Author: jfortenberry@fortenberrylaw.com

In its Fall 2008 Retirement News for Employers, the IRS reminds employers of the following deadlines:

Dec. 2: Deadline to provide safe harbor notice for Safe Harbor 401(k) plans for 2009 plan year.

Dec. 2: Deadline to give eligible employees Automatic Enrollment Notice.

Dec. 31: Deadline for: making 2008 required minimum distributions; and distributing 2007 401(k) excess contributions (including income or losses) without jeopardizing a plan’s tax-qualified status.

This article from Wharton–“As Layoffs Spread, Innovative Alternatives May Soften the Blow“–indicates companies are looking at creative alternatives to layoffs “such as voluntary retirements or salary cuts, hiring freezes, reductions in hours, or the cancellation of business trips and/or costly perquisites.” The article also notes the trend of cutting “benefit packages and matching contributions to 401(k) plans.”

Whatever the alternatives contemplated, employers need to beware of the minefield of Section 510 of ERISA. For those not familiar with ERISA section 510, it provides as follows:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan. . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan. . .

For instance, targeting for layoff those employees who are costing the company more when it comes to health care costs or pension costs is unlawful under Section 510. Some may recall the well-known Millsap et al. v. McDonnell Douglas Corporation case in which the company was accused of seeking to maximize their pension plan’s surplus by selecting for layoff or plant closing its older, more senior employees. You can read about the millions that were recovered in that case by the plaintiffs here, here, and here.

Also, outsourcing or reclassifying employees to cut benefits costs can give rise to ERISA Section 510 claims. Read more about that topic here, here, and here.

For anyone considering a career jump from legal practitioner to law professor, I highly recommend Jeffrey Lipshaw’s piece entitled “Memo to Lawyers: How Not to “Retire and Teach.” Abstract:

Many long-time practitioners muse about what it might be like to retire and teach, not realizing there is no more galvanizing phrase to their counterparts who have long toiled in the academy, nor one less likely to enhance the prospects of the unfortunate seasoned applicant who utters the phrase. I intend this essay not for law professors (though it may either amuse or irritate them), but for those in the practice who aspire, after all these years, to return to the academy. With a good deal of humility acquired along the way, I offer some realistic advice to job seekers, concluding that wistful phrase is precisely the opposite of the true sine qua non of success: demonstrating the capability of, and commitment to, being a productive scholar

While I enjoyed the article, I found it humorous that Professor Lipshaw considers employee benefits to be “mundane”:

It seems like the vast majority of young law professors want to talk and write about the burning constitutional, political, and rights issues of the day. It’s an advantage to want to teach and write in a niche that may be considered more mundane (somebody has to think about employee benefits, for example). But merely writing in the niche is not enough; you need to have something scholarly to say about it.

Apparently, he hasn’t been reading Benefitsblog. Who could possibly think this is mundane? Or even this?

The IRS has published its 2008 Cumulative List. The 2008 Cumulative List informs plan sponsors of issues the Service has specifically identified for review in determining whether a plan filing in Cycle D has been properly updated. It also acts as an attorney’s legal checklist for updating an individually designed plan that falls into the Cycle D Remedial Amendment Period.

In accordance with Rev. Proc. 2007-44, the Service will start accepting determination letter applications for Cycle D plans beginning on February 1, 2009. The 12-month submission period for Cycle D plans will end January 31, 2010.

It sounds like they might still be counting votes. However, the most recent report indicates that Proposition 101 in Arizona which would have attempted to block any government-run universal health plan in Arizona will be defeated. From The Arizona Republic: Health-care debate will rage on; However, universal plan in state appears unlikely. Excerpt:

The most recent count shows that 50.3 percent voted against the measure that backers said would prevent a government-run universal health plan in Arizona.

Dr. Eric Novack, chairman of Medical Choice for Arizona, said the close vote showed that Arizona voters are interested in blocking government-run health plans.

Read about the proposed legislation in previous posts here.

(The New York Times is gloating over the result.)

From CFO.com: “Study Shows Workers Sticking with Retirement Plans.” Excerpt:

U.S. employees seem to be resisting the temptation to save less in their retirement accounts, a Hewitt Associates survey shows.

