Month: November 2003

The Tax Guru-Ker$tetter Letter has this.

The following articles discuss reaction to the agreement made by Congressional conferees to adopt the Harkin’s Amendment relating to cash balance plans (discussed here and here):

• New York Times: “Employers Denounce Move on Pensions“
• Washington Post: “Pension Regulation Advances On Hill: Compromise Would Curb Conversions”
• LA Times: “Congress Derails New Rules on Pensions”
• Reuters via Forbes: ” US employers mad at blow to cash balance pension plan“

Also, from the Wall Street Journal:

• “Cash-Balance Plans Appear To Face a Regulatory Limbo” and
• “IBM Blasts Congress On Pension Inaction”

From Plan Sponsor: “Cash Balance Regs “On” Again – But…“

From the American Benefits Council: “Council Condemns Inclusion of Cash Balance Provision in Appropriations Bill“

From ERIC: “ERIC Statement on Passage of Harkin Cash Balance Amendment“

For those of you who have been following the General Dynamics case before the U.S. Supreme Court (oral arguments were heard Wednesday in the case which you can read about here), the following article highlights a great many of the issues which could arise should the Supreme Court rule that the ADEA allows reverse age-discrimination claims: “United Kingdom: Age Discrimination And Pensions.” Granted, the article deals with Europe, but many of the issues would apply in the U.S. if the employees (age 40-50 group) prevail in the General Dynamics case.

The Philadelphia Inquirer today has a good “how-to” article on calculating required minimum distributions for IRAs: “How to calculate your minimum IRA withdrawals.”

Also, another good article from the Philadelphia Inquirer today on the continuing mutual fund saga: “Fees may be next on fund investigators’ list.”

Thanks to Mike O’Sullivan at Corp Law Blog for informing us about a California Court of Appeals case which held that it is illegal for California employers to award a traditional profits-based bonus to non-exempt employees (see Ralphs Grocery Co. v. Superior Court (Swanson) (Cal. App., Oct. 23, 2003) due to certain California laws which prohibit employers from taking into account certain expenses of the company in determining those profits. You can access his post on the case here.

By the way, the result in this case reminds me of what is going on in the cash balance plan arena. By holding that the bonus plan in this case is unlawful, employers will be discouraged from offering such plans in the first place since requiring them to offer ones which do not take into account legitimate expenses seems unreasonable. It is the same in the cash balance plan arena. With the recent pronouncement by a federal district court that such plans violate ERISA and with the ongoing chaos brewing in Congress over the issue with little resolution in sight, employers will decide that the economically rational thing to do is to “cease and desist” with these plans since they are not required to offer them in the first place. Employees may then be left with their 401(k) plans where employees must bear the burden of providing much of their own retirement. Thus, the irony of it all is that what is termed a “great victory” for employees will in the end hurt employees.

(By the way, I have added a new category over on the right entitled “California and 9th Circuit Legal Developments” to keep track of all of the “fun” stuff going on in California and the 9th Circuit.)

Milliman USA has posted a very good “Client Action Bulletin” entitled “New disclosures for Pensions and Other Benefits.” The Bulletin highlights what was decided by the FASB Board day before yesterday concerning financial statement disclosures for sponsors of pensions and postretirement benefits. For employers with calendar fiscal years, most of the new requirements will apply to the upcoming December 31, 2003 year-end financial statements.

According to the Bulletin:

After reviewing comments from companies, financial statement preparers, and financial statement users, the Board has affirmed its intention to change the disclosure rules, with most of the changes set to take effect as early as the end of 2003.

The Bulletin notes that the decisions made by the FASB Board incorporate several key modifications to the proposal issued this past September, “notably the elimination of a requirement that sponsors disclose expected rates of return segregated by major asset classes.” The Bulletin states further that “the added disclosures could necessitate new calculations and may influence management decisions about pensions and other post-employment benefits.”

Other articles on the subject:

• The Wall Street Journal: “FASB Keeps Existing Format For Corporate Pension Data”
• Plan Sponsor: “FASB Retreats From Partial Pension Accounting Rule”

(An unofficial source tells me that the latter articles could be a bit misleading for plan sponsors since the articles do not appear to discuss the fact that many of the changes will apply to the upcoming December 31, 2003 year-end financial statements.)

The FASB website provides a great deal of information concerning the decisions made by the Board and you can access that information here.

Reuters is reporting on what transpired late yesterday as representatives from the House and the Senate hashed out how to go forward with the Sanders’ and the Harkin’s measures addressing cash balance plans. (Previous post on the issues here.) The article by Reuters–“U.S. lawmakers hit cash balance pension rules“–indicates the following:

Negotiators from both chambers had to reconcile the two approaches as part of the annual spending bill that funds the Treasury Department. They basically embraced the Senate provision and dropped the House language involving the court case.

The article stated further:

. . . lawmakers also said the Treasury must offer legislation within 180 days on how best to convert traditional pensions to the newer cash balance plans — giving the administration another chance to set out a regulatory framework for such changes that Congress might embrace.

You can read about the Senate provision here.

More on this later . . .