Author: jfortenberry@fortenberrylaw.com

House Republican Leader John Boehner and others have put together a website supporting the Savings Recovery Act of 2009 which was introduced yesterday as H.R. 2021. According to this press release here, this is what the bill will accomplish:

Make it easier for Americans to save more for their retirement by increasing the contribution and catch-up limits for individuals and families.

Restore college savings by extending the existing SAVERs Credit to contributions made to 529 college savings accounts.

Increase retirement income by doubling the Social Security earnings limit from $14,160 to $28,320 and allowing more Americans to increase their income without being hit by the Social Security earnings penalty.

Provide tax relief for investors and seniors by immediately suspending the capital gains tax on newly acquired assets for the next two years, raise and index to inflation the amount of capital losses allowed against ordinary income to $10,000, and suspend taxes on dividend income through 2011.

Stabilize worker pensions and helping employers invest in the future by temporarily providing an increased glide path for recognizing losses and two additional years to resolve pension funding shortfalls.

Preserve employee-controlled 401(k)s by blocking efforts to wipe out 401(k)s entirely and replace them with government-run accounts.

More on the purpose of the bill here:

. . . [A]ccording to a March 2009 National Public Radio (NPR) survey conducted by Public Opinion Strategies/Greenberg Quinlan Rosner, Americans concern about decline in the stock market and investment losses trumps even concerns about losing their jobs. But instead of taking action to help Americans rebuild their savings as quickly as possible, Washington is pursuing policies that are causing Americans savings to evaporate even more quickly. Some are even proposing to wipe out 401(k)s entirely, replacing them with government-run accounts that put bureaucrats in charge of savings decisions instead of families.

Both the American Benefits Council and ERIC have expressed their support for the bill. You can express your support here by signing an online petition.

Towers Perrin has published an interesting report on the impact of the current recession on benefit plans–Benefits in Crisis – Weathering Economic Climate Change:

Some companies, of course, have already taken steps to reduce benefits, including suspending contributions to 401(k) plans. But in contrast to media attention on the most severe cutbacks, most companies in the Towers Perrin survey are staying the course in the benefits arena, with very few taking precipitous action right now in terms of dramatic reductions or outright elimination of current plans. In part, this is because many have actively managed their programs over the past decade, particularly in terms of limiting new participation in traditional pension plans and increasing employee cost sharing for both active and retiree health benefits.

Some interesting trends to note from the survey:

(1) Nearly 40% of respondents are making or increasing investments in financial education for employees. A similar percentage have changed or plan to change the investment options in DC plans.

(2) Just over half (51%) of respondents have taken or plan to take steps to reduce or eliminate subsidized coverage for future retirees, compared with only about a quarter taking or considering such action for current retirees. 59% do not intend to cut back on or eliminate subsidized coverage for current retirees at all.

(3) While a third of respondents already have health savings accounts built into their plans, a roughly similar number are planning to introduce such features over the next two years or are considering doing so.

The recent Eighth Circuit case of Halbach v. Great-West Life & Annuity Insurance Company involves another controversy over the issue of vesting in regards to medical benefits. The Eighth Circuit overturned the district court on two issues:

(1) Whether there was a valid plan amendment eliminating medical benefits for long-term disability recipients; and

(2) Whether the disability recipients were vested in their medical benefits prior to the plan amendment.

The lower court said there was no valid amendment and that the disability recipients were indeed vested. However, the Eighth Circuit reversed the district court and ruled there was a valid amendment, but held that whether or not the disability recipients were vested presented a genuine issue of material fact that needed to be resolved at trial.

While there appears to have been a plan document for the plan, the document which the plan sponsor claimed was the plan amendment terminating benefits and which gave rise to the controversy consisted of a letter to the disability recipients notifying them of the cessation of their benefits. The letter referenced an attached SPD-type document which summarized the changes that were being made. Because the plan document indicated that the plan could be amended by a “written instrument signed by an officer of the Company,” the Eighth Circuit felt that the letter to the disability recipients qualified as a plan amendment.

While the conclusion reached by the Eighth Circuit might have gotten the plan sponsor to the result they wanted in the case, sometimes a loose interpretation of what constitutes a plan amendment can go the other way. Remember the Fifth Circuit Halliburton case holding that a Merger Agreement acted as a plan amendment?

Great advice from Joe Kristan: E-File, Use Certified Mail or Roll the Dice.

The Third Circuit has officially opined in the case of Schwing v. Lilly Health Plan (3rd Cir 04/14/2009) that MetLife v. Glenn overruled the “sliding scale” standard of review previously adopted by the Third Circuit in reviewing decisions of ERISA fiduciaries:

Test

The IRS has issued Announcement 2009-34 which provides details regarding a new program for the pre-approval of prototype plans under Section 403(b) of the Internal Revenue Code.

Campaign Diaries appears to have the latest tally regarding the Employee Free Choice Act here. One senator cites the looming health care debate as one reason why he has concerns about EFCA in its present form, i.e. if supporters of the bill splinter relationships over EFCA, there might not be enough supporters left for the current administration’s proposed health care agenda.

Employers and their advisors will want to keep an eye on some legislation that has been introduced and referred to Committee called the “Emergency Retiree Health Benefits Protection Act of 2009″ (H.R. 1322). The bill would effectively prevent employers from terminating or reducing retiree medical after participants retire, or even passing additional costs of the coverage along to retired participants. In other words, the legislation would attempt to “vest” retirees in their retiree medical benefits upon retirement, regardless of any provisions in the Plan documents to the contrary.

Here is a portion of the language in the legislation:

Notwithstanding that a group health plan described in subsection (b) may contain a provision reserving the general power to amend or terminate the plan or a provision specifically authorizing the plan to make post-retirement reductions in retiree health benefits, it shall be prohibited for any group health plan, whether through amendment or otherwise, to reduce the benefits provided to a retired participant or his or her beneficiary under the terms of the plan if such reduction of benefits occurs after the date the participant retired for purposes of the plan and reduces benefits that were provided to the participant, or his or her beneficiary, as of the date the participant retired. Any group health plan provision which purports to authorize the reduction of benefits in a manner inconsistent with the foregoing prohibition shall be void as against public policy.

The American Benefits Council, SHRM, and ERIC and others have expressed their concern over the legislation in a letter.

The concern, of course, is that employers will jettison these programs if the legislation is passed (retirees would be vested under the legislation, but employers would likely be able prevent future vesting for active employees by terminating the programs.)

With many employers weathering the economic slump by cutting jobs, pay and/or benefits, employers also fear the repercussions that could come from such actions. Particularly, the Wall Street Journal today notes that employers are gearing up for how such actions might make them vulnerable to workers seeking to unionize:

U.S. businesses, fearful of rising union influence and a crackdown by the Obama administration on workplace practices, are scrambling for legal advice and training. . .

Labor consultants and lawyers are . . briefing companies large and small on a range of matters such as complying with current and recently enacted legislation, and how to detect union organizing and prevent it without breaking the law. Another pressing issue is whether companies have opened themselves to union organizing drives because they have cut jobs, pay or benefits to weather the economic slump.