Category: Erisa

Suppose an employer discovers that some of its employees are market-timing* in the employer’s 401(k) plan and rightly decides that such practices are detrimental to the rest of the participants. Suppose the employer asks the employees to cease the market-timing and all employees heed the request, except one. Could the employer terminate the rebellious employee who fails to comply with its request? Or how about just warning the employee that his employment and career at the company could be impacted if the employee doesn’t stop? Wouldn’t such action on its face appear necessary in light of recent mutual fund scandals? Does an employee have a right to engage in market-timing in a 401(k) plan?

A federal district court in Iowa grappled with these very issues in a fascinating case decided last year. The case was Borneman v. Principal Life Ins. Co., 291 F. Supp. 2d 935 (S.D. Iowa Nov. 25, 2003) [pdf (62 pages)]. According to the court in Borneman, if the plan document allows market-timing, i.e. does not contain any restrictions on market-timing, the employer could be held to violate section 510 of ERISA if it takes adverse action against an employee in order to hinder the employee from exercising his or her rights under the plan. In other words, the court reasoned that, if the plan document allows market-timing, the participant then would have a supposed right to engage in market-timing, and any adverse action taken against the employee to prevent his or her exercise of such right could violate Section 510 of ERISA. (That section provides that “It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan [or] this subchapter.”)

The court in Borneman stated:

An integral part of Plaintiff’s § 1140 claim for retaliation is a showing that he exercised a right to which he was entitled under the terms of his employee benefit plan or under ERISA itself: There is no dispute in this case that throughout the time period relevant to this lawsuit, the market timing trading that Mr. Borneman was engaging in was permitted under the terms of his Plan. Mr. Borneman freely engaged in market timing trading until approximately June 14, 2001. Until that time, there had been no market timing trading restriction in place. Principal had requested that Plaintiff voluntarily limit his trading, but such request does not constitute a limitation under the Plan. Plaintiff’s trading to that point was a protected activity. After June 14, 2001, it is undisputed that Mr. Borneman did not trade in excess of the $30,000 limit imposed by Principal, which this Court has found that Principal had the right to impose. Thus, any trading after June 14, 2001 was a protected activity as well. Consequently, any retaliation by Principal on the basis of Plaintiff’s market timing trading throughout the duration of his employment would have been prohibited under § 1140. At all times, market timing trading in the amounts engaged in by Plaintiff was a right to which he was entitled under his employee benefit plan.

The court went on the analyze the different actions taken by the employer, and determined whether or not they were actions which could constitute “adverse employment actions” interfering with plaintiff’s right to engage in market-timing under ERISA. The court made the following interesting determinations:

(1) Amazingly, terminating the employee did not interfere with his right to engage in market-timing, said the court, since the “[p]aintiff retained his employee benefit plan after termination” and would have been “able to continue market timing trading even after his employment was terminated.”

(2) However, the court held that the adverse performance reviews and even “threats” about the employee’s future at the company could interfere with the employee’s exercise of his “right” of market-timing and section 510 claims should be allowed to survive a Motion for Summary Judgment on those issues:

Although these threats do not immediately affect the terms and conditions of a claimant’s employment, they do materially affect whether or not such employee can freely exercise his ERISA rights. By prohibiting retaliation and interference, § 1140 creates a seamless web of protection for participants and beneficiaries. Participants and beneficiaries are protected from attempts to discourage them from exercising rights under ERISA or their employee benefit plans, and they are protected if exercise of these rights actually results in an adverse employment action. If interference did not encompass protection against threats of discrimination, employers would be free to threaten employees with severe adverse employment actions, including termination, for exercising their rights.

