Month: March 2005

From MarketingProfs.com–“How To Write Compelling Blog Posts“:

Forget what you learned about business writing in school if you graduated before 1990. Go ahead! Start sentences with “and” or “but.” Don’t be afraid to break archaic rules. But, jeez, follow all grammatical rules that provide clarity to your content.

. . . Stiff, formal writing is only for lawyers. And you know what Shakespeare said about them. . .

The IRS has set up a new web page called the “EP Examination Process Guide” which provides links to a great deal of helpful information for practitioners and taxpayers who need to understand more about the Employee Plans examination process. Some highlights:

1. An EP examination flowchart.

2. EP Examination Guidelines providing “guidance on specific technical topics of particular interest relating to qualified retirement plans.”

3. Top Ten Issues identified during examinations of 401(k), 403(b), EPTA and multi-employer plans.

4. Compliance Monitoring Procedures which include examination tips, audit techniques, check-ups, publications and other guidance useful in determining if a plan is in compliance with the Internal Revenue Code and regulations.

(Source: Benefitslink.com)

Greenspan gave his thoughts on tax reform today in testimony before the President’s Advisory Panel on Federal Tax Reform which included comments about the baby-boom generation and the need to boost “greater national saving[s].” You can access his testimony here. Excerpts:

1. “Given the expertise on this panel and the ultimate responsibility of the Congress and the President for the tax system, I would not presume to suggest the best specific path for reforming the tax system. However, past experience suggests that as the panel’s work gets under way, one of the first decisions that you will confront is the choice of tax base; possibilities include a comprehensive income tax, a consumption tax, or some combination of the two, as is done in many other countries. As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth–particularly if one were designing a tax system from scratch–because a consumption tax is likely to encourage saving and capital formation. However, getting from the current tax system to a consumption tax raises a challenging set of transition issues.“

2. “The choice of the tax base and other provisions of the code must also be taken in light of coming demographic changes. I believe that, as the baby boom generation begins to retire in a few years, it will become increasingly important for the nation to boost resources available in the future through greater national saving and enhanced incentives for participation in the labor force. The tax system has the potential to contribute importantly to those goals, and, at a minimum, tax reform should not hinder the achievement of those objectives.“

TaxProf Blog has more on today’s hearing at this link.

The DOL has announced a new page on their website devoted to the Bush administration’s proposal for pension reform:

As indicated in the President’s FY 2006 Federal Budget, this Web site hosted by the Department of Labor is the official location for all Administration documents pertaining to the President’s single employer defined benefit pension reform proposal. It will be regularly updated to include new documents from other Federal Agencies as well as the Department of Labor.

The website features testimony at today’s hearing before the Senate Finance Committee. More on the hearing here, including these spirited comments from Senator Grassley here.

In addition, access the Joint Committee on Taxation‘s 81-page report entitled the “Present Law and Background Relating to Employer-Sponsored Defined Benefit Pension Plans and the Pension Benefit Guaranty Corporation (“PBGC”).” (Source: The TaxProf Blog)

Don’t miss Kristen Carey’s post over at the Greater Valley Forge HR Law Link, discussing a recent development in Pennsylvania that is causing a flurry–“Pennsylvania Employers Must Be Represented By Legal Counsel At Unemployment Compensation Hearings.” The Commonwealth Court held that a tax consultant involved in the case had improperly engaged in behavior “encompassed within the scope of the practice of law.” (Query as to whether the case will have more far-reaching implications for the practice of law generally in Pennsylvania.)

I was delighted to receive a copy of Jim Wooten‘s recently published book entitled “The Employee Retirement Income Security Act of 1974: A Political History.” Jim is a professor at the SUNY Buffalo School of Law and states in the “Acknowledgements” that he spent more than ten years working on the book, compiling this rich resource for those wishing to understand the history behind ERISA. While I have not yet had a chance to read the whole book, what I have read so far convinces me that it belongs in every ERISA lawyer’s library.

