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July 31, 2006
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(Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor)

Text of Final IRS Reg: Employer Comparable Contributions to Health Savings Accounts
Excerpt: "This document contains final Pension Excise Tax Regulations . . . under section 4980G of the [Internal Revenue Code]. Under section 4980G of the Code, an excise tax is imposed on an employer that fails to make comparable contributions to the HSAs of its employees. . . . [I]f an employer fails to make comparable contributions . . . , an excise tax equal to 35% of the aggregate amount contributed by the employer to the HSAs of its employees during that calendar year is imposed . . . ." (Internal Revenue Service)

Rules Fixed for HSA Employer Contributions
Excerpt: "The Treasury Department and the Internal Revenue Service today issued final regulations for rules governing contributions made by employers to Health Savings Accounts. The so-called 'comparability' rules, which require employers to contribute comparable amounts to all employee HSAs, expand the flexibility of rules first proposed last year, the Treasury Department said in a statement." (; free registration required)

Total Health Management: The Future of Health Care Cost Management?
Excerpt: "The new cost management tools for emerging total health management are designed to address the real causes of medical cost escalation: consumer health habits, waste in the health care system, poor quality care and poor preventive care." (Segal/Sibson)

Workers Are Being Sent Abroad to Get Operations that Cost Tens of Thousands More in the U.S.
Excerpt: "Every year, tens of thousands of Americans travel abroad for cheaper tummy tucks and angioplasties. This 'medical tourism' has typically been reserved for uninsured procedures or uninsured patients. No major insurer offers such travel, but several employers that fund their own benefit programs have expressed interest, according to consultants and medical tourism agencies. No statistics are readily available on how many companies or patients have undertaken such travel." (Los Angeles Times; one-time registration required)

Avian Flu: Background and Potential Impact on Employers
Excerpt: "An Avian Flu pandemic could have a serious impact on employers' operations, workforce, and administration of benefits. What can employers do to prepare?" (Hewitt Associates)

Opinion: Saving Health Insurance from the Minimum Wage
Excerpt: "What are the likely consequences [of another increase in the federal minimum wage]? Economists have traditionally warned that a higher minimum wage causes more people to be unemployed. [See, for instance, David R. Henderson, 'The Negative Effects of the Minimum Wage,' NCPA Brief Analysis No. 550.] But a number of studies point to an even more serious consequence: fewer fringe benefits, including health insurance." (National Center for Policy Analysis)

Senator Kerry Proposes Universal Health Insurance Coverage by 2012
Excerpt: "In the text of his prepared speech, Kerry concedes that his health care proposal is virtually the same as one he outlined during his failed campaign for the White House in 2004. However, he said that continuity was a measure of his commitment to his health care ideals." (AP via The Washington Post; one-time registration required)

Hewitt Federal Legislation Quick Guide Updated as of July 25, 2006, for Health and Welfare Plans (PDF)
26 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding health and welfare benefit plans. (Hewitt Associates)

Links to Items on Executive Comp, Benefits in General

Employee Benefits Developments, July 2006
The newsletter covers the following issues: IRS issues guidance on revoking Section 83(b) election; Accountant/TPA as ERISA fiduciary; Court finds no serious consideration of early retirement; No retroactive exhaustion requirement for plan lacking a claims procedure; QDRO may be entered after death of alternate payee; Failure to respond to plan information request leads to employer penalties; U.S. Airways stock approved as 401(k) investment; Teachers' early retirement payments are FICA wages. (Hodgson Russ LLP)

Commentary: Backdating Executive Stock Options -- The Role of Volatility, Part I
Excerpt: "As demonstrated in 'Model Risk and Valuation' by this blog's author, Dr. Susan M. Mangiero, the volatility number can have a dramatic impact on the computed value of an option. Moreover, the relationship between volatility and option value is not proportional." (Pension Risk Matters)

FEI Summary: PCAOB Audit Practice Alert: Timing and Accounting for Stock Options Grants
Excerpt: "On July 28, 2006, the Public Company Accounting Oversight Board (PCAOB) announced issuance of an Audit Practice Alert entitled, 'Matters Relating to Timing and Accounting for Options Grants (the 'APA'). The APA was issued two days after the U.S. Securities and Exchange Commission (SEC) approved final rules for disclosure of Executive Compensation, including disclosures relating to options grants." (Financial Executives International)

GAO Report: Nonprofit Hospital Systems -- Survey on Executive Compensation Policies and Practices
65 pages. Excerpt: "[GAO was asked] to review executive compensation issues at selected private, nonprofit hospital systems to gain an understanding of the policies and practices related to the salaries, benefits, travel, gifts, and entertainment expenses paid by these hospital systems." (U.S. Government Accountability Office)

Overview: Landmark 'Disney' Decision Provides Guidance for Compensation Governance (PDF)
3 pages. Excerpt: "The June 2006 landmark decision by the Delaware Supreme Court over the $130 million severance payout by The Walt Disney Company to Michael Ovitz provides guidance on possible legal protection for compensation committees that use termination tally sheets when approving employment agreements for senior executives." (Frederic W. Cook & Co., Inc.)