While many plan documents now contain such market-timing restrictions or give discretion to impose market-timlng restrictions, many still do not address the issue. Putting the restrictions in the plan document may protect the employer from liability under section 510 of ERISA. In addition, the DOL has indicated (in guidance issued last February on the subject of fiduciary response to the mutual fund scandals) that plan documentation is important with respect to the market-timing issue:

The imposition of trading restrictions that are not contemplated under the terms of the plan raises issues concerning the application of section 404(c), as well as issues as to whether such restrictions constitute the imposition of a “blackout period” requiring advance notice to affected participants and beneficiaries.

*”Market-timing” is a trading strategy that involves frequent purchases and sales of securities (with the securities being held for short periods) in an effort to anticipate changes in market prices.

Don’t miss this interesting article by PlanSponsor.com called “Lawyering Up” discussing how ERISA lawsuits are at an “all-time high.” ERISA experts make the following comments about the up-tick in lawsuits as follows:

“. . . more 401(k) litigation now than ever”

“[T]the trend has snowballed. . . ”

“[T]he current spate of salacious scandals at major corporations has fanned the flames . . . ”

“The law is in a state of flux” and “evolving.”

What should plan fiduciaries be doing in light of the trend? Hiring a qualified ERISA attorney to advise the plan sponsor and fiduciaries about best practices and “prudent process and procedures” is really the best first step that a plan sponsor can take in protecting the company and fiduciaries from liability due to unexpected ERISA lawsuits. Burying one’s head in the sand is not an option, as the fiduciaries mentioned in this previous post here found out the hard way.

In addition, it is always amazing to me how little attention is given to plan documents and communication materials that are really the source for determining the fiduciary structure of an ERISA plan. If you have read and kept up with this “evolving” ERISA law, you will note that plaintiffs’ attorneys do a good job of exploiting and uncovering all of the weaknesses of a plan document in making their case for a fiduciary breach. (For instance, the plan document will be the starting point for determining whether or not a board of directors will be considered to be fiduciaries under ERISA.) In fact, many documents are never reviewed by an attorney experienced in ERISA, and many employers are not even aware of the weaknesses in their documentation and materials until they are uncovered in a lawsuit.

Recent news of Spitzer shaking up the insurance industry has filled the news over the past week. However, yesterday’s article in the Wall Street Journal (subscription required) entitled “Class-Action Threat Added to Challenges Facing the Insurers” discusses the impact of the probe on the employee benefits arena. (See also today’s New York Times article entitled “States Increase Their Scrutiny of Insurance Brokers” mentioned by Benefitslink.com.) The WSJ article states that “the insurance probe started by New York Attorney General Eliot Spitzer into kickbacks and other improper incentives in the insurance industry is widening into other states and moving toward the employee-benefits arena.” Excerpt:

In California, insurance regulators are hiring San Diego class-action law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP, home of high-profile trial lawyer William Lerach. The firm is expected to lead a legal fight against insurance brokers and insurers who the firm may accuse of cheating workers and other consumers by placing insurance and other benefits packages in the hands of insurers paying the biggest commissions, not providing the best prices and terms, a person close to the matter said.

The potential alleged victims include individual employees, who typically pay some or all of the cost of benefits sponsored by their employers. That would contrast with the picture so far painted by Mr. Spitzer, of insurance brokers cheating corporations as they bought sophisticated liability-insurance packages. Mr. Spitzer, too, has indicated that the employee-benefits sector is a coming front.

The New York Times article states that “[i]n Connecticut, Richard Blumenthal, the attorney general, stepped up his investigation into health insurance companies and those that sell employee benefits like group life and disability coverage” and that yesterday “regulators from 46 of the states huddled in a closed telephone conference and said in a cautious statement afterward that they were ‘assessing the adequacy of current laws or regulations.”’

