Stable Value Funds Discussed

From the Wall Street Journal: ‘Stable’ Funds in your 401(k) May Not Be. The article discusses how fiduciaries are reviewing their stable-value fund offerings and “looking to move retirement-plan assets out of certain stable-value funds because of performance concerns” but “finding it’s not always easy to do so.”


In a recent report, David Merkel, chief economist and director of research at brokerage firm Finacorp Securities, advised clients who use stable-value funds to “consider moving funds out if the market value is unlikely to be able to support the book value.”

“I would not be surprised to see a stable-value fund fail in 2009,” Mr. Merkel later said in an interview.

The Stable Value Investment Association’s Ms. Mitchell replies: “It’s got to be a cataclysmic event for that to happen. I’m not saying it can’t happen, but it would be the perfect storm.”

DOL Issues COBRA Subsidy Model Notices

The DOL has posted on their website model notices to be used in complying with ARRA’s COBRA subsidy provisions. Please note that there are different notices available for the different groups of qualified beneficiaries that are required to receive notices about the premium reduction pursuant to ARRA. The notices must be provided by April 18, 2009 which leaves very little time for employers to act.

  • General Notice (Full version): Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event, AND who either have not yet been provided an election notice or who were provided an election notice on or after February 17, 2009 that did not include the additional information required by ARRA. This full version includes information on the premium reduction as well as information required in a COBRA election notice.

  • General Notice (Abbreviated version): The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. The DOL indicates that this notice may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.

  • Alternative Notice: Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a state law. Since continuation coverage requirements vary among states, the DOL has indicated that issuers should modify this model notice as necessary to conform it to the applicable state law requirements. The DOL further indicates that issuers may find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

  • Notice in Connection with Extended Election Periods: Plans subject to the federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

    1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
    2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

  • Majority of Employers Continue 401(k) Match

    A survey released by WorldatWork and the American Benefits Council indicates that the majority of employers are continuing to offer a 401(k) match:

    A full 74 percent of employers reported no change in the employer matching contribution; 15 percent have either increased or are considering increasing the employer match; eight percent have either decreased or are considering decreasing the 401(k) match, and three percent reported eliminating the match.

    According to the survey, more than nine out of ten U.S. companies offer an employee 401(k) plan. In addition, despite the widely reported drop in account balances, two-thirds (66 percent) of organizations indicated that at least 70 percent of eligible employees participated in those 401(k) plans in 2008.

    The survey was conducted in December of 2008 by WorldatWork, sampling 4,938 U.S. WorldatWork members. A total of 505 members responded to the survey.

    Contrast that survey with this one by Sun Life on the Social Security System which indicates that 48% of Americans would prefer to stop paying into the Social Security system, knowing that they would not receive any benefits if they did. All of this may have to do with the lack of confidence in the government’s ability to continue to fund these programs as the survey indicates:

    70% of workers in their 30s and 66% in their 40s do not believe Social Security will be available when they are 67.

    More on this survey from Plan Sponsor here.

    Pension Bills to Surge Nationwide

    From the Wall Street Journal: “Pension Bills to Surge Nationwide: Many States and Cities Face Hard Choices Because of Market Declines. Excerpt:

    Many state and city governments reeling from financial woes are about to get whacked again, this time by an unforeseen increase in their pension bill thanks to market declines.

    In an effort to stave off tax increases, New Jersey lawmakers on Monday will consider a bill that would allow municipalities to defer payment of half their annual pension bill, due April 1, for one year. Those towns, counties and schools that opt to defer would face a higher pension bill for years to come.

    Other states and municipalities are facing similarly difficult choices. In Pennsylvania, the state employees and public teachers pension funds both have warned that employer contribution rates could surge seven-fold from about 4% of payroll to 28%, starting in 2012. The Detroit police and fire pension plan might have to double employer contribution rates to 50% of payroll by 2011, according to the fund’s outside actuary.

    Read here how the Governor of Illinois is considering a 50% state income tax increase to assist with his state’s pension funding issues (discussed here.)