Research Paper Abstract: Reforming the Taxation of Deferred Compensation
Excerpt: "This Article addresses potential legislative reforms that would remedy [the flawed federal tax rules] problem by neutralizing the tax treatment of current and deferred compensation. . . . There has been little serious academic analysis of how to implement a set of tax rules that would create neutrality while avoiding undue complexity. This Article attempts to fill that void." (North Carolina Law Review, Forthcoming via Social Science Research Network)

Overview: SEC Executive Compensation Disclosure Rules and'Backdated' Options (PDF)
3 pages. Excerpt: "According to the SEC's press release, the new rules will require tabular disclosure of (1) grant date fair value, (2) the grant date determined under FAS 123R, (3) the closing market price of the underlying stock if greater than the option exercise price, and (4) the date the compensation committee or full board took action to grant the award, if that date differs from the grant date." (Sutherland Asbill & Brennan LLP)

Overview: New Law Impacts 2006 Income Tax Liability of U.S. Citizens Working Abroad (PDF)
1 page. Excerpt: "The Act modified the income exclusion limit and provided for earlier inflation indexing in 2006. The Act also modified the amount of the housing exclusion allowance for individuals working abroad, and modified the tax rates applicable to non-excluded income." (Haynes and Boone, LLP)

Hewitt Federal Legislation Quick Guide as of July 25, 2006, on Human Resources and Employment Law (PDF)
9 pages. This Federal Legislation Quick Guide provides short updates on federal legislation that is currently under active consideration by Congress or has recently been enacted into law regarding human resources and employment law. (Hewitt Associates)

Commentary: Forthcoming Entitlement Explosion
Excerpt: "Serious as the consequences will be, they won't be immediate, but build over time as resources increasingly drain from the private sector to cover public sector obligations. As Japan, the world's second-largest economy, demonstrated for well more than a decade, repercussions as serious as minimal economic growth can be endured for some time. Whether America would be so patient remains to be seen." (The Washington Times)

Overview: EBSA Releases Final Rule on Electronic Filing of Annual Reports
Excerpt: "'We are moving to a wholly electronic filing system that will be streamlined, cost-effective, and more efficient for plans. This new state-of-the-art system will increase the accuracy of information used by the public and the government,' said Ann L. Combs, Assistant Secretary of Labor for EBSA." (CCH Pension & Benefits)

IRS Plans Its Own Stock Options Inquiry
Excerpt: "The head of the Internal Revenue Service said [July 28, 2006] that the agency will examine stock option awards to executives at some companies for possible tax-law violations, as the controversy over suspect timing of option grants spreads through corporate America." (The Washington Post; one-time registration required)

Newly Posted Press Releases
(Post Yours!)

National Conference on Public Employee Retirement Systems Statement on Deloitte Public Employee Pension Research Study
(National Conference on Public Employee Retirement Systems)

Teamsters Oppose Flawed Pension Bill, Fight for Retirement Security
(International Brotherhood of Teamsters)

Newly Posted or Renewed Job Openings
Post a Help Wanted Ad

Compliance Manager
for Vanguard
in AZ

Marketing Manager - Retirement Plans Services
for Vanguard
in PA

Account Executive, Employee Benefits
for ABD Insurance and Financial Services
in CA

Communications Consultant
for Fidelity Investments
in MA, TX, UT

Manager, Alliance Plan Administration
for Sentinel Benefits Group
in MA

Relationship Manager
for John Mulligan & Associates, Inc.
in IL

Recordkeeping Services Manager
for Vanguard
in PA

Retirement Plan Service/Participant Management in Metro St. Louis
for Tax Favored Benefits, Inc.
in MO

Communications Consultant/SPD Specialist
for Benefit Consulting Company in the Greater Phoenix Area
in AZ

Risk Manager
for U.S. Bank
in MN

Senior Employee Benefits Program Analyst (Ref.# JP23961-JN)
for Southern California Edison
in CA

Marketing Director
for BISYS Retirement Services
in PA

Copywriter - Marketing
for BISYS Retirement Services
in PA

Client Relationship Manager (CRM)
for Merrill Lynch
in CO, NJ

Pension Administrator/Consultant
for Third Party Administrators, Inc.
in NH

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