INSIDER

Legislation Introduced to Mandate
Paid Sick Leave
On Nov. 3, House Education and Labor Committee chair George Miller (D-Calif.) introduced the Emergency Influenza Containment Act to ensure that employees sent home by their employers because of a contagious illness receive paid sick leave. On Nov. 17, Senator Chris Dodd (D-Conn.) and Representative Rosa DeLauro (D-Conn.) introduced the Pandemic Protection for Workers, Families and Businesses Act, which shares many of the same goals, although there are important differences between the two bills as well. Paid sick leave has been receiving more attention from lawmakers recently, and legislative action is possible. [December 2009]

House Approves Health Care Reform; Senate Begins Debate
On Nov. 7, in a rare Saturday vote, the House of Representatives approved the Affordable Health Care for America Act (H.R. 3962) by a tally of 220 to 215. While the vote represents an important step forward in the health care reform debate, lawmakers still have a long and difficult battle ahead. [December 2009]

Pay Czar Reduces Executive Pay for Firms Receiving Exceptional TARP Assistance
In an effort to tie compensation more closely to long-term performance and appropriate competitive levels, Special Master for TARP Executive Compensation Kenneth R. Feinberg has directed companies that received exceptional Troubled Asset Relief Program assistance to cut compensation for top executives by an average of 50 percent. While the pay cuts apply to only seven firms, the levels and structures could become a template for compensation at other financial institutions that participate in TARP. Feinberg also clarified that these firms are subject to the same corporate governance provisions that apply to other TARP recipients, including say-on-pay votes, clawbacks, compensation consultant disclosures, risk reviews, perquisite disclosures, prohibition on tax gross-ups and chief executive officer/chief financial officer certifications. [December 2009]

Intranet Posting of Schedule SB
The 2008 Form 5500 instructions direct defined benefit (DB) pension plan sponsors (or plan administrators acting on their behalf) to display actuarial information from the form on their intranets. The instruction reflects a new PPA disclosure requirement for DB plan sponsors that maintain intranet Web sites for their employees. The DOL is also currently posting scanned versions of 2008 Schedule SB filings on a Web site that may be viewed by the general public. [December 2009]

New Law Expands Military FMLA Leave Rights
The National Defense Authorization Act for Fiscal Year 2010 (H.R. 2647) expands eligibility for certain rights under the Family and Medical Leave Act (FMLA). The new law will increase the number of employees who qualify for leave on account of a family member's deployment and will broaden the circumstances in which employees may take leave to tend to a family member with a service-related injury or illness. The provisions took effect when President Obama signed the legislation on Oct. 28, 2009. [December 2009]

Mental Health Parity: What Employers Need to Know
After more than a decade of discussion, Congress finally enacted legislation mandating full parity for mental health and substance abuse benefits. The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) became law on Oct. 3, 2008, as part of the Emergency Economic Stabilization Act. The law, which generally becomes effective in 2010, affects insured and self-insured group health plans provided by employers. [November 2009]

Health Care Reform Bill Would Restrict Health Insurers' Compensation
A provision in America’s Healthy Future Act, passed by the Senate Finance Committee on Oct. 13, would limit deductible compensation for health insurers. If the provision makes it into the final legislation, it will establish a special rule under section 162(m) to cut the deductible compensation limit in half — from $1 million to $500,000 — for “covered health insurance providers.” The provision is targeted at the health insurance industry — employers with self- insured plans are excluded. [November 2009]

Ways and Means Committee Holds Hearing on DB Plan Funding and Investment Advice
On Oct. 1, 2009, two panels testified before the House Committee on Ways and Means on retirement -related matters. The first focused on, and lobbied for, defined benefit (DB) pension funding relief. The six panelists, including Watson Wyatt's director of Retirement Research, Mark Warshawsky, Ph.D., provided a wide range of experience and expertise. While it was universally accepted that pension relief is necessary, panelists disagreed about its form and who should receive it. Some advocated temporary relief from certain provisions of the Pension Protection Act of 2006 (PPA), while others argued for permanent changes to the law. [November 2009]

SEC Votes to Change
Proxy Disclosure Rules
The Securities and Exchange Commission (SEC) has voted unanimously to propose several important changes to the proxy disclosure rules that could take effect for the 2010 proxy season. The proposal calls for new disclosures about risk and more information about directors and compensation consultants. [September 2009]

Compensation Guidance for TARP Companies
The U.S. Department of the Treasury issued interim final regulations interpreting the restrictions imposed on executive compensation by the American Recovery and Reinvestment Act of 2009 (ARRA) and their interaction with previous iterations of Troubled Asset Relief Program (TARP) guidance. These regulations resolve many gray areas, generally in favor of TARP participants. For example, the rules eliminate President Obama’s proposed $500,000 cap on pay, clarify that commissions are not prohibited bonus payments and expand the definition of stock-based compensation that can be granted in lieu of other incentive compensation.  [August 2009]

FASB Decides to Recodify U.S. Accounting Standards
At its June 3 meeting, the Financial Accounting Standards Board (FASB) voted to approve the “FASB Accounting Standards Codification” as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The codification project required a structural overhaul to change from a standards-based model to a topically based model. The codification was launched on July 1, 2009, and takes effect for interim and annual periods ending after Sept. 15, 2009, when it will supersede all existing accounting standard documents. [August 2009]

PBGC Proposes Regulations for Determining Guaranteed Benefits for Service Members on Active Duty
The Pension Benefit Guaranty Corporation (PBGC) has proposed making it easier for military service members to qualify for guaranteed benefits if their pension plan terminates. Currently, the PBGC guarantees the pension benefit only if the participant satisfies all conditions for entitlement by the plan’s termination date.  [August 2009]

New Legislative Focus on Executive Compensation and Risk
On July 31, the House passed the Corporate and Financial Institution Compensation Fairness Act (H.R. 3269), which was proposed by House Financial Services Committee Chairman Barney Frank (D-Mass.). The act would require say-on-pay, mandate independence for compensation committees and compensation consultants, and establish new disclosure requirements for incentive-based compensation.  [August 2009]

Health Care Reform Debate to Continue During August Recess
As Congress enters its August recess, health care reform legislation remains in flux. In July, four of the congressional committees responsible for moving the legislation approved proposals. Despite this progress, however, obstacles threaten to block the legislative path to reform, including escalating concern about costs — now and in the future — and dissent among House Democrats. Lawmakers plan to discuss the proposals with their constituents over the August recess, and constituents’ views will affect the negotiations when they return.  [August 2009]

Accounting for Change: New FASB Standards’ Ripple Effects on M&A
We can count mergers and acquisitions (M&A) activity as one more casualty of the credit crisis: During the last 12 months, deals have sharply declined in volume and size. As a result, an important change in the M&A landscape has not received the attention it would have attracted just a couple of years ago. [August 2009]

