Benefits in the News

The NCEO presents excerpts from Understanding ESOPs, its new introductory book on employee stock ownership plans. Written by NCEO cofounder and executive director Corey Rosen and NCEO publications director Scott Rodrick, the book is a comprehensive overview of how ESOPs work in both C and S corporations, what their applications are, what the valuation and financing issues are, what the steps to set one up are, and more.

Excerpt: "Pensions resemble a reverse neutron bomb: They gut cities and factories, yet leave armies of retirees standing, unscathed and ready for that Caribbean cruise. If you don't believe me, dip into Roger Lowenstein's troubling financial fable, 'While America Aged.' The three narrative histories presented here outline how pensions drove General Motors Corp. to the brink, brought New York subways to a halt, and turned sunny San Diego into Enron-by-the-Sea."

Excerpt: "Bestselling author and former Wall Street Journal reporter Roger Lowenstein explains how the looming pension crisis could dwarf the current sub-prime mortgage mess. He examines the how the country arrived at its current pension predicament... and what can be done to protect retirement security."

Excerpt: "Tom DiNapoli and Andrew Cuomo are doing a long-overdue service cracking down on part-time public sector lawyers padding their time slips. Unfortunately, the savings is minimal compared with the cost of allowing part-time elected officials to claim full-time retirement credits. Elected legislators from counties, cities, towns and villages are credited with full-time work although most attend only a few monthly meetings."

Excerpt: "Let me use my home state, New Jersey, as an example, but I could just as well cite figures for West Virginia, Illinois, and others that are just flat out of money because they mortgaged the future to vast public pension plans. These states are essentially insolvent and others are not far behind."

Excerpt: "For the first time, it appears that more than half of all insured Americans are taking prescription medicines regularly for chronic health problems, a study shows. The most widely used drugs are those to lower high blood pressure and cholesterol -- problems often linked to heart disease, obesity and diabetes."

Excerpt: "The good news about San Francisco's Proposition B is that it represents a rare effort by a local government to confront its daunting long-term liability for its retirees. Governments at all levels have been ignoring a fiscal time bomb: Their binding promises to provide workers with lifetime health care benefits, without putting away any money to prepare for the cost. The bad news about Proposition B is that it is more complicated and less effective than it could have been."

Excerpt: "The California Public Employees' Retirement System is about to vote on whether the mammoth public pension fund takes the first step to helping private individuals chart their financial future. But only after it can be convinced that such a plan is legal – and that CalPERS controls it."

Excerpt: "At first glance, the union-backed bill might seem harmless. In reality, it's a Trojan horse. It would create a task force to study 'retiree health insurance protection,' whose 12 members include at least five pro-labor votes. It also would impose a moratorium, through June 30, 2009, blocking efforts by local governments to implement cost savings for retiree benefits -- unless the same changes are negotiated for current employees. "

Excerpt: "A new diversified investment policy adopted by the PBGC is likely to produce higher returns over the long run, but also increases the risk that the PBGC will not have sufficient assets to pay benefits during an economic downturn, the director of the Congressional Budget Office (CBO) said in an April 24, 2008 letter."

Excerpt: "Two studies show increases in the number wellness initiatives offered by companies, as employers focus on improving worker health as a way to decrease healthcare costs. The need to retain older boomers on the job is also a factor."

Excerpt: "The House Committee on Education and Labor recently approved a revised 401(k) Fair Disclosure for Retirement Security Act (H.R. 3185). The new bill is substantially different from the bill originally introduced and represents a compromise with critics of the earlier bill's detailed disclosure requirements. In this article, we review the bill, primarily focusing on describing what the bill itself says."

Excerpt: "Employers are required to post and distribute a notice of the new Family Temporary Disability Leave program within 30 days after it is developed by the Commissioner of Labor. Notice also must be given when an employee is hired, at the request of an employee, and when an employee notifies the employer of a leave that is covered by the Family Temporary Disability Leave program."

Excerpt: "The Secretary of Labor is provided new enforcement authority. It may impose a penalty against the plan sponsor or issuer for failure to meet the requirements of ERISA §§ 701 and 702 regarding genetic information and discrimination. The permissive penalty is $100 per day for each participant or beneficiary to whom the failure applies. If the failure is discovered by the Secretary before it is corrected, however, a minimum penalty of at least $2,500 per person shall apply (or, where the violations have been more than de minimis, at least $15,000 per person shall apply)."