Whether or not ERISA will be involved in the lawsuits spawned by the probe will depend upon whether or not the plans offering these types of benefits to employees are ERISA plans. (Read a previous post here on the subject of when a plan for voluntary benefits becomes an ERISA plan.) For those plans that are ERISA plans, I would think that fiduciaries for such plans should be taking a hard look at the insurance carriers and brokers through which the insurance has been offered and purchased, and have in place “prudent processes” for dealing with the recent investigations and lawsuits (similar to the types of processes utilized by 401(k) plan fiduciaries in the recent mutual fund scandals.) For starters, one could read again this guidance here issued by the DOL pertaining to the mutual fund investigations, and tailor it to the ERISA plan in question. For instance, fiduciaries will want to assess the impact of the investigations on their plans, conduct a review, and engage in a “deliberative process.” In cases where specific insurance carriers are implicated, fiduciaries will want to take an “appropriate course of action which will depend on the particular facts and circumstances” relating to the plan. Fiduciaries will also want to contact specific insurance carriers directly if information is needed and document their actions accordingly. Above all, fiduciaries will need to “act reasonably, prudently and solely in the interests of participants and beneficiaries.”

Unfortunately, many employers are already not up-to-speed in this area of compliance with ERISA when it comes to benefits such as life, health, and disability policies. Many do not even know that they have an ERISA plan, let alone think that there might be any fiduciary liability involved in the offering of such plans. (Post here contains information on this widespread lack of compliance, and the post here discusses a case where the employer didn’t know it had an ERISA plan, and an executive was held personally liable as a fiduciary.)

In this other WSJ op-ed entitled “Spitzer Investigation May Be Just the Start For Insurance Industry“, the author predicts that “the carnage has just begun” and that by the time “Mr. Spitzer is finished with the insurance industry, the mutual-fund scandal will look like child’s play.”

Law.com is reporting: “SmithKline to Pay $5.2 Million to Settle ERISA Suit.” According to the article, the employer has agreed “to pay $5.2 million to settle an ERISA class action suit brought by workers who said they were improperly labeled ‘temporary’ and therefore denied pension benefits despite working full time for months or even years.” The lawsuit highlights the problematic issues that can arise with respect to benefits programs when a portion of the workforce is comprised of “temporary” or “leased employees.” (Previous posts on benefits issues pertaining to outsourcing and temporary employees are here, here and here.)

As reported, the class action was initiated by 1,290 workers who began their jobs as temporary workers provided by agencies such as Kelly Services or Olsten Temporary Services, but who were later hired on as regular employees. The employees brought claims for benefits under the employer’s retirement plans and claims for breach of fiduciary duty. The plaintiffs in the suit claimed breaches of fiduciary duty for (1) failure to calculate and award them vesting and eligibility credits under the employer’s retirement plans; (2) failure to keep track of their vesting and eligibility credits; (3) imposing a “burden shifting scheme” on the plaintiffs, requiring them to provide the information supporting their entitlement to vesting and eligibility credits; and (4) failure to notify the plaintiffs of their right to appeal SmithKline’s benefits decisions. (You can access the Memorandum and Order, granting in part and denying in part, Motions for Summary Judgment in the case; and the Memorandum and Order granting the plaintiffs’ motion for class certification.)

The obligation to credit a leased employee’s prior service with the employer once the employee is hired by the employer as a regular employee poses significant problems for employers. Many times employers don’t even know that they are required to credit such service. If they do know it, they may not have the records, nor can they get the records, to substantiate the service. Reish Luftman Reicher & Cohen has published a good article on the subject: “What Difference Does It Make If I Hire a Former “Leased” Employee?” The author states that he believes the case is important “because it highlights an issue often overlooked by plan sponsors, but which is clearly on the radar screen of the IRS.” As indicated above, the issue is on the radar screen of plaintiffs’ attorneys as well.

The IRS has announced [pdf] that it is acquiescing in the Ninth Circuit case of U.S. v. Snyder, 343 F3d 1171 (9th Cir. 2003) (via Findlaw.com). Not only is the case significant as it relates to tax liens, ERISA plans, and bankruptcy, but the case also illustrates how the term “flip-flopping” is not just reserved for politicians.

