Category: Benefits

Today’s edition of the Wall Street Journal contains these three articles on pension funding and accounting:

• “FedEx’s Accounting for Pensions Puts Spotlight on Opaque Rules“, an article by Tiffany Kary which highlights how pension accounting is causing concerns among Wall Street analysts.

• “A Pension ‘Guaranty,'” an op-ed on how the PBGC’s deficit could become a crisis if Congress does not act.

• And this very useful article by Jonathan Clements for those investing their 401(k) assets: “The Copycat School of Investing: Running Your Retirement Plan Like a Pro.“

McDermott, Will & Emery has published this article: “Ninth Circuit Case Creates Deduction Opportunity for Companies with ESOPs.” The article discusses this case: Boise Cascade Corp. v. U.S., No. 01-36086 (9th Cir. 5/20/2003), in which the Ninth Circuit held that payments made by a corporation to redeem shares of its stock held in an Employee Stock Ownership Plan (“ESOP”) and distributed by the ESOP to participants were deductible under section 404(k) of the Internal Revenue Code (the “Code”). The holding was directly contrary to an IRS holding in Rev. Rul. 2001-6 that, under Code section 162(k), a corporation could not deduct amounts paid or incurred in connection with the redemption of its stock.

McGuire Woods LLP also has this report on the case and makes the point “that dividends that are deductible under Code section 404(k) cannot be rolled over to IRAs by participants.”

Today’s Federal Register is here.

This article at Bloomberg.com: “Bush’s Budget Nominee Says No New Tax Cuts Planned.” Regarding the economy, the article reports:

“The economy is projected to grow at a 3.5 percent annual rate in the third quarter and improve to a 3.7 percent pace in the last three months of the year, according to the consensus estimate of 53 economists surveyed this month by Blue Chip Economic Indicators. That would follow an expected 2 percent growth rate this quarter.”

Bill Mann for the Motley Fool has this very interesting article: “GM’s Pension Peril.” The article discusses GM’s $13 billion debt offering to fund its pension liabilities which was discussed in a previous post here. Mr. Mann writes:

“GM is sort of the worst case scenario of pensions, but its funding problems and its solutions are instructive to investors in any company with a pension fund. It ought to also serve as a warning. The company you hold, or the one you are analyzing, may have an enormous pension liability that you cannot see on the balance sheet or income statement, but is instead buried in the footnotes.”

On the same subject, Reuters has this article by Dena Aubin: “Pension gap unlikely to spur US debt issuance wave.“

Very interesting post by Steve Covell suggests some blawgers may be “frustrated novelists.”

CorpLawBlog here and today’s posting at TheCorporateCounsel.net Blog discuss how companies are for now providing the 906 certification with their SEC Form 11-K filings, as evidenced by the filings that are coming in. The subject has been discussed in previous posts which you can access here.

Seyfarth, Shaw posts this article: “Statutory Option Regulations Give Welcome Clarification.”

Can you believe it? Pensions the subject of a computer game? That’s what the BBC News reports in this article : “Pension crisis: The game.” The article states that the Amicus union will e-mail the game to 50,000 people who are not in a trade union in a bid to highlight the threat to company pension schemes.

More on pension deficits from TheStreet.com: “Pension Problems Threaten Earnings Quality.”

Reuters reports: “NYSE to Let Investors Block Option Plans.” The article reports that the “New York Stock Exchange has informed its U.S. listed companies that new stock option plans or significant changes to existing plans will require shareholder approval under stricter rules expected to take effect next week.” A memo provided by the exchange to Reuters on Monday “described the imminent changes to executives of 2,800 companies listed on the Big Board.”

Jana Tchinkova for The Ticker reports–“Odd Blend May Be a Match”–and discusses pension funds turning to hedge funds as an alternative investment.

Today’s edition of the Wall Street Journal provides this report: “Fidelity Ends Sales Charge On Five of Its Largest Funds.”

The WSJ also contains a very good article today: “Employees May Pay More on Retirement Plans: Labor Department Guides Sponsors to Pass on Costs Involving Administration.” The article discusses Field Assistance Bulletin 2003-3 which allows certain plan expenses to be passed on to participants. Highlighted is the Internal Revenue Code Section 411 issue which arises due to the fact that, according to the FAB, plan expenses can now be charged to those employees who have left a company yet are still vested in their account, even if those same expenses are not charged to participants still employed by the plan sponsor. The article reports Don Roberts, an IRS spokesman, as stating: “We are aware of the issue that is out there, but we don’t have any guidance at this point as it may relate to Code Section 411.”

Today’s Federal Register is here.

The Federal Register contains temporary regulations which provide rules to prevent the duplication and acceleration of loss through the assumption by a partnership of a liability of a partner in a nonrecognition transaction. The temporary reg.’s also prohibit partners and partnerships engaging in transactions described in IRS Notice 2000-44 from relying on the exception in Internal Revenue Code (“Code”) section 358(h)(2)(B).

The Federal Register contains proposed regulations relating to the definition of liabilities under section 752 of the Code. The proposed reg.’s provide rules regarding a partnership’s assumption of certain fixed and contingent obligations in exchange for a partnership interest and provide conforming changes to certain regulations. They also provide rules under Code section 358(h) for assumptions of liabilities by corporations from partners and partnerships.

The Federal Register also contains a lengthy DOL Prohibited Transaction Exemption 2003-19, to replace Prohibited Transaction Exemption 97-63, involving State Street Bank and Trust Company (State Street). The Exemption permits securities lending transactions between State Street, its United States (U.S.) domiciled affiliates, and certain employee benefit plans and/or commingled investment funds holding plan assets, provided that State Street (through any division or U.S. affiliate of State Street or of its parent) acts as securities lending agent (or sub-agent). The exemption also permits receipt of compensation by a U.S. registered introducing broker affiliated with State Street in connection with an arrangement whereby securities are lent to an unrelated U.S. registered broker-dealer who in turn lends such securities to clients of the introducing Broker, provided that certain conditions are satisfied.

The Associated Press via the Washington Post reports that the U.S. Supreme Court today “upheld a university law school admissions policy that gives minorities an edge, ruling that race can be one of many factors that colleges consider when selecting their students.” Of course, SCOTUSBlog and How Appealing provide extensive reporting on all of the U.S. Supreme Court opinions delivered today.

Today’s Federal Register is here.

“Pensions in peril: With 77% of Canadian plans in a deficit position, sponsoring companies are being asked to cover the shortfall. They can’t afford to be too generous”: the National Post has this excellent article by Paul Purcell which discusses the alternatives for plan sponsors with big pension deficits.

The Washington Post has this article by Albert B. Crenshaw: “401(k)s: Remember Them?” The article reports how employees are ignoring the risks of investing too heavily in company stock, i.e. putting all of their eggs in one basket, even though many companies have eliminated restrictions on participants’ ability to shift out of company stock.

Business Week Online provides this good news for the economy: “A Hidden Stash? New research says taxes on boomer retirement savings could bring in trillions.” This great article discusses a new, as-yet-unpublished paper by Stanford University economist Michael J. Boskin which estimates that the value of ordinary income tax baby boomers will pay on their retirement accounts as they begin to retire through 2040 is roughly $12 trillion in today’s dollars. The article reports that Mr. Boskin has zeroed in on an “issue that has escaped the notice of the vast majority of economists, politicians, and investment experts.”

“Lawyers see complex provisions in Bush’s $350-billion tax plan”: Mike Colias for Providence Business News reports on the legal intricacies of the Jobs and Growth Tax Relief and Reconciliation Act.