Fortune's first issue of 2010 delivers plenty of material on benefits and tax concerns.
Among the topics covered: board member pay, a challenge to the concept of cadillac health care plans, and for those who remember Enron's Jeff Skilling an article on honest services fraud. Chicagoans may have already read the Chicago Reader's December 2009 article on honest services fraud.
Also featured is an estate settlement battle between a Revlon exec and his father in law
1/10/10
12/30/09
Hiatus for Exams but back with More Benefits Reading
Hope that everyone did well on exams.
Here are some links to other benefits blogs that may interest you.
Benefit Blog
Employee Benefits Legal Blog
Precept Employee Benefit BlogThe Delaware Employment Law Blog's List of top benefits blogs
The Retirement Plan Blog
Here are some links to other benefits blogs that may interest you.
Benefit Blog
Employee Benefits Legal Blog
Precept Employee Benefit BlogThe Delaware Employment Law Blog's List of top benefits blogs
The Retirement Plan Blog
12/1/09
A proposal to end the executive bonus system
A proposal to end executive bonuses will not go over in C-suites and among benefits attorneys. Read the article here.
Author Henry Mintzberg makes an interesting argument about the importannce of goodwill, which is not easily measured, but likewise not easily manipulated like financial measures.
Excerpt:
"A company's health is represented by its financial measures alone—even better, by just the price of its stock.
Come on. Companies are a lot more complicated than that. Their health is significantly represented by what accountants call goodwill, which in its basic sense means a company's intrinsic value beyond its tangible assets: the quality of its brands, its overall reputation in the marketplace, the depth of its culture, the commitment of its people, and so on.
But how to measure such things? Accountants have always had trouble when they have tried, as have stock-market analysts, investors and even potential purchasers of the company. (That's one of the reasons so many mergers fail.) No board of directors is going to have much luck finding that elusive measure, either.
This flawed assumption, though, does far more damage than simply distorting CEO compensation. All too often, financial measures are a convenient substitute used by disconnected executives who don't know what else to do—including how to manage more deeply.
Or worse, such measures encourage abuse from impatient CEOs, who can have a field day cashing in that goodwill by cutting back on maintenance and customer service, "downsizing" experienced employees while others are left to "burn out," trashing valued brands, and so on. Quickly the measured costs are reduced while slowly the institution deteriorates."
Author Henry Mintzberg makes an interesting argument about the importannce of goodwill, which is not easily measured, but likewise not easily manipulated like financial measures.
Excerpt:
"A company's health is represented by its financial measures alone—even better, by just the price of its stock.
Come on. Companies are a lot more complicated than that. Their health is significantly represented by what accountants call goodwill, which in its basic sense means a company's intrinsic value beyond its tangible assets: the quality of its brands, its overall reputation in the marketplace, the depth of its culture, the commitment of its people, and so on.
But how to measure such things? Accountants have always had trouble when they have tried, as have stock-market analysts, investors and even potential purchasers of the company. (That's one of the reasons so many mergers fail.) No board of directors is going to have much luck finding that elusive measure, either.
This flawed assumption, though, does far more damage than simply distorting CEO compensation. All too often, financial measures are a convenient substitute used by disconnected executives who don't know what else to do—including how to manage more deeply.
Or worse, such measures encourage abuse from impatient CEOs, who can have a field day cashing in that goodwill by cutting back on maintenance and customer service, "downsizing" experienced employees while others are left to "burn out," trashing valued brands, and so on. Quickly the measured costs are reduced while slowly the institution deteriorates."
Pittsburgh taxes college students to fund pensions
The Wall Street Journal reports:
"Facing big unfunded pension liabilities for city workers, Pittsburgh is proposing what appears to be a one-of-a-kind 1% tuition tax on local university and college students, who claim the tax is illegal and unfair...
The tuition tax, which would raise an estimated $16 million, threatens to drive a wedge between the city and its universities, which have been credited with fueling much of Pittsburgh's economic transformation from an industrial city to an education and medical-services center.
The cash-strapped city, which has 85,000 students at its 10 universities and colleges, including top-ranked engineering school Carnegie Mellon University, says it needs the tax to help cover a $600 million pension-fund shortfall and keep several branches of the Carnegie Library system open.
The "Post Secondary Education Privilege Tax" or "Fair Share Tax" is justified, the city argues, because the students use city services -- roads, police and fire protection -- and should pay for them. Moreover, the city contends that the tuition tax, which would range from $27 for students attending Community College of Allegheny County to $400 for those attending Carnegie Mellon, amounts to a small charge for services."
Read the article.
"Facing big unfunded pension liabilities for city workers, Pittsburgh is proposing what appears to be a one-of-a-kind 1% tuition tax on local university and college students, who claim the tax is illegal and unfair...
The tuition tax, which would raise an estimated $16 million, threatens to drive a wedge between the city and its universities, which have been credited with fueling much of Pittsburgh's economic transformation from an industrial city to an education and medical-services center.
The cash-strapped city, which has 85,000 students at its 10 universities and colleges, including top-ranked engineering school Carnegie Mellon University, says it needs the tax to help cover a $600 million pension-fund shortfall and keep several branches of the Carnegie Library system open.
The "Post Secondary Education Privilege Tax" or "Fair Share Tax" is justified, the city argues, because the students use city services -- roads, police and fire protection -- and should pay for them. Moreover, the city contends that the tuition tax, which would range from $27 for students attending Community College of Allegheny County to $400 for those attending Carnegie Mellon, amounts to a small charge for services."
Read the article.
