Category: Benefits

The SEC will be conducting the first-ever Seniors Summit on July 17, 2006, to examine how regulators and others can better coordinate efforts to protect older Americans from investment fraud and abusive sales practices.

See also this related article from MSNBC: “SEC steps up campaign against pension scams.”

The IRS has issued Notice 2006-69 providing guidance addressing these topics: (1) the use of debit cards, credit cards, and stored value cards to reimburse participants in flexible spending accounts and health reimbursement arrangements, (2) the substantiation requirements that apply to all medical reimbursement plans whether or not a card is used, and (3) the use of cards to reimburse participants in dependent care assistance programs, including dependent care flexible spending arrangements. The Notice builds on the previous guidance issued in Rev. Rul. 2003-43 which you can read about in a number of previous posts here.

Each year, the ABA’s Joint Committee on Employee Benefits (“JCEB”) meets with officials of federal agencies to discuss issues of interest to employee benefits practitioners. The JCEB then posts the question and answer transcripts on its website. The Q & A’s have now been posted for 2006. You can access them here.

There is some really interesting info in these new Q & As. See Q & As 32 and 33 of the IRS session for some Q & As on section 409A. Also, Q & A 34 for the IRS session discusses the recent Quality Assurance Bulletin mentioned in this previous post here and anwers a question regarding exclusion of “on call,” “per diem,” and “temporary” employees from qualified plans.

Please note that the JCEB website provides the following disclaimer:

The questions are submitted by ABA members and the responses are given at a meeting of JCEB and government representatives. The responses reflect the unofficial, individual views of the government participants as of the time of the discussion, and do not necessarily represent agency policy.

Access previous JCEB Q & As here.

A recent study by Watson Wyatt–Retiree Health Benefits: Time to Resuscitate?–contains data regarding the future of retiree medical benefits:

Future retirees will shoulder substantially more ? if not all ? of the costs of their health care in retirement. Watson Wyatt estimates that the level of employer financial support will drop to less than 10 percent of total retiree medical expense by the year 2031, under plan provisions already adopted by many employers.

Also, a recent article on the topic from the National Law Journal: “Benefits as Burdens.” (At the end of the article, there is a quote from this author.)

The legislative history to section 409A provides that it was intended that the Secretary of Treasury would provide limited exceptions to the prohibition on acceleration of payments under 409A. The IRS has issued Notice 2006-64 to clarify that section 409A may permit acceleration of the time or schedule of payment as is necessary to satisfy requirements established pursuant to a written determination by the Office of Government Ethics that a divestiture of the financial interest or termination of the financial arrangement “is reasonably necessary to comply with any Federal conflict of interest statute, regulation, rule or executive order, or as is requested by a congressional committee as a condition of confirmation.”

Sometimes those in the benefits field get discouraged about all of the arcane and highly complex rules which employers must wrestle with in offering retirement plans for employees. Despite all of the work and struggle involved, it is encouraging to read how such efforts are helping to pay off when it comes to assisting folks in being where they need to be at retirement, as this study by EBRI–Will More of Us Be Working Forever? The 2006 Retirement Confidence Survey— indicates:

Employer-provided retirement savings plans, such as 401(k)s, perform an important role in encouraging retirement savings. Eligible workers are much more likely to save through a plan offered by their employer (82 percent) than workers are overall to have an individual retirement account (IRA) in which they have contributed (36 percent). In addition, employer-sponsored plans account for a significant proportion of workers’ retirement savings. Seven in 10 plan participants say that half or more of their household’s total retirement savings are in their current employer’s plan (70 percent).

Law.com explores the reasons why there aren’t more bloggers among the 735,000 lawyers practicing law in this article: “Lawyer-Bloggers: Fact or Fiction?”