Excerpt: "Among other things, the Tax Relief and Health Care Act of 2006 changed the time for computing cost-of-living adjustments to health savings account (HSA) and high-deductible health plan (HDHP) limits so as to assure their release by June 1 prior to the calendar year in which they become effective. The IRS has now released these numbers for 2009."

Excerpt: "For calendar year 2009, the annual limitation on deductions under Code Sec. 223(b)(2) for an individual with self-only coverage under a high-deductible plan is $3,000 ($5,950 for an individual with family coverage)."

Excerpt: "Not a single-payer system -- a policy approach often considered a nonstarter in U.S. policy circles -- the Dutch approach combines mandatory universal health insurance with competition among private health insurers."

Excerpt: "Last week, an Assembly committee approved a bill that would require companies bidding on California state contracts to provide wellness benefits for employees."

Excerpt: "With another national health care debate on the horizon, many assume that health plans will present a major source of opposition to universal coverage and other reforms. But a closer look reveals signs of change."

Excerpt: "How secure are the promises of DB plans on a scale of 1 to 10? . . . Now is the time to help your clients who participate in DB plans answer complex, anxiety-inducing questions. The ideas, tools and techniques in this article will help you."

Excerpt: "Please select the professional services that you require, then you may select to search by zip code and mile radius or city, state and mile radius. . . . Please select one or more services . . . : 401(K)/Defined Contribution Services; Actuarial and Defined Benefit Services; Compliance and Fiduciary Services; Investment Services." [ASPPA membership information is online at http://www.asppa.org/membership/member_join.htm]

Excerpt: "High health care costs in the Milwaukee area stem from the market power of health care systems, according to a study by the Wisconsin Policy Research Institute. The study contends that health care systems have increased their market power by employing physicians, which gives them a referral base for their hospitals, which makes it harder for would-be competitors to enter the market."

Excerpt: "Some people marry for love, some for companionship and others for status or money. Now comes another reason to get hitched: health insurance. In a poll released Tuesday, 7 percent of Americans said they or someone in their household decided to marry in the past year so they could obtain health-care benefits via their spouse."

87 pages. Excerpt: "This document, prepared by the staff of the Joint Committee on Taxation . . . reconsiders the utility of the JCT Staff's current implementation of tax expenditure analysis. . . . Driven off track by seemingly endless debates about what should and should not be included in the 'normal' tax base, tax expenditure analysis today does not advance either of the two goals that inspired its original proponents: clarifying the aggregate size and application of government expenditures, and improving the Internal Revenue Code."

Excerpt: "A top Department of Labor (DoL) benefits regulator on Thursday revealed that the agency is studying ways to help 403(b) plan sponsors better deal with the difficult problem of getting an exact accounting of their orphan contracts."

Excerpt: "Growth in the number of 401(k)-type plans and the number of participants in those plans, which increased sharply in the 1990s, has slowed in recent years, according to a new EBRI study."

Excerpt: "As of March, 4,011 Milwaukee-area employees had value passes, subsidized by 65 employers. That matches the highest ridership in the program ever and is up 8% from the same time last year, said Jackie Janz, marketing director for Milwaukee County Transit."

Excerpt: "[Kelli] Hueler and her team are setting out on a gargantuan task -- to convince a generation of do-it-yourself investors who don't trust annuities to embrace them as a way to ensure they won't outlast their money. In recent years, annuities have only made headlines as unsuitable investments sold to the elderly."

Excerpt: "Americans with employer-provided health insurance have seen their premiums increase ten times faster than their income in the past few years, according to a study released on April 29 by the Robert Wood Johnson Foundation."

Excerpt: "Financial institutions receiving the direct deposit of the Economic Stimulus Payment and making the distribution should report the deposit and distribution in the usual manner. Taxpayers will receive instructions in the Form 1040 package that will allow them to report the distribution on their individual income tax return in a manner that shows that the amount withdrawn is not subject to taxes or penalties."