11/28/09
Take Back Old 401(k) Accounts
Money magazine advises investors to consider transferring old 401(k) accounts into an IRA. The article begins by cautioning against the liquidation of one's 401(k) account.
"[L]iquidating a 401(k) can be tempting for many people, especially if money is tight in the wake of a job loss. A recent survey by consulting firm Hewitt Associates shows that, layoff or no, nearly half of people with 401(k)s who leave their job take the money and run.
But that's typically not a very good choice. Aside from the fact that such a move will trigger income taxes and possibly a 10% penalty, taking the cash now could seriously jeopardize your retirement security. If you've still got a ways to go before retirement, raiding your savings early means you'll have a much smaller nest egg when you eventually retire. And if you're close to your retirement date, cashing out makes it less likely your savings will last as long as you do."
"[L]iquidating a 401(k) can be tempting for many people, especially if money is tight in the wake of a job loss. A recent survey by consulting firm Hewitt Associates shows that, layoff or no, nearly half of people with 401(k)s who leave their job take the money and run.
But that's typically not a very good choice. Aside from the fact that such a move will trigger income taxes and possibly a 10% penalty, taking the cash now could seriously jeopardize your retirement security. If you've still got a ways to go before retirement, raiding your savings early means you'll have a much smaller nest egg when you eventually retire. And if you're close to your retirement date, cashing out makes it less likely your savings will last as long as you do."
Divorce and Social Security Benefits
The Wall Street Journal answers questions about the impact of divorce on Social Security benefits here.
"To review, here are the general requirements for collecting retirement benefits based on an ex-spouse's earnings: Your marriage had to have lasted at least 10 years; you can't be remarried; you have to be at least 62; and your ex-spouse has to be entitled to Social Security retirement or disability benefits. If you haven't yet reached your full retirement age, you would receive a percentage of the benefit you would be entitled to get at that date.
Also, the benefit you are entitled to based on your own work generally would have to be less than the benefits you would receive based on your husband's work. (However, if you wait until your full retirement age to file for Social Security, you can restrict the scope of your application to your ex-spouse's benefit only, and continue to accrue credits for delaying your own retirement benefit up to age 70.)
If your ex-spouse receives a benefit based on your earnings, your own Social Security benefit wouldn't be affected whatsoever. In fact, the rules are basically the same for married couples and divorced couples. Let's say Bob and Carol are married. And let's say Carol—who never worked outside the home—applies for benefits from Social Security based on Bob's earnings record. Bob's own benefit wouldn't be changed, reduced or penalized because of his wife's application."
"To review, here are the general requirements for collecting retirement benefits based on an ex-spouse's earnings: Your marriage had to have lasted at least 10 years; you can't be remarried; you have to be at least 62; and your ex-spouse has to be entitled to Social Security retirement or disability benefits. If you haven't yet reached your full retirement age, you would receive a percentage of the benefit you would be entitled to get at that date.
Also, the benefit you are entitled to based on your own work generally would have to be less than the benefits you would receive based on your husband's work. (However, if you wait until your full retirement age to file for Social Security, you can restrict the scope of your application to your ex-spouse's benefit only, and continue to accrue credits for delaying your own retirement benefit up to age 70.)
If your ex-spouse receives a benefit based on your earnings, your own Social Security benefit wouldn't be affected whatsoever. In fact, the rules are basically the same for married couples and divorced couples. Let's say Bob and Carol are married. And let's say Carol—who never worked outside the home—applies for benefits from Social Security based on Bob's earnings record. Bob's own benefit wouldn't be changed, reduced or penalized because of his wife's application."
11/27/09
Conkright v. Frommert
The Supreme Court case Conkright v. Frommert "which addresses whether a court must continue to give deference to a plan administrator's interpretation of a pension plan after the first interpretation has been found to be arbitrary and capricious under Firestone." See Workplace Prof Blog.
You can download an amicus caraie brief by a group of law professors who support the employees plaintiffs, here.
Note that one of the keywords is Mark DeBofsky, who teaches ERISA Litigation at Marshall.
Excerpt from the SSRN page:
"Amici curiae law professors filed this brief to urge the U.S. Supreme Court to affirm the decision of the Second Circuit Court of Appeals and not to import inappropriate administrative law deference principles into ERISA denial of benefit claims under Section 502(a)(1)(B).
The brief argues that the Court should reject Petitioners' effort to engage in serial attempts to reinterpret its pension plan and also reject Petitioners' attempt to introduce administrative law deference into the ERISA benefit claims process. Such an approach would be inconsistent with the language and intent of ERISA and Supreme Court precedent.
Keywords: ERISA, Section 502(a)(1)(B), deference, benefits, denial of benefits, reinterpretation, administrative law, Donald Bogan, Mark DeBofsky"
You can download an amicus caraie brief by a group of law professors who support the employees plaintiffs, here.
Note that one of the keywords is Mark DeBofsky, who teaches ERISA Litigation at Marshall.
Excerpt from the SSRN page:
"Amici curiae law professors filed this brief to urge the U.S. Supreme Court to affirm the decision of the Second Circuit Court of Appeals and not to import inappropriate administrative law deference principles into ERISA denial of benefit claims under Section 502(a)(1)(B).
The brief argues that the Court should reject Petitioners' effort to engage in serial attempts to reinterpret its pension plan and also reject Petitioners' attempt to introduce administrative law deference into the ERISA benefit claims process. Such an approach would be inconsistent with the language and intent of ERISA and Supreme Court precedent.
Keywords: ERISA, Section 502(a)(1)(B), deference, benefits, denial of benefits, reinterpretation, administrative law, Donald Bogan, Mark DeBofsky"
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