(Some other possible explanations: Maybe they want to have a life, maybe they want to spend time with family and friends, maybe they want to take a walk in the park and enjoy the beauty of a sunset, instead of sitting in front of a computer screen all day? . . . 🙂

I have written a lot here at Benefitsblog about how improper classification of workers as independent contractors/employees can sometimes wreak havoc with benefit plans. The IRS has issued a fact sheet – FS-2006-21 entitled “IRS Reminds Businesses to Classify Workers Correctly which provides helpful links and tips for those seeking to educate themselves on classifying workers properly. The fact sheet begins:

The rash of natural disasters that have hit the United States in the last several months have caused many businesses to hire additional workers to help them meet increased demand for their goods or services. These businesses must make sure they treat their workers properly to make sure everyone can meet their tax obligations.

Read more about how misclassifications affect benefit plans in previous posts here.

(Hat Tip: TaxProf Blog)

In an address to the New York Financial Writers Association (which you can access here), SEC Chairman Christopher Cox discusses upcoming rules for disclosure of executive compensation as well as what he sees on the horizon as far as addressing the current issue of back-dated options.

Regarding executive compensation disclosure:

The Commission’s proposal to significantly improve the way executive compensation is reported to shareholders has received more than 20,000 comments. No issue in the 72 years of the Commission’s history has generated such interest. Our basic approach is straightforward: We propose to tell Compensation Committees to release all material information regarding their decisions, and we mean all. . .

The principle here is simple: no shareholder should need a machete and a pith helmet to go hunting for what the CEO makes.

And we want shareholders to know how much the executives will get once they retire or leave for any other reason. One of the problems with the current regime for disclosing executive pay is that the shareholder doesn’t get to know what the golden parachute looks like until the CEO floats cheerfully away from the mother ship.

The new executive compensation disclosure will deliver more than just clear and understandable numbers. We’ll also be getting a plain English narrative that will give investors an insight into the Compensation Committee’s thinking when it decides how to pay the CEO.

Today’s Compensation Committee Report and Performance Graph – which have become little more than pro-forma and boilerplate – will be replaced with an explanation by management called Compensation Discussion and Analysis. We expect the new CD&A to be clearly written, so every investor can understand it.

Regarding back-dated options:

Our final rule will very likely address the issue of back-dated options, which is currently so much in the news. . .

While I can’t comment on the SEC’s ongoing investigations of specific companies, I can tell you what the Commission’s position is. Back-dating must be fully disclosed. And the granting of back-dated options must be properly accounted for.

As one means of dealing with this problem, our proposed executive compensation rule will provide better and more useful disclosure of the backdating of options. It would require that a company clearly identify the portion of compensation that results from “in-the-money” option awards resulting from backdating.

The proposed rule will require the disclosure of the full value of an option based on the date the award was actually made. That means the added value from an option’s being in-the-money at the time of grant would be clearly disclosed. It would specifically require a comparison of the exercise price of the option to the grant date market price of the option, whenever the exercise price is lower than market price. That way, investors could see the additional compensation that was immediately conferred on executives when the option was granted.

Just as important as these dates and numbers will be the plain English disclosure of just how the company determined when to make its option awards. . .

The Commission is even now considering further adjustments to our executive compensation proposal to deal with the issue of backdating options. Our staff in the Division of Corporation Finance are collating all of those thousands of comments and will make a recommendation to the Commission at an open meeting soon.

As part of that review process, we will consider the need not only for any changes to the rule, but also for additional guidance to address further the backdating of stock options. So stay tuned. We want this matter settled in time for next year’s proxy season, and I have every reason to expect that it will be. . .

(Hat Tip: TheCorporateCounsel.net Blog)

For a limited time, ALI-ABA has provided free access to the following articles:

• ERISA and the 401(k) Plan Fiduciary by Thomas Hoecker
• Tax Exempt Organizations Compensation Audits: 403(b) and 457(b) and (f) by Roger Siske (1944 -2006) and Pamela Baker
• Health Savings Accounts Under the New Medicare Laws by Roberta Casper Watson
• The Qualified Plan Potpourri; Considerations for Selecting the Appropriate Plan For a Specific Client by David Duff
• Proposed Roth Distribution Regulations by Pam Perdue