Month: September 2003

The Wall Street Journal today tells you how to start a blog.

Also this article from Sunspot.net: “Weblogs finding a home in nation’s workplace.” The article notes the legal concerns of workplace blogs:

Christopher Wolf, a partner at the Washington law firm, Proskauer Rose, thinks the potential perils of workplace blogging are so great that he advises clients not to start them. “People are just more casual in the stuff they put on the Internet,” Wolf said. “Recording one’s thoughts can lead to problems for both the employer and the employee because it becomes readily available for all to see.”

My thoughts: workplace blogs are probably here to stay due to the many benefits they offer and legal experts should come up with good guidelines and helpful procedures for handling this very important tool.

The Washington Post today: “Bill Would Modify Pension Plan Rules.” The article by Albert Crenshaw reports that “Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) plans to sponsor legislation that would require operators of pension plans to take into account the age of their workforce when computing pension liabilities.” The article also reports that Grassley has said through an aide “that his proposal has ‘a solid core of bipartisan support’ in the committee and is important because ‘workers need reliable funding of their pensions and employers need a reliable basis on which to calculate pension payments.'”

“United pension fuels anxiety: Funding gap stirs retirement fears,”: The Denver Post is reporting. Also this from the Honolulu Star-Bulletin regarding the Hawaiian Airlines pension crises: “Pilots’ pension ruling delayed.”

Here’s a great article from the Detroit Free Press on a growing benefits trend–paid-time off plans: “Flexible Absence: Employers take the sick out of sick leave: More companies pool sick, vacation and leave time.” The article notes how the plans have reduced sick leave for employees. (Question: But are more employees coming to work sick under these paid-time off plans?)

Regarding the California Health Insurance Act of 2003 (SB 2) passed late last week, the Mercury News has this: “What health insurance bill means: Q & A: Sizing Up Plan Passed by Legislature.”

The Philadelphia Inquirer today reports that Mayor Street wants to end the City’s DROP plan: “Street risks votes with retirement-plan stance.” According to the article, Street wants to end the Deferred Retirement Option Plan which is an experimental program allowing workers to receive lump-sum payments in exchange for delaying retirement for up to four years because it is reportedly “draining money from the city.”

Another article from Albert Crenshaw for the Washington Post yesterday: “Feeding the 401(k), Even in Bad Times.” The article reports on this study by the Investment Company Institute. PlanSponsor.com reports on the study–“EBRI: Bears Merely Scratched 401(k) Balances“–and the 401khelpcenter.com has this press release–“Asset Allocation and Continued Contributions Muted Effects of Bear Market on 401k Balances.”

“Legislature passes bill requiring many companies to provide insurance“: SFGate.com is reporting that California will become the fourth state in the country to require employers to offer their workers health insurance if a bill which passed the Senate on Friday, 25-14, and the Assembly early Saturday, 46-31, is signed by Governor Gray Davis. According to the article, California will then join Hawaii, Washington and Oregon, as states with similar employee-mandated health insurance systems. The Mercury News has this report about the bill: “Health insurance legislation at-a-glance.”

You can obtain information about the bill at this link.

Other reports:

The East Bay Business Times: “Health care bill’s cost to fall on state’s employers.“
The Sacramento Bee: “Major health change is OK’d: Legislation would assure care for 1 million uninsured workers.”

An article from the The Galen Institute–“Tired Ideas and Innovative Solutions“–has this to say regarding the possible future challenges under ERISA:

My colleague Greg Scandlen predicts that the legislation, if signed by an apparently willing Gov. Gray Davis, will face years of court tests. The Employee Retirement Income Security Act (ERISA) makes it clear that the federal government, not states, have authority over employee health plans. (Hawaii’s employer mandate was grandfathered in the 1970s.) But Burton has written his bill to make it a test case that supporters believe can crack ERISA.

Newsday.com is reporting: “Avaya switching salaried employees from pension to 401(k) plan.” The article states that Avaya Inc. is ending its defined pension plan for U.S. salaried employees and instead beefing up its 401(k) plan, affecting approximately 8,300 salaried employees in the United States. According to the article, Avaya’s pension plan had assets of $1.94 billion and was underfunded by $798 million as of Sept. 30, 2002.

