Month: May 2004

From the Financial Times.com, “401(k) investors, prick up your ears“:

Dear reader, ask yourself: Have you ever looked at the roster of mutual fund offerings in your 401(k) and wondered, how. . . did this fund get in here? Now you know. Investors can be forgiven for suffering from scandal fatigue at this point, but they should prick up their ears on this one. No man can serve two masters, yet many pension consultants routinely do. . .

An op-ed from John Wasik for Bloomberg.com–“Many Questions, Few Answers on Pension Consultants.”

From Forbes.com, “Funds: Many investors neglect the key to retirement“:

In a study, the Employee Benefit Research Institute and the Investment Company Institute came up with surprising answers that suggest how individuals can boost their retirement prospects. . . Even if stocks match the returns of their worst 50-year period on record — 1929 to 1978 — workers with continuous 401(k) coverage would still be able to replace 72 percent to 92 percent of their pre-retirement income. So if you have a 401(k), take advantage of it.

From ABC Action News.com, “PA Workers in Retirement Rush”:

More than 1,400 state employees have announced their retirement this year, and officials say another 4,000 are expected to do so by the end of June. That way they’ll avoid paying more for health insurance. Employees who retire after July first will see a reduced benefits package, according to provisions in the 2003 state employees’ contract. That deadline has prompted one state worker in 14 to call it quits this year – and one in nine over the past 18 months

From Liz Pulliam Weston at MSN Money.com, “Is the new wave in health insurance for you?“:

Architect Robert Payne of Richmond, Va., signed up for a Medical Savings Account — the predecessor to the HSA — as soon as Congress made them available in 1997. He bought a high-deductible insurance policy that required him to pay the first $3,500 of medical expenses for himself and his wife each year, and put that much tax-deductible money into an investment account offered by Health Savings Administrators, also of Richmond. . . Most years, the Paynes haven’t had to take much out of their account, which is invested in low-cost Fidelity mutual funds. Even after back surgery last year, Payne still has a $30,000 balance. “When you’re self-employed, it really couldn’t be any better,” Payne said. “You can put away money, and it keeps compounding.”

From the blogosphere:

From the TaxProf Blog, “The End Of Tax As We Know It?“:

Six red-state Republican Senators (Brownback (Kan.), Craig (Idaho), Chambliss (Ga.), Crapo (Idaho), Graham (S.C.) & Inhofe (Okla.)) have introduced the Tax Code Termination Act (S. 2463), which would repeal the Internal Revenue Code as of January 1, 2010. The bill does not say what will take the place of the Tax Code. Instead, the bill directs that Congress enact a new “simple and fair” tax law by July 4, 2009. . .

From Roth CPA.com, “IRS: OZONE POLICE.”

If you are interested in the whole Atkins-diet phenomena, the Securities Litigation Watch has an interesting post worth reading, “Blaming Atkins, Part III: And We Have a Winner.”

The law firm of Reish, Luftman, Reicher & Cohen has posted on their website the Memorandum in Support of Tittle Plaintiffs’ Motion for Preliminary Approval of Proposed Partial Settlement and Conditionally Certifying Class for Purposes of Settlement (pdf 135 pages). (Thanks to Benefitslink.com for the pointer.) The settlement was reached on Wednesday, May 12, 2004 as discussed in previous posts here and here.

The Memorandum contains an interesting discussion on the issue of damages:

To determine damages, a Court may look at the return plaintiffs’ would have obtained had the plan’s investment in Enron stock been invested instead in the best performing fund alternative in the plan. . . The Defendants will undoubtedly attempt to dispute this measure of damages or offer some alternative measure of damages. . .

In order to assist the Court with its evaluation of the adequacy of the settlement amount, the following information is provided with respect to theoretical damages for both the Savings Plan and ESOP. The analysis for the Savings Plan includes separate calculations of both “purchaser” and “holder” damages because both those who held stock in their accounts at the beginning of the Class Period and allocated moneys to the Enron Stock Fund (and received matching contributions from Enron in the form of Enron common stock) during the Class Period were damaged. . .[T]the approximate range of total holder and purchaser damages for the Savings Plan and the damages for the ESOP, not taking into account the risk of not prevailing, is between $1.1 billion and $1.2 billion. Therefore, under scenarios assuming the highest conceivable recovery after a full trial on the merits, the proposed settlement amount is between 7.73% and 7.09% of the total potential damages suffered by the Savings Plan and ESOP. If, as the defendants likely will argue, only purchaser claims for the Savings Plan may be considered, the range of alleged damages is between $856 and $865 million, under which scenario the proposed settlement amount is between 9.94% and 9.83% of the damages allegedly suffered by the Plans.