DB Pension Relief Under Discussion
On June 23, Representative Earl Pomeroy (D-N.D.) released a discussion draft for defined benefit (DB) funding relief. The draft features many ideas that Watson Wyatt and others in the business community have been advocating: expanding the asset corridor, automatically approving 2010 interest rate elections, providing a longer amortization period for recent market losses and more. However, some of the relief would be tied to maintenance-of-effort provisions, such as asking employers to keep their DB plans active or to continue contributing to employees’ 401(k) plans.  [July 2009]

EEOC Proposes Procedural and Administrative Regulations on
Genetic Information
The Equal Employment Opportunity Commission (EEOC) has released proposed regulations on procedural and administrative issues under the Genetic Information Nondiscrimination Act of 2008 (GINA). The proposal would amend existing regulations to reflect GINA and update the language in the regulations. [July 2009]

Health Care Reform Advances, Obstacles Loom
Health care reform took important steps forward in mid-July, when three of the congressional committees responsible for moving the legislation approved proposals. President Obama and lawmakers and stakeholders who support the reform efforts hailed the committee votes. Despite the progress, however, obstacles threaten to block the legislative path to reform, including escalating concern about the proposals’ costs, dissent among House Democrats and the pending August recess. Lawmakers must forge consensus before any legislation can be presented for President Obama’s signature. [July 2009]

Bumps in the Road to IFRS? SEC Receives Comments
The adoption of International Financial Reporting Standards (IFRS) is advancing in fits and starts. The Securities and Exchange Commission (SEC) proposed a roadmap to IFRS in late 2008, but SEC Chairwoman Mary Schapiro expressed misgivings about the plan during her confirmation hearing earlier this year. Moreover, the SEC has received roughly 200 comments on its roadmap, some voicing support but others — including many from corporations and two from members of Congress —forcefully objecting to the proposed reporting regime. The Financial Accounting Standards Board (FASB) supports the goal of international reporting standards but has expressed some reservations and recommendations for modifications to the roadmap.  [July 2009]

SEC Proposes Greater Shareholder Proxy Access, and Senator Schumer Introduces Shareholder Bill of Rights
On May 20, the Securities and Exchange Commission (SEC) voted 3-2 (along party lines) to give some shareholders access to the corporate proxies used to nominate board directors. SEC Chairwoman Mary Schapiro believes companies and boards need to be more responsive to shareholder interests — such as compensation structures and risk management — and wants shareholders to have a “meaningful opportunity to effectuate the rights that they already have under state law to nominate directors.” [July 2009]

Expanded HIPAA Requirements and HHS Guidance on Securing PHI
The push for health information technology (IT) has prompted concerns about keeping health information private, and the American Recovery and Reinvestment Act of 2009 (ARRA) expands the privacy protections under the Health Insurance Portability and Accountability Act (HIPAA). The 2009 act imposes new notification requirements for breaches of unsecured protected health information (PHI), establishes new disclosure requirements for electronic health records, and strengthens enforcement and penalties for violations. It also includes provisions aimed at encouraging greater use of health IT.  [June 2009]

Emergency Retiree Health Benefits Protection Act Reintroduced
Representative John Tierney (D-Mass.) has reintroduced the Emergency Retiree Health Benefits Protection Act (H.R. 1322), which would prevent employers from reducing or eliminating health benefits for retirees or their dependents. The bill has been around for years but has attracted more attention since it appeared in a pension bill last year.  [June 2009]

Healthy Families Act Would Mandate Paid Sick Leave
Representative Rosa DeLauro (D-Conn.) has reintroduced the Healthy Families Act (H.R. 2460), which would require employers with more than 15 employees to provide paid sick leave to employees who work more than 30 hours per week. Senator Edward Kennedy (D-Mass.) is sponsoring the legislation in the Senate (S. 1152). Senator Kennedy had considered an earlier version of the legislation a top priority at the start of the 2007-2008 legislative session, but the act stalled. Supporters hope the recent flu outbreak will bolster support for legislation that could encourage sick workers to stay home.  [June 2009]

EEOC Releases Informal Guidance on Health Risk Assessments and the ADA
The Equal Employment Opportunity Commission (EEOC) has released an opinion letter saying an employer’s health risk assessment program violates the Americans with Disabilities Act (ADA). While many employers have moved forward with health risk assessments and other mandated wellness arrangements, the EEOC’s letter is a reminder of the importance of considering ADA implications before instituting a wellness program.  [June 2009]

Legislation Calls for More Transparent Disclosures of 401(k) Fees
The legislative push for new fee disclosure requirements for defined contribution plans is gaining momentum on Capitol Hill. Key lawmakers have brought back fee disclosure bills they sponsored during the 2007-2008 legislative session. Representatives George Miller (D-Calif.) and Rob Andrews (D-N.J.) reintroduced the 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984). Senators Herb Kohl (D-Wis.) and Tom Harkin (D-Iowa) reintroduced the Defined Contribution Fee Disclosure Act (S. 401). And on June 10, Representative Richard Neal (D-Mass.) introduced a modified version of the Defined Contribution Plan Fee Transparency Act (H.R. 2779).  [June 2009]

Health Care Reform Takes Shape
Congress is in a flurry of decision making and debate as it scrambles to get health care reform bills ready before the August recess. The next few months will be critical as lawmakers try to work out important and contentious issues — including individual and employer mandates, a health insurance exchange, a public plan option and subsidies to help individuals and families purchase coverage. President Obama has asked Congress to present a bill for his signature by Oct. 1 — which would be an impressive feat, given the upcoming Independence Day and August recesses. [June 2009]

DB Plans Face Steep Increase
In Variable-Rate Insurance Premium
In 2008, the value of investments held by defined benefit (DB) pension plans dropped precipitously. Provisions of the Worker, Retiree and Employer Recovery Act (WRERA), judicious elections of valuation methods and the recent IRS announcement on the “applicable month” will ameliorate the impact of the market decline on 2009 required contributions. However, DB plan sponsors also face a steep increase in their variable-rate premium (VRP), which is paid to the Pension Benefit Guaranty Corporation (PBGC) to insure vested employee pension benefits.  [June 2009]

Card-Check Legislation Stalled in Congress
The Employee Free Choice Act (EFCA) — also referred to as "card check" — was reintroduced on March 10. The act would allow the National Labor Relations Board (NLRB) to certify a union once a majority of employees sign authorization cards and would establish strict and mandatory deadlines for reaching an initial bargaining agreement. But the act is currently stalled in Congress and lacks the 60 votes required to overcome a filibuster. [May 2009]

Advocating for Pension Funding Relief
In the wake of the financial crisis, defined benefit (DB) funding relief has become a critical issue for many plan sponsors. The Worker, Retiree and Employer Recovery Act of 2008 (WRERA) allowed sponsors of underfunded plans to rely on their 2008 funded status to avoid plan freezes, phased in the Pension Protection Act funding targets and made other changes. In late March, the IRS offered additional relief by permitting plan sponsors to use a reasonable interpretation of the law (in the absence of final regulations) in selecting a yield curve for determining plan liabilities. This will provide options that can reduce required DB plan contributions for the 2009 plan year and also dim prospects for further relief from Congress, at least in the near term. However, the potential for steep contribution hikes for the 2010 plan year may fuel a renewed push.  [May 2009]

