Benefits in the News

16 pages; highlights page is at . Excerpt: "States and localities are facing increased demand for services during a period of declining revenues and reduced access to capital. In the midst of these challenges, the federal government continues to rely on this sector for delivery of services such as Medicaid . . . . Incorporation of August 2008 data shows that the position of the sector has worsened since our January 2008 report."

Excerpt: "Senate Health, Education, Labor and Pensions Committee Chair Edward Kennedy (D-Mass.) on Tuesday named committee members to lead three working groups that will target specific aspects of the health care system in writing overhaul legislation, including Sen. Hillary Rodham Clinton . . . ."

Excerpt: "[UAW President Ron] Gettelfinger also rejected new concessions by UAW on wages or retiree benefits as some lawmakers have demanded as a condition of emergency assistance for the auto industry."

Excerpt: "Employer-provided family health coverage is tax-free to employees only if family members meet certain rules. Congress and the IRS have recently revised these tax rules, creating uncertainty about which family members can have employer-provided health coverage exempt from federal taxes. This Update reflects IRS guidance issued earlier this year and federal tax law changes enacted in October . . . ."

Excerpt: "New Jersey regulators issued a model employee notice that describes new paid family leave benefits."

Excerpt: "Faced with the prospect of employers transferring retiree medical liability to union-sponsored voluntary employees' beneficiary association (VEBA) trusts, the Centers for Medicare and Medicaid Services has issued guidance confirming that VEBAs can participate in the Part D retiree drug subsidy (RDS) program but must file their own RDS applications."

Excerpt: "As the largest single payer of health care in the country, Medicare's proposal to no longer cover a procedure strongly influences what procedures employers and health insurers will cover."

Excerpt: "The regulations take effect January 16, 2009. It is imperative that all employers covered by the FMLA consider these regulations in connection with their existing FMLA policies, procedures and handbook provisions accordingly."

22 pages; at pages 1-14; bravo! Excerpt: "Attached are seven 'to do' lists that may require you to take action before the end of 2008 or in early 2009. Many of the action items are a result of the Pension Protection Act of 2006 (the 'PPA'). For your convenience we have broken the 'to do' lists into the following seven categories: All Qualified Plans; Section 401(k) Plans; Defined Contribution Plans (other than Section 401(k) Plans); Defined Benefit Plans; Section 403(b) and Section 457(b) Plans; Health and Welfare Plans; [and] Executive Compensation."

A GM spokesperson said PBGC officials had met on Monday with GM's officer in charge of pension funding.

Excerpt: "[T]here are at least three sound business reasons for using automatic enrollment: Improving 401(k) nondiscrimination results; Recruiting and retaining valued employees; Mitigating [and] the loss of defined benefit ('DB') pensions."

Excerpt: "American International Group Inc. is terminating 14 voluntary deferred compensation programs involving 5,600 employees and independent agents and representatives. Approximately $500 million in earned but deferred pay will be distributed in the first quarter of 2009."

84-page PDF version of November 13, 2008 Powerpoint presentation.

Excerpt: "[The executive compensation restrictions under the Emergency Economic Stabilization Act] may stimulate further legislative efforts to reform executive compensation and may influence institutional shareholders, corporate governance firms and proxy solicitors in the coming months. As a result, it is reasonable to expect that compensation committees will be asking in the coming months whether some of these changes would be appropriate to extend to companies that are not participating in these programs. "

The Fourth Circuit opinion stated, 'The district court's reliance on the Sixth Circuit's decision in Wenner was misplaced, both because it is contrary to the law of this circuit and because that decision's rationale is flawed. In Wenner, a claimant's ERISA benefits were ordered reinstated, a substantive remedy, even though the only ERISA violation was a 29 U.S.C. ? 1133 procedural violation and the merits of the claim had not been decided."

Excerpt: "On October 20, 2008, the Office of Domestic Finance of the Department of the Treasury published in the Federal Register an interim final rule providing guidance on the executive compensation provisions applicable to participants in the Troubled Asset Relief Program Capital Purchase Program ('CPP') under the Emergency Economic Stabilization Act of 2008 (the 'Act'). This letter sets forth the comments of Frederic W. Cook & Co., Inc. to the interim final rule."

Excerpt: "Arizona, Florida, Louisiana, Pennsylvania, and South Carolina all have passed laws requiring insurance companies to provide coverage for treatment associated with autism. In addition, California, New Jersey, New York, Michigan, Ohio, and Virginia are considering such legislation in 2009."

Excerpt: "No incoming president has set a more ambitious work-family agenda than Barack Obama. The president-elect has said he wants a federal sick-day mandate and expansion of family leave. With Democrats also in control now of legislatures in 27 states, up from 23 before the election, change on this front is likely."

