Month: July 2003

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.

Gardner, Carton & Douglas provides this discussion and analysis entitled, “SEC Approves NYSE and Nasdaq Rules Governing Shareholder Approval of Equity Compensation Plans.”

ICMA Retirement Corporation provides an analysis of the new section 457 regulations which you can access here. The site provides summaries of the key provisions broken down into these categories: Contributions, Withdrawals, Portability, and Other. The article states that the IRS has not provided any guidance regarding deadlines for amending 457 plan documents to comply with the final regulations.

I enjoyed Nevin Adams’ op-ed today at PlanSponsor.com–“IMHO: Reality “Check? It’s hard for plan sponsors to catch a break in the headlines these days” responding to this Wall Street Journal article which you can now read at SFGate.com and which was discussed here yesterday.

Watson Wyatt provides an article on the pension funding crisis in the Watson Wyatt Insider–“Pension Plan Sponsors Looking for Funding Relief from ‘Perfect Storm’ Conditions“–which recommends legislation to ease the funding situation. The article states that “contribution amounts will be significant and burdensome, and relaxing funding requirements somewhat could help plan sponsors keep their plans afloat in these stormy economic times, which would certainly benefit plan participants as well.” The article also suggests that “[e]xtending the current JCWAA relief for another two years or adopting the higher rates proposed in Portman/Cardin would go far in providing plan sponsors with the funding relief they sorely need right now.”

Corey Rosen for the National Center for Employee Ownership provides this discussion: “Microsoft Replaces Options With Restricted Stock.” You can also access an article discussing restricted stock generally at the NCEO website as well.

Todd Bishop for the Seattle Post-Intelligencer Reporter provides this article via the website for the International Foundation of Employee Benefit Plans discussing Microsoft’s arrangement with J.P. Morgan for the sale of underwater options: “Microsoft Plan Would Revive Underwater Options.”

“Investors hail shift in options“: Mark Schwanhausser for the Mercury News via Yahoo! News.com reports on how institutional investors are praising Microsoft’s recent announcement to abandon its stock option program in favor of restricted stock. The article reports that one reason institutional investors favor the shift is that Microsoft’s top 600 bosses must now meet performance targets to get their restricted-stock grants. Also, you can read about the latter feature of Microsoft’s compensation program from the transcript of Microsoft’s Press Conference held July 8, 2003.

Corey Rosen for the National Center for Employee Ownership provides this discussion: “Microsoft Replaces Options With Restricted Stock.” You can also access an article discussing restricted stock generally at the NCEO website as well.

Todd Bishop for the Seattle Post-Intelligencer Reporter provides this article via the website for the International Foundation of Employee Benefit Plans discussing Microsoft’s arrangement with J.P. Morgan for the sale of underwater options: “Microsoft Plan Would Revive Underwater Options.”

“Investors hail shift in options“: Mark Schwanhausser for the Mercury News via Yahoo! News.com reports on how institutional investors are praising Microsoft’s recent announcement to abandon its stock option program in favor of restricted stock. The article reports that one reason institutional investors favor the shift is that Microsoft’s top 600 bosses must now meet performance targets to get their restricted-stock grants.