Category: Benefits

The Financial Accounting Standards Board voted April 22, 2003 to require companies to treat their employee stock options as “expenses” on their income statements. Apparently, this move by FASB is only an initial decision that will be followed by a more formal proposal later this year. Under curent rules, companies can either choose to disclose the theoretical value in footnotes or treat the value of options as a compensation expense in their income statements. After Enron, many companies have already voluntarily agreed to expense options on their income statements. The problem seems to be how to value the options and critics of this decision by the Board say that this change in accounting treatment will make financial statements less reliable because of the difficulty in coming up with an identifiable value for the options.

Check out the following DOL Field Assistance Bulletin which allows plan fiduciaries of public companies to deny participant loans to officers and directors without violating certain requirements of ERISA: Field Assistance Bulletin 2003-1

Section 402 of the Sarbanes-Oxley Act of 2002 added a new subsection (k) to Section 13 of the Securities Exchange Act of 1934 which makes it unlawful for any issuer to to make loans to directors or executive officers. Many have been concerned that this provision might be interpreted to prohibit loans to be made to directors or executive officers under qualified employee benefit plans. With no guidance from the SEC on the subject, practitioners have been promoting the view that qualified plan loans should not violate the Act. However, with the push from certain Senators and the SEC for a broad interpretation of the Act, some have felt that a more cautious approach should be taken–that of prohibiting new qualified plan loans to executive officers. Before this guidance issued by the DOL, many thought that if you took such a cautious approach you might violate a provision of ERISA which requires that all loans be made available to participants and benefiticiares on a reasonably equivalent basis. However, the DOL makes it clear that such action to disallow a participant loan based on a reasonable question concerning the legality of the loan would not be a failure to provide loans to all participants on a reasonably equivalent basis. The question now becomes whether or not this DOL guidance will open the door for the SEC to take an overly broad interpretation of the Act, i.e. that of prohibiting loans to executive officers under qualified plans. . .

Welcome to Benefitsblog, a tax, benefits and ERISA law commentary and news filter, written and maintained by B. Janell Grenier, Esq., of the Grenier Law Office, a Philadelphia-area law firm. Ms. Grenier has over 20 years of experience counseling clients in all aspects of employee benefits law, including the design, drafting, implementation and administration of qualified and nonqualified retirement plans, flexible compensation programs, welfare benefits plans, and fiduciary law aspects of ERISA. Her clients have included small private start-up companies, family-owned businesses, Fortune 100 companies, as well as tax-exempt and governmental entities. Ms. Grenier is admitted to practice law in the following states: Pennsylvania, Missouri, Oklahoma and Utah.

Ms. Grenier’s practice has involved her in extensive plan compliance work on behalf of clients, including plan compliance audits, submitting plans for correction under the IRS’ Employee Plan Compliance Resolution Program, obtaining prohibited transaction exemptions and advisory opinions from the Department of Labor and private letter rulings from the Internal Revenue Service. Her experience also includes representing Plan fiduciaries in governmental and adversarial proceedings and protection of Plan fiduciaries through ERISA fiduciary compliance programs.

Previous experience includes the following: Special Counsel, Morgan Lewis & Bockius LLP (Philadelphia, Pennsylvania), Of Counsel, Ray, Quinney & Nebeker (Salt Lake City, Utah), Associate, Stinson, Morrison & Hecker LLP (Kansas City, Missouri), and Partner, Hartzog, Conger Cason & Neville (Oklahoma City, Oklahoma).

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