This article from the HoustonChronicle.com–“Recovery is closer for Enron retirement cash
But Lay, Skilling hold partial claim,” reports that “[a]bout 20 percent of the total would likely be consumed by federal fines and plaintiffs attorneys fees.”

The U.S. Senate Special Committee on Aging held a hearing today on the topic of health savings accounts. You can read testimony from the hearing or view the hearing at this link. (There is some good information here for those interested in HSAs, especially this survey from Mercer.)

June 2004 Applicable Federal Rates are here. (Compliments of Benefitslink.com)

Speaking of Benefitslink.com, Dave Baker, benefits-internet-guru, has rolled out a great new search engine, at no extra charge, I might add. Thanks, Dave! If you want to thank him too, you can do so by clicking here.

Palmer & Dodge LLP has published a handy summary (pdf) of the benefits issues pertaining to the legalization of same-gender marriages in Massachusetts. Also, this article from BusinessWeek Online indicates the legal battles ahead will keep benefits professionals very busy. Some companies are already scaling back their domestic partnership benefits programs as discussed in this article here from the Washington Post. And cost will be a factor as this article from the Washington Times reports:

A General Accounting Office report lists 1,138 federal laws in which marital status conveys benefits, rights or privileges. The benefits include Social Security, disability payments, food stamps, Medicare and welfare. “Won’t this just break the bank?” said Rep. Spencer Bachus, Alabama Republican, during a House Judiciary Constitution subcommittee hearing last week. . . Health care and retirement benefits for domestic partners of federal employees would cost the government about $1.4 billion from 2004 to 2013, according to a Congressional Budget Office report. . .

Also, retired government employees in Iraq are finally getting their pensions, as reported here by Blogger Arthur Chrenkoff. (From the Wall Street Journal‘s Best of the Web Today.)

Oh, and, what new skills do you need for the 21st century? The answer is here. (From the TaxGuru.)

The DOL has announced that it is launching a national education campaign called “Getting It Right—Know Your Fiduciary Responsibilities” in this press release. An excerpt from the press release:

“Strong fiduciary oversight and protecting workers’ benefits is our highest priority,” said Secretary Chao. ‘Getting it Right,’ however, can be challenging. This is particularly true for small and medium-sized employers who have limited time, resources and access to professional help with benefit programs. Today, we are announcing a series of educational seminars to help plan sponsors understand the rules and meet their responsibilities to workers and retirees, thereby improving their financial security.”

Visit the DOL’s Fiduciary Education Campaign website here.

Read U.S. Secretary of Labor Chao’s comments on the program here in which she states:

The Department uncovered the need for this kind of program because of our vigorous enforcement efforts in the health benefits and pension plan areas. In FY 2003 alone, our enforcement recovered $1.4 billion for employee pension and health benefit programs. . . [M]any employers have not implemented a systematic process to educate fiduciaries about their responsibilities under ERISA. We have found that many ERISA fiduciaries are generally not full-time plan fiduciaries. They have other jobs—for instance, running the company—and may not spend time daily focusing on their retirement plans. This program offers a helping hand to those who want to do the right thing, so that the pension plans of workers will be better protected. That’s the goal of compliance assistance.

You can also listen to an audio version of the news release here.

Some related reading from BizJournals.com: “Are you living up to responsibility?“

The Associated Press via SFGate.com is reporting that, for the second time in a week, House Republicans have blocked a Democratic attempt to force a vote on the new overtime pay rules issued by the Department of Labor and discussed in a previous post here. According to reports:

Tuesday’s vote, 216-199, barred an effort by Democratic Rep. George Miller of California to get a vote on the new rules, which take effect in August. Miller’s provision would require the Labor Department to retain the eligibility of all workers who currently qualify for overtime pay. The House had also rebuffed Miller’s effort last week.

The Senate approved a similar measure earlier this month which you can read about here.

The Internal Revenue Service has announced that it is introducing two new tools to help small businesses keep their employee retirement plans compliant with federal tax law. The tools are as follows:

• A Check-Up for Your SEP, SIMPLE or Similar Plan
• A Newsletter entitled “Retirement News for Employers.” You can access the first installment for Spring 2004 here.

The Newsletter has a section entitled, “We’re With the Government and We’re Here to Help You.” (It is great to know the IRS has a sense of humor. Remember that line when you’re audited. :-)

You can read more about how the IRS has used these checklists in the past in this previous post entitled “Plan Information or Pre-Audit Preparation Packets?“

How about this? (Courtesy of the BBC via Discourse.Net) Thanks to TaxProf Blog for the pointer.