Improving Executive Compensation Disclosure: Why the SEC Rules Don’t Fit in a Down Market
Changes to the executive compensation disclosure rules made during Christopher Cox’s tenure as chairman of the Securities and Exchange Commission (SEC) vastly improved disclosures, particularly in the enhanced Compensation Discussion and Analysis (CD&A) section. However, in reviewing the 2008 stock price performance of our clients, we have found the reporting rules require these companies to significantly overstate the value of executive compensation earned. The overstatement will make the inevitable criticism of executive pay practices that arises each proxy season far worse than it should be. In an effort to blunt the critics, companies might shift from shareholder-friendly equity compensation programs to less effective cash-based programs.  [April 2009]

DOL Releases FAB on Annual Funding Notice Requirement
The U.S. Department of Labor (DOL) recently published Field Assistance Bulletin (FAB) 2009-01, which addresses good-faith compliance with the annual funding notice requirement for defined benefit plans under ERISA section 101(f). The FAB also contains a model annual funding notice for single-employer plans.  [March 2009]

President Obama Signs SCHIP Legislation Into Law
On Feb. 4, President Obama signed the Children’s Health Insurance Program Reauthorization Act (H.R. 2) into law, just hours after it was cleared for his signature. The act extends and expands the State Children’s Health Insurance Program (SCHIP). Several of its provisions affect employer-sponsored group health plans by adding special enrollment rights and imposing new reporting and disclosure requirements. [March 2009]

Stimulus Bill Expands TAA Benefits
President Obama signed the American Recovery and Reinvestment Act of 2009 (H.R. 1) into law on Feb. 17. Otherwise known as the stimulus bill, the act makes numerous changes to the Trade Adjustment Assistance (TAA) program. In addition to expanding TAA eligibility, the act increases the health coverage tax credit (HCTC) and extends COBRA eligibility periods for TAA-eligible individuals and Pension Benefit Guaranty Corporation (PBGC) pension recipients.  [March 2009]

COBRA Subsidy: What Employers Need to Know
On Feb. 17, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA) into law. The massive stimulus package of government spending and tax cuts will have direct and immediate effects on employer-sponsored health care plans. Under the act, the government will subsidize Consolidated Omnibus Budget Reconciliation Act (COBRA) continuing health care coverage for certain individuals who lose their jobs between Sept. 1, 2008, and Dec. 31, 2009, through a payroll tax offset arrangement with employers. Individuals involuntarily terminated between Sept. 1, 2008, and Feb. 16, 2009, who do not currently have a COBRA election in place must be given a second chance to enroll. [March 2009]

Additional TARP Compensation Restrictions in Stimulus Package
President Obama signed the American Recovery and Reinvestment Act of 2009 on Feb. 17. The bill imposes stringent limits on executive compensation for companies receiving assistance under the Troubled Asset Relief Program (TARP). It applies the restrictions retroactively to all financial institutions currently participating in the TARP (with some limited exceptions for employment agreements in place before Feb. 11).  [March 2009]

Golden Parachute Gross-Ups May Be Unnecessary for Many Executives
Compensation committees have been reexamining their non-core compensation elements under the brighter light shone by the recent changes to the Securities and Exchange Commission (SEC) proxy disclosure rules. Severance and change-in-control (CIC) benefits seem to be attracting the most criticism these days, so many companies are reevaluating the business purpose and effectiveness of those first.  [March 2009]

DOL Issues — But Then Delays — Final Regulations on Providing Investment Advice to Plan Participants
In August 2008, the Department of Labor (DOL) proposed regulations and a class exemption for investment advice provided to participants in 401(k) plans. On Jan. 16, 2009, the department issued final regulations, which generally follow the proposed regulations. The final regulations were intended to take effect March 23, 2009, but the DOL has delayed the effective date to May 22, 2009. The delay was in response to a Jan. 20 request from White House Chief of Staff Rahm Emanuel to delay Bush administration regulations pending review by the Obama administration.  [March 2009]

President Signs Pay Discrimination Legislation
On Jan. 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act — his first major bill — into law. The act expands the time frame during which individuals may file workplace discrimination claims and will affect both compensation practices and retirement plans. [March 2009]

DOL Issues Final FMLA Regulations on Military Family Leave
The Department of Labor (DOL) recently issued final Family and Medical Leave Act (FMLA) regulations addressing the new military family leave entitlements under the National Defense Authorization Act (NDAA) for fiscal year 2008. There are two new types of military leave: (1) qualifying exigency and (2) military caregiver. The regulations took effect Jan. 16.  [March 2009]

Stimulus Bill Provides Subsidized COBRA Coverage
On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (H.R. 1) into law. The massive stimulus package will subsidize COBRA coverage for some eligible qualified beneficiaries. The COBRA provisions will take effect soon after enactment and so require prompt attention and action from plan sponsors and administrators. Among other actions, employers must issue updated COBRA notices, provide new enrollment options and implement subsidy procedures. [February 2009]

President Signs Pension Funding Relief and Technical Corrections to PPA
The Worker, Retiree and Employer Recovery Act (WRERA), signed into law on Dec. 23, 2008, provides some funding relief to defined benefit (DB) sponsors affected by recent market declines, as well as temporarily waiving the minimum distribution rules for seniors. The act also makes permanent technical corrections to the Pension Protection Act of 2006 (PPA).  [February 2009]

Legislating Executive Compensation: Unintended Consequences Ahead?
As a new administration takes office, companies are preparing for what is anticipated to be a lively congressional debate on perceived inequities between compensation paid to corporate executives versus that paid to rank-and-file employees. While many new ideas are certain to emerge between now and then, we’ve seen a number of proposals, some of which have become part of the recent bank bailout legislation. In addition, shareholder activists have enjoyed some success in winning approval for “say on pay” shareholder votes.  [January 2009]

FAS 123(R) Option Assumptions: The 2007 Results
Watson Wyatt recently completed its second annual analysis of stock option valuation assumptions and results under Statement of Financial Accounting Standards (SFAS) 123(R). From 2006 to 2007, the percentage of companies disclosing option fair values decreased from 74 percent to 73 percent, and the number disclosing stock compensation expense increased from 93 percent to 94 percent. Median stock compensation expense increased by 9 percent in 2007.  [January 2009]

Fiduciary Responsibility and ETIs: A Conflict?
The U.S. Department of Labor (DOL) recently issued Interpretive Bulletin 08-1, which warns plan fiduciaries against selecting investments to promote public policy preferences. The notice specifically addresses economically targeted investments (ETIs), which create economic benefits apart from their investment return. The bulletin replaces Interpretive Bulletin 94-1 and clarifies and formalizes the DOL’s position.  [January 2009]

