Author: jfortenberry@fortenberrylaw.com

Sidley Austin Brown & Wood LLP provides this great discussion on the 906 Certification issue regarding SEC 11-K filings as well as this discussion. See also this post at Bowne Securities Connect. (Previous posts on the subject are here.)

Interesting post by John Palfrey on how Reed Smith encourages Denise Howell with her blog. (Check this out as well.)

Reuters provides this article by Martha Graybow: “Study finds 401(k) investors not diversified enough.” You can access the study performed by Hewitt Associates Inc. here. The study reports that “the average participant holding company stock had 42 percent of balances in company stock.” It also reports that “more than one quarter (28 percent) of employees held 50 percent or more of their 401(k) plan balances in company stock.” This is all pretty amazing when you consider all of the publicity over Enron about how participants lost their life savings in their 401(k) accounts due to not being properly diversified.

This very interesting study by the Vanguard Group Center for Retirement Research–“Can There Be Too Much Choice in a Retirement Savings Program?”–provides useful information for plan sponsors designing their plans. The study applies the “choice overload hypothesis” to the
401(k) plan arena and may provide some insight as to why employees continue to be heavily weighted in company stock. In my opinion the study seems to say that people simply do not respond very well when provided with too many choices, and may choose what is most familiar to them when confronted with more choices than they can handle.

Thanks, Howard, for pointing us to this great press release from U.S. Senator John Cornyn (R-TX) responding to suggestions by members of the Senate that despite constitutional mandate, and 200 years of Senate precedent, the Congress should select nominees to the Supreme Court. This statement in Senator Cornyn’s letter to President Bush says it all, in my opinion:

“Of course, individual Senators, like all Americans, have the right to suggest possible nominees to the Supreme Court. But no one should be confused into believing that the President is in any way bound, as a constitutional, political, or traditional matter, to follow any of those recommendations. Indeed, it is impossible to comprehend how the President would obey the wishes of 100 individual Senators, each of whom might submit their own slate of nominees.”

Kilpatrick Stockton provides a very good discussion and analysis of defined contribution health plan arrangements which are becoming more popular due to rising health care costs. These types of arrangements were sanctioned in IRS Rev. Rul. 2002-41 and IRS Notice 2002-45 issued July 15, 2002.

This link will take you to the Pension Benefit Guaranty Corporation website page listing all states which have received disaster relief from deadlines due to tornadoes, ice storms, etc. Illinois, Mississippi and Kentucky are among the most recent states which have been given relief.

Today’s edition of the Wall Street Journal has this important article (subscription required) by Jesse Drucker and Theo Francis: “Pensions Fall–Not CEO’s Bonus.” The article discusses how in good times, pension surpluses helped to boost corporate earnings which in turn increased executive compensation under executive bonus plans which were tied to net income. However, now that pension plans are underfunded, with many companies having to pump money into their pension plans, companies have been inserting special language into their bonus plans so that bonuses can continue to be paid, despite earnings, according to the article. The article quotes Carol Bowie, director of governance research at the Investor Responsibility Research Center, a Washington research and advisory firm for institutional investors as saying, “This pattern where pension surpluses are included for bonuses but pension expenses are excluded just underscores how these incentive programs can be manipulated in order to maximize payouts.” The article quotes a Verizon spokesman as saying that their executives have always been compensated “based on operational performance and strategic factors” and not based on “losses or gains in the pension fund.”

The 10b-5 Daily by Lyle Roberts has a good commentary on the wave of ERISA 401(k) litigation which has been the subject of multiple posts here.

Today’s Federal Register is here.

This article–“Ruling Approaches in IBM Pension Lawsuit”–by Arden Dale for the Associated Press at MercuryNews.com reports that a ruling in the IBM cash balance plan conversion case is forthcoming, with lawyers having submitted their final documents last week to U.S. District Judge G. Patrick Murphy, who is presiding over the case. (See previous posts on the subject here.)

Stock option expensing is becoming a hot topic among presidential candidates, as reported in this article by Laura Kurtzman at MercuryNews.com–“Gephardt backs foes of options expensing.” Also, this article for Reuters by Ben Klayman reports on the call for better valuation methods for stock options by Cisco Systems Inc. Chief Executive John Chambers: “New method to value options essential-Cisco CEO.”

The news is full of benefits issues today. Much more later . . .