The case involved the following facts:

The debtor was a vested participant in an ERISA-qualified pension plan and the plan contained the usual anti-alienation provision. The debtor’s interest in the defined benefit pension plan was about $200,000, with pay-out to begin when the debtor reached normal retirement at age 60, early retirement at age 55 through 59, total disability, or death. The debtor was 49 years old and had unpaid tax liabilities for the years 1983-1986, 1989-1995, and 1997. The IRS had made assessments and had duly recorded notices of federal tax liens for the taxes due in each of those years, except 1997. Federal tax liens had therefore attached by operation of law to the debtor’s interest in his pension plan.

The debtor filed a Chapter 13 bankruptcy petition listing the IRS as an unsecured creditor in the amount of $158,228. The IRS filed a proof of claim for roughly that amount, but claimed $145,664 as secured by virtue of its liens on debtor’s interest in the plan. The debtor objected to the secured portion of the IRS’s claim, arguing that his interest in the plan was excluded from the bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2), and that the IRS liens on that interest therefore could not secure the IRS’s claim in bankruptcy. The bankruptcy court overruled the debtor’s objection and allowed the IRS’s claim as secured. The district court affirmed. Both courts held that the debtor’s interest in the plan became property of the bankruptcy estate for the limited purpose of securing the IRS’s claim.

On appeal, the Ninth Circuit reversed. In reaching its decision, the court noted the IRS’s inconsistent positions on the issue, pointing out that in some instances the IRS was motivated in its inconsistencies by the result it sought to obtain. The court stated as follows:

During the past decade, the IRS has taken inconsistent positions on the question before us. In In re Lyons, 148 B.R.88 (Bankr. D.C. 1992), a bankruptcy court held that an IRS claim secured by a federal tax lien on the debtor’s pension was secured in bankruptcy, even though that pension otherwise qualified for exclusion from the bankruptcy estate pursuant to § 541(c)(2). In 1996, in reaction to Lyons, the IRS issued a litigation bulletin, in which it took the opposite position from the position it takes today:

The Lyons approach is not consistent with section 506(a) of the Bankruptcy Code. Under section 506(a), a creditor’s rights in property are dependent on the bankruptcy estate’s interest in property; the determination of the estate’s interest is separate from and must precede the determination of the creditor’s interest. If the estate has no interest in the property at issue, as was the case in both the Patterson and Lyons situations, it is not possible for the claim of any creditor, including the [IRS], to be secured by that property under section 506(a). Therefore, Lyons is inconsistent with the statute, in that the Lyons analysis essentially gives one particular creditor (the [IRS]) an interest in property where the estate has no interest in that property. Accordingly, Lyons [is] viewed as legally unsound. I.R.S. Litig. Bulletin No. 431, 1996 WL 33105615 (Aug. 1996).

In 1998, in In re Persky, 1998 WL 695311 (E.D. Penn. Oct. 5, 1998), the IRS in litigation took the same position it took in the litigation bulletin in 1996. It was to the IRS’s advantage in Persky to increase the amount of the Perskys’ total unsecured debt so as to defeat their eligibility for Chapter 13 relief under 11 U.S.C. § 109(e). The IRS therefore argued that its lien on the debtors’ spendthrift trust was not a lien on property in which the estate had an interest under § 541(c)(2), and thus did not operate to secure the IRS’s claim in bankruptcy pursuant to § 506(a). See also Amy Madigan, Note, Using Unfiled Dischargeable Tax Liens to Attach to ERISA Qualified Pension Plan Interests After Patterson v. Shumate, 14 Bankr. Dev. J. 461, 490-93 (1998) (describing an unpublished case in which the IRS argued that an ERISA-qualified pension plan was excluded from the bankruptcy estate pursuant to § 541(c)(2), where exclusion was to the IRS’s advantage because it would permit the attachment of an unfiled dischargeable tax lien on the debtor’s pension plan).

