Category: Erisa

“Legislature passes bill requiring many companies to provide insurance“: SFGate.com is reporting that California will become the fourth state in the country to require employers to offer their workers health insurance if a bill which passed the Senate on Friday, 25-14, and the Assembly early Saturday, 46-31, is signed by Governor Gray Davis. According to the article, California will then join Hawaii, Washington and Oregon, as states with similar employee-mandated health insurance systems. The Mercury News has this report about the bill: “Health insurance legislation at-a-glance.”

You can obtain information about the bill at this link.

Other reports:

The East Bay Business Times: “Health care bill’s cost to fall on state’s employers.“
The Sacramento Bee: “Major health change is OK’d: Legislation would assure care for 1 million uninsured workers.”

An article from the The Galen Institute–“Tired Ideas and Innovative Solutions“–has this to say regarding the possible future challenges under ERISA:

My colleague Greg Scandlen predicts that the legislation, if signed by an apparently willing Gov. Gray Davis, will face years of court tests. The Employee Retirement Income Security Act (ERISA) makes it clear that the federal government, not states, have authority over employee health plans. (Hawaii’s employer mandate was grandfathered in the 1970s.) But Burton has written his bill to make it a test case that supporters believe can crack ERISA.

In a previous post here this week, I discussed the Sanders amendment which was passed by the House on Tuesday and added to the Fiscal 2004 Transportation-Treasury Appropriations Bill. The Amendment would prohibit any funds in the bill from being used to assist in overturning the IBM cash balance plan ruling handed down by the federal district court of Southern Illinois last summer. One comment made on the House floor in support of the amendment: ” . . we should not mess with this. . . I do not think the Congress should be messing with this. I do not think the administration should be messing with this. I think this should be left to the courts.” (The House member quoted also called the cash balance plan controversy an “explosive political issue.”)

Ironically, in a CNBC interview with Seventh Circuit Judge Richard Posner entitled “Richard Posner discusses his position on law, pragmatism and democracy” on Monday, July 28th (prior to the issuance of the opinion in the Xerox case, Berger et al. v. Xerox, which was written by Judge Posner) Mario Bartiromo for CNBC asked Judge Posner about his views regarding employees suing pension funds over reduced payments. His response was that with all of the litigation and all of the “detailed regulations of pension funds,” Congress might have to “step in at some point and change the rules.” Interestingly enough, as mentioned here before, Judge Posner may end up being one of the judges who will decide the appeal in Cooper et al. v. IBM Personal Pension Plan et al. since the case will go to the Seventh Circuit on appeal.

Well, it seems that Congress would like the courts to unravel the mess, and perhaps the feeling of some judges is that Congress should unravel the mess . . .

Towers Perrin has called on Congress to unravel it in this press release: “Towers Perrin Calls for Legislative Clarity for Cash Balance Plans.” Quote of Note:”It is in everyone’s interest for there to be clarity with respect to the rules governing cash balance plans. For years, the private pension system in the U.S. has been a key pillar of retirement security for millions of Americans. Confusion around the appropriate guidelines for the design of cash balance plans can only undermine private pensions and threaten this security . . .We believe that Congress should act immediately to clarify the past and future status of these plans.”

The Wall Street Journal is reporting today in this article–“California Considers Health-Care Bill“–that “California is close to making businesses pay for a new step toward universal health insurance, by requiring any companies with 50 or more employees to either provide them insurance or pay into a state pool to purchase the coverage.” Another article from the Kaisernetwork.org–“California Legislature Close To Passing Employer-Sponsored Health Insurance Bill“–reports:

The measure would require employers with 200 or more employees to provide health coverage to workers and their dependents by 2006 to avoid paying into the fund. Businesses that employ 50 to 199 workers would have to offer health insurance to employees only by 2007. Employers with 20 to 49 workers would be exempt from the law unless the state provides tax credits to offset the cost of health benefits, and those with 20 or fewer employees would be exempt from the law. The bill would cap employee contributions to premiums at 20%.

The Wall Street Journal article says that passage of the bill would be a “wake-up call” for one of the most important social issues facing the country today.

A previous post has discussed how the proposed legislation might be subject to challenges under ERISA.

I was out with illness yesterday, so that is why there were no posts here. Today is full of so much news that I’m afraid I cannot do it all justice.

The Wall Street Journal today is reporting: “House Moves to Prevent Proposed Pension Rules.” Other reports:

• Washington Post: “House Vote Backs Ruling On Pensions”
• New York Times: “House Blocks Treasury Work on Pensions.”

The Wall Street Journal gives a full account of what has been transpiring. The amendment, which was tacked on to the Fiscal 2004 Transportation-Treasury Appropriations Bill, would prohibit any funds in the bill from being used to assist in overturning the ruling of a federal court that a corporation using cash balance pension conversions would be in violation of federal law. The amendment is, of course, aimed at the Treasury which is apparently poised to issue regulations regarding cash balance plans. The amendment is also referring to this case which was handed down this summer by a federal district court of Southern Illinois holding that IBM’s cash balance plan violated ERISA.

Text of the Amendment from the Congressional Record:

Amendment offered by Mr. Sanders:

At the end of the bill, insert after the last section (preceding the short title) the following new section:

SEC. 742. 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 Hillesheim, Individually and on Behalf of All Those Similarly Situated vs. IBM Personal Pension Plan and IBM Corporation (Civil No. 99-829-GPM).

To read more about what was said on the House Floor regarding the amendment, continue reading . . .

