Author: jfortenberry@fortenberrylaw.com

Both ASPA and the American Benefits Council have provided their views on the Bush administration’s pension funding proposals:

• ASPA: “Examining Pension Security and Defined Benefit Plans: The Bush Administration’s Proposal to Replace the 30-Year Treasury Rate”
• American Benefits Council:
  • American Benefits Council’s Position Paper on Treasury Department’s Yield Curve Approach
  • American Benefits Council’s Position Paper on Effect of Pension Interest Rates on Distributions
  • American Benefits Council’s Position Paper on Pension Interest Rate Replacement

Today’s Federal Register.

Federal Reserve Chairman Alan Greenspan spoke to the House of Representatives Financial Services Committee today. The main point of his speech, according to Reuters via Yahoo! News as reported in this article–“Greenspan Vows Low Rates, Sees Recovery“–was that he vowed to keep U.S. interest rates low for a long time, but said that the economy “could very well be embarking on a period of extended growth.” Forbes reports in this article–“Greenspan: Bush admin pension proposal is an advance“–that Greenspan also addressed the Bush administration pension funding proposal and called the proposal “an improvement,” but said that problems remain including company pension rules from the Internal Revenue Service and the Financial Accounting Standards Board that are “more complex than we need.”

Also, Christine Hall for CNSNews via Crosswalk.com reports: “White House, Congress Tackle Pension Quandary.“

The Washington Post has this op-ed: “Fixing Pensions.” The article calls for working out an “approach based on factual, accurate projections of future costs, not convenient fictions that may boost corporate profits now but create more problems down the road.”

“Employees vs. executives: BellSouth, Scientific-Atlanta sued over management of company retirement plans“: MSNBCNews reports that ERISA lawsuits have been filed against BellSouth Corp. and Scientific-Atlanta Inc. The article mentions the Enron and Worldcom lawsuits (which have been discussed here previously) and how all of these cases have brought an increased focus on the role of ERISA fiduciaries. The article also mentions the trend, particularly among the airline industry, of hiring independent fiduciaries to oversee plan investment decisions to avoid having the executives make these decisions “with all the conflict of interest that entails.”

Some good news from CNNMoney.com: “Coming soon: Gains in your 401(k): A strong quarter for stocks should translate into more money in your retirement plan.“

This article–“Court Aces“–by Tony Mauro at Findlaw.com gives an interesting inside view of what U.S. Supreme Court Chief Justice William Rehnquist thinks of ERISA cases. The article quotes Rehnquist as saying, “The thing that stands out about them is that they’re dreary.” The comments came in his annual talk to the 4th U.S. Circuit Court of Appeals recently in which he spotlighted the little-noticed decisions of the term. One he picked out was Kentucky Association of Health Plans v. Miller, which held that Kentucky’s “any willing provider” law affecting HMOs was pre-empted by ERISA. You can read about the case in posts at Benefitsblog here, here, and here.

Broc Romanek at The CorporateCounsel.net Blog reported in a post this weekend that Microsoft will be awarding “restricted stock units” rather than stock awards in the usual sense.

That is what today’s edition of the Wall Street Journal is reporting in an article by Joseph Pereira entitled: “To Save on Health-Care Costs, Firms Fire Disabled Workers: Policy Shift at Polaroid Leads to Scrimping, New Worries for Extremely Sick Employees.” (Subscription required.) The article contains some heart-wrenching stories of how the disabled have been impacted by what the Journal says is a trend among companies of dismissing the disabled to cut costs. The article refers to a Mercer Human Resource Consulting study last year which found that 27% of the 723 companies surveyed dismiss employees as soon as they go on long-term disability and that 24% dismiss them at a set time thereafter, usually six to 12 months, with only 15% of companies keeping the disabled on as employees with benefits until age 65. The article also refers to DOL statistics which show that there has been a 62% increase in those on long term disability since 1992 and suggests an “aging work force” could be the cause.

All of this is further complicated by the Ninth Circuit case last year “Lessard v. Applied Risk Management” in which the court held that a buyer and a seller in a corporate transaction violated Section 510 of ERISA where the buyer (in an asset sale) did not hire seller’s employees who were on extended leave of absence. Section 510 of ERISA provides:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter, section 1201 of this title, or the Welfare and Pension Plans Disclosure Act [29 U.S.C. 301 et seq.], or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act.

You can read about the case in an article by BenefitNews.com and in an article by White & Case LLP. The Journal reports a discrimination lawsuit having been filed last week against Polaroid on behalf of disabled workers in federal court in Boston.

Today’s Federal Register.

The Boston Globe reports today, regarding Microsoft’s decision to end its stock option program: “No rush yet to abandon stock options: Firms that hope to grow see them as worker lure.” The article reports that “[w]hile some area technology companies say they are considering a plan to phase out stock options in favor of more stable restricted stock awards, most said they did not plan to change the way they compensate employees in the immediate future.”

USAToday, however, reports: “Citigroup doing away with stock options.”

Lisa Bowman for CNET News.com writes a very good article discussing the future of stock options via ZDNet.com entitled, “Stock options: End of an era?” The article reports that, based upon an internal memo, Microsoft employees at a certain level–who would normally be given 1,320 options–will get 325 restricted stock awards under the new Microsoft program. The article reports compensation experts as saying that the award is in line with a typical industry ratio of one share grant for every three or four options. In addition, the article quotes Martin Staubus, director of consulting for the nonprofit Beyster Institute for Entrepreneurial Employee Ownership, as stating that companies will increasingly turn to a “smorgasbord of incentives–including options, stock grants, cash and even souped-up retirement plans–rather than follow any single trend as they did with stock options in the 1990s.”

Today’s edition of the Wall Street Journal provides this article by Matt Murray and Lee Hawkins Jr., regarding House and Senate bills pertaining to Medicare prescription drug benefits: “Employers Will Face Many Choices, Including Trimming or Cutting Out Prescription Programs for Retirees.” (Subscription required.) The article reports that the “Congressional Budget Office has estimated that 37% of retirees now covered by a company plan would lose employer-provided drug benefits under the Senate bill, and 31% under the House proposal.”

Also, this by Mick Wingfield from the Journal: “Shift in Stock Options May Be At Expense of Accounting Purists.” (Subscription required.)

Finally, Alwyn Scott for The Seattle Times via NewsAlert.com has this article: “Some Analysts Fear Long-Term Consequences of Plan to Erase Pension Shortfalls” The article quotes some as saying that the proposed Bush administration pension funding changes (which you can read about here under Benefitsblog’s Pension Funding archives) are mere “accounting wizardry” or “hocus-pocus” while others say it is badly needed in this economy to preserve the defined benefit plan as a viable retirement program which companies will be willing to continue.

Seyfarth Shaw publishes its analysis of the final catch-up contribution regulations in this article entitled: “http://www.seyfarth.com/db30/cgi-bin/pubs/071103%20Catchup%20Rules.pdf”>Final Catch-up Contribution Regulations Exempt Union Plans..” The article discusses how the most important change in the regulations is that the “universal availability” requirement no longer applies to union employees covered by a collectively bargained agreement. What this means is that an employer can provide catch-up contributions for all of its non-union employees without being required to offer catch-up contributions to its union employees.