Two years after Persky, the IRS took the opposite position. In April 2000, the Assistant Chief Counsel for the IRS wrote:

Not following Lyons leads to results that are straightforward: ERISA-qualified plans and similar interests are excluded from the bankruptcy estate with respect to the [IRS] and all other creditors. Because they are not property of the estate, they cannot be used in determining the value of the [IRS’s] secured claim. On the other hand, to the extent that the [IRS] has a lien that survives the bankruptcy, it can pursue collection outside bankruptcy. However, given the statutory framework of sections 541 and 506 and the Supreme Court’s reasoning in Patterson . . . , upon reconsideration we now believe that the holding in Lyons is correct. The wording of each section, on its face, supports the court’s reasoning. In addition, there is nothing in the legislative history that would call for a different result. I.R.S. Chief Couns. Advis. 200041029, 2000 WL 33120271 (Apr. 11, 2000).

Courts had split on the issue as well and the Snyder opinion gives a good run-down of all of the differing case law which had developed on the issue. In the end, the court adopts the view espoused in the group of cases which had aligned with the IRS’s position in its 1996 Litigation Bulletin, stating as follows:

We agree with the position taken in the first group of cases described above. That is, we agree with the position the IRS took in its 1996 litigation bulletin and in Persky, and disagree with the position it took in 2000.

The court goes on to state in dicta that, although exclusion of the debtor’s interest in the plan from the bankruptcy estate precludes the IRS from attaining secured status in the bankruptcy proceeding, the IRS’s liens against the debtor’s interest continue to exist, but outside of bankruptcy. This means that the IRS will be able to reach the assets in the plan upon the debtor’s retirement, when the debtor is entitled to payments from the plan. Since the life-span of a tax lien is only ten years from the date of assessment, potentially the lien might expire before the IRS is able to collect.

By the way, for those who aren’t familiar with the IRS’s “Action on Decision” procedure under which the Acquiescence was issued, the Tax Bulletin explains the procedure as follows:

It is the policy of the Internal Revenue Service to announce at an early date whether it will follow the holdings in certain cases. An Action on Decision is the document making such an announcement. An Action on Decision will be issued at the discretion of the Service only on unappealed issues decided adverse to the government. Generally, an Action on Decision is issued where its guidance would be helpful to Service personnel working with the same or similar issues. Unlike a Treasury Regulation or a Revenue Ruling, an Action on Decision is not an affirmative statement of Service position. It is not intended to serve as public guidance and may not be cited as precedent.

The Bulletin goes on to state that, prior to 1991, the Service published acquiescence or nonacquiescence only in certain regular Tax Court opinions and that the Service has expanded its acquiescence program to include other civil tax cases where guidance is determined to be helpful. The Bulletin explains that the “Service now may acquiesce or nonacquiescence in the holdings of memorandum Tax Court opinions, as well as those of the United States District Courts, Claims Court, and Circuit Courts of Appeal.”

What does this actually mean when the Service acquiesces with respect to an opinion? According to the Bulletin:

Both “acquiescence” and “acquiescence in result only” mean that the Service accepts the holding of the court in a case and that the Service will follow it in disposing of cases with the same controlling facts.

Please note: All links to the Bankruptcy Code are via the Cornell Law School’s Legal Information Institute. The site is a terrific resource for lawyers and others and is requesting donations from those who feel so inclined.

The New York Times is reporting: “IBM Employees Get $320 Million in Pension Suit.” According to the article:

Under the settlement, which is subject to approval by the court, IBM would pay at least $300 million to current and former employees and $20 million to employees who had not been at the company long enough to earn a pension. The payment of $300 million settles all disputes that arose when IBM changed its pension plan the first time, in 1995, to an interim design called a pension-equity plan.

But the settlement leaves unresolved the two claims in the class-action lawsuit that pertain to cash-balance pensions. IBM intends to appeal those claims. One remaining claim is at the very heart of the case: whether cash-balance pension plans by definition discriminate against older workers.

