Month: January 2009

The Tax Update Blog has the results of its polling of this question: What was the worst newly-enacted Bush-era tax provision? Section 409A won hands down. View the results here.

This is an important age discrimination case for the times we are in: Carras v. MGS 782 Lex, Inc.. The Second Circuit Civil Rights Blog writes about it here. The case involves a likely scenario in our day: an older higly-paid worker being replaced by a younger less-experienced worker for “cost-cutting” reasons. Excerpt from the case:

Although the record shows that MGS was in a difficult financial position and was attempting to cut costs, the District Court’s repeated references to the company’s financial situation reflect, in our view, an impermissible weighing of the evidence. For example, although the District Court acknowledged plaintiff’s offer to work for a reduced salary, the Court concluded that “even a $60,000 salary would have presented a substantial [financial] issue.” (Opinion 14.) However, a jury could have determined, based on plaintiff’s offer to work for less than what was paid to Winegard, that the employer’s motivation for firing him was not cost cutting but was rather discrimination against his age.

This is an important age discrimination case for the times we are in: Carras v. MGS 782 Lex, Inc.. The Second Circuit Civil Rights Blog writes about it here.

In this previous post here, I have written about how targeting for layoff those employees who are costing the company more when it comes to health care costs or pension costs is unlawful under ERISA Section 510. The Carras case, however, involved targeting for layoff an older employee who was costing the company more when it came to his salary. (Benefits were not discussed.) Unfortunately, the case involves what is probably a likely scenario in our day: an older higly-paid worker being replaced by a younger less-experienced worker for “cost-cutting” reasons. Excerpt from the case:

Although the record shows that MGS was in a difficult financial position and was attempting to cut costs, the District Court’s repeated references to the company’s financial situation reflect, in our view, an impermissible weighing of the evidence. For example, although the District Court acknowledged plaintiff’s offer to work for a reduced salary, the Court concluded that “even a $60,000 salary would have presented a substantial [financial] issue.” (Opinion 14.) However, a jury could have determined, based on plaintiff’s offer to work for less than what was paid to Winegard, that the employer’s motivation for firing him was not cost cutting but was rather discrimination against his age.

Bottomline: Employers need to tread carefully as they contemplate cost-cutting measures. Engaging a good employment lawyer who can guide the employer through the process is a good first step in avoiding unwanted litigation. However, employers also need to consider the long-term impact of losing the wealth of knowledge and experience that older, albeit more experienced workers bring to the table. While the economics of our times will likely drive many employers to take some drastic measures, they should remember that when things turn around, it may be difficult to find experienced workers as the demographics of our society play out. Employers will likely see more competition in the future in terms of filling their employee ranks when it comes to highly skilled workers. And, of course, benefits will play a big part in how employers fare in that competition.

You can now access the text of the proposed American Economic Recovery and Reinvestment Plan. A large portion of the bill with its own separate title–the Health Insurance Assistance for the Unemployed Act of 2009–contains provisions which would greatly impact employers and provide a massive expansion of the current COBRA program. The proposal includes three components pertaining to health insurance for the unemployed:

1. A government-provided COBRA subsidy for those involuntarily terminated from employment. The subsidy provided would be equal to 65 percent of the COBRA continuation premiums for up to 12 months for workers who have been involuntarily terminated (and their families). The subsidy would apparently also apply to health care continuation coverage if required by states for small employers.

2. Medicaid provisions providing states the option of offering coverage to unemployed workers via their Medicaid programs with the federal government matching 100 percent of the costs of the benefits and administration.

3. An extension of COBRA for older and tenured workers. The benefits provided by this portion of the legislation would be separate from the short-term subsidy for involuntarily terminated workers. COBRA-eligible workers who are 55 and older, or have worked for an employer for 10 or more years, would be able to retain COBRA coverage, at their own expense, until they become Medicare eligible at age 65 or secure coverage through a subsequent employer.

Access the Ways and Means summary here. More links here.

Workforce Management in its article here notes:

Currently, only about 20 percent of those eligible for COBRA enroll, a low acceptance due in part to the high cost of coverage. Under law, employers can charge beneficiaries a rate equal to 102 percent of the cost of coverage offered to employees.

With a higher take-up rate, employer costs would rise since beneficiaries opting for COBRA on average use more medical services than other health plan enrollees, surveys have found.

House Democrats estimate the subsidy would cost the government a total of $30.3 billion.