DOL Finalizes Fiduciary Safe Harbor for Selection of DC Plan Annuity Providers
The U.S. Department of Labor (DOL) has finalized regulations establishing a safe harbor for the selection of an annuity provider and purchase of annuity contracts for defined contribution (DC) plans. The final regulations simplify the safe harbor proposed in September 2007 and clarify that the safe harbor is an optional means of satisfying the fiduciary standards of the Employee Retirement Income Security Act (ERISA). The regulations took effect Dec. 8, 2008.  [January 2009]

Valuing Stock Options: Is It Time to Reconsider Binomial Lattice Models?
Valuation models were the subject of intense debate during the drafting of “Statement of Financial Accounting Standards (SFAS) No. 123(R) — Share-Based Payment.” The exposure draft would have required companies to use a binomial lattice model (or something similar) to value employee stock option awards, but the final standard has allowed companies to use either a binomial lattice or a closed-form model, such as Black-Scholes, without preference. [January 2009]

House Prices, Financial Markets, Government Intervention and the U.S. Economic Outlook
When he made his urgent request on Sept. 19 to Congress for the federal government to buy distressed assets, Treasury Secretary Henry Paulson stated that “[t]he underlying weakness in our financial system today is the illiquid mortgage assets that have lost value as the housing correction has proceeded. … These troubled loans are now parked, or frozen, on the balance sheets of banks and other financial institutions, preventing them from financing productive loans. The inability to determine their worth has fostered uncertainty about mortgage assets and even about the financial condition of the institutions that own them.”  [November 2008]

Claims Denial Faces Stricter Review Because Sponsor Failed to Meet DOL Electronic Delivery Requirements
A ruling by the 9th U.S. Circuit Court of Appeals emphasizes the importance of compliance with the U.S. Department of Labor’s regulations on delivering plan documents electronically. In Gertjejansen v. Kemper Insurance Companies, Inc., the court applied a stricter standard of review to a claims denial because the employer’s delivery of the summary plan description (SPD) did not meet DOL requirements. [November 2008]

Emergency Economic Stabilization Act Has Broad Reach
On Oct. 3, President Bush signed the Emergency Economic Stabilization Act (EESA) of 2008 into law. The act is aimed at stabilizing the nation’s turbulent financial and credit markets by authorizing the secretary of the Treasury to purchase troubled mortgages, mortgage-backed securities and other assets from financial institutions, including pension plans.  [November 2008]

DOL Adds to Enforcement Policy for Gifts, Entertainment and Educational Expense Reimbursement
The U.S. Department of Labor (DOL) recently added a new section to its enforcement manual concerning gifts and entertainment provided to plan fiduciaries. The section directs DOL investigators to determine whether gifts, meals and entertainment (including expenses associated with educational conferences) violate ERISA’s fiduciary standards.  [November 2008]

Is the Bailout Package a Template for Future Executive Compensation Regulation?
In the world of executive compensation, Congress has an inglorious history of passing laws to restrict compensation that achieve the opposite effect. Commentators often cite the million-dollar pay cap (in tax code section 162(m)) and the “golden parachute” excise tax (in section 280G) to prove the point. Rather than reduce executive compensation, companies simply shifted to stock option compensation in the 1990s (which is not subject to the million-dollar pay cap), and significant golden parachute payments (many that include tax gross-ups) remain very common.  [November 2008]

EESA Allows Bicycle Commuter Fringe Benefits
In an effort to encourage fuel-free commuting, the recently enacted Emergency Economic Stabilization Act (EESA) includes a provision allowing fringe benefits for bicycle commuters. Under the act, employers may provide tax-free reimbursement of up to $20 a month to employees for qualified bicycle commuting expenses.  [October 2008]

New Law Helps Sick Students Keep Health Coverage
President Bush signed “Michelle’s Law” on Oct. 9. Under the new law, health plans must allow college students who take a leave of absence or reduce their class load because of illness to retain their dependent status under their parents’ health plan for up to one year. The act takes effect for medically necessary leaves of absence that begin in plan years beginning on or after Oct. 9, 2009 (Jan. 1, 2010, for calendar-year plans). [October 2008]

Onsite Health Facilities: Watch Out for Regulatory Pitfalls
By 2009, roughly 30 percent of large employers will have an onsite health care facility, according to research performed jointly by Watson Wyatt and the National Business Group on Health. While these employer-provided onsite facilities serve a useful purpose, many employers and vendors are unaware of the welfare benefit implications they entail.  [October 2008]

DOL Proposes New Disclosure Requirements for 401(k) Fees and Expenses
The U.S. Department of Labor (DOL) has proposed new disclosure rules, which are intended to help 401(k) plan participants make informed retirement savings decisions. Under the proposal, companies offering 401(k) and other participant-directed individual account plans would have to disclose summary information, including fee and expense information, for all investment options under the plan. [October 2008]

Legislation to Restrict Commodity Investments Could Affect Pension Funds
The skyrocketing price of oil and gasoline was a key issue for Congress during its summer session. At the beginning of 2008, a barrel of crude oil cost close to $100, and a gallon of gasoline averaged about $3.05. By June, the average motorist was paying more than $4 per gallon for gas, prompting Congress to take a closer look. One discussion focused on whether speculation in the commodity markets is fueling higher prices. [September 2008]

House Bill Would Allow Students on Medical Leave to Keep Coverage
On July 30, 2008, the House passed “Michelle’s Law” (H.R.2851), which would enable full-time students on a medically necessary leave of absence to keep their health insurance for up to one year. Under most health plans, college-age dependent students who are not enrolled in school full-time are no longer eligible for coverage under their family’s health insurance plan. If the bill becomes law during this legislative session, it would apply to medically necessary leaves of absence beginning on or after Jan. 1, 2010. [August 2008]

IRS Releases Question-and-Answer Guidance on HSAs
In Notice 2008-59, the IRS provides much-anticipated guidance on health savings accounts (HSAs). The guidance clarifies which onsite health clinic services cancel out HSA eligibility and when employers can recoup HSA contributions, as well as addressing other eligibility issues, high-deductible health plans (HDHPs), contributions, distributions and prohibited transactions. While some of the information restates earlier guidance, the notice fills in some gaps and provides new guidance as well. [August 2008]

Administration Sets Deadline for Final Regulations
The White House sent a memorandum to regulatory agencies on May 9 setting a deadline for proposed and final regulations in the last year of President Bush’s administration. The memo states that “except in extraordinary circumstances, regulations to be finalized in this Administration should be proposed no later than June 1, 2008, and final regulations should be issued no later than November 1, 2008.” The memo does not clarify what constitutes “extraordinary circumstances.”  [July 2008]

House Approves the Airline Flight Crew Technical Corrections Act
On May 20, the House approved the Airline Flight Crew Technical Corrections Act (H.R. 2744) by a vote of 402-9. The act would enable more flight attendants and crew members to qualify for leave under the Family and Medical Leave Act (FMLA). These employees would qualify for unpaid leave after working at least 60 percent of the employer’s full-time schedule or the equivalent during the 12 months preceding the leave.  [June 2008]