Excerpt: "The recently issued FAB clarifies that when a plan sponsor chooses to create and manage a QDIA using a mix of the plan's available investment alternatives, the plan sponsor will not qualify for the QDIA safe harbor unless it is a named fiduciary of the plan. The plan sponsor would remain liable for the management and monitoring of the QDIA."

Excerpt: "Most married men claim Social Security benefits at age 62 or 63, well short of both Social Security's Full Retirement Age and the age that maximizes the household's expected present value of benefits (EPVB). . . . But financial education has not been especially effective in changing behavior. Policymakers should thus consider other initiatives to assure a survivor benefit greater than that produced by an age 62 or 63 husbands' claiming age. "

Excerpt: "This case attracts my attention for a several important reasons. First, it points up the potential for mischief in the give and take of trigger events and exclusions, an area that has generated considerable litigation. Second, it provides insight into interpretative canons that can neutralize the typical advantage of the plan fiduciary when a plan grants discretion to the administrator."

Excerpt: "The interesting legal points of the case lie in the district court's assessment of probative value of UNUM's internal claims manual, its perspective in applying the standard of review and as an illustration of the felicitous effects of de novo review for a claimant's case."

Excerpt: "Increased reliance on the individual insurance market in its present form is unlikely tomeet society's goals, but directing those without access to employer coverage who receive subsidies to regional insurance exchanges could make such coverage much more attractive. But real-world experience with such a reform is needed before considering the substitution of individual coverage for employer-based coverage."

Excerpt: "Between 30,000 and 40,000 Massachusetts residents are offered health insurance by their employer but have incomes less than 300% of the federal poverty level and cannot afford the premiums, according to a report released Thursday by the Commonwealth Health Insurance Connector, the Boston Globe reports."

Excerpt: "In this issue: San Francisco Health Care Security Ordinance in effect - for now; New laws impact California employers; New leaves for military families in California . . . ."

Excerpt: "The heated debate about how to reform Social Security has come to a standstill because the view of most Democrats (that Social Security must be a defined benefits plan similar in spirit to the current system) seems irreconcilable with the proposals supported by many Republicans (to create a defined contribution system of personal accounts holding marketed assets). We describe a system of 'progressive personal accounts' that preserves the core goals of both parties, and that is self-balancing on an ongoing basis."

Excerpt: "For workers in fair or poor health, owning individual health insurance seems to offer more security than relying on employer-sponsored small-group health coverage does."

Excerpt: "Recently, i heard three European journalists express astonishment at the primitive state of America's social safety net. 'Do you have private pensions?' they asked. The system is unraveling, I explained. 'Healthcare?' Some folks get it, some don't. 'Public pensions?' Vastly underfunded. When I mentioned that Hillary Rodham Clinton and Barack Obama are touting innovative ideas for government savings plans, in the form of a national 401(k) -- the journalists harrumphed. Holland and Switzerland have had such plans for years."

Excerpt: "According to the Employee Benefits Research Institute, 25 percent of women have no retirement savings. Women also are less likely than men to qualify for a pension. Because women tend to live longer, they also tend to have a longer retirement than men. Up to 90 percent of women will spend at least part of that retirement alone, either because they never marry, they divorce or they outlive their spouses."

Excerpt: "The coalition, Fed Up With Taxes, comprises a dozen business trade groups and is leading a drive to put a proposal on the November ballot to repeal the taxes that state legislators approved in April."

Excerpt: "While almost half of the companies in the S&P 500 have underfunded pension plans, the shortfalls at Ford and Goodyear pose more of a threat to future profitability of those companies than is the case with any of the others in the index, according to a new report from UBS analysts."

Excerpt: "In an announcement May 5, 2008 The Tennessee Department of Commerce and Insurance released a report documenting the results of a multi-state settlement concerning disability claim practices by Unum and its subsidiaries since 2004 and the results are fascinating; 45.1% of group LTD claim decisions were reversed resulting in an additional $558.6M of additional benefits either paid or reserved for future benefit payment. . . . Keep in mind the majority of these contracts were likely to be ERISA plans."

Excerpt: "The Department should provide longer due dates for defined benefit plan benefit statements, dates that recognize the time it takes to accumulate details of participant data necessary to calculate all participants' accrued benefits, and that recognize differences in accumulating data."