AMENDMENT OFFERED BY MR. SANDERS

Mr. SANDERS. Mr. Chairman, I offer an amendment.

The CHAIRMAN pro tempore. The Clerk will designate the amendment.

The text of the amendment is as follows:

Amendment offered by Mr. Sanders:

At the end of the bill, insert after the last section (preceding the short title) the following new section:

SEC. 742. 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 Hillesheim, Individually and on Behalf of All Those Similarly Situated vs. IBM Personal Pension Plan and IBM Corporation (Civil No. 99-829-GPM).

[Page H8040]

The CHAIRMAN pro tempore. Pursuant to the order of the House of September 4, 2003, the gentleman from Vermont (Mr. Sanders) and a Member opposed each will control 30 minutes.

The Chair recognizes the gentleman from Vermont (Mr. Sanders).

Mr. SANDERS. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, this tripartisan amendment is cosponsored by the gentleman from California (Mr. George Miller) who is the ranking member of the Committee on Education and the Workforce, the gentleman from New York (Mr. Hinchey), the gentleman from Illinois (Mr. Emanuel) and the gentleman from Minnesota (Mr. Gutknecht). This amendment also has the strong support of the AARP, the largest senior citizen group in this country representing over 35 million Americans, it has the support of the Pension Right Centers, and the IBM Employees Benefit Action Coalition.

This amendment is simple and straightforward. Five weeks ago, the Federal District Court for the Southern District of Illinois ruled that IBM

As many of you know, the Department of Labor filed an amicus brief in the Williams Company ERISA Litigation. In the brief, the DOL discusses its views on the ERISA fiduciary duties and responsibilities of a Board of Directors which has responsibilitiy for appointing, removing and retaining members of a plan’s Benefits Committee. I am reviewing the Amicus Brief and plan to report on it here in the near future . . . so stay tuned.

Andy Meisler for the September issue of Workforce Management magazine writes an article–“They came from the Internet“–which discusses the proliferation of blogs which cover workforce-related issues. (Link is to table of contents for September issue.) Some of the blogs featured are Benefitsblog (along with a picture of yours truly!), George’s Employment Blawg, and HIPAA Blog. Unfortunately, you cannot link to the article since it is only available to subscribers. (Somehow an article about blogs just ought to be linkable in the blogosphere.) Thanks to Andy and the editors of Workforce Management for such a great article.

Quote of Note from the Article: “Recently, the blog bug seems to have bitten particularly hard among workforce professionals and consultants. . .A short stint of Googling turns up enough work-force management blogs to keep the average workforce manager distracted from real work almost indefinitely.”

According to this article at NJ.com–“Retirees’ benefits under scrutiny: Politicians help ex-Steel workers address state’s problems with plan“–the Pennsylvania State Insurance Department is claiming a health plan for retirees under age 65 is not in compliance with state insurance law and puts consumers at risk. “The Retired Employees’ Benefits Coalition Inc., a Bethlehem-based organization which represents salaried Steel retirees, obtained the health benefits plan through the National Employees Benefit Cos. Inc. of Warwick, R.I., after Bethlehem Steel was taken over by International Steel Group of Cleveland earlier this year,” the article states. The benefits are provided through a VEBA which NEBCO is claiming is subject to ERISA, and therefore exempt from regulation by state insurance laws.

SHRM has a great article in this month’s issue of the HR Magazine: “Fiduciary Fitness.” (Unfortunately, only members can access the article.) The article would be very helpful to those HR professionals and executives seeking to attain a good overview of the complex area of ERISA fiduciary compliance. The article reports:

Interest in fiduciary education is running strong because fiduciaries increasingly want to be sure they’re complying with ERISA’s complex requirements, particularly in the tense environment created by the dozens of lawsuits against companies-Enron Corp., WorldCom Inc. and R.J. Reynolds Tobacco Co., to name a few-alleging breaches of fiduciary responsibility.

The article emphasizes a point made here quite often at ERISAblog:

As many human resource managers know, ERISA compliance is a complex, time-consuming process that requires close, continuous attention, the expertise of a team of specialists and, above all, prudent behavior. Although the meaning of prudence varies with the situation, experts generally maintain that a fiduciary who creates, follows and documents processes and procedures to make informed decisions is doing the right thing.

The Associated Press reports via Newsday.com: “House Bill Changes Church Pension Laws.” The legislation (H.R. 1533) passed the House by a 397-0 vote and would amend current securities laws so that church pension plans would be able to participate in “collective trusts” for investment purposes. Normally, secular pension plans diversify their holdings by investing a portion of their portfolios in rental real estate and other private investment offerings. Frequently, pension plans make these investments by joining other pension plans in a collective trust fund that is created and managed by a financial institution solely as an investment vehicle for pension programs. Current securities laws have prohibited church plans from participating in these arrangements.

You can read more about the bill here. If anyone has any insight into why these rules have been different for church plans, I would be interested in knowing the history.

The Associated Press reports via Newsday.com: “House Bill Changes Church Pension Laws.” The legislation (H.R. 1533) passed the House by a 397-0 vote and would amend current securities laws so that church pension plans would be able to participate in “collective trusts” for investment purposes. Normally, secular pension plans diversify their holdings by investing a portion of their portfolios in rental real estate and other private investment offerings. Frequently, pension plans make these investments by joining other pension plans in a collective trust fund that is created and managed by a financial institution solely as an investment vehicle for pension programs. Current securities laws have prohibited church plans from participating in these arrangements.

You can read more about the bill here. If anyone has any insight into why these rules have been different for church plans, I would be interested in knowing the history.