    Thoughts on the Employee Free Choice Act

    Michael Fox over at Jottings By an Employment Lawyer has some great thoughts on the Employee Free Choice Act recently introduced into Congress, including these remarks:

    I think the opponents of EFCA are making a mistake focusing so much on card check. How a union is formed is important, and my belief is that the secret ballot is far superior to card check. However, in my view the most radical change contained in EFCA is binding arbitration for the first contract. The current national policy, which as mentioned above, is that collective bargaining is the preferred way of organizing the workplace, also is founded on the principle that an employer while required to bargain in good faith, was never forced to concede or agree to any point. To “force” concessions, unions have the economic power to withhold their labor, strike. If EFCA is passed as introduced, for first contracts this would no longer be true. If agreement is not reached, a solution will be imposed, which will require an employer (and employees) to be bound for two years. It represents a total reversal of the current policy, and so far is getting relatively little attention. If that continues, what will happen is that a “compromise” will be reached that retains secret ballot elections (albeit it with major changes designed to make it easier for unions to organize) but keeping binding arbitration for first contract. That would mean that one of the underlying principles of our current system will have been changed, with little discussion or my guess, is little understanding that it is even happening.

    More from this Fulbright & Jaworski article on EFCA:

    Some have argued that this provision of EFCA would constitute an unconstitutional taking of an employer

    How Large Employers View Health Care Proposals

    Watson Wyatt’s survey of 489 large U.S. employers about health care produced some interesting results about how employers view the recent health care proposals floating around in Congress:

    The survey found that employers do not support most of the commonly prescribed solutions to the issues that plague the health care system. More than two-thirds (68 percent) are very or somewhat supportive of reforms that advance the consumer-oriented model and emphasize greater individual responsibility. Respondents are least in favor of tax policy changes that remove tax deductibility of employer premium contributions, with only 12 percent supporting those proposals.

    Also, regarding the use of health savings accounts:

    Health savings accounts (HSAs) are currently offered by 34 percent of companies. By 2010, that number is expected to increase to 43 percent. Health reimbursement accounts (HRAs) are offered by 21 percent today, and only 3 percent plan to add one next year.

    Workforce Management reports on the survey here.

    Health, Employment, Labor, and Pension Subcommittee Hearing

    Yesterday, the Health, Employment, Labor and Pensions Subcommittee of the House Education and Labor Committee held a hearing to “examine ways to increase health care insurance coverage for Americans through their employer.” Access the testimony given at the hearing here.

    Also, did you know that the House Education and Labor Committee now posts video excerpts of testimony on YouTube which you can access here?

    UPDATE: More from on the hearing here.

    Is Health Care a “Right”?

    Professor Bainbridge gives his views on the subject here. Excerpt:

    As the analysis thus far suggests, private property and freedom of contract are at the center of the debate over positive and negative rights. You cannot achieve positive rights without infringing on someone’s negative rights to private property and/or freedom of contract. Health care “reform,” for example, will inevitably affect — almost certainly adversely — my contractual relationship with my doctor.

    Here, as elsewhere, achieving a system of positive rights will come at a very high cost not only to individuals but also to society as a whole. . .

    When we infringe on private property and freedom of contract in the name of creating positive rights, we thus infringe on the very engine of democracy. As Russell Kirk observed, “freedom and property are closely linked: separate property from private possession, and Leviathan becomes master of all.”

    So, no, health care is not a “right” — at least not the kind that advances liberty.

    Blogs from the U.S. Government

    You can access a list of blogs maintained by the government at this link here. There do not appear to be any benefits-related blogs yet in the line-up.

    See also this post here from the Biddleblog, a blog from the University of Pennsylvania Law School, which discusses the emergence of government blogs:

    Governmental web sites are usually one of the first places people go for official government information. Few of us, however, know that government blogs exist as a possible source of information. It may surprise many to learn that the federal government maintains a web page entitled “Blogs from the U.S. Government,” which lists active and archived government blogs.

    While governments have been slow to embrace Web 2.0 technology, it has nevertheless begun to do so. . .

    There are those who will seriously question the veracity, value and reliability of information found on government blogs, as indeed should be the case. Regardless, government blogs remain a potential resource which may provide invaluable information and insight.

    Pictorial View of the Great Recession

    Via the New York Times here. (Click on the map in the upper left-hand corner.)

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