Excerpt: "[H]ere are the benefits-related sections of the regulations: 825.209 Maintenance of employee benefits; 825.210 Employee payment of group health benefit premiums; 825.211 Maintenance of benefits under multi-employer health plans; 825.212 Employee failure to pay health plan premium payments; [and] 825.213 Employer recovery of benefit costs. . . . Also, here is what the DOL has to say in the preamble as to what, if any changes, were made to the benefits-related provisions in these final regulations:"

1 page of 'talking points.' Excerpt: "Recent economic turmoil has had a devastating effect on defined benefit pension plans due to a combination of dropping asset values and credit market strains. As a result pension obligations have ballooned unpredictably since earlier in 2008. This in turn is forcing companies to set aside enormous amounts of cash that they would otherwise invest in job creation and business growth and thus is severely hampering economic recovery. A few changes to the Pension Protection Act (PPA) would largely address the problems . . . . "

2 pages; October 28, 2008. Excerpt: "The Association of School Business Officials International (ASBO) is an organization of school and community college business managers with members in the public school district segment of the market who are in a position to understand the issues surrounding the effort to achieve compliance with the final 403(b) regulations created by the absence of (a) clear-cut guidance regarding non-grandfathered accounts, (b) concrete instruction from Treasury and the Internal Revenue Service in preparing compliant written plans, and (c) published correction programs specific to the final regulations and the guidance posted in Revenue Procedure 2007-71."

Excerpt: "The program allows employees with five or fewer years left until retirement to keep working and collect a monthly pension payment based on their salary and years of service at the time they enter the program. The pension money is deposited into an account controlled by the pension system, which pays an 8 percent return no matter what is happening in the financial markets. When the employee does retire, he or she can roll the entire balance of their DROP account into an individual retirement account or annuity."

Excerpt: "This Snapshot expands on information presented in the 2008 Kaiser/HRET Survey of Employer-Sponsored Health Benefits to look exclusively at the differences in offer rates, plan costs and cost sharing for small firms and large firms and includes an analysis of out-of-pocket payments from 2004 and 2005 Medical Expenditure Panel Survey data."

Excerpt: "U.S. District Judge J.P. Stadtmueller of the U.S. District Court for the Eastern District of Wisconsin ruled that the plaintiffs' claim of a violation of ERISA interest credit rules that went into effect earlier this year was premature."

12 pages. Excerpt from a Principal Financial Group press release: 'As market turbulence takes its toll on everything from 401(k) account balances to pension plan funding, employers are scrambling to assess the full impact on their retirement programs. They are also worried about what actions they may need to take right now as fiduciaries. . . . A new guide from the Principal Financial Group(r) can help employers make this critical review of their retirement programs. Navigating Your Way through Market Turbulence takes an in-depth look at how the market volatility may be affecting four common retirement plan types: defined benefit, defined contribution, Employee Stock Ownership Plan and nonqualified deferred compensation. The guide offers action steps to consider for each plan type."

4 pages. The annual mid-term applicable federal interest rate under Code section 1274(d) for December 2008 is 2.85 percent. It is used when calculating 'substantially equal periodic payments' that are exempt from the Code section 72(t) early distribution penalty.

Excerpt: "Steps should be taken to support employers who continue to sponsor defined benefit plans in which employees are continuing to earn benefits. There is, however, absolutely no reason to grant funding relief to employers that have frozen benefits. Extending relief to frozen plans will harm employees without giving them anything in return and will unnecessarily compromise the solvency of the [PBGC]. We also ask you to make relief conditional on an employer's commitment to continue accruals for the plan for five years following the period of funding relief."

3 pages. Excerpt: "Puerto Rico has enacted legislation that increases the pre-tax contribution limits to qualified savings plans under Section 1165(e) of the Puerto Rico Internal Revenue Code. Recent guidance provides that distributions from Puerto Rico profit sharing plans are not taxable in Puerto Rico upon company shutdowns. Also, the IRS issued a revenue ruling establishing that a transfer of assets from a U.S. qualified plan to a plan qualified only and exclusively under Section 1165 of the Puerto Rico Internal Revenue Code is a distribution to a participant whose account is included in the transfer, but the ruling is subject to important transition relief."

2 pages. Excerpt: "On November 6, 2008, the U.S. Court of Appeals for the First Circuit overturned the dismissal of a complaint against an insurer asserting breaches of fiduciary duties under ERISA where the insurer paid life insurance benefits by means of a retained asset account. In so ruling, the court rejected arguments by the insurer (1) that payment through the retained asset account was the equivalent of a lump sum payment and (2) that the breach of fiduciary duty claim was precluded by ERISA's guaranteed benefit contract provision."

Excerpt: "The brief's key findings are: The financial crisis suggests the need for a new universal tier of retirement saving to supplement Social Security and 401(k)s. If the tier were a defined contribution system, asset levels would vary with market returns and payouts with interest rates. Replacement rates could fluctuate as much as 30 percentage points -- even if everyone invested in an identical target-date fund. An alternative is to guarantee a fixed return, but this return will almost always be lower than that under a target-date fund, and guarantees are not costless."

Excerpt: "Combined with declines in the value of sponsoring companies, pension plan deficits compared with firms' values are larger and could indicate potential disturbances in some companies by the end of 2008. Weaker funding positions could necessitate larger cash contributions from sponsors to shore up pension funding. And with market values dropping and profitability shrinking, larger contributions could present some companies with a cash flow challenge."