Good post here from Fi360 containing tips for fiduciaries. Excerpt:

Acting as his own custodian and avoiding any kind of transparency looks to be a huge part of how he managed to get away with it for so long, but also the most prominent red flag that should preclude an investment fiduciary from choosing this type of investment. Both an ABC News article and a Kiplinger’s column look at how acting as his own custodian should have been the first and clearest sign that something wasn’t right.

Before the new regulations are even formally published, Congressman George Miller (D-California), the chairman of the House Education and Labor Committee, and Congressman Rob Andrews (D-New Jersey) in a statement here have indicated that they will use every tool at their disposal to block their implementation. The regulations being referred to in the statement are the final regulations issued in connection with the Pension Protection Act’s prohibited transaction exemption for investment advice provided to participants. (Proposed regulations are here. Comments to the proposed regulations are here.)

Plan Adviser reports on the controversy: Miller, Andrews Threaten to Block Advice Regulation

From the Press Release:

The U.S. Department of the Treasury today issued interim final rules for reporting and recordkeeping requirements under the executive compensation standards of the TARP Capital Purchase Program (CPP).

The new rule issued today requires the CEO to certify annually within 135 days after the financial institution’s fiscal year end that the financial institution and its compensation committee have complied with the executive compensation standards. In addition, within 120 days of the closing date of the Securities Purchase Agreement between the financial institution and the Treasury, the CEO is required to certify that the compensation committee has reviewed the senior executives’ incentive compensation arrangements with the senior risk officers to ensure that these arrangements do not encourage senior executives to take unnecessary and excessive risks that could threaten the value of the financial institution.

The CEO must provide the 120-day and annual certifications to the TARP Chief Compliance Officer.

Interim Final Rule
Revised Notice 2008-PSSFI
Executive Compensation FAQ

U.S. Airways Crash Rescue Picture: Citizen Journalism, Twitter At Work

For those who aren’t familiar with Twitter, view this previous post here.

(If you read the comments to the photo, some folks want to know if the Christians are walking on water, and if only those flying in First Class got the rafts.)

From Ways and Means:

Ways and Means Committee Chairman Charles B. Rangel (D-NY) today released details of the economic recovery package falling under the jurisdiction of the Committee. This groundbreaking plan will provide critical tax, health and job-training benefits to American families, incentives for businesses to grow and create jobs and assistance for those who have lost their jobs or are economically disadvantaged.

“The critical state of our economy calls for swift, comprehensive action and this package will provide relief to all communities and all sectors of the American economy,” said Chairman Charles B. Rangel (D-NY). “This recovery package will provide tremendous tax relief, health care and job training benefits for families struggling to make ends meet, while also giving businesses the boost they need to create new jobs. We have also designed specific provisions to help State and local governments fund critical infrastructure projects to improve our roads, schools, bridges and airports, while also maintaining and creating good-paying jobs for working families. This package was developed with strong coordination between the House and Senate leaders, President-elect Obama and his economic team. I look forward to working with all parties involved toward a swift passage.”

The Recovery legislation will be formally introduced in the coming days, and is expected to receive consideration in the Ways and Means Committee next week.

There are indications that the bill will include provisions governing COBRA for the unemployed.

UPDATE: Outline of the Legislation includes:

Tax Relief for Individuals

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From How Appealing:

“This case is finito.” So ends an opinion that Seventh Circuit Judge Richard A. Posner issued today in typescript form on behalf of a unanimous three-judge panel of that court.

While this is not a benefits-related case, it is interesting as it reveals Judge Posner’s frustration with the “pathalogy” of class action litigation in general, and as yesterday’s post reveals, class action litigation in the ERISA arena is increasing. Excerpt:

We are disheartened that the litigation by the information-sharing class has been allowed to drag on for eight years, when it had no merit—and that as a matter of law, without need to take evidence. It is an example of the typical pathology of class action litigation, which is riven with conflicts of interest, as we discussed recently in Thorogood v. Sears, Roebuck & Co., supra, 547 F.3d at 744–46. The lawyers for the class could not concede the utter worthlessness of their claim because they wanted an award of attorneys’ fees. The lawyers for Fleet were reluctant to argue the utter worthlessness of the claim because they were able to negotiate a settlement that cost their client virtually nothing—provided they did not take such a strong stand that it jeopardized the class lawyers’ shot at a generous award of attorneys’ fees, and hence the settlement. And the objectors were motivated to exaggerate the value of the claim of the information- sharing class so that they could get a generous award of attorneys’ fees.