Category: Benefits

Section 906 of the Sarbanes-Oxley Act of 2002 requires that all periodic reports containing financial statements that are filed with the SEC be accompanied by a written statement of the CEO and the CFO of the issuer (or officers performing equivalent functions), certifying the accuracy of certain information contained in such reports (referred to as a “906 Certification”). Apparently there has been a great deal of concern as whether or not the 906 Certification is required for Form 11-K filings for employee benefit plans. For calendar year ERISA plans, the Form 11-K is to be filed with the SEC within 180 days after the close of the plan’s fiscal year, or June 30th. Please see this article by Cleary, Gottlieb, Steen & Hamilton on the subject, this message thread on Benefitslink which contains a link to the 11-K filing for Amazon.com (containing a 906 Certification), this commentary at realcorporatelawyer.com, and the recent SEC News Release 2003-66 by the SEC. Any corporate securities bloggers out there who can shed any light on the subject?

UPDATE: Read more about the subject here . . .

Today’s Federal Register is here. This article by Craig Schneider–“Congress, FASB in Stock Option Flap: Dreier-Eshoo bill would prevent expensing of stock options — and derail FASB initiative“–at CFO.com points out that tomorrow morning, the House Financial Services Capital Markets Subcommittee will hold a hearing on HR 1372, the Broad-Based Stock Option Plan Transparency Act, a bill which was introduced by Reps. David Dreier (R-Calif.) and Anna G. Eshoo (D-Calif.) on March 20. The bill would require greater disclosure of corporate stock options, but would commission a three-year study on the effects of such disclosure. During the study, new accounting standards would not be recognized which would delay any changes promulgated by FASB. Also, see this article at the WashingtonPost.com by Jackie Spinner: “Executives Resigned To Their Options: Change in Accounting Rules Would Cost Some Local Companies.”

401(k) plans are “tiptoeing back into stocks” as reported in this article by John Waggoner and Christine Dugas for USA Today (via Yahoo! News). The article states that the 401(k) Index from Hewitt Associates, which tracks 1.5 million participants, indicates investors moved into stocks for 14 out of the 21 trading days in April which was the first time since January of 2000 that the Index recorded so many days in which investors shifted 401(k) assets into stock funds.

There is a very good article at Workforce.com showing trends in executive compensation. The article–“Executive Compensation: Recent Trends, Changes, and Highlights” discusses the results of a study performed by Sibson Consulting, the human-capital consulting division of The Segal Company, which reviewed a random sampling of large-company proxy statements filed with the SEC. The article contains tables showing the executive compensation provided by various companies, such as Merck and Eastman Kodak.

Some thoughts and notes from materials presented at the recent ALI-ABA seminar, “ERISA Fiduciary Responsibility Issues Update: Qualified Pension and 401(k) Plans and ESOPs in a Post-Enron World,” last week will be published here over the next week or so. . .

Karen L. Handorf, Deputy Associate Solicitor, Plan Benefits Security Division, of the Department of Labor, spoke on the recent case “Black & Decker Disability Plan v. Nord” which was reviewed here in a May 27th post. The recent U.S. Supreme Court case holds that ERISA does not require a plan administrator to use the “treating physician rule” for purposes of determining eligibility under a disability plan. Ms. Handorf said that the case resolved a split within the circuits on this issue and that the reasoning behind the Supreme Court’s decision were basically two-fold: (1) The court said there was no reason to take the Social Security Administration’s use of the “treating physician rule” and apply it to ERISA due to the differences between Social Security and ERISA; and (2) the 2002 DOL claims regulations had not included the “treating physician rule” and therefore the courts should not promulgate a rule in this area. An interesting issue that was left unresolved, she said, was: what standard of review should there be where a conflict of interest exists for the plan administrator? Ms. Handorf mentioned that the DOL had filed an amicus brief in the case and that the court had upheld the flexibility given to employers under ERISA in designing these types of plans.

She contrasted, however, the U.S. Supreme Court case of Kentucky Association of Health Plans v. Miller, decided April 2, 2003, in which she said flexibility for the plan sponsor and HMO gave way to the state’s interest in assuring broad based participation in these plans. In that case the court held that a state’s “any willing provider law” was not preempted by ERISA. The court rejected a test utilized in previous cases and adopted a new test for determining whether or not a law was held to “regulate insurance” and “saved” from preemption under the “savings clause” of ERISA. The court stated:

“Today we make a clean break from the McCarran-Ferguson factors and hold that for a state law to be deemed a “law . . . which regulates insurance”. . . it must satisfy two requirements. First, the state law must be specifically directed toward entities engaged in insurance. . . Second, as explained above, the state law must substantially affect the risk pooling arrangement between the insurer and the insured. Kentucky’s law satisfies each of these requirements.”

The panel of attorneys presenting at the seminar agreed that the case will mean a broadening of the “savings clause” under ERISA and fewer state laws being preempted under ERISA.

CCH provides online this briefing of the Jobs and Growth Tax Reconciliation Act of 2003 (“JAGTRA”) and this quick Tax Facts table.

In addition, this article at BusinessWeekOnline by Mike McNamee and Susan Scherreik provides some commentary on how JAGTRA may affect whether or not taxpayers will want to continue making contributions to a 401(k) or IRA.

Today’s Federal Register is here. Elizabeth MacDonald for Forbes Magazine reports via Yahoo! News.com: “Pension Pangs: Some big companies are in for an earnings jolt when they own up to the reality of rotten pension fund performance.”

Reuters has reported that the House Subcommittee on Capital Markets will hold a hearing, entitled “The Accounting Treatment of Employee Stock Options,” on June 3, 2003.

Louis Lavelle for Business Week Online offers this commentary: “Shareholders Unite to Expense Options.”

Benefitslink.com points us to this insightful article by Accounting Today–“GAAP for pensions: Sanctioned fraud must go“–and this article by Fred Reisch for PlanSponsor.com–“Doing Well While Doing Good“–which talks about the selection of socially responsible funds as an 401(k) plan investment option.

TRI Pension Services reports in its Recent Developments on the Field Assistance Bulletin issued by the DOL regarding allocation of expenses to participants and also reports on the new deemed IRA regulations.

Thompson Publishing provides this article discussing the new COBRA notice regulations.

Today’s Federal Register is here. This article by Andrea Combes for CBSMarketwatch.com: “Mismanaged options: stock option plans confound many workers, experts say.” Today’s edition of the Wall Street Journal has this article–“A New Retirement Tactic for a New Tax Law: Changes Mean Investors Should Now Favor Bonds Over Stocks in 401(k) Plans“–by Jonathan Clements and Tom Herman. The article talks about how, under the new tax law signed by President Bush yesterday, bonds, real estate investment trusts, and short term stock holdings could be better investment choices for 401(k) plans than stocks.

Reuters just reported: “FASB to reconsider pension proposal under attack.”

The President made these remarks today at the signing of the Jobs and Growth Tax Relief Reconciliation Act of 2003.

This very good article by Thompson Publishing Group details the benefits provisions dropped from the Jobs and Growth Tax Relief Reconciliation Act” (H.R. 2): “Comp and Benefits Provisions Dropped From Tax Bill.”