Month: May 2004

For those who are Trekkies and love tax humor, a great comic from the Tax Guru here.

Some important IRS guidance:

• Revenue Ruling 2004-45: Health Savings Accounts–Interaction with other Health Arrangements (via Benefitslink.com) More on this later, I’m sure . . .
• Notice 2004-40: Weighted Average Interest Rates Update (also via Benefitslink.com)

And, the IRS has announced that the “Taxpayer Advocate Service Seeks Input on Systemic Tax Issues“:

“Individuals who have identified systemic issues that affect taxpayers on an ongoing basis will find it both easier and faster to use this new system,” said Nina E. Olson, the National Taxpayer Advocate. “This will improve our ability to be responsive to taxpayers and speed the process of addressing their ongoing concerns.”

Those wishing to bring issues to the attention of TAS can go to www.irs.gov/advocate and click on “What is Systemic Advocacy?” Private information, such as taxpayer names and identification numbers, will be screened out of any submissions. The system will also automatically generate a receipt notice for those taxpayers, tax practitioners, academicians and researchers who use it.

(A way for bloggers and non-bloggers alike to rant anonymously. . . )

The Philadelphia Inquirer today has a whole section referred to as the “Retirement Guide” which contains the following articles:

“Even big nest egg doesn’t make retirement or stock issues easy“

“Costs of Retirement“

“Fee deals can hurt retirement savers“

“You may never retire from stock market“

“His visible fees are tricky to market: A low-cost alternative to mutual funds is a hard sell in an industry where costs aren’t clear“

In today’s post, Broc Romanek has some interesting “inside” info regarding new Item 703 of Regulation S-K which requires public companies to disclose in a table (sample table here via Blank Rome LLP) any purchase made by or on behalf of the company or any affiliated purchaser of the company of shares or other units of any class of the company’s equity securities registered pursuant to Section 12 of the Exchange Act. He states as follows:

[A]t the ABA-JCEB meeting this week, the SEC staff apparently stated that stock repurchases by a 401(k) plan or other employee benefit plan may be required to be reported when the plan is an “affiliated purchaser” within the meaning of Rule 10b-18(a)(3). This could be a real problem in cases where a benefit plan is administered in-house, instead of being handled by a brokerage firm, transfer agent or other outside party. I would wait until the staff has a position in writing on this one before taking any drastic actions, such as hiring a third-party administrator.

The post goes on to describe what an “affiliated purchaser” is within the meaning of the Rule:

(i) A person acting, directly or indirectly, in concert with the issuer for the purpose of acquiring the issuer’s securities; or
(ii) An affiliate who, directly or indirectly, controls the issuer’s purchases of such securities, whose purchases are controlled by the issuer, or whose purchases are under common control with those of the issuer; Provided, however, that “affiliated purchaser “shall not include a broker, dealer, or other person solely by reason of such broker, dealer, or other person effecting Rule 10b-18 purchases on behalf of the issuer or for its account, and shall not include an officer or director of the issuer solely by reason of that officer or director’s participation in the decision to authorize Rule 10b-18 purchases by or on behalf of the issuer.

You can read a good summary of the new rules here (from Palmer & Dodge LLP).

If any other bloggers or readers with expertise in this area of the law have comments on this development, please email me and I will be glad to post them for readers.

From the PBGC today, “PBGC Proposes Expanded Enforcement for Failure to Inform Workers of Pension Underfunding“:

The Pension Benefit Guaranty Corporation (PBGC) today proposed an expanded enforcement program, including a new penalty structure, for administrators of underfunded pension plans who fail to inform participants of the plan’s funding status and PBGC’s guarantee limits. As a transition to this expanded enforcement program, the agency also announced a Voluntary Correction Program to encourage administrators to correct recent failures to issue underfunding notices to plan participants.

The proposal is here (pdf) and information regarding the Participant Notice Voluntary Correction Program is here (pdf). Also, more about Participant Notices here with further information pertaining to the announcement.

From Newsday.com, “Pension Insurer Proposes New Penalties“:

The government’s pension insurance program proposed a new penalty system for companies that fail to notify workers of underfunded retirement plans, tied to the number of participants instead of how late the notice. . . The new policy would impose a penalty of $5 per participant if the plan administrator issues the notice on or before it receives written notice of a possible audit from the pension insurer agency. Repeat violators would be charged $20 per participant. If an administrator issues a notice after receiving the agency’s written notice, the penalty would be $40 per participant and $100 per participant for repeat violators. However, if the plan administrator sends a notice within a year after the due date, the agency would prorate the penalty based on the number of days it was late.

From the Wall Street Journal (subscription required), “Regulators Not Finished With Mutual-Fund Investigations“:

Despite resistance from the fund industry, more law-enforcement actions against mutual funds, managers, directors and their financers are on the way, state and federal regulators said at a conference Wednesday. . . Eight months later, “there is more to come,” New York Deputy Attorney General Beth Golden said at an Institutional Investor mutual fund conference Wednesday. She said targets might include fund directors and firms that knowingly financed abusive trading in mutual funds.”

