Month: October 2003

Corp Law Blog reports today that “Microsoft filed tender offer documents divulging the details of its novel stock option transfer program, which is designed to permit its employees to sell their underwater options to J.P. Morgan.” You can access the documents through links at Corp Law Blog.

Thanks to Broc and Mike, I was able to share with readers last week in this post that the SEC, the Department of Justice and the President’s Corporate Fraud Task Force had jointly concluded that Section 906 of Sarbanes-Oxley does not apply to 8-Ks, 6-Ks and 11-Ks. Broc and Mike share some additional thoughts this week.

Also, the Wall Street Journal had this article on Monday (subscription required): “SEC, Justice Dept. Say Execs Needn’t Certify All Reports.” Quote of Note from the WSJ article: “The staff of the SEC and the Justice Department, in consultation with their representatives on the corporate fraud task force, have concluded that the criminal certification requirements of Sarbanes-Oxley don’t apply to current reports on form 6-K or 8-K, or employee benefit plan reports on form 11-K ,” SEC corporation finance division director Alan Beller said in a telephone interview with Dow Jones Newswires on Friday.

This is a great article by Brown Rudnick Berlack Israels LLP which takes some very complicated laws and regulations and boils them down into a simpler Q & A format: “Group Health Plan Compliance with HIPAA and ERISA: Navigating the Legal and Administrative Maze.”

Legislation that would ban genetic discrimination by employers, group health plans and insurers passed the full Senate October 14th by a vote of 95-0. Under the The Genetic Information Nondiscrimination Act of 2003 (S. 1053) employers would be:

• barred from using genetic information in making employment decisions, including hiring, firing, compensation and promotions;
• prevented from collecting genetic information except in special circumstances, such as monitoring the effects of hazardous workplace conditions.

Also, health insurers, meanwhile, would be prohibited from:

• using genetic information to deny coverage or set rates;
• collecting genetic information before a person is enrolled in an insurance plan;
• and requesting that anyone take a genetic test.

As reported by the New York Times today in this article–“Senate Backs Genetic Privacy Bill“– the White House supports the measure, but the bill “faces an uncertain future in the House, where Representative Louise M. Slaughter, Democrat of New York, has been working on a similar measure since 1995.”

The Wall Street Journal reports in this article–“In 95-0 Vote, Senate Passes Bill Barring Genetic Discrimination“–that “Rep. John Boehner (R., Ohio), chairman of the House Education and the Workforce Committee, said hearings would be held on the bill’s employment-related provisions, but House passage this year seems unlikely.”

There are many articles today regarding the PBGC’s deficit reaching a record $8.8 billion as of August 31st. This from Steven Kandarian, executive director of the PBGC, speaking to the U.S. Senate Special Committee on Aging at a hearing entitled “America’s Pensions: The Next Savings and Loan Crisis?” The Wall Street Journal reports: “Federal Pension Agency Shows Wider Deficit.” (Subscription required.) Newsday.com also reports: “Deficit at Pension Insurance Agency Soars.” You can read Mr. Kandarian’s testimony here. You can actually view the hearing at this link and read other testimony at the hearing as follows:

• Scott Macey, Former Chairman of the ERISA Industry Committeee (“ERIC”) and current ERIC Board member
• Barbara D. Bovbjerg, Director of Education, Workforce, and Income Security for the Government Accounting Office
• Mark J. Warshawsky, Acting Assistant Secretary for Economic Policy for the U.S. Department of the Treasury
• David C. John, Research Fellow for the Thomas A. Roe Institute for Economic Policy Studies, Heritage Foundation

On the health care front, the Wall Street Journal also has this: “Your Health Plan’s New Math: Many People Must Rethink Benefit Choices This Year As Firms Revamp Options.” The article discusses how employers have been “[s]tung by what is expected to be the fifth consecutive year of double-digit increases in health-care costs” and that “many employers are aggressively revamping their offerings — dropping old options, adding new ones and making subtle but important changes” in their health plans. The article focuses on how employers like International Paper and Lockheed Martin are shifting to “consumer driven” health care approaches.

Today’s Federal Register contains corrections to final regulations that were published in the Federal Register on Monday, August 4, 2003, relating to golden parachute payments under section 280G of the Internal Revenue Code.

Sad news: EthicalEsq. is now ExitedEsq. as David Giacalone tells us in this post. (Alas! Your leaving comes just as I had mastered the spelling of your name.) You will be greatly missed. Somehow Steve Gillmor captures the emotion of it in this . . .

In a previous post, I noted the fact that plan fiduciaries are inquiring into their ERISA fiduciary duties regarding a 401(k) plan’s offering of mutual funds which have been the subject of allegations by New York Attorney General Elliot Spitzer. The allegations relate to improper “late trading” and “market timing” in mutual fund shares by hedge funds. Gardner Carton & Douglas highlights some of the points to consider in a client alert entitled “How Should Plan Fiduciaries Respond to Current Investigations of Mutual Fund Practices?.”

For those who do not know, a decision to offer or continue to offer a fund in a 401(k) plan as an investment option for participants is a fiduciary act, subject to all of the fiduciary duties and responsibilities under ERISA. The fiduciaries are subject to an ongoing responsibility of monitoring those investment options, and certainly once fiduciaries receive information that casts some doubt on whether or not an investment option continues to be prudent to offer, they must engage in prudent processes and procedures to evaluate that information and determine whether or not the investment option should be replaced. Such processes and procedures should, of course, be well-documented.

But what about the duty to disclose to participants what is going on with these funds if the fiduciaries decide not to eliminate the mutual fund option? The article states that fiduciaries must, of course, respond to any participant inquiries about the mutual funds in question, but goes on to state that “disclosure would generally not be required” absent a change in the investment funds offered. My view would be that the fiduciaries should tread carefully here. Most of the recent class action lawsuits are pivoted around this duty to disclose and most of the courts have held that fiduciaries have a an affirmative duty to disclose material information which might affect a participant’s or beneficiary’s interest in the plan even though the participant or beneficiary does not make an inquiry.