Author: jfortenberry@fortenberrylaw.com

Christopher Oster for today’s edition of the Wall Street Journal reports: “The ERISA Trap: When Employees Can’t Sue.” The article makes the point that whether or not a disability insurance plan is covered by ERISA could make a big difference from a litigation standpoint if the employee is wrongfully denied a claim and wants to sue, i.e. that insurance companies prefer that ERISA apply because the likelihood of recovery by the employee is less.

The subject was also covered by Workforce Management magazine (at Workforce.com) in their July, 2003 issue in an article by Douglas P. Shuit entitled “Nasty Business” (Subscription required.) That article provides a more in depth discussion of why recovery under ERISA is so difficult to obtain, stating correctly that ERISA limits the participant’s right to a jury trial and prevents participants from recovering punitive or compensatory damages. (Despite the difficulties with suing under ERISA, the article quotes Raymond Bourhis of San Francisco as predicting that there are going to be a huge number of class action “lawsuits filed against employers, as well as insurance companies, alleging conspiracy and collusion to deprive ERISA-preempted workers’ protections under state law.”)

Note: In contrast, another area of ERISA litigation–involving alleged ERISA fiduciary breaches–has been called an “oasis for plaintiffs’ lawyers.” (See this previous post which mentions an article by Jason Hoppin for the Recorder at Law.com–“A Matter of Trust: Stung by corporate collapses, workers look to ERISA for relief“–which discusses how ERISA has become an “oasis for plaintiffs’ lawyers, where you can make new law, the bar is friendly on both sides of the aisle, there are few competitors and, of course, huge recoveries are the norm.”)

Today’s Federal Register.

Christopher Oster for today’s edition of the Wall Street Journal has a very interesting article entitled: “The ERISA Trap: Workers Find Limited Rights to Sue Insurers.” (Subscription required.) To be discussed in a separate post today . . .

The National Association of Securities Dealers, Inc. (“NASD”) has launched the Smart 401(k) Learning Center which has some good information for 401(k) plan participants. A summary of what the site offers is found in NASD’s news release about the site:

Whether an investor is just starting out or has already retired, Smart 401(k) Investing has the information needed to understand 401(k) plans. Smart 401(k) Investing guides investors through the process of enrolling and managing a 401(k) account and answers questions about everything from 401(k) investment options to asset allocation and diversification, from moving a 401(k) when changing jobs to handling withdrawals after retirement. It also provides a number of interactive tools, including a Minimum Required Distribution Calculator that allows the user to quickly calculate the amount of money the law requires investors to withdraw from their 401(k), or traditional IRA by April 1st of the year following the year they turn 70 1/2. By simply inputting the investor’s age and account balance, the calculator determines the required withdrawal factor, minimum required distribution (MRD), and the required rate of return needed for the next year to maintain an account balance following a withdrawal.

An interesting section of the site provides some guidance about whether or not company stock is a wise investment for a 401(k) plan participant. The plan participant is warned that employers may encourage them to choose company stock as an investment and that too much company stock is not a good thing. How much is too much? The site states that experts disagree on how much company stock in a 401(k) account is too much, “but many prefer a maximum of 10% to 20%.”

While we are on the subject of 401(k)’s, John Wasik writes this op-ed for Bloomberg.com with some more tips for 401(k) plan participant-investors: “You Can Take Back Your 401(k) Plan.” Mr. Wasik says that “[t]aking back control of your 401(k) or any defined- contribution retirement plan involves asking your company if they’ve recently reviewed your plan to select better-performing funds that charge lower operating expenses.” He goes on to say that “[I]f they haven’t, you can ask them to improve the plan, because they are legally obligated as fiduciaries to do so.”

More on fund expenses from a Standard & Poor’s report (issued August 4, 2003): “Mutual Funds Closed to New Investments Continuing to Charge 12b-1 Fees, Says S&P.” This article by Thompson Publishing Group discusses the release: “Closed Mutual Funds Still Charging 12b-1 Fees.”