PlanSponsor.com has a good summary of the development here and reports that the settlement caps IBM’s liability with respect to the cash balance plan issue at $1.4 billion if IBM were to lose that issue on appeal.

From the Wall Street Journal article here:

IBM Treasurer Jesse Greene said that “this settlement protects the company and our shareholders.” He said that even if it loses the sections it is appealing, “the remedies are within IBM’s ability to handle.” IBM said it expects to prevail on appeal.

As part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), Congress enacted a provision requiring a plan to roll over the accounts of participants that exceed $1,000 (but do not exceed $5,000) and are distributable, if the participant does not elect to roll over the account directly or to receive the distribution. This EGTRRA provision, however, was not effective until the DOL issued guidance, and EGTRRA required the DOL to issue this guidance by June 7, 2004, which it did in the form of proposed regulations discussed here. The DOL has announced that it has finalized those regulations (access them here) providing guidance and establishing a safe harbor pursuant to which a fiduciary of a pension plan subject to Title I of ERISA will be deemed to have satisfied his or her fiduciary responsibilities in connection with the provisions. Also, the DOL has issued a final class exemption permitting a fiduciary of a plan, who is also the employer maintaining the plan, to establish, on behalf of its separated employees, an individual retirement plan at a financial institution which is the employer or an affiliate. The effective date of the final regulations is March 28, 2005.

There are a number of interesting differences between the proposed and the final regulations, the most notable of which is the fact that the DOL has extended the safe harbor to rollovers of mandatory distributions of $1,000 or less. The DOL states in the final regulations that it “believes that the availability of the safe harbor for such distributions may increase the likelihood that such amounts will be rolled over to individual retirement plans and thereby may promote the preservation of retirement assets, without compromising the interests of the participants on whose behalf such rollovers are made.”

Another major change to these final regulations has to do with the fees and expenses that can be assessed against an individual retirement plan. The DOL explains that “[m]ost commenters objected to the provision limiting fees and expenses to income earned by the individual retirement plan” and argued “that the income to be generated by the investments permitted by the safe harbor against which expenses may be assessed would be very limited, while the costs attendant to maintaining such individual retirement plans would tend to be higher than individual retirement plans with respect to which the account holder contributes and maintains contact with the institution.” Commenters argued that this problem would limit the number of individual retirement plan providers that would be willing to accept rollover distributions in accordance with the safe harbor regulation.

Accordingly, the DOL has provided in the final regulations that “[a]ll fees and expenses attendant to an individual retirement plan, including investments of such plan, (e.g., establishment charges, maintenance fees, investment expenses, termination costs and surrender charges) shall not exceed the fees and expenses charged by the individual retirement plan provider for comparable individual retirement plans established for reasons other than the receipt of a rollover distribution subject to the provisions of section 401(a)(31)(B) of the Code.” The DOL states that the “comparability standard” is sufficient to protect individual retirement plans from being assessed unreasonable fees. (Interesting assumption here in light of recent controversies over unreasonable 401(k) fees and expenses. )

Regarding the effective date provisions, the DOL provides that:

(1) The final regulation shall apply to the rollover of mandatory distributions made on or after March 28, 2005.

(2) The EGTRRA automatic rollover provisions will be effective March 28, 2005. The DOL states: “Section 657(c)(2)(A) of EGTRRA provides that the requirements of section 401(a)(31)(B) of the Code requiring automatic rollovers of mandatory distributions to individual retirement plans do not become effective until the Department prescribes a final regulation. Inasmuch as it appears clear that Congress did not intend fiduciaries to be subject to the automatic rollover requirements under the Code in the absence of a safe harbor, the Department as well as Treasury and IRS believe that the effective date of the Code’s rollover requirement must be determined by reference to the effective date of this regulation, which is the point in time when plan fiduciaries may first avail themselves of the relief provided by the safe harbor.“

(3) Prior to the March 28, 2005 effective date, fiduciaries may rely in good faith on the regulation for purposes of satisfying their fiduciary responsibilities under section 404(a) of ERISA with regard to the selection of an institution to receive a rollover of a mandatory distribution and the initial investment choice for the rolled-over funds made before the effective date of this regulation. However, the class exemption is not available prior to the effective date for purposes of the prohibited transactionr relief afforded by the exemption.

