveries and injunctive relief.

On May 12, the House passed H.R. 4279 which would amend the Internal Revenue Code to provide for the disposition of unused health benefits in cafeteria plans and flexible spending arrangements. (In other words, the bill would abolish the very unpopular “use-it-or-lose-it-rule” which has plagued these type of plans.) Articles:

• Wall Street Journal (subscription required): “House Passes Bill, Allowing Rollover of Unused Money In Flexible Spending Accounts”
• AP via SFGate.com: “House passes bill to allow rollover of unused money in flexible spending accounts”

Also, on May 12, H.R. 3574, the Stock Option Accounting Reform Act, was passed in the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. (Press release is here.) The bill would require companies to expense stock options granted to the five highest-paid officers and would also defer enforcement of any Financial Accounting Standards Board expensing rule until the Securities and Exchange Commission does a study on its economic impact. Articles:

• CFO.com: “House Bill Would Impede FASB”
• AccountingWeb.com: “Stock Options Accounting Legislation Clears House Subcommittee”
• Reuters via Forbes.com: “US House panel backs limit to options expensing”

Then, on May 13, the House voted (252-162) to approve H.R. 4281, the “Small Business Health Fairness Act of 2004” which would amend ERISA to provide for the establishment and governance of association health plans (AHPs). (H.R. 4281 has been appended to H.R. 4279 above.) AHPs would be group health plans whose sponsors are trade, industry, professional, chamber of commerce, or similar business associations, and which would meet certain ERISA certification requirements. The bill would establish rules governing AHPs (through ERISA preemption of state law), including requirements relating to certification, sponsors and boards of trustees, participation and coverage, nondiscrimination, plan documents, contribution rates, benefit options, applications for certification, notice of voluntary termination, corrective actions, and mandatory termination. Articles:

• KaiserNetwork.org: “House Approves Association Health Plan Legislation”
• Reuters: “U.S. House Backs Small Business Health Plans”

On May 13, the House by a vote of 344-76 also approved H.R. 4275, a bill to permanently extend the 10% individual income tax rate bracket. The provision would make permanent the expanded 10% income bracket by preventing the scheduled reduction in 2005 of the upper threshold for the 10% tax bracket (for single taxpayers, joint-filers, and qualifying surviving spouses). A Democratic amendment in the nature of a substitute was offered by House Ways and Means Ranking Democrat Charlie Rangel (D-NY), but was defeated by a vote of 190-227.

The Wall Street Journal is reporting: “Enron Employees to Settle Retirement Suit for $85 Million.” According to the article:

Approximately 20,000 current and former Enron Corp. employees who lost money in their retirement plans when the company collapsed in late 2001 will participate in an $85 million settlement of a class-action lawsuit.

The tentative settlement, filed yesterday, would be the largest to date for a case involving company stock in retirement plans, said Lynn Sarko, the attorney representing the employees. Earlier this year, employees of Global Crossing Ltd. settled for $79 million, and employees of Lucent Technologies Inc. settled for $69 million.

The article further notes that the “partial settlement resolves claims against Enron’s human-resource staff and company directors, but doesn’t settle claims against top Enron executives.” The settlement does not resolve claims against Northern Trust Corp. or Arthur Andersen.

More on the settlement from the New York Times here.

For those who are Trekkies and love tax humor, a great comic from the Tax Guru here.

Some important IRS guidance:

• Revenue Ruling 2004-45: Health Savings Accounts–Interaction with other Health Arrangements (via Benefitslink.com) More on this later, I’m sure . . .
• Notice 2004-40: Weighted Average Interest Rates Update (also via Benefitslink.com)

And, the IRS has announced that the “Taxpayer Advocate Service Seeks Input on Systemic Tax Issues“:

“Individuals who have identified systemic issues that affect taxpayers on an ongoing basis will find it both easier and faster to use this new system,” said Nina E. Olson, the National Taxpayer Advocate. “This will improve our ability to be responsive to taxpayers and speed the process of addressing their ongoing concerns.”

Those wishing to bring issues to the attention of TAS can go to www.irs.gov/advocate and click on “What is Systemic Advocacy?” Private information, such as taxpayer names and identification numbers, will be screened out of any submissions. The system will also automatically generate a receipt notice for those taxpayers, tax practitioners, academicians and researchers who use it.

(A way for bloggers and non-bloggers alike to rant anonymously. . . )

The Philadelphia Inquirer today has a whole section referred to as the “Retirement Guide” which contains the following articles:

“Even big nest egg doesn’t make retirement or stock issues easy“

“Costs of Retirement“

“Fee deals can hurt retirement savers“

“You may never retire from stock market“

“His visible fees are tricky to market: A low-cost alternative to mutual funds is a hard sell in an industry where costs aren’t clear“

In today’s post, Broc Romanek has some interesting “inside” info regarding new Item 703 of Regulation S-K which requires public companies to disclose in a table (sample table here via Blank Rome LLP) any purchase made by or on behalf of the company or any affiliated purchaser of the company of shares or other units of any class of the company’s equity securities registered pursuant to Section 12 of the Exchange Act. He states as follows:

[A]t the ABA-JCEB meeting this week, the SEC staff apparently stated that stock repurchases by a 401(k) plan or other employee benefit plan may be required to be reported when the plan is an “affiliated purchaser” within the meaning of Rule 10b-18(a)(3). This could be a real problem in cases where a benefit plan is administered in-house, instead of being handled by a brokerage firm, transfer agent or other outside party. I would wait until the staff has a position in writing on this one before taking any drastic actions, such as hiring a third-party administrator.