Also from the Wall Street Journal, “Spitzer Studies New Conflicts on Insurance“:

Since Mr. Spitzer’s inquiry became public last month, most attention has focused on insurance companies paying brokers and consultants for arranging certain property-and-casualty insurance policies, not employee life-insurance and health-benefit plans. . . Mr. Spitzer’s office has said almost nothing publicly about the focus of its investigation, but people familiar with subpoenas sent to the brokers said they appear broad enough to encompass areas beyond property and casualty insurance, including benefits programs.

From CFO.com, “Pension Funding Levels Improving“:

The aggregate funding ratio of the 340 or so companies in the S&P 500 with defined benefit pension plans rose by 6 percentage points by year-end 2003, to 87 percent, from 81 percent the prior year, it noted. However, this is still significantly below the peak of 128 percent at the end of 1999, the last very strong year for the stock market before the ’90s tech bubble burst.

From Steptoe & Johnson LLP via Mondaq, “VEBAs: Possibilities For Employee Benefit Funding.”

From CNET News.com, “Poll shows support for offshoring tax“:

More than 40 percent of U.S. technology executives surveyed would be willing to pay higher taxes to compensate for jobs they send offshore, according to a nationwide poll conducted jointly by CNET News.com and Harris Interactive. These executives agree with the proposition that companies should be required to pay a “per-head tax” for every position sent to another country.

This will never happen, although it provides some interesting food for thought: “Outsource CEOs, Not Workers.”

American companies are busily outsourcing workers when they should be insourcing CEOs from other countries. U.S. CEOs are way too expensive. U.S. CEOs make 23 times as much as CEOs in mainland China, 10 times as much as CEOs in India and 9 times as much as CEOs in Taiwan, according to the latest Towers Perrin worldwide survey.

From the Blogosphere:

A dormant blogger has awakened. Welcome back, Mike!

From the TaxProf Blog, “IRS Offers Amnesty for Investors in “Son of Boss” Tax Shelter.”

It will be interesting to see how the U.S. Supreme Court responds to these important questions relating to findings of fact and other issues in Tax Court cases. (via SCOTUSBlog)

The U.S. House of Representatives voted last week to permanently eliminate what’s known as the “marriage penalty tax” — an extra tax many couples are forced to pay simply because they’re married.

Speaker of the House Dennis Hastert has posted a link to the Marriage Penalty Tax Calculator on his website so married couples can get a better idea of how much they’ll save if the Senate follows the House’s lead and passes legislation designed to kill the tax permanently.

You can read more about the tax relief here and here.

Thanks to Glenn Reynolds of InstaPundit for this pointer:

A blogger has pointed out an error in a judicial opinion and gotten the Ninth Circuit to amend the opinion to correct the error. Interestingly, this isn’t the first time that’s happened.

CBS MarketWatch has this: “Senate votes to block overtime regs.” According to the article:

The chamber voted 52-47 to amend an unrelated corporate tax bill with language that would bar the Labor Department from implementing controversial new overtime rules finalized last month. The new rules would have made some white-collar workers potentially ineligible for overtime pay while expanding overtime eligibility to 1.3 million lower-income workers.

Also, from Reuters via Forbes.com–“U.S. Senate votes to block new overtime rules“:

[F]or the amendment to become law, the Republican-led U.S. House of Representatives would have to agree, and that was far from a certainty.

Finally, this press release from the Employee Benefits Research Institute: “New EBRI Research: Continuing Decline of Pension Plans Likely to Hit Younger Workers & Families the Hardest, Study Shows; ‘A Demographic Time Bomb is Ticking, and the Time to Act is Now.” According to the press release:

The EBRI report notes that between 1975, when the Employee Retirement Income Security Act (ERISA) became effective, and 2003, the number of private employer-sponsored DB pension plans declined from more than 100,000 to less than 31,000. In addition, a number of recent studies have been documenting the continuing decline of pension plans in the United States.

(There is plenty of irony in that statement.)

This is a great article by Albert B. Crenshaw for the Washington Post: “Benefits Bust: No Job-Paid Health, No Pension and More Time to Miss Them.” Everyone should read it. Here is an excerpt:

The result is a large and growing number of retirees and near-retirees who realize that major retirement benefits they had counted on will not be there. For health insurance, instead of a company-sponsored program similar to the one they enjoyed while working, they are being left to a combination of the government’s Medicare program — itself struggling with funding problems — and whatever private insurance they themselves can buy. Pension changes will leave them to live on a combination of their own savings and Social Security.

Yikes! to that very true last statement. As we all know, Americans aren’t saving and Social Security has serious problems.