Proxy CD&A Disclosures in 2008 Improving, but Analysis Often Lacking
Overall compliance with the U.S. Securities and Exchange Commission’s (SEC’s) enhanced disclosure rules continued to improve during the 2008 proxy season, according to Watson Wyatt’s second annual Report on Proxy Statement CD&A Compliance completed in 2008.  [June 2008]

EEOC Proposes Changes to Age Discrimination Regulations
The Equal Employment Opportunity Commission (EEOC) has proposed amending the regulations that govern disparate impact claims under the Age Discrimination in Employment Act (ADEA). The new rules would permit employment practices that have a disparate impact on older workers as long as the practice was based on a “reasonable factor other than age.” The current rules require employers to meet a narrower “business necessity” standard.  [May 2008]

DOL Proposes Employee Contribution Safe Harbor Rule for Small Pension Plans
The U.S. Department of Labor (DOL) has proposed a safe harbor for deposits of employee contributions to pension plans (including 401(k) plans) with fewer than 100 participants. Employers sponsoring such plans would have seven business days after the employer received or withheld the contribution to make the deposits.  [April 2008]

IASB Paper on Retirement Benefit Accounting Being Watched Around the World
The International Accounting Standards Board (IASB) has published a “preliminary views” paper that would make a number of changes to the way retirement benefits are accounted for on employer financial statements. The proposal would result in significant changes on both the balance sheet and income statement for companies that sponsor these types of plans.  [April 2008]

DOL Proposes New FMLA Regulations
The U.S. Department of Labor (DOL) has proposed new regulations for the Family and Medical Leave Act (FMLA). Although employers were hoping for significant guidance, these proposed regulations provide mostly clarifications and minor changes.  [April 2008]

Recent Developments Regarding Global Accounting Convergence and FASB Restructuring
Global accounting standards might be adopted much sooner than anyone expected (within years versus decades). Recent events and public statements from various accounting constituencies suggest an intensified focus on convergence and an uncertain future for the U.S. Financial Accounting Standards Board (FASB).  [April 2008]

U.K. Recommendations Could Have Significant Effects on Pension Accounting Worldwide
Recent recommendations by the U.K. Accounting Standards Board (ASB) could have significant effects on pension accounting worldwide if the International Accounting Standards Board (IASB) and U.S. Financial Accounting Standards Board (FASB) follow the same line of reasoning. The ASB’s recommendations would substantially increase the reported pension liabilities that appear on the balance sheet. [March 2008]

DOL Addresses Exemption From HIPAA Portability Rules
In a recent Field Assistance Bulletin (FAB), the U.S. Department of Labor (DOL) differentiates exempt from nonexempt supplemental health coverage under the Health Insurance Portability and Accountability Act (HIPAA). The DOL is responding to concerns about some insurance products being improperly marketed as HIPAA-exempt supplemental plans.  [February 2008]

EEOC Issues Final Rule Permitting Coordination of Retiree Medical and Medicare
The Equal Employment Opportunity Commission (EEOC) released final regulations that allow employers to coordinate retiree health benefits with Medicare benefits. Although the EEOC decided to approve this long-standing employer practice some time ago, the agency had been blocked from issuing these final rules by litigation brought by AARP. Under the final rules, employers can eliminate or reduce retiree health benefits when retirees become eligible for Medicare without violating the Age Discrimination in Employment Act (ADEA).  [February 2008]

Major Expansion of FMLA Allows Six-Month Leave to Care for Injured Servicemembers
Employees may take up to six months of job- and benefit-protected leave to care for family members injured in the line of active military duty. In certain other circumstances, workers may take up to 12 weeks of leave when a family member is on active duty or has been notified of an impending call to active duty.  [February 2008]

DOL Proposes Regulation and Class Exemption for Fee Disclosure
The U.S. Department of Labor (DOL) has released proposed regulations that require certain service providers to disclose information about fees and compensation – both direct and indirect – to plan fiduciaries.  [January 2008]

Form 5500 in Transition
The U.S. Department of Labor’s Employee Benefits Security Administration, in conjunction with the IRS and the Pension Benefit Guaranty Corporation, recently finalized new Form 5500 regulations, making a few changes to the proposed version.  [January 2008]

DOL Releases Opinion Letter on Pension Assets and Politically Motivated Proxy Activity
Pension fiduciaries may not engage in politically motivated proxy activity, according to an opinion letter released by the U.S. Department of Labor (DOL). The letter states that fiduciaries may not introduce or support proxy resolutions unless doing so would provide a clear economic benefit to the plan. The DOL was responding to an inquiry from the U.S. Chamber of Commerce about whether a shareholder activism campaign organized by an employee organization to promote its health care agenda – and reportedly to seek disclosure of political contributions from corporate directors and officers to candidates who oppose that agenda – was compatible with ERISA. [January 2008]

DOL Finalizes Qualified Default Investment Alternative Regulation
The Pension Protection Act of 2006 (PPA) required the U.S. Department of Labor (DOL) to provide fiduciary protection for default investments in participatory defined contribution plans. The DOL proposed default investment guidance in 2006 and now has finalized the qualified default investment alternative (QDIA) regulation.  [December 2007]

SAR Exemption for DB Plans
Under the Pension Protection Act of 2006, defined benefit plans will no longer be required to furnish a summary annual report (SAR) to participants and beneficiaries. Defined benefit plans will file their first annual funding notice in 2009 for the 2008 plan year, which will replace the SAR. [December 2007]

The Results Are In: FAS 123 Option Assumptions
Fair values as a percentage of underlying stock values dropped from 39 percent in 2004 to 33 percent in 2006 among the FORTUNE 1000, largely because of lower expected volatility. The overwhelming majority of these companies – 85 percent -- used the Black-Scholes formula to value their options – only 14 percent used the more complicated lattice model (1 percent used both). Expected option life assumptions generally have remained very stable from year to year.  [November 2007]

SEC Issues Comment Letters on Executive Compensation Disclosures
On August 21, the Securities and Exchange Commission (SEC) asked the CEOs of roughly 300 large public companies to submit additional information for their fiscal year 2007 Compensation Discussion and Analysis (CDA) and proxy disclosures by September 21. While many of the SEC’s comments may not warrant a restatement of either the proxy or the company’s 2007 10-K, they suggest a significant gap between what the SEC expected and what was filed.  [October 2007]

Proposed Regulations on Benefit Restrictions for Underfunded Plans
The IRS recently released proposed regulations on benefit restrictions soon to be imposed on certain underfunded pension plans (and on those deemed to be underfunded by the new rules). The regulations address credit balances, limitations on benefits and accelerated payouts, and the certification of funded status under the Pension Protection Act of 2006 (PPA).  [October 2007]