Savings rates have barely dropped, from 8 percent in 2007 to 7.8 percent in 2008, although there is a predictably aggressive shifting of assets from equities to more other investments. What’s more, just 4 percent of employees have terminated their 401(k) plan contributions altogether this year, according to the analysis by Hewitt, a global human resources consulting company.

So, how bad does the survey show 401(k) investors being hit? The analysis of 2.7 million U.S. employees measured the average 401(k) plan balance as falling 14 percent through 2008, to $68,000 from $79,000 in 2007. In the past two months alone, employees on average have lost nearly 18 percent of their 401(k) plan savings. Some have lost more than 30 percent.

Senators Baucus, Grassley, Kennedy, and Enzi have joined together in proposing some year-end pension legislation. The name of the proposed legislation is : The Worker, Retiree, and Employer Recovery Act of 2008. Some links:

Press Release here.
Text of the Worker, Retiree, and Employer Recovery Act of 2008 (“WRERA?”)
Staff Summary here.

SEC Improves Disclosure for Mutual Fund Investors:

The Securities and Exchange Commission today voted unanimously to improve mutual fund disclosure by requiring that funds provide investors with a concise summary — in plain English — of the key information they need to make informed investment decisions. The new summary prospectus will appear at the front of a fund’s prospectus.

The Commission also approved amendments to encourage funds to make greater use of the Internet so investors can receive more detailed information in a way that best suits their needs.

More on the change from Reuters–“U.S. SEC adopts rules to improve fund disclosures.” Excerpt:

Almost half of the households in the United States use mutual funds to save for retirement or college tuition. But many consumers cannot understand the documents that fund firms such as Fidelity Investments or Vanguard are required to publish, detailing what will be done with their money.

Nor do retail investors generally take the time to wade through the prospectuses, which often run hundreds of pages long.

The SEC’s rule requires mutual funds to include key information at the front of its statutory prospectus such as the fund’s investment objectives, strategies, risks and costs.

The summary prospectus also needs to include brief information about the investment advisers and portfolio managers, as well as the fund’s purchase and sale procedures and tax consequences.

The new SEC rules, which do not go into effect until 2010, will allow investors to access more detailed information via the Internet or from the traditional paper prospectus.

Here is a website that has been studying and analyzing blogs and psychoanalyzing their authors. According to the “happy people” at PRfekt:

By studying how people write, we can get a glimpse of what is on the mind of the person and what is characteristic of the person – or, as in the case of a blog – what is typical of the role/persona used when writing that blog. maintaining the site and, supposedly, tells you the blogger’s psychological profile.

Watch the video about it here where the founders explain how they came up with this.

The author of Benefitsblog has been analyzed as the Scientist type:

The long-range thinking and individualistic type. They are especially good at looking at almost anything and figuring out a way of improving it – often with a highly creative and imaginative touch. They are intellectually curious and daring, but might be hesitant to try new things.

The Scientists enjoy theoretical work that allows them to use their strong minds and bold creativity. Since they tend to be so abstract and theoretical in their communication they often have a problem communcating their visions to other people and need to learn patience and use conrete examples. Since they are extremly good at concentrating they often have no trouble working alone.

(A lot of it is correct, but the part about trying new things. . . well, that is not really true or I wouldn’t have started a blog–back when people hardly knew what a blog was. Thanks to the TaxUpdate Blog for the link.)

Great article from Professor Katherine V.W. Stone of UCLA: The deeper roots of the mortgage crisis: employment instability:

In the 1980s, adjustable mortgages became commonplace and most mortgages ceased imposing prepayment fees, so that homeowners gained flexibility to adjust their debt level as interest rates changed. But that flexibility did not address the deeper source of instability – the danger of joblessness.

The problem now is that few people have the kind of long-term job security that our housing policies take for granted. According to the Bureau of Labor Statistics, the median length of time a worker spends with a particular employer has decreased in every age group.Today people have a more episodic experience in the labor market, moving from employer to employer, with periods of employment often followed by periods of unemployment and transition. When unemployment strikes, mortgage payments that once had been manageable become impossible.

These episodic employment patterns can also impact benefits negatively as well: people may lose their health insurance, or never build up a very big retirement nest egg because they are always leaving an employer before vesting in the employer’s retirement plan, etc.