Category: Benefits

Today’s Federal Register contains final regulations regarding implementation of Section 417(a)(7), which was added to the Internal Revenue Code by the Small Business Job Protection Act of 1996. For those who do not know, Section 417(a)(7) provides that a plan may furnish the qualified joint and survivor annuity explanation after the annuity stating date, as long as the applicable election period is extended for at least 30 days after the date on which the explanation is furnished (i.e. a retroactive annuity starting date.) The regulations are quite complicated and I am sure there will be more about them here in the days to come.

The news is chock-full of pension funding articles which I will cover in a separate post today.

Sandra Block for USA Today provides this comparison–“Stock options vs. restricted shares: A case of risk vs. reward.”

FT.com reports a “Rift at Applied over stock options.” The article discusses how the debate over stock options vs. restricted stock (started by Microsoft’s announcement late last week) has created a “senior management rift” at Applied Materials, Inc., the Silicon Valley based chip equipment maker. However, grants of stock options are still occurring as reported by InfoWorld.com in this article–“Stock options still in favor at Oracle“–and by the Oakland Tribune in this article–“Oracle stock options rain down.”

Also, this very good article from the Seattle Times–“No to stock options? Microsoft move debated“–discusses the problem of “how to best link employee compensation to the interests of company shareholders.” The article quotes Paul Hodgson, a senior research analyst with the Corporate Library, a corporate-governance research and information service, as saying that “[r]estricted stock is only a good compensation tool if it’s tied to performance.” The article quotes Jack Marsteller, leader of the executive compensation practice at Towers Perrin in Los Angeles, as saying that restricted stock grants are becoming the “fad du jour” and quotes Matt Ward, chief executive of WestWard Pay Strategies in San Francisco, as calling them the “lay-low-and-don’t-get-fired award.”

Allan Sloan for the Washington Post has this lively op-ed: “Don’t Write Obituary for Options Just Yet.”

Rick Klau (here) and Erik Heels (here) have both written about how a weblog can become the “main publishing tool for any website.” Matt Haughey provides an essay called “Beyond the Blog” about how Movable Type can be used to do just that. Brad Choate also talks about it here as well.

I may be late in making this discovery (compared to those who are much more tech-savy than I), but I have discovered (correct me if I am wrong) that anyone who wishes can receive the postings from this site through email if they so choose by signing up through BlogStreet via the Info Aggregator. I guess for those subscribing to a great many blogs through a news aggregator, this would probably not be a good option. But for those just wishing to read posts on a daily basis from narrow topic blogs, this might be a possibility. I would be very interested in hearing what others think about this development. Warning to Readers: This is not a recommendation to sign up for Info Aggregator. I merely bring it to your attention as an interesting development in the world of blogging.

You can read more about it here at Blogroots.com.

I will be attending a Board meeting all day so blogging will be slim to none today.

Kirkpatrick & Lockhart LLP provides this commentary on the final catch-up contribution regulations: “Internal Revenue Service Issues Final Catch-up Regulations.“

Both ASPA and the American Benefits Council have provided their views on the Bush administration’s pension funding proposals:

• ASPA: “Examining Pension Security and Defined Benefit Plans: The Bush Administration’s Proposal to Replace the 30-Year Treasury Rate”
• American Benefits Council:
  • American Benefits Council’s Position Paper on Treasury Department’s Yield Curve Approach
  • American Benefits Council’s Position Paper on Effect of Pension Interest Rates on Distributions
  • American Benefits Council’s Position Paper on Pension Interest Rate Replacement

Today’s Federal Register.

Federal Reserve Chairman Alan Greenspan spoke to the House of Representatives Financial Services Committee today. The main point of his speech, according to Reuters via Yahoo! News as reported in this article–“Greenspan Vows Low Rates, Sees Recovery“–was that he vowed to keep U.S. interest rates low for a long time, but said that the economy “could very well be embarking on a period of extended growth.” Forbes reports in this article–“Greenspan: Bush admin pension proposal is an advance“–that Greenspan also addressed the Bush administration pension funding proposal and called the proposal “an improvement,” but said that problems remain including company pension rules from the Internal Revenue Service and the Financial Accounting Standards Board that are “more complex than we need.”

Also, Christine Hall for CNSNews via Crosswalk.com reports: “White House, Congress Tackle Pension Quandary.“

The Washington Post has this op-ed: “Fixing Pensions.” The article calls for working out an “approach based on factual, accurate projections of future costs, not convenient fictions that may boost corporate profits now but create more problems down the road.”

“Employees vs. executives: BellSouth, Scientific-Atlanta sued over management of company retirement plans“: MSNBCNews reports that ERISA lawsuits have been filed against BellSouth Corp. and Scientific-Atlanta Inc. The article mentions the Enron and Worldcom lawsuits (which have been discussed here previously) and how all of these cases have brought an increased focus on the role of ERISA fiduciaries. The article also mentions the trend, particularly among the airline industry, of hiring independent fiduciaries to oversee plan investment decisions to avoid having the executives make these decisions “with all the conflict of interest that entails.”

Some good news from CNNMoney.com: “Coming soon: Gains in your 401(k): A strong quarter for stocks should translate into more money in your retirement plan.“

This article–“Court Aces“–by Tony Mauro at Findlaw.com gives an interesting inside view of what U.S. Supreme Court Chief Justice William Rehnquist thinks of ERISA cases. The article quotes Rehnquist as saying, “The thing that stands out about them is that they’re dreary.” The comments came in his annual talk to the 4th U.S. Circuit Court of Appeals recently in which he spotlighted the little-noticed decisions of the term. One he picked out was Kentucky Association of Health Plans v. Miller, which held that Kentucky’s “any willing provider” law affecting HMOs was pre-empted by ERISA. You can read about the case in posts at Benefitsblog here, here, and here.

Broc Romanek at The CorporateCounsel.net Blog reported in a post this weekend that Microsoft will be awarding “restricted stock units” rather than stock awards in the usual sense.

That is what today’s edition of the Wall Street Journal is reporting in an article by Joseph Pereira entitled: “To Save on Health-Care Costs, Firms Fire Disabled Workers: Policy Shift at Polaroid Leads to Scrimping, New Worries for Extremely Sick Employees.” (Subscription required.) The article contains some heart-wrenching stories of how the disabled have been impacted by what the Journal says is a trend among companies of dismissing the disabled to cut costs. The article refers to a Mercer Human Resource Consulting study last year which found that 27% of the 723 companies surveyed dismiss employees as soon as they go on long-term disability and that 24% dismiss them at a set time thereafter, usually six to 12 months, with only 15% of companies keeping the disabled on as employees with benefits until age 65. The article also refers to DOL statistics which show that there has been a 62% increase in those on long term disability since 1992 and suggests an “aging work force” could be the cause.

All of this is further complicated by the Ninth Circuit case last year “Lessard v. Applied Risk Management” in which the court held that a buyer and a seller in a corporate transaction violated Section 510 of ERISA where the buyer (in an asset sale) did not hire seller’s employees who were on extended leave of absence. Section 510 of ERISA provides:

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, this subchapter, section 1201 of this title, or the Welfare and Pension Plans Disclosure Act [29 U.S.C. 301 et seq.], or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act.

You can read about the case in an article by BenefitNews.com and in an article by White & Case LLP. The Journal reports a discrimination lawsuit having been filed last week against Polaroid on behalf of disabled workers in federal court in Boston.