2007 Proxy Disclosures of CEO Pay – Some Observations
Companies had to disclose significantly more information about executive pay in their latest proxies than ever before. To gain greater insight into the current state of executive compensation and lay the groundwork for future trend analyses, Watson Wyatt studied the first proxy disclosures under these new rules, focusing on 690 of the largest U.S. companies (FORTUNE 1000 companies that were the earliest filers of their 2007 proxy statements).  [October 2007]

Watson Wyatt Comments on Pension Harmonization for Government Contractors
The Pension Protection Act of 2006 (PPA) requires the Cost Accounting Standards Board (CASB) to harmonize the PPA’s funding requirements with the cost accounting standards applicable to government contractors by January 1, 2010. Watson Wyatt has filed comments with the CASB regarding the harmonization project. [October 2007]

Tying Health Benefits to Health Status: A Few Words of Caution
With health costs still rising at twice the rate of inflation, employers are looking for ways to get more from their health care dollars. To encourage workers to improve their health, some new insurance products provide supplemental benefits to members who meet specific health thresholds, such as a low body-mass index or cholesterol level, or practice certain healthy behaviors, such as not smoking.  [September 2007]

A Reasonable Approach to Severance and Change-in-Control Payments
Watson Wyatt’s executive compensation consultants are advising clients to rethink their severance and change-in-control provisions and, when warranted, to bring them into closer alignment with their purpose and shareholder interests.  [August 2007]

Massachusetts Universal Health Care Goes Live
In a first for the nation, all residents of Massachusetts were required to obtain health insurance by July 1, 2007, under a law passed last year. By May 2007, more than 100,000 residents who had been uninsured had acquired coverage. To make universal coverage possible, the law makes new demands on employers in Massachusetts, which must make a “fair and reasonable” contribution to the cost of their employees’ health insurance or else pay a fair-share contribution to the state.  [August 2007]

DOE Abandons Proposal to Restrict Defined Benefit Reimbursements to Contractors
The U.S. Department of Energy (DOE) has decided to drop a controversial proposal to stop reimbursing contractors for new employees' defined benefit coverage.  [July 2007]

PBGC Proposes Changes to Variable-Rate Premium Calculations
The Pension Benefit Guaranty Corporation (PBGC) recently proposed changing the calculations that determine variable-rate premiums under the Pension Protection Act of 2006 (PPA). The proposed changes would take effect for 2008 premium payment years.  [July 2007]

Looking Into the FASB’s Crystal Ball: What’s Ahead for Balance Sheet Consolidation?
The Financial Accounting Standards Board (FASB) concluded the first phase of its two-part project on postretirement benefit accounting reform last year with the issuance of Statement of Financial Accounting Standards (SFAS) 158. Although the FASB is pleased with the first phase of its accounting reforms, which moved market-based measures of funded status from the footnotes of financial statements to the balance sheet, the board left many of the biggest issues for Phase Two. [May 2007]

Department of Energy Seeks Comments on Policy Toward Contractors’ Pensions
The Department of Energy (DOE) is seeking recommendations on the best way to address rising costs and liabilities in its contractors’ pension and health plans. The DOE first announced a controversial policy to stop reimbursing contractors for defined benefit (DB) plan expenses for new employees in April 2006.  [May 2007]

Looking Into the FASB’s Crystal Ball: What’s Ahead for Liability Measurement?
Last year, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 158, bringing the first phase of the FASB’s accounting reforms for pensions and other postretirement benefits to a close. Phase One moved market-based measures of funded status from the footnotes of sponsors’ financial statements to the balance sheets. Many important issues were left for Phase Two, including the determination of expense, liability measurement and balance sheet consolidation. Phase Two will essentially rebuild the foundation of pension accounting. As plan sponsors and their advisers are completing the implementation of Phase One, this article, the second in a planned series about Phase Two, focuses on liability measurement.  [April 2007]

Some 2007 Proxy Statements Falling Short of New SEC Guidelines
In a recent speech before the Corporate Counsel Institute, Securities and Exchange Commission (SEC) Chairman Christopher Cox warned filers that enforcement of the SEC’s plain-English requirement for proxy statements will become increasingly strict during the coming year, although the commission is granting filers some leeway during the transition. The SEC adopted new rules last year to give investors a clearer and more complete picture of executive compensation. [April 2007]

DOL Issues Final Regulations on Timing of QDROs
As required under the Pension Protection Act of 2006, the U.S. Department of Labor (DOL) recently issued interim final regulations to clarify the qualified status of domestic relations orders (DROs). A qualified domestic relations order (QDRO) assigns all or part of a participant’s retirement benefits to a spouse, former spouse, child or other dependent.  [April 2007]

DOL Releases Guidance on PTE for Investment Advice
In Field Assistance Bulletin (FAB) 2007-01, the U.S. Department of Labor provides guidance on the statutory prohibited transaction exemption (PTE) for investment advice under the Pension Protection Act of 2006 (PPA). The guidance primarily affects defined contribution plan sponsors and those who provide investment advice to defined contribution plan participants. [March 2007]

Looking Into the FASB’s Crystal Ball: What’s on the Horizon for Phase Two of Postretirement Benefit Accounting Reform?
On September 29, 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 158, which concluded the first phase of the FASB’s accounting reforms for pensions and other postretirement benefits.  [March 2007]

Default Investment Options in Defined Contribution Plans: A Simple Comparison
Employers increasingly provide retirement benefits to their employees through defined contribution (DC) plans. To build up enough wealth for a secure retirement, workers must save regularly and invest wisely. Automatic enrollment and effective default investments can help with both.  [March 2007]

SEC Amends Disclosure Rules for Stock and Option Grants
On December 22, 2006, the Securities and Exchange Commission (SEC) adopted interim final rules for the disclosure of executive compensation. The new rules make the reporting of stock and option awards in the Summary and Director Compensation Tables comparable with their accounting treatment under Financial Accounting Statement (FAS) 123(R).  [February 2007]

109th Congress Wraps Up — Important Changes Ahead for 110th
By the time it finished up in early December, the 109th Congress had approved several important benefits-related bills, including the Pension Protection Act of 2006 (PPA) and the Tax Relief and Health Care Act, which makes important changes to health savings accounts (HSAs).  [January 2007]

Watson Wyatt’s Survey on Default Investments and the DOL’s Proposed Regulations
Automatic enrollment arrangements and the corresponding default investment provisions in defined contribution (DC) plans have been gaining popularity as a way to help more workers save for retirement. [December 2006]

President Signs Landmark Pension Reform Into Law
President Bush has signed off on pension reform, finally concluding a debate that has swirled around Capitol Hill for years. The Pension Protection Act of 2006 enacts sweeping changes that will affect defined benefit plan sponsors, workers and — eventually — retirees. [September 2006]

Electronic Filing of Form 5500 and Proposed Form Revisions
Companies must file their Form 5500s electronically for plan years beginning January 1, 2008, under final guidance recently released by the U.S. Department of Labor’s Employee Benefits Security Administration. [September 2006]