I’m overdue in acknowledging ERISA’s 30th Anniversary. Back on Labor Day of 1974, President Ford signed into law the Employee Retirement Income Security Act. View the signing here as well as a statement from President Ford regarding the importance of the Act. It is interesting to look back on President Ford’s statement and to think about how ERISA may, or may not, have created a “brighter future” or “solid protection” for “men and women of our labor force.”

CNNMoney.com is reporting: “House backs IBM pension ruling.” According to the article:

The House of Representatives voted 237-162 Tuesday to prohibit the government from trying to use regulations to overturn a court case that ruled against the cash balance pension plan of International Business Machines Corp.

The move echoed a vote the House took a year ago. But the sponsor of both measures, Rep. Bernard Sanders, an Independent from Vermont, argued that Congress should weigh in on the subject again to make clear its opposition to cash balance plans that do not include protections for older workers.

Opponents of the measure charge that Sanders is trying to “enshrine in law a flawed court case,” and warned that such a measure would undermine pension plans generally:

“Given the growing reluctance of business to sponsor additional defined benefit plans, this amendment is just one more reason for companies to walk away from this type of pension,” [Rep. Sam] Johnson said.

The Wall Street Journal (subscription required) also reports on the development: “House Votes to Bar U.S. Intervention On IBM Pensions.”

You can access the legislation here. The language of the amendment reads as follows:

None of the funds appropriated by this Act may be used to assist in overturning the judicial ruling contained in the Memorandum and Order of the United States District Court for the Southern District of Illinois entered on July 31, 2003, in the action entitled Kathi Cooper, Beth Harrington, and Matthew Hilleshein, Individually and on Behalf of All ThoseSimilarly Situated vs. IBM Personal Pension Plan and IBM Corporation (CivilNo. 99-829-GPM).

You can read about the amendment in this previous post here. (For background on the cash balance plan controversy, previous posts on the topic are here and here.)

What’s going on in the House regarding cash balance plans and pension plans in general?

(1) Rep. Bernie Sanders (I-Vt.) has introduced more amendments directed at cash balance plans this time trying to tie the hands of the Treasury in assisting in the appeal of the IBM cash balance plan case (you can read all about the cash balance plan controversy in previous posts which you can access here and here.) The American Benefits Council has posted the Amendment on their website as well as a discussion as to why the Amendment is flawed and “harmful to employees’ retirement security.” The discussion piece includes comments by University of Chicago Professor of Law Richard Epstein who is quoted as saying, “[The amendment] itself is contrary to the constitutional principle of separation of powers. The provision prevents the President from faithfully executing the laws and manipulates the appellate process to deny the judiciary access to the views of the Treasury Department, which normally receives deference in interpreting complex statutory provisions.” Professor Epstein further states, “The Executive Branch is effectively handcuffed in its ability to articulate its position in regulations or litigation, and the courts are deprived of an important source of information that allows them to decide an important case.”

(2) Regarding pensions in general, Rep. John A. Boehner (R-Ohio), chairman of the House Education and the Workforce Committee has made remarks regarding his plans for pension reform. You can access his “Six Principles for Fixing America’s Outdated Pension Laws ” here. Regarding cash balance plans, he states that the “continuous threat of legal liability for employers offering cash balance plans is creating ongoing uncertainty and undermining the retirement security of American workers” and that “Congress should consider solutions to ensure cash balance pension plans remain a viable part of the defined benefit system and a positive retirement security option for workers and employers.”

(Thanks to Benefitslink.com for alerting readers to these developments.)