The Philadelphia Inquirer today reports: “United struggling with pension options.” The article states that “United Airlines, seeking ways to ease a huge pension burden before emerging from bankruptcy, faces several unpleasant options, including, as a last resort, terminating the plans, according to industry analysts.” The article also reports that “United is pushing Congress for changes to pension-funding laws, particularly regarding the deficit-reduction contributions, which have the effect of front-loading the financial burden.” Another article on the subject at RockyMountainNews.com: “Retired pilots defend pensions: Ex-United workers seek help to ensure benefits aren’t cut.”

On Wednesday, FASB pushed back the target date for issuing new rules to force companies to expense options as they began discussions on the controversial topic of stock option valuation. Reuters reports: “US accounting board tackles option valuation.” According to the article, FASB said it expected to issue a proposed rule in the first quarter next year and a final rule by the third quarter after that. It also debated the merits of various models to value stock options, “stating a preference for a model other than the widely used but often-criticized Black-Scholes method.” The San Mercury News reports on the action taken as well: “FASB delays stock-option proposal.”

EBIA Weekly in their newsletter is reporting that the Treasury Department has released two letters, Treasury Tax Correspondence, 2003 TNT 172-44 and 2003 TNT 172-45, indicating that it is reconsidering the issue of whether reporting on Form 1099 is required for payments to health care providers with debit/credit cards under health FSAs and HRAs. The letters state that Treasury is reviewing “whether the reporting requirement is appropriate under existing law [and] the appropriateness of applying any reporting requirements on a prospective basis.” As discussed here in a previous post, Harry Beker, Esq., of the Office of Chief Counsel with the IRS, speaking at a conference of the Employers Council on Flexible Compensation (ECFC), announced that officials were looking into a possible waiver of the 1099 requirement.

Mike O’Sullivan at Corp Law Blog tells you why you need a copy of the ABA Model Stock Purchase Agreement With Commentary in a post today. Thanks, Mike, for pointing out a good resource.

Yesterday, the IRS issued a press release announcing the issuance of final regulations governing the taxation of split-dollar life insurance arrangements and the issuance of Revenue Ruling 2003-105 declaring that “certain prior administrative guidance on split-dollar life insurance arrangements is now obsolete.” The press release gives a summary of the new rules:

The final regulations provide that the tax treatment of split-dollar life insurance arrangements will be determined under one of two sets of rules, depending on who owns the policy. If the executive owns the policy, the employer’s premium payments are treated as loans to the executive. Consequently, unless the executive is required to pay the employer market-rate interest on the loan, the executive will be taxed on the difference between market-rate interest and the actual interest. If the employer is the owner, the employer’s premium payments are treated as providing taxable economic benefits to the executive. The economic benefits include the executive’s interest in the policy cash value and current life insurance protection.

More on this later . . .

In a previous post here this week, I discussed the Sanders amendment which was passed by the House on Tuesday and added to the Fiscal 2004 Transportation-Treasury Appropriations Bill. The Amendment would prohibit any funds in the bill from being used to assist in overturning the IBM cash balance plan decision handed down by the federal district court of Southern Illinois last summer. One comment made on the House floor in support of the amendment: ” . . we should not mess with this. . . I do not think the Congress should be messing with this. I do not think the administration should be messing with this. I think this should be left to the courts.” (The House member quoted also called the cash balance plan controversy an “explosive political issue.”)

Ironically, in a CNBC interview with Seventh Circuit Judge Richard Posner entitled “Richard Posner discusses his position on law, pragmatism and democracy” on Monday, July 28th (prior to the issuance of the opinion in the Xerox case, Berger et al. v. Xerox, which was written by Judge Posner) Mario Bartiromo for CNBC asked Judge Posner about his views regarding employees suing pension funds over reduced payments. His response was that with all of the litigation and all of the “detailed regulations of pension funds,” Congress might have to “step in at some point and change the rules.” Interestingly enough, as mentioned here before, Judge Posner may end up being one of the judges who will decide the appeal in Cooper et al. v. IBM Personal Pension Plan et al. since the case will go to the Seventh Circuit on appeal.

Well, it seems that Congress would like the courts to unravel the mess, and perhaps the feeling of some judges is that Congress should unravel the mess . . .

Towers Perrin has called on Congress to unravel it in this press release: “Towers Perrin Calls for Legislative Clarity for Cash Balance Plans.” Quote of Note:”It is in everyone’s interest for there to be clarity with respect to the rules governing cash balance plans. For years, the private pension system in the U.S. has been a key pillar of retirement security for millions of Americans. Confusion around the appropriate guidelines for the design of cash balance plans can only undermine private pensions and threaten this security . . .We believe that Congress should act immediately to clarify the past and future status of these plans.”