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The BenefitsLink Newsletter -
Retirement Plans Edition
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April 5, 2002 - 11,902 subscribers
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State Street Intends to Continue Serving as Special Independent Fiduciary to Enron Plans
Excerpt: "Judge Arthur Gonzalez sided with Enron's creditors on Tuesday when he said State Street's $1.5 million fee should be paid from the assets of the retirement funds.... State Street added, 'We're working to resolve the issues raised by the bankruptcy judge and hope to reach a speedy resolution.'" (Boston Globe)

Plaintiffs' Law Firms Establish Enron 401(k) ERISA Litigation Website
Includes link to full text of complaint for breach of fiduciary duty and proposed class action. Law firms maintaining the web site are Keller Rohrback L.L.P.; Campbell, Harrison & Dagley L.L.P.; and Dalton Gotto Samson & Kilgard, P.L.C. (www.enronerisa.com)

Government Agencies Employ Thousands as "Temporary" Employees Without Retirement Benefits
Excerpt: "Although temporary employees help agencies cope with short-term increases in their workloads and allow them to fill park and forest jobs in the summer, it seems clear that some agencies use temporaries as an easy way to avoid civil service hiring rules and to lower the government's share of pension and life insurance costs." (Washington Post)

Commentary: Pension Change Puts the Burden on the Worker
Excerpt: "American workers now put more money into pension and retirement savings plans sponsored by their employers than the companies themselves do.... The milestone is all the more remarkable because 401(k)'s and similar retirement accounts were never intended to be the main way for an employee to save for retirement." (New York Times; free registration required)

Rethinking Automatic Enrollment in 401(k) Plans
Excerpt: "McDonald's Corporation's recent decision to discontinue its automatic enrollment program raised a few eyebrows. After all, the famed franchise was the first to roll out the program. But McDonald's has a point, defined contribution experts say." (PLANSPONSOR.com; free registration required)

Employee Ownership Update for April 4
NCEO executive director Corey Rosen discusses the recently introduced House version of the 'Ending the Double Standard for Stock Options Act'; a new report on employer stock in 401(k) plans; more 401(k) plan-related lawsuits; and an article in Time magazine that reflects the research the NCEO and others have conducted on the impact of employee ownership. (National Center for Employee Ownership)

New Defined Contribution Pension Plans Provide Educators With Options, Risks
Excerpt: "[Replacing or supplementing DB plans with DC plans is] an attempt by legislators to give teachers, administrators, and other school employees more control over their own savings, improve recruitment, and reduce the financial risk to state governments. They also mirror a national trend apparent in the private sector.... But critics worry that states and employees who rely on defined-contribution plans will be disappointed by the results." (Education Week)

Another Question is Answered in the Who's the Employer Q&A Column
Company A owns 66% of the common stock of Company B and 100% of the nonvoting convertible preferred stock of Company B. The remaining common stock is owned by an unrelated entity. If Company A were to convert all of the preferred stock into common stock, Company A would own more than 80% of the common stock of Company B. Are Company A and Company B in a controlled group? In other words, is convertible preferred stock treated like an option for purposes of the attribution rules? (BenefitsLink.com)

We're All the Boss: Employee-Owned Firms
Excerpt: "After extending their reach from only a few thousand Americans 30 years ago to about 20 million today, employee-ownership plans have fallen in public esteem.... But the people at successful employee-owned companies want the world to know there are many ways to make workers into owners-- and knowing which ways work is crucial." (Time.com)

(Following items are in both editions of the BenefitsLink Newsletter)

Analysis: IRS Technical Advice Memorandum Shows Continued IRS Attack on Leveraged COLI (PDF)
Excerpt: "In a Technical Advice Memorandum (TAM 200213010), the IRS has determined that even though a Pre-1986 'Leveraged COLI' arrangement satisfied the 'four out of seven' premium rule under §264(c)(1), the corporate owner could not deduct loan interest payments from income because the arrangement was a sham. While the conclusion is consistent with recent court decisions 1 it is notable for a number of reasons: ..." (Vinings Management Corporation)

Link to Full Text of IRS TAM 200213010 on Corporate-Owned Life Insurance Program (PDF)
41 pages; issued December 11, 2001. (Internal Revenue Service)

SEC's Pitt Calls for Stock Option Reform
Excerpt: "Corporations should not be able to freely hand out stock options to senior executives without more input from shareholders and independent directors of the company, Securities and Exchange Commission Chairman Harvey L. Pitt said yesterday." (Washington Post)

Opinion: SEC Chairman's Views on Stock Options Are Hopeful Sign for Investors
Excerpt: "Mr. Pitt got off to a rocky start at the S.E.C., prompting some to view him as a compliant regulator. It is too early to be sure, but his options speech yesterday could be the start of an agenda that will really help investors." (New York Times; free registration required)

Opinion: Leave Stock Options Alone
Excerpt: "[C]ounting options as expenses-- 'expensing' them-- would actually distort and confuse that picture considerably. It could also prevent millions of workers from sharing in the success of their firms through employee ownership." (John Doerr and Frederick W. Smith in the New York Times; free registration required)

Newly Posted or Renewed Job Openings - Post a Help Wanted Ad
Senior Systems Analyst - Benefits Administration for Universal Studios
in CA
National Account Manager for Scudder Investments
in MA
Health and Welfare Consultant for Buck Consultants
in MO

Newly Posted Announcements of Promotions and New Personnel (Post Yours!)
Eric G. Knauss (Vinings Management)

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Copyright 2002 BenefitsLink.com, Inc., but you may freely distribute this email newsletter in whole. This newsletter is edited by David Rhett Baker, J.D.