Benefits in the News

Excerpt: "The employees were terminated following an investigation that commenced just eleven days after a relapse of their son's cancer; the investigation showed discrepancies between their time sheets and security gate entrance/exit records. The Tenth Circuit noted concerns expressed by the employer about the son's health care costs and the close 'temporal proximity' between the son's relapse and the employees' termination (less than three weeks for the father and approximately six weeks for the mother)."

Excerpt: "Despite a fulsome notice-and-comment period in which much of the regulatory community participated, many interpretative and practical questions about the regulation have persisted. Although the Department appears to have touched on several of the most common issues, this newest guidance did not put to rest all of the interpretative questions related, and may have even created new ones."

Excerpt: "I believe that without a mechanism to control what care is available and to whom and at what time, costs will continue to be a problem. We have more technology than we can afford. In national health care systems care is rationed by either long waits or guidelines that restrict access."

At page 10. Excerpt: "Whereas most circuits have generally permitted employers to terminate retiree benefits upon the expiration of a collective bargaining agreement, absent explicit language in the agreement guaranteeing lifetime benefits, the Sixth Circuit continues to create a presumption favoring lifetime benefits. As a result, participants bringing claims for retiree benefits stand a dramatically better chance of prevailing in the Sixth Circuit than anywhere else in the country."

At page 5. Excerpt: "For years, discretionary clauses have been challenged by ERISA plaintiffs and consumer groups. State insurance regulators entered the fray in 2002, and appear to be succeeding in setting aside these clauses for insured plans. Significantly, the usual ERISA preemption defense appears to be giving way to a wave of state insurance regulation preventing insured ERISA plans from giving Firestone discretion to fiduciaries of insured plans. This article examines some recent case law on the preemption issue . . . ."

At page 2. Excerpt: "The Seventh Circuit recently provided a stark reminder to ERISA plans and fiduciaries of the consequences resulting from the failure to timely notify the insurer of a potential litigation settlement. In Federal Insurance Co. v. Arthur Andersen LLP . . . the Seventh Circuit held that Federal Insurance Company . . . was not obligated to contribute the [fiduciary breach] policy limit of $25 million towards a settlement of pension claims by retirees who had worked for Arthur Andersen."

Excerpt: "It is premature to predict . . . that LaRue will trigger a significant increase in ERISA litigation. The decision in LaRue removes one of the legal hurdles that, in some circuits (i.e., parts of the country), would have dissuaded would-be plaintiffs' attorneys from taking cases in which an individual participant, or small group of participants, have sustained damage to their plan accounts. While that legal hurdle has been removed, other practical issues will be the deciding factors for plan participants contemplating litigation."

Excerpt: "The U.S. District Court for the Middle District of Alabama rejected the attempt by an employee stock ownership plan (ESOP) participant to revive her fiduciary breach case based on the recent U.S. Supreme Court ruling that defined contribution plan participants can seek individual account damages in fiduciary breach suits."

Excerpt: "With the 172-page ruling, including a majority opinion penned by Chief Justice Ronald M. George, California becomes the second U.S. state behind Massachusetts to allow gay marriage, according to news reports . . . . The decision was a product of a deeply divided court that narrowly approved the final holding 4 to 3."

John E. Dicken of the U.S. Government Accountability Office; Michael E. Chernew, Ph.D. of Harvard Medical School; Linda J. Blumberg, Ph.D. of The Urban Institute; Judy Waxman of the National Women's Law Center; Wayne Sensor of Alegent Health.

5 pages. Excerpt: "Accounting for retirement and other post-employment benefits continues to evolve. This evolution reflects a desire by standard setters for immediate recognition of changes in the funded position of retirement plans and increased transparency of their effect on their sponsors' financial position and income. In addition, the increased importance of less traditional retirement plan designs has led some to question the very nature of how retirement program obligations are measured."

2 pages.

Excerpt: "Financial economics (FE) is a branch of economics that studies the valuation of corporations and investments. Over the past decade, adherents to these theories have successfully advocated applying FE principles to corporate pension plans. Over the past year, they have begun advocating applying FE to public pension plans. This article examines the FE approach and compares it with conventional actuarial approaches for valuing public plans."

At page 2. Excerpt: "On February 29, 2008, the IRS released a private letter ruling (PLR 200809011) related to the treatment of disability benefits paid to firefighters and public safety officers. The request for the ruling came from a governmental plan after a state court held that a state statute . . . created a 'rebuttable presumption' that an employee's heart condition 'arises out of or in the course or his or her employment.'"

Excerpt: "On February 22, 2008, the Executive Board of the Government Finance Officers Association (GFOA) approved new recommended practices on essential design elements for public-sector defined benefit plans, defined contribution plans, and hybrid plans. The documents can be downloaded from the GFOA website for the following types of retirement plans: . . . "

3 pages.

At page 3. Excerpt: "Employers increasingly are using alternative coverage as a means of reducing their exposure to COBRA liability and decreasing administrative expenses associated with providing COBRA coverage. Alternative coverage generally refers to continued coverage that is provided independently from COBRA and that covers a period of time following the occurrence of a qualifying event."