With mandatory arbitration clauses becoming more and more popular with employers, it is predictable that issues will continue to arise in the courts regarding how these clauses are impacted by ERISA. The recent Sixth Circuit case of Simon v. Pfizer, 2005 U.S. App. LEXIS 2881 (6th Cir. 2005) provides some good background regarding the narrow issue of whether or not ERISA preempts arbitration under the Federal Arbitration Act (“FAA”), even though the court in the end declined to rule on the issue.

The ERISA plan in question was an “Enhanced Severance Plan”, or “ESP” for short. Plaintiff had been terminated from his employment and was seeking benefits under the ESP. The plan provided for a three-step claims review process after which an unsuccessful participant could then proceed to arbitration before the American Arbitration Association and the results would be binding on the participant and the employer.

The plaintiff had brought claims against the employer for retaliatory discharge and discrimination in violation of ERISA § 510, improper denial of benefits, breach of fiduciary duty, and failure to provide timely and proper notice of COBRA benefits. The employer filed a motion to dismiss seeking to dismiss all counts of the complaint based on the ESP’s mandatory arbitration provisions and on a failure on the part of the plaintiff to exhaust his administrative remedies.

The District Court denied the employer’s motion to dismiss with respect to all but Count III (breach of fiduciary duty) and refused to require exhaustion of administrative remedies as to plaintiff’s ERISA Section 510 (Count I) and COBRA (Count IV) claims on the basis that the claims were statutory and thus separate and apart from plaintiff’s claim under the ESP.

On appeal, the Sixth Court overturned the District Court’s decision denying the employer’s motion to dismiss with respect to the ESP claims, holding that a “compulsory arbitration provision divests the District Court of jurisdiction over claims that seek benefits under an ERISA plan, such as the ESP.” However, the Court upheld the District Court’s denial of the employer’s motion to dismiss with respect to the ERISA section 510 claim and the COBRA claim, holding that these claims were not subject to arbitration in the case. The Court held that, even though there was some “factual overlap” between the ERISA section 510 claim and COBRA claim and the wrongful denial of benefits claim, nevertheless the ERISA 510 and COBRA claims had “independent legal bases” and were not simply claims for violations of the ESP that had been recharacterized in order to avoid arbitration. The Court went on to state that, because plaintiff’s ERISA Section 510 and COBRA claims were not covered by the arbitration clauses at issue, it was not necessary to address the question of whether ERISA would pre-empt an arbitration clause that did cover those claims.

Nevertheless, despite the fact that the Court did not find it necessary to decide the issue in the Sixth Circuit, the Court did provide a helpful list of cases which had already reached a decision on the issue:

This narrow issue has not yet been addressed by the Sixth Circuit, see Eckel v. Equitable Life Assur. Soc. of the U.S., 1 F.Supp.2d 687 at 688 (noting that the Sixth Circuit had not yet addressed the issue); however, the majority of courts considering this issue have held that disputes arising under ERISA, including COBRA claims, are subject to arbitration under the FAA. See Kramer v. Smith Barney, 80 F.3d 1080, 1084 (5th Cir.1996); Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1115-16 (3d Cir.1993); Bird v. Shearson Lehman/American Express, Inc. 926 F.2d 116, 122 (2d Cir.1991), cert. denied 501 U.S. 1251 (1991); Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds, Inc., 847 F.2d 475, 479 (8th Cir.1988); Peruvian Connection, Ltd. v. Christian, 977 F.Supp. 1107, 1111 (D.Kan.1997); Fabian Fin. erv. v. Kurt H. Volk, Inc. Profit Sharing Plan, 768 F.Supp. 728, 733-34 (C.D.Cal.1991); Southside Internists Group PC Money Purchase Pension Plan v. Janus Capital Corp., 741 F.Supp. 1536, 1541-42 (N.D.Ala.1990); Glover v. Wolf, Webb, Burk & Campbell, Inc., 731 F.Supp. 292, 293 (N.D.Ill.1990).

Please note that employers who include such clauses in their plans may subject themselves to additional fiduciary obligations with respect to notifying participants of such provisions, as indicated in this Ninth Circuit decision here: Chapel v. Laboratory Corporation of America.