News on an underfunded pension plan from Reuters: “General Mills pension plans underfunded by $224 mln.” The article states that GM’s “pension plans were underfunded by $224 million at the end of its recent fiscal year after being overfunded by $571 million the prior year” according to SEC filings.

PlanSponsor.com in this article–“Thomas Bill Includes New Corporate Tax Structure–is reporting that US Representative Bill Thomas (R-California), Chairman of the House Ways and Means Committee, has introduced a bill (HR. 2896) to replace the Foreign Sales Corporation-Extraterritorial Income Act (FSC-ETI). The bill apparently also contains provisions overhauling the rules governing nonqualified deferred compensation plans. A previous post here has discussed the fact that changes to the nonqualified plan rules have been contemplated by Congress for some time, and were actually dropped from the Jobs and Growth Tax Relief Reconciliation Act of 2003 before it was passed last May. Apparently, they have now made their way into this bill introduced by Thomas.

The ABA Litigation Section has posted an article with tips for lawyers for that dreaded daily detail of preparing timesheets. (Thanks to Ernie Svenson for the link. By the way, you should check out Ernie Svenson’s new pad–I mean Typepad, that is.)

Deloitte & Touche has published this detailed analysis of the IBM cash balance plan case, Cooper, et. v. The IBM Personal Pension Plan, et al.: IBM’s Cash Balance and Pension Equity Formulas Violate ERISA, District Court Rules .

Today’s Federal Register.

Today’s edition of the Wall Street Journal (subscription required) is reporting that the Jobs and Growth Tax Relief Reconciliation Act of 2003 (“JAGTRRA”) will put about $46.7 billion in investors’ pockets this year through the dividend tax cut: “Dividend Tax Cut Pleases Firms More Than Investors.” A slew of companies have increased their dividends since the bill was passed. The article reports that, according to Standard & Poor, 44 companies in the S&P 500-stock Index raised their dividends this month, and six initiated new dividends. In addition, the article quotes Howard Silverblatt, an analyst at S&P who tracks dividend activity, as saying that there has not been this kind of dividend activity since the 1970’s: “It’s at a point where, if you’re a company whose competitors are raising their dividends, the question is, why aren’t you?”

“Judge Gives Initial Approval To Medco Settlement“: the Journal reports in this article that a federal court judge has given preliminary approval to an agreement to settle a series of ERISA-related class action lawsuits against pharmacy benefit manager Medco Health Solutions for $42.5 million.” (Subscription required.) FT.com also reports: “Medco wins tentative approval for settlement.” However, this article–Federal Judge Grants Preliminary Approval to Medco Health Class-Action Settlement“–at Stock World (Germany) provides the most detailed coverage of the settlement.

Brian Tumulty for the Journal Washington bureau via the Poughkeepsie Journal reports on the IBM and Xerox cash balance plan cases recently handed down: “Pension rulings put pressure on fed officials: IBM says it will appeal decision.” The article provides an interesting view of how some plaintiffs’ lawyers are viewing the decision and quotes Eva Cantarella, a Michigan-based lawyer who represents Georgia Pacific employees in a pension case pending before the 11th U.S. Circuit Court of Appeals in Atlanta, as saying:

[M]any employers have amended their plans to avoid the deficiencies that occurred in the IBM and Xerox plans. A lot of them have done a pretty good job or come so close that we wouldn’t even bother bringing a suit. . .We have looked at over 40 plans and only felt compelled to file lawsuits in two.

Apparently, Cantarella also represents employees challenging the legality of pension plan changes at another paper company, Bowater.

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) today announced a new compliance assistance guide to help employers, plan sponsors, service providers and state officials understand the federal health benefits law regarding qualified medical child support orders. You can access the Compliance Guide for Qualified Medical Child Support Orders here.

KaiserNetwork.org is reporting in the Daily Health Policy Report that payment of health care premiums are a big issue in the contract negotiations with two unions representing 78,000 employees of Verizon Communications. The union is claiming that “none of the unionized telecommunications companies … require employees to share the cost of insurance premiums.”

“Pricey perk lets executives fly high“: USA Today reports.