At page 2. Excerpt: "Late last month, the IRS issued a directive announcing that the issue of backdated stock options was being redesignated from Tier I status to Tier II status. Tier II issues are those where the IRS' Large and Mid- Sized Business (LMSB) division believes there is a significant risk of noncompliance."

Excerpt: "It is probably too much to ask of federal regulators to coordinate their rules, but the IRS, SEC and FAA rules affecting personal use of company aircraft by executives are frustratingly out of synch. Companies need to be careful that they use the correct valuation method . . . ."

Excerpt: "Reports by the Institute of Medicine and others are spurring a national debate about how to improve health care quality. A new consensus is emerging on the value of evidence-based care, measurement and reporting of performance, as well as rewards for results. This report examines the effectiveness of regional coalitions in leading and implementing such initiatives."

Excerpt: "According to the table above, if you are a typical 40-year-old working American, there's a nearly 50% chance that your savings and investments total less than $25,000. Let's be generous and assume that you have $20,000 socked away and that you have about 25 to 30 years until you retire. How will that money grow for you? Well, here's what happens . . . ."

Excerpt: "This recent unpublished Tenth Circuit opinion illustrates the troubles that may be visited on employers that experiment with employee leasing arrangements coupled with self-funded benefit plan arrangements. Theoretically, neither concept is flawed. Practically, when combined, the utmost due diligence is required to avoid difficulties of the sort evidenced in the Voyles matter."

Excerpt: "For years, stock investors have been led to expect average annual returns of 8% to 10%. Similarly, many people have assumed that their homes would appreciate by roughly 10% a year. Both assumptions, though, rest on two decades of outsize returns -- returns that were inflated by low interest rates that fueled bubbles in the values of stocks and real estate."

Excerpt: "Total retirement plan assets in the United States continued to grow from $16.5 trillion at the end of 2006 to $17.8 trillion at the end of the third quarter of 2007, according to statistics reported by the Investment Company Institute (ICI) . . . ."

Excerpt: "Among the items in the PBGC's proposed rule stage are: . . . . Among the items in the IRS proposed rule stage are: . . . . The prerule and final rule EBSA agenda items are: . . . ."

Excerpt: "A bill offering thousands of additional city workers early retirement has been gaining support in the Legislature in recent weeks. New York City officials have protested, saying it would cost the city $200 million annually."

Excerpt: "The California Supreme Court has overturned a ban on g.ay marriage, paving the way for California to become the second state where g.ay and les.bian residents can marry. The ruling reverses a voter-approved law that defined marriage as a union between a man and a woman."

Excerpt: "Trade groups decry lawsuit charging Deere, Fidelity with excessive fees; call suit a 'fishing expedition.' Several industry groups have filed a joint brief stating that the lawsuit should be dismissed."

Excerpt: "We recommend that governmental employers that wish to comply only with the tax qualification rules applicable to them simply adopt an individually designed plan document expressly intended for a governmental sponsor. Any governmental employer that maintains an individually designed retirement plan must review the status of its plan, update both its operation and plan document compliance, and have the plan submitted to the IRS for a determination letter by January 31, 2009."

Excerpt: "Even though the LaRue case involved a drop in the value of a 401(k) account, the impact of the case can be significant in any context where a plan participant believes that by fiduciary action or inaction, his or her individual benefits were negatively impacted. This means that a participant may directly and immediately bring suit for breach of fiduciary duty without moving through the benefit claim and appeal process. The presumption of correctness for fiduciary defendants and the requirement that plaintiffs prove that a benefit denial was 'arbitrary and capricious,' simply does not apply in a breach of fiduciary duty claim."

9 page letter to the Internal Revenue Service by attorney Alex M. Brucker. Excerpt: "The potential $15,000 penalty is more burdensome for small than large employers, especially when more than one plan and more than one plan year are involved. . . . For a one-participant plan which has been exempt from Form 5500-EZ filings because plan assets are below the $250,000 threshold, it is easy to inadvertently miss a filing when plan assets increase above the $250,000 threshold. . . . There is no justification for denying the DFVC Program to a plan covering an owner and spouse while allowing the program to be used by a plan covering an owner and a non-spouse employee."

2 pages. Excerpt: "This [report describes] the percentage of multiemployer pension plans that fell into the yellow zone and red zone in the first round of certifications, as well as the percentage whose funding status was classified as neither endangered nor critical (known as the green zone), based on The Segal Company's actual certifications of more than 230 calendar-year plans."

Excerpt: "While the primary reason for creating a defined benefit (DB) pension plan is to help employees prepare for retirement, financial stewardship issues have recently eroded their importance as part of the employer's total rewards package to attract and retain talent. Study after study of DB plans has shown that the volatility -- rather than the absolute level -- of costs has spurred employers to act."

Excerpt: "Health savings accounts were criticized as 'tax shelters' that help the wealthy at the expense of those struggling to afford insurance coverage at a Wednesday Congressional hearing."

