Category: Benefits

Today’s Federal Register is here.

This article by Michael Ellis for Reuters discusses how the company with the “largest pension deficit among U.S. companies” is meeting its pension funding obligations: “GM to Fund Pension with $13 Billion Debt.”

“[A]ttorneys and accountants should be pillars of our system of voluntary compliance, not the architects of its circumvention.” This is what IRS Commissioner Mark W. Everson is reported to have said in this article by David Cay Johnston for the New York Times: “IRS Seeks Names of Wealthy Clients Who Used Tax Shelters.” According to the article, the IRS is ordering one of the nation’s biggest law firms, Jenkens & Gilchrist, to disclose the names of 600 wealthy clients who bought tax shelters that it considers abusive. The law firm has said it would not comply. The IRS won approval yesterday from a federal judge in Chicago to issue its summons to Jenkens & Gilchrist, which is based in Dallas. The article reports that the “government has not used this particular type of summons before.”

This article by Ben White from the Washington Post: “Excellent Year for Executives–CEO Compensation Rose Nearly 17%.”

You can access the Opinion and Order issued Tuesday by U.S. District Judge Denise Cote of the Southern District of New York in the case of In Re WorldCom, Inc. ERISA Litigation here. (via WorldComERISALawsuit.com) To be discussed . . .

Ernie alerts us to two very interesting items in the blogging world:

1) MSNBC now has a column called “Blogspotting.”

2) British Parliament MP Richard Allan now has a blog which reads:

Welcome to the weblog of Richard Allan, Member of Parliament for the Sheffield Hallam constituency. This log contains occasional observations of a mostly political nature…”

Also, this article from the New York Times (free subscription required) by Catherine Greenman: “A Blogger’s Big-Fish Fantasy.”

CFO.com provides this article by Jennifer Caplan–“Comp Formulas: Execs Riding the Right Side of the Curve–Some companies move to exclude pension expenses from exec comp formulas; during bull market, pension gains were included”–which discusses the whole topic of pensions and their effect on executive compensation which was the subject of an article in the Wall Street Journal reported on here yesterday.

This article–“House Votes to End Federal Estate Tax as Senate Battle Looms“–by David Firestone for the New York Times (free subscription required) discusses how the House of Representatives voted yesterday to end the federal estate tax in a vote of 264 to 163, with 41 Democrats joining the Republican majority. The federal estate tax was scheduled to disappear in 2010, but then reappear in 2011 under a “sunset provision.” The measure approved by the House would end that “sunset provision” and kill the tax permanently in 2011. President Bush issued a statement praising the House for its vote, but Republicans and Democrats in the Senate expressed more interest in a substitute bill. The article reports that Senate Republicans “agreed today to meet their House counterparts in a conference about another divisive tax issue, increasing the child tax credit for 6.5 million families who did not receive it in the tax law signed by Mr. Bush last month.”

Today’s Federal Register is here.

Lee Berton, a journalist and a consultant to the accounting department of the City University of New York’s Baruch College, writes this article at Bloomberg.com: “Pension Accounting Rules Create False Profits.” The article reports that companies do not have to “practice fraud to create suspect earnings,” but merely have to follow accepted pension accounting standards to do so. The article criticizes rules which “permit a company to assume appreciation on pension portfolio assets, even though sharp stock market declines have decimated the portfolio’s value.” FASB is seeking to revamp pension accounting rules which can be read about in previous posts here.

This article by Rachel Beck at Newsday.com discusses the effect falling interest rates have on pension funding: “Interest Rates Prolong Pension Woes.” The article points out that FASB is beginning to look into requiring quarterly, instead of annual, pension disclosures in order to avoid annual investor “sticker shock.”

This article–“Investing with Safety”–at KansasCity.com reports on the study by Hewitt Associates Inc. (discussed here yesterday) indicating the three most popular places participants are putting their 401(k) money while stocks are suffering: money market funds, bond funds, and stable value funds.

Also, this very good article by Sharon Epperson at Time.com on a new disability insurance product which is becoming more popular: “Saving Your Nest Egg: Retirement funds suffer if you go on disability–An insurance policy can help.” The article discusses group and individual disability insurance products which cover employee contributions and employer contributions to a defined contribution plan, if the individual becomes disabled.

U.S. District Judge Denise Cote of the Southern District of New York, in a 49-page opinion released late Tuesday, refused to dismiss ERISA claims against WorldCom Chief Executive Bernie Ebbers and others as reported here at Law.com. Much more on this later . . .

Sidley Austin Brown & Wood LLP provides this great discussion on the 906 Certification issue regarding SEC 11-K filings as well as this discussion. See also this post at Bowne Securities Connect. (Previous posts on the subject are here.)

Interesting post by John Palfrey on how Reed Smith encourages Denise Howell with her blog. (Check this out as well.)

Reuters provides this article by Martha Graybow: “Study finds 401(k) investors not diversified enough.” You can access the study performed by Hewitt Associates Inc. here. The study reports that “the average participant holding company stock had 42 percent of balances in company stock.” It also reports that “more than one quarter (28 percent) of employees held 50 percent or more of their 401(k) plan balances in company stock.” This is all pretty amazing when you consider all of the publicity over Enron about how participants lost their life savings in their 401(k) accounts due to not being properly diversified.

This very interesting study by the Vanguard Group Center for Retirement Research–“Can There Be Too Much Choice in a Retirement Savings Program?”–provides useful information for plan sponsors designing their plans. The study applies the “choice overload hypothesis” to the
401(k) plan arena and may provide some insight as to why employees continue to be heavily weighted in company stock. In my opinion the study seems to say that people simply do not respond very well when provided with too many choices, and may choose what is most familiar to them when confronted with more choices than they can handle.