The post goes on to describe what an “affiliated purchaser” is within the meaning of the Rule:

(i) A person acting, directly or indirectly, in concert with the issuer for the purpose of acquiring the issuer’s securities; or
(ii) An affiliate who, directly or indirectly, controls the issuer’s purchases of such securities, whose purchases are controlled by the issuer, or whose purchases are under common control with those of the issuer; Provided, however, that “affiliated purchaser “shall not include a broker, dealer, or other person solely by reason of such broker, dealer, or other person effecting Rule 10b-18 purchases on behalf of the issuer or for its account, and shall not include an officer or director of the issuer solely by reason of that officer or director’s participation in the decision to authorize Rule 10b-18 purchases by or on behalf of the issuer.

You can read a good summary of the new rules here (from Palmer & Dodge LLP).

If any other bloggers or readers with expertise in this area of the law have comments on this development, please email me and I will be glad to post them for readers.

From the PBGC today, “PBGC Proposes Expanded Enforcement for Failure to Inform Workers of Pension Underfunding“:

The Pension Benefit Guaranty Corporation (PBGC) today proposed an expanded enforcement program, including a new penalty structure, for administrators of underfunded pension plans who fail to inform participants of the plan’s funding status and PBGC’s guarantee limits. As a transition to this expanded enforcement program, the agency also announced a Voluntary Correction Program to encourage administrators to correct recent failures to issue underfunding notices to plan participants.

The proposal is here (pdf) and information regarding the Participant Notice Voluntary Correction Program is here (pdf). Also, more about Participant Notices here with further information pertaining to the announcement.

From Newsday.com, “Pension Insurer Proposes New Penalties“:

The government’s pension insurance program proposed a new penalty system for companies that fail to notify workers of underfunded retirement plans, tied to the number of participants instead of how late the notice. . . The new policy would impose a penalty of $5 per participant if the plan administrator issues the notice on or before it receives written notice of a possible audit from the pension insurer agency. Repeat violators would be charged $20 per participant. If an administrator issues a notice after receiving the agency’s written notice, the penalty would be $40 per participant and $100 per participant for repeat violators. However, if the plan administrator sends a notice within a year after the due date, the agency would prorate the penalty based on the number of days it was late.

From the Wall Street Journal (subscription required), “Regulators Not Finished With Mutual-Fund Investigations“:

Despite resistance from the fund industry, more law-enforcement actions against mutual funds, managers, directors and their financers are on the way, state and federal regulators said at a conference Wednesday. . . Eight months later, “there is more to come,” New York Deputy Attorney General Beth Golden said at an Institutional Investor mutual fund conference Wednesday. She said targets might include fund directors and firms that knowingly financed abusive trading in mutual funds.”

Also from the Wall Street Journal, “Spitzer Studies New Conflicts on Insurance“:

Since Mr. Spitzer’s inquiry became public last month, most attention has focused on insurance companies paying brokers and consultants for arranging certain property-and-casualty insurance policies, not employee life-insurance and health-benefit plans. . . Mr. Spitzer’s office has said almost nothing publicly about the focus of its investigation, but people familiar with subpoenas sent to the brokers said they appear broad enough to encompass areas beyond property and casualty insurance, including benefits programs.

From CFO.com, “Pension Funding Levels Improving“:

The aggregate funding ratio of the 340 or so companies in the S&P 500 with defined benefit pension plans rose by 6 percentage points by year-end 2003, to 87 percent, from 81 percent the prior year, it noted. However, this is still significantly below the peak of 128 percent at the end of 1999, the last very strong year for the stock market before the ’90s tech bubble burst.

From Steptoe & Johnson LLP via Mondaq, “VEBAs: Possibilities For Employee Benefit Funding.”

From CNET News.com, “Poll shows support for offshoring tax“:

More than 40 percent of U.S. technology executives surveyed would be willing to pay higher taxes to compensate for jobs they send offshore, according to a nationwide poll conducted jointly by CNET News.com and Harris Interactive. These executives agree with the proposition that companies should be required to pay a “per-head tax” for every position sent to another country.

This will never happen, although it provides some interesting food for thought: “Outsource CEOs, Not Workers.”

American companies are busily outsourcing workers when they should be insourcing CEOs from other countries. U.S. CEOs are way too expensive. U.S. CEOs make 23 times as much as CEOs in mainland China, 10 times as much as CEOs in India and 9 times as much as CEOs in Taiwan, according to the latest Towers Perrin worldwide survey.

From the Blogosphere:

A dormant blogger has awakened. Welcome back, Mike!

From the TaxProf Blog, “IRS Offers Amnesty for Investors in “Son of Boss” Tax Shelter.”

It will be interesting to see how the U.S. Supreme Court responds to these important questions relating to findings of fact and other issues in Tax Court cases. (via SCOTUSBlog)