88 pages. Excerpt: "I am pleased to transmit the Pension Benefit Guaranty Corporation's Annual Management Report for fiscal year 2008. This report includes PBGC's financial statements, the transmittal letter of PBGC's Inspector General, and the independent auditor's combined report on the Corporation's financial statements, internal controls, and compliance with laws and regulations. Also included is the Corporation's Annual Performance Report as required under the Government Performance and Results Act."

Excerpt: "Given the dire financial circumstances our country is experiencing, the NRLN's legislative team has concluded that we could accept a temporary delay in the implementation of pension funding and accounting requirements if Congress will include in any ERISA relief legislation the NRLN's proposals to protect pension assets. The measures we want included are: (1) Protect pension plan assets by preventing companies from using assets for restructuring expenses, such as paying lump-sum severance or layoff payments. (2) Prevent the purchase of pension plans by third parties, such as financial firms. (3) Prevent the use of pension plan assets to enhance deferred compensation of executives."

Excerpt: "Employers and TPA's should give careful thought to these case authorities in drafting claims administration agreements. At a minimum, the agreements and the plan language should be coordinated on grants of authority. Obviously, explicit grants of authority are preferred and may in some jurisdictions be required to gain deferential review of claims denials. Administrative practices should conform to the agreement terms with attention to documentation of decisions as responsibility is allocated by plan terms."

Excerpt: "The public's indignation over lavish executive pay has rippled beyond the circles of activist investors and corporate governance watchdogs, who for years have wrung their hands over compensation practices. It has spread even beyond grass-roots community organizers and public policy think tanks to people who make their living in the financial industry . . . ."

Excerpt: "In 2008, 3 percent of the population was enrolled in a consumer-driven health plan (CDHP), up from 2 percent in 2007 and 1 percent in 2006. . . . In 2008, HDHP enrollees continued to be more likely than traditional plan enrollees to report that they had delayed or avoided getting any needed health care services because of costs. But the difference between traditional plan enrollees and CDHP disappeared, mostly because more traditional plan enrollees reported access issues due to costs."

6 pages. Excerpt: "Employers have several options when considering their role and responsibilities for an on-site clinic. Options include a clinic: (1) Owned and operated by the employer, (2) Owned by an employer who subcontracts with health care providers to staff and operate the clinic, [or] (3) Owned by the employer who outsources the clinic's entire operation to a third-party vendor partner."

Excerpt: "After December 31, 2008, Code Section 457A prohibits deferrals by US taxpayers under certain deferred compensation and equity-related arrangements of 'tax indifferent parties', which include entities located in certain tax free (so-called 'tax haven') jurisdictions. Code Section 457A requires that such compensation be included in the income of US employees and other service providers subject to US income tax in the year in which it is no longer subject to a substantial risk of forfeiture."

Excerpt: "Congress will return next week for a brief 'lame duck' session. It is critical that members of Congress hear from individual companies. This will improve the likelihood that lawmakers will consider legislation addressing pension concerns before the end of the year. It is important that they understand that the need is urgent and that they must consider legislation that is sufficient enough to help companies manage the volatility caused by the financial turmoil."

Excerpt: "[One reason states incur budget deficits] is their failure to deal with huge and growing employee pension and benefits liabilities. . . . A study three years ago by the Employee Benefit Research Institute estimated that the average public sector worker earns 46% more in total compensation than his counterpart in the private sector, largely because government employers spend 60% more per worker on benefits than counterparts in the private sector."

Excerpt: "Agency spokesman Marc Hopkins said the PBGC is looking for a 'more accurate' picture of the auto maker's pension programs stability, which is necessary for the agency to effectively monitor the financial health of auto makers."

Excerpt: "The nation's largest corporate pensions had record losses in October and won't meet federal-funding requirements without a massive infusion of cash, improved asset values or a change in law."

Excerpt: "As states try to figure out how to cut costs and services to current taxpayers, it seems no one is talking about is rolling back the retirement age for government workers to help ease at least one part of the budget problem: massive pension burdens."

Excerpt: "The final regulation is unchanged from the proposed regulation, except that the final regulation states explicitly, with reference to the applicable statutory provisions, that plan administrators in distress and PBGC-initiated terminations, and plan sponsors in PBGC-initiated terminations, may charge a reasonable fee for any information provided in other than electronic form."

Excerpt: "The regulations provide employers new tools to administer FMLA leave more efficiently, including improvements in the area employers have identified as the most problematic -- potential abuse of intermittent leave rights. However, to leverage those tools, employers must update FMLA policies and forms and communicate more effectively, both verbally and in writing, with employees."

Excerpt: "The following offers highlights of the more significant changes in the FMLA rules from an employer's perspective: . . . ."

2 pages. Excerpt: "To encourage governmental plan sponsors to file under Cycle C, the IRS provides some incentives. . . . For many governmental plans that file for determination letters, this delay will be useful -- either because they are not able to meet the current deadline or because there will be more time to receive further information on what the IRS is looking for in the applications for governmental plans. On the other hand, if a plan sponsor is ready and able to file by the Cycle C deadline, it may be advisable to do so."