Excerpt: "Prompted by the national mortgage mess and myriad other legal issues that people face, more employers are offering group legal plans to employees."

14 pages. By John E. Dicken, director, health care, before the Subcommittee on Health, House Committee on Ways and Means, May 14, 2008.

NCEO Executive Director Corey Rosen discusses a program in Indiana to encourage banks to loan to ESOPs; a pro-ESOP resolution in Congress; an inaccurate claim by many compensation professionals that broad-based equity plans don't work; an NCEO survey of equity compensation practices in closely held companies; and a Winning Workplaces Webinar on employee ownership.

16 pages; submitted May 5, 2008. Excerpt: "The purpose of this submission is to identify for [the Office of Labor-Management Standards] significant points which support the reinstatement of the exclusion contained in prior T-1 regulations whereby information for Trust Funds covered by ERISA and [that are required to] file Form 5500 need not be reported on the T-1 Form."

Excerpt: "In their study, 'Building Blocks for Reform: Achieving Universal Coverage with Private and Public Group Health Insurance' (Health Affairs, May/June 2008), The Commonwealth Fund's Cathy Schoen, Karen Davis, and Sara R. Collins present a new health reform framework, built on the current U.S. mixed private–public system, that 'provides a pathway to universal coverage with a minimal increase in total national spending and relatively modest net federal budget costs.'"

Excerpt: "This paper argues that historical political preferences on the role of capital markets shaped national choices on pension reliance on private funding. Under democratic voting, a majority will support investor protection and a privately funded pension system when the middle class has significant financial participation, while high wealth concentration favors a state-funded retirement system and weak investor rights."

Excerpt: "The brief finds that: Over 40 percent of plans in our sample failed to make their annual required contribution (ARC) in 2006. The majority of these plans faced legal constraints on their contributions, but many are gradually adjusting their limits."

Excerpt: "New Jersey Gov. Jon Corzine (D) said his near-fatal car accident last year changed the way he thought about several state policy priorities. Paid family leave was one of them."

Excerpt: "Undoubtedly, some industries are both more prone to misclassify workers and more vulnerable to challenge due to the nature of the work involved. Construction, transportation and even the medical profession have proven at risk on the issue."

Excerpt: "If you contribute to a multi-employer pension fund, the 415-page Pension Protection Act's ('PPA' or 'the Act') provisions affecting multi-employer plans are now taking effect. The first of these provisions is the requirement that actuaries certify to the Internal Revenue Service into which funding zone (critical - red; endangered yellow; or no zone - green) the plan falls."

Excerpt: "As a taxpayer and the parent of two school-age children, I'm all in favor of denying state pensions to lawyers who pretended to be school employees and a superintendent who was convicted of stealing from his district. But I'm completely baffled by recent articles and editorials that attempt to compare such malfeasance with the hiring of retired school administrators - a practice that is specifically authorized by state law and one that actually reduces school taxes."

Excerpt: "There is no limit on how much sick leave an employee can carry forward into the next year, and IRS employees had an average balance of 43 days of accumulated sick leave at the end of 2006. 'We believe that the lack of compensation for unused sick leave at retirement has contributed to the higher amount of sick leave used by FERS employees,' the report said . . . ."

Excerpt: "I have come to realize that 'As time marches on' --- so do the errors in our client's retirement plans. So, with 'spring cleaning' in the air, I decided to clean out the garage of plan errors and list, in no particular order, some of the errors that have occurred over the past year. The type of error might not be new --- but the resulting consequences clearly explain the often used phrase: 'No Good Deed Goes Unpunished.'"

Excerpt: "Plan sponsors are not required to follow the QDIA rules. However, if a 401(k) plan has a default investment, we recommend reviewing the opportunity for reduced legal exposure by implementing a QDIA."

Excerpt: "Older men who expect high health care costs for themselves or their spouses after age 65 retire about 13 months later than those who expect low costs. The difference for women is 12 months. For those receiving health insurance from their employers, continued work reduces the risk of high out-of-pocket health care costs. Working longer also increases retirement incomes, making health care costs more affordable."

48 pages. Excerpt: "The emergence of biologic therapies [also known as biopharmaceuticals and specialty drugs] is straining traditional models of health insurance and health care financing . . . . For payers and purchasers, the cost of biologics is provoking benefit design changes that include significant cost shifting to patients and attempts to control or limit the cost of these therapeutics to the plan or plan sponsor."

Excerpt: "These charts summarize selected federal legislation that would affect employer benefit programs. The bills included on the charts are based on judgments regarding the prominence of the issue, the likelihood of enactment, and the influence of the sponsors."

Excerpt: "These charts summarize selected federal legislation that would affect employer benefit programs. The bills included on the charts are based on judgments regarding the prominence of the issue, the likelihood of enactment, and the influence of the sponsors."

Excerpt: "These charts summarize selected federal legislation that would affect employer benefit programs. The bills included on the charts are based on judgments regarding the prominence of the issue, the likelihood of enactment, and the influence of the sponsors."