Congress Passes Landmark Pension Reform Bill
Last night the U.S. Senate passed a long-awaited pension reform measure that when signed into law will mark the most significant overhaul of pension laws since the Employee Retirement Income Security Act (ERISA) was enacted in 1974. The House of Representatives approved the bill one week ago and President Bush is expected to sign the legislation shortly. [August 2006]

SEC Proposes New Disclosure Rules for Executive Compensation
Under the Securities and Exchange Commission's recent proposal, companies would have to disclose far more details about the pay and perks provided to named executive officers. [February 2006]

Congress Increases PBGC Premiums
Pension plan sponsors will pay higher Pension Benefit Guaranty Corporation (PBGC) premiums this year, now that the Deficit Reduction Act has been signed into law. The act increases flat-rate premiums for single-employer and multiemployer plans. It also establishes a new premium for single-employer plans that undergo involuntary terminations or distress terminations in connection with a bankruptcy reorganization. [February 2006]

2007 Budget Would Expand HSAs, Calls for Pension Reform
President Bush sent Congress his budget proposal for fiscal year 2007 on February 6, 2006. The budget puts renewed emphasis on health care initiatives, proposing to expand health savings accounts (HSAs), encourage greater transparency about health care cost and quality, authorize association health plans (AHPs) and improve health information technology. [February 2006]

Marking to Market: A Second Look
A couple of months ago, Watson Wyatt projected the effects of phase 1 of the Financial Accounting Standards Board's (FASB) proposal to change accounting standards for pensions and postretirement benefit plans. Phase 1 focuses on disclosing the funded status of postretirement benefit obligations on corporate balance sheets. As the details of FASB's approach have evolved, we have undertaken a second analysis. [February 2006]

Multiemployer Plans Must Give Annual Notice of Funded Status
The U.S. Department of Labor (DOL) recently released a final regulation implementing the annual funding notice requirements for multiemployer defined benefit plans, which were added by the Pension Funding Equity Act of 2004. Under the act, plan administrators of multiemployer defined benefit plans must annually notify interested parties of the plan's funded status. [February 2006]

Pension Reform Moves Forward — Stage Set for Final Agreement in 2006
As the U.S. House of Representatives was wrapping up its 2005 legislative session, the Pension Protection Act (PPA, H.R.2830) seemed stalled. But a last-minute agreement between key lawmakers and the United Auto Workers cleared the way, and the House approved the PPA by a vote of 294-132 on December 15, 2005. [January 2006]

Benefits Activity During 2005 Session Will Continue Into 2006
Benefits-related legislation remained high on the legislative agenda during 2005 as Congress focused on pension reform. Legislators proposed clarifications to the legal status of hybrid pension plans and new laws to encourage automatic 401(k) enrollment, improve retirement education and increase other retirement savings. [January 2006]

Flex HSA Act Aims to Improve Health Savings Accounts
Representative Eric Cantor (R-Virginia) introduced the Flex HSA Act (H.R.4511) on December 13, 2005. The act aims to promote health savings accounts (HSAs) by raising the limit on HSA contributions and permitting individuals covered by flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) to contribute to HSAs. [January 2006]

Stock Options and SARs Under the New 409A Regime
The regulations recently proposed under section 409A have broadened the definition of nonqualified deferred compensation (NQDC) to encompass virtually all equity or equity-based grants not covered by a specific exception. Fortunately, most NQDC can be crafted to either qualify for an exception or comply with section 409A. In some situations, however, seemingly innocuous designs or design changes could unwittingly run afoul of the new rules, with unfavorable tax results. [November 2005]

Pension Reform: New Mandates for Hybrid Plans
Pending pension reform would attempt to clear up the legal ambiguity surrounding hybrid plans and would impose new restrictions on conversions of traditional defined benefit plans to hybrid plans. But the new rules may leave existing plans in legal limbo. [November 2005]

How Would the Proposed Changes to Mortality Standards Affect Plan Sponsors?
Pending pension reform would require defined benefit plan sponsors to change the mortality assumptions they use to value their plan liabilities, so Watson Wyatt analyzed the impact of the proposed changes. We find that the new mortality assumptions would increase liabilities somewhat for most plan sponsors, especially for plans in which men outnumber women. [November 2005]

Tax Reform Panel Final Report Recommends Significant Changes for Employer-Sponsored Programs
In January 2005, President Bush tasked the President's Advisory Panel on Federal Tax Reform with reforming the U.S. tax code. Former U.S. Senators Connie Mack (R-Florida) and John Breaux (D-Louisiana), the panel's chair and vice-chair, recently presented the panel's final report to Treasury Secretary John Snow. [November 2005]

Judge Affirms EEOC's Proposed Regulation on Retiree Health and ADEA, but AARP Appeals
The district court judge who prohibited the U.S. Equal Employment Opportunity Commission (EEOC) from issuing its final rule on coordinating retiree medical benefits with Medicare has reversed her decision. [October 2005]

Disaster Relief: Lending a Helping Hand
In the wake of Hurricane Katrina and the urgent need for charitable relief, many employers want to make a difference. [October 2005]

Senate HELP Committee Approves Defined Benefit Security Act
On September 8, the Senate Health, Education, Labor and Pensions (HELP) Committee approved the Defined Benefit Security Act (DBSA).  [September 2005]

Technical Corrections Act Introduced
Senate Finance Committee chair Charles Grassley (R-Iowa), Finance Committee ranking member Max Baucus (D-Montana), and House Ways and Means Committee chair William Thomas (R-California) recently introduced the Tax Technical Corrections Act of 2005. [September 2005]

Finance Committee Approves Pension Reform Legislation
Senate Finance Committee chair Charles Grassley (R-Iowa) and ranking member Max Baucus (D-Montana) released a new version of their National Employee Savings and Trust Equity Guarantee Act (NESTEG) on July 22, placing a stronger focus on defined benefit funding and related pension reform issues. The Finance Committee approved NESTEG on July 26, thus advancing the pension reform debate. [August 2005]

Credit Balances in Funding Reform — Will They Be Real or Illusory?
Under pension funding law established over 30 years ago in ERISA, plan sponsors that contribute more than the minimum funding requirement in any plan year accumulate the overpayments as "credit balances" in their funding standard accounts. This encourages sponsors to prefund their plans when they can afford to, generally during good economic times, so there is less need for additional funding during poorer economic times. [August 2005]

Retirement Savings on Congress' Radar Screen
As defined benefit reform was debated on Capitol Hill in June and July, lawmakers also continued to focus on retirement savings and other issues that affect defined contribution plans. Final pension reform could include provisions to ease automatic 401(k) enrollment, encourage annuities, and promote retirement education and investment advice. [August 2005]

FASB Considers Amending SFAS 87 for Plans That Pay Lump Sum Benefits
At its May meeting, the Financial Accounting Standards Board directed its staff to analyze how accounting for a defined benefit plan that offers a lump sum payment option would be affected if the accumulated benefit obligation for each participant eligible for a lump sum were required to at least equal the lump sum payable to the participant as of the measurement date. [July 2005]

