Category: Erisa

“Pension Rulings Roil Hundreds of Businesses: Companies Seek U.S. Role In Cash-Balance Plans.”: Ellen E. Schultz for the Wall Street Journal reports today. The article discusses both the IBM and Xerox cash balance plan decisions handed down late last week. (You can access previous discussions about the IBM case here and a previous discussion about the Xerox case here. Also Benefitsblog has additional background information on the case as well.) With respect to IBM’s plans to appeal, the article makes the point that employers will have reason to worry since the IBM appeal “will be heard in the Seventh Circuit, where it may be decided by one or more of the judges who just ruled against Xerox on appeal. These include Judge Posner, a highly regarded judge whose opinions have been cited by the Supreme Court, and a prolific writer of Erisa decisions that have had substantial impact.”

Deepa Babington for Reuters has this: “IBM ruling turns promising pension move into headache.”

Milliman USA has issued this Client Action Bulletin: Emerging Developments for Cash Balance Plans.

You can now access the IBM cash balance plan decision, Cooper et al. v. the IBM Personal Pension Plan and IBM Corporation online here at the website for the United States District Court for the Southern District of Illinois.

More on the IBM Cash Balance Plan Case:

Ellen E. Schultz and William M. Bulkeley for the Wall Street Journal report: “IBM Pension-Plan Changes Are Ruled Discriminatory: Finding Is Viewed as Boon To Older Workers in U.S.” (Subscription required.)

Reuters has this: “IBM ruling turns promising pension move into headache.”

The Times Argus Online also has an article entitled: “IBM workers in Vermont welcome ruling on pension plan.”

“IBM pension move penalizes older workers, U.S. court says“: Mary Williams March for the New York Times reports (via the International Herald Tribune.)

Friday brought more cash balance plan news, with a federal appeals court ordering Xerox Corp. to pay $300 million to former employees who the court determined were shortchanged when Xerox calculated lump-sum pension benefits due them when they left the company. You can access the opinion by Circuit Judge Richard A. Posner of the U.S. Court of Appeals for the Seventh Circuit at this link. The following news sources are reporting:

Albert B. Crenshaw for the Washington Post reports: “Court Backs Workers In Xerox Pension Fight.”

Bloomberg.com has an article entitled: “Xerox Must Pay $300 Mln Judgment Over Pension Dispute.”

“Xerox to Pay $300 Million In Suit Over Pension Plan“: the Wall Street Journal reports. (Subscription required.)

Seyfarth, Shaw has posted this article on the proposed 401(k) and 401(m) regulations: “401(k) Rules Restated With Some New Twists.”

PR Newswire has this regarding the case: “Cash Balance Court Ruling Could Harm U.S. Pension System, According to Watson Wyattt.” From the news release:

“This ruling has the potential to cause great harm to the U.S. private pension system,” said Eric Lofgren, Global Director of the Benefit Consulting Group of Watson Wyatt Worldwide. “Moreover, two other district courts and the U.S. Treasury Department have previously reached the opposite conclusion concerning the validity of cash balance plans.”

SmartMoney.com reports in an article by Arden Dale for the Dow Jones Newswires: “IBM Pension Ruling Stirs Debate.” The article quotes J. Mark Iwry, a senior fellow at the Brookings Institution and the former benefits tax counsel at the Treasury Department as saying that it “is likely that the issue will ultimately be resolved neither by the appellate courts nor by the executive branch but by the Congress.” The article also quotes William Sweetnam, benefits tax counsel at Treasury as saying that Judge Murphy’s decision does not refer to the Treasury initiative. Mr. Sweetnam also commented that the agency would continue to go “forward with our reg writing process.”

More on the IBM Cash Balance Plan decision handed down yesterday and reported on here yesterday:

Albert B. Crenshaw for the WashingtonPost.com reports: “Judge Finds Age Bias in IBM Pensions: Experts Say Ruling Could End Other Employers’ ‘Cash Balance’ Plans.“

The American Benefits Council has issued a statement on the case. James Klein, ABC’s President, states:

“Conversions to cash balance plans are currently the one good thing going on in the defined benefit pension plan system because they demonstrate a commitment by employers to remain within the defined benefit world. Other companies are exiting the system altogether. A decision like this sends one more negative signal to employers that ‘no good deed goes unpunished’ since it penalizes employers trying to provide their workers with a pension that is funded by the employer and guaranteed by the government, as opposed to requiring workers to rely solely on employee-funded retirement alternatives.”

You can also access a copy of the case on their website as well.

PlanSponsor.com reports: “Murphy’s Law: IBM Loses Cash Balance Ruling.” (One time registration required.)

The Associated Press in this article–“IBM loses lawsuit over pensions: Federal judge rules firm discriminated against older workers at MSNBC.com quotes Mr. Klein as saying that “cash balance plans are ‘currently the one good thing going’ in an environment where many companies are dropping pension plans altogether and requiring employees to save for retirement on their own.”

Thanks to Dennis Kennedy for these great links:

• “Tight ties could damage eyesight“: the BBC News reports.
• “PC replacements: Lawyers, auditors and common sense“: SearchCIO.com reports.

This post by Larry Bodine from the LawMarketing Blog provides some great information for lawyers on managing client relationships.

Chief United States District Judge G. Patrick Murphy for the Southern District of Illinois rendered an opinion in the IBM cash balance plan case, Cooper et al. vs. the IBM Personal Pension Plan and IBM Corporation. The following news sources are reporting on the case:

• USA Today: “IBM loses closely watched pension lawsuit“
• Reuters: “IBM loses pension plan lawsuit, will appeal“
• The Wall Street Journal: “IBM Pension-Plan Changes Are Ruled Discriminatory: Finding Is Viewed as Boon To Older Workers in U.S.” (Subscription required.)
• The Associated Press via Yahoo! News.com: “IBM Loses Closely Watched Pension Lawsuit.”
• Dow Jones Business News via Yahoo! News.com: “Attorney: Judge Rules Against IBM in Pension Case.”
• San Jose Mercury News: “IBM Loses Closely Watched Pension Lawsuit.”

More to come on this . . . In the meantime, you can read previous posts about the case here.

Jill Ellswick for BenefitNews.com reports: “Scandals spur fiduciary liability premiums.” According to the article which reports on the results of a survey of the Risk and Insurance Management Society (RIMS), premiums for ERISA fiduciary liability insurance spiraled by 43% from 2001 to 2002 and rose 22% during the first quarter of this year. The article quotes John Coonan, vice president and fiduciary liability insurance product manager for Chubb Specialty Insurance, as saying that fiduciary lawsuits under ERISA are on the rise. The article also comments on how the parallel lawsuits under ERISA and the securities laws (discussed previously here) are “worrisome to underwriters” since liability exposure is basically doubled for what amounts to the same set of facts. The article comments on the exclusions which are becoming more common to mitigate risk, one of which is an exclusion for “fiduciary violations voluntarily disclosed to the Internal Revenue Service.” (Does the article mean “fiduciary violations voluntarily disclosed to the DOL” since fiduciary violations are generally disclosed to the DOL under the Voluntary Fiduciary Correction Program, and not the IRS? Or does it mean plan compliance violations disclosed to the IRS under EPCRS–which may or may not involve fiduciary violations?)