Month: June 2003

Can you believe it? Pensions the subject of a computer game? That’s what the BBC News reports in this article : “Pension crisis: The game.” The article states that the Amicus union will e-mail the game to 50,000 people who are not in a trade union in a bid to highlight the threat to company pension schemes.

More on pension deficits from TheStreet.com: “Pension Problems Threaten Earnings Quality.”

Reuters reports: “NYSE to Let Investors Block Option Plans.” The article reports that the “New York Stock Exchange has informed its U.S. listed companies that new stock option plans or significant changes to existing plans will require shareholder approval under stricter rules expected to take effect next week.” A memo provided by the exchange to Reuters on Monday “described the imminent changes to executives of 2,800 companies listed on the Big Board.”

Jana Tchinkova for The Ticker reports–“Odd Blend May Be a Match”–and discusses pension funds turning to hedge funds as an alternative investment.

Today’s edition of the Wall Street Journal provides this report: “Fidelity Ends Sales Charge On Five of Its Largest Funds.”

The WSJ also contains a very good article today: “Employees May Pay More on Retirement Plans: Labor Department Guides Sponsors to Pass on Costs Involving Administration.” The article discusses Field Assistance Bulletin 2003-3 which allows certain plan expenses to be passed on to participants. Highlighted is the Internal Revenue Code Section 411 issue which arises due to the fact that, according to the FAB, plan expenses can now be charged to those employees who have left a company yet are still vested in their account, even if those same expenses are not charged to participants still employed by the plan sponsor. The article reports Don Roberts, an IRS spokesman, as stating: “We are aware of the issue that is out there, but we don’t have any guidance at this point as it may relate to Code Section 411.”

Today’s Federal Register is here.

The Federal Register contains temporary regulations which provide rules to prevent the duplication and acceleration of loss through the assumption by a partnership of a liability of a partner in a nonrecognition transaction. The temporary reg.’s also prohibit partners and partnerships engaging in transactions described in IRS Notice 2000-44 from relying on the exception in Internal Revenue Code (“Code”) section 358(h)(2)(B).

The Federal Register contains proposed regulations relating to the definition of liabilities under section 752 of the Code. The proposed reg.’s provide rules regarding a partnership’s assumption of certain fixed and contingent obligations in exchange for a partnership interest and provide conforming changes to certain regulations. They also provide rules under Code section 358(h) for assumptions of liabilities by corporations from partners and partnerships.

The Federal Register also contains a lengthy DOL Prohibited Transaction Exemption 2003-19, to replace Prohibited Transaction Exemption 97-63, involving State Street Bank and Trust Company (State Street). The Exemption permits securities lending transactions between State Street, its United States (U.S.) domiciled affiliates, and certain employee benefit plans and/or commingled investment funds holding plan assets, provided that State Street (through any division or U.S. affiliate of State Street or of its parent) acts as securities lending agent (or sub-agent). The exemption also permits receipt of compensation by a U.S. registered introducing broker affiliated with State Street in connection with an arrangement whereby securities are lent to an unrelated U.S. registered broker-dealer who in turn lends such securities to clients of the introducing Broker, provided that certain conditions are satisfied.

The Associated Press via the Washington Post reports that the U.S. Supreme Court today “upheld a university law school admissions policy that gives minorities an edge, ruling that race can be one of many factors that colleges consider when selecting their students.” Of course, SCOTUSBlog and How Appealing provide extensive reporting on all of the U.S. Supreme Court opinions delivered today.

Today’s Federal Register is here.

“Pensions in peril: With 77% of Canadian plans in a deficit position, sponsoring companies are being asked to cover the shortfall. They can’t afford to be too generous”: the National Post has this excellent article by Paul Purcell which discusses the alternatives for plan sponsors with big pension deficits.

The Washington Post has this article by Albert B. Crenshaw: “401(k)s: Remember Them?” The article reports how employees are ignoring the risks of investing too heavily in company stock, i.e. putting all of their eggs in one basket, even though many companies have eliminated restrictions on participants’ ability to shift out of company stock.

Business Week Online provides this good news for the economy: “A Hidden Stash? New research says taxes on boomer retirement savings could bring in trillions.” This great article discusses a new, as-yet-unpublished paper by Stanford University economist Michael J. Boskin which estimates that the value of ordinary income tax baby boomers will pay on their retirement accounts as they begin to retire through 2040 is roughly $12 trillion in today’s dollars. The article reports that Mr. Boskin has zeroed in on an “issue that has escaped the notice of the vast majority of economists, politicians, and investment experts.”

“Lawyers see complex provisions in Bush’s $350-billion tax plan”: Mike Colias for Providence Business News reports on the legal intricacies of the Jobs and Growth Tax Relief and Reconciliation Act.

Shearman & Sterling has posted this very good article on the ramifications of the May 28th decision of In Re The Walt Disney Company Derivative Litigation issued by the Delaware Court of Chancery. The article suggests that independent directors–“most typically those comprising a designated compensation committee”– be involved in the negotiation and review of the terms of executive officers’ employment and severance packages and such negotiations be conducted in an “arms’ length manner.” The article provides a number of steps directors should take in approving such packages.

Lou Dobbs has this article for USNews.com: “Retirement realities.” The article warns that there is a “retirement crisis” in America and urges “individuals, policymakers, and corporate decision makers alike to work toward a solution.”

That’s the advice in this article–“401(k) trustees feel heat”–by Harriet Johnson Brackey for the Miami Herald. Derek Loeser, a partner in the Seattle law firm Keller Rohrback, in discussing ERISA plan fiduciaries states: “[t]heir duty as fiduciaries is the highest known to law. This should remind them they can’t operate on autopilot.” Thomas Noonan, president of Union Financial, a registered investment advisor in Fort Lauderdale, warns that “especially at smaller companies, the 401(k) plan trustees often rely blindly on an investment advisor.” A good time for ERISA fiduciaries to consider this . . .

LeBoeuf, Lamb, Green & McRae, LLP has posted this article: “Applicability of Section 906 Certification to Form 11-K Filings.” Debevoise and Plimpton has published this article by Lawrence K Cagney and Elizabeth Pagel Serebranskys as well: “Sarbanes-Oxley Certification of Form 11-K Filings Required.” The article at Debevoise and Plimpton has a detailed discussion of who should sign the certification and the criminal liability involved.

See previous posts on the subject here.

Liz Pulliam Weston for MSN reports on how the Jobs and Growth Tax Relief and Reconciliation Act (“JAGTRRA”) makes 401(k)’s and 403(b)’s “lose a little of their sparkle . . . because the break you receive for contributing to them shrinks along with your tax bracket.”