Annual Funding Notice for Multiemployer Defined Benefit Plans
The U.S. Department of Labor has issued proposed regulations implementing the annual funding notice requirement for multiemployer defined benefit plans, which was enacted by the Pension Funding Equity Act of 2004. [March 2005]

PBGC Releases Final 4010 Regulations
In March, the Pension Benefit Guaranty Corporation released final revised 4010 regulations. [March 2005]

News in Brief
News in Brief: JCT Recommendation Would Affect Cafeteria Plans, Dependent Care Plans; Senators Introduce FSA Rollover Bill; Senate Approves Genetic Nondiscrimination Bill; and IRS Challenges Short-Service Employee Accruals for Nondiscrimination Testing [March 2005]

Benefits Issues After the 2004 Elections: A Sneak Peek
Election Day has come and gone, but the effects on benefits-related issues are likely to be significant and long-lasting. President Bush is expected to stay the course on health care and to move toward Social Security reform. [December 2004]

Plans Must Soon Comply With Automatic Default Rollover Rule
The U.S. Department of Labor has released final safe harbor regulations for automatic rollovers of mandatory distributions to IRAs. [November 2004]

New Definitions in Working Families Tax Relief Act Will Have Broad Effects
The Working Families Tax Relief Act of 2004 changed the Code section 152 definition of "tax dependent," which is often used to determine health and group plan eligibility and benefits’ tax status. [November 2004]

DOL Provides Guidance on Missing Participants in Terminated Defined Contribution Plans
In Field Assistance Bulletin (FAB) 2004-02, the U.S. Department of Labor provides guidance on steps for plan fiduciaries to take to locate missing participants and beneficiaries in terminated defined contribution plans. [November 2004]

Plans Must Soon Comply With Automatic Default Rollover Rule
The U.S. Department of Labor (DOL) has released final safe harbor regulations for automatic rollovers of mandatory distributions to IRAs.  [October 2004]

DOL Issues Final COBRA Regulations on Notice and Disclosure
The U.S. Department of Labor (DOL) has issued final COBRA regulations addressing notice and disclosure.  [August 2004]

A Mixed Bag: Treasury's Proposed Cash Balance and Pension Equity Plan Legislation
Treasury’s proposed legislative solution to end the current limbo status of hybrid plans has some aspects that are very good and others that are worse than we expected. [February 2004]

The Next Phase of HIPAA: Security
Many health plans, providers and health plan sponsors just recently managed compliance with the Health Insurance Portability and Accountability Act’s privacy requirements, which became effective in April of this year. Now, these same plans and covered entities must begin planning for the next phase of HIPAA — the Security Rule — which becomes effective in April 2005 (April 2006 for small plans). [October 2003]

Update on FASB Project on Revised Pension Disclosures
The FASB has tentatively decided to make some changes to FAS 132 pension disclosures. [August 2003]

DOL Issues Proposed COBRA Notice Regulations
The DOL is proposing new rules to improve the consistency and clarity of four COBRA notices furnished by employers, plan administrators, employees and their families.  [August 2003]

Supreme Court to Determine Whether ADEA Prohibits “Reverse” Age Discrimination
The Supreme Court has agreed to hear Cline v. General Dynamics, to determine whether the Age Discrimination in Employment Act prohibits employment or benefit practices that favor older workers over younger workers within the protected class. [June 2003]

FASB Issues New Disclosure Standard on Transition and Disclosure of Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board (FASB) issued FAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure, which amends FAS 123, Accounting for Stock-Based Compensation. [February 2003]

The DOL Speaks on ESOP Loan Refinancing
In a new form of informal guidance called a Field Assistance Bulletin (FAB), the U.S. Department of Labor’s national office explained to its regional office staff (and indirectly to the private sector) what it believes are the fiduciary considerations under ERISA involved with refinancing an employee stock ownership plan (ESOP) loan. [January 2003]

DOL Releases Blackout Notice Guidelines
The U.S. Department of Labor (DOL) has released requirements for blackout notices to 401(k) plan participants as required by the Sarbanes-Oxley Act enacted earlier this year. [December 2002]

HHS Releases Final HIPAA Privacy Regulations
The Department of Health and Human Services (HHS) recently published final regulations that clarify the Health Insurance Portability and Accountability Act (HIPAA) standards due to become effective April 2003.  [September 2002]

Treasury Issues New Proposed Regulations for Split Dollar Life Insurance
In a notice released on July 3, 2002, the IRS proposed extensive regulations that, when finalized, will dramatically change the taxation of future split dollar arrangements. [August 2002]

ADEA and Retirees: Settlement Reached in Erie County
The parties in Erie County Retirees Assoc. v. County of Erie, Pennsylvania recently settled their case out of court, bringing to a close their three-year court battle over how the ADEA affects retirees. [June 2002]

California Law Restricts Use and Communication of Employees’ Social Security Numbers
A new California state law limits printing, transmitting, communicating or otherwise using Social Security numbers (SSNs). The law goes into effect July 1, 2002, and will change the way employers use SSNs, including in employee benefit plan transactions. [June 2002]

DOL Issues Final Rules on Electronic Communications
The Department of Labor (DOL) recently issued final rules for disclosing certain employee benefit plan information via electronic media and maintaining employee benefit plan records electronically.  [May 2002]

Congress Discusses Faster Reporting of Insider Stock Sales
Congress and the Securities and Exchange Commission (SEC) have taken aim at current rules that allow corporate insiders to report sales of company stock days — or even more than a year — after the transaction occurs. Lawmakers and securities regulators want faster reporting to both the government and the public. [April 2002]

Final Regs on FMLA and Cafeteria Plans
The IRS recently issued final regulations governing the interaction of the Family and Medical Leave Act (FMLA) with cafeteria plans. These regulations finalize the regulations proposed in 1995, with a few modifications, and become effective for cafeteria plan years beginning on or after January 1, 2002. [December 2001]

Agencies and Congress Working on Disaster Relief
The tragic events of September 11 raise many issues for U.S. employers, including human resource and benefits issues. The IRS, Department of Labor (DOL) and other government agencies already have issued guidance providing some relief, and Congress is expected to provide even more. [October 2001]

Companies Face Employment, Benefits Issues After Attacks
In the wake of the September 11 terrorist attacks, the Department of Defense (DOD) has been authorized to call up military reservists. Their mobilization brings up many questions regarding the employment status and benefits of employees called to military service. [October 2001]

IRS and DOL Provide Disaster Relief Extensions
In response to the September 11 terrorist attacks on New York and Washington, both the IRS and the Department of Labor (DOL) have granted Form 5500 extensions for filers located in areas designated as federal disaster areas. Extensions also were granted for Form 5500 filers who are located outside of the disaster areas but unable to obtain the information necessary for filing from service providers, banks or insurance companies. [September 2001]

Employer Obligations under USERRA
The Department of Defense (DOD) has been authorized to mobilize as many as 50,000 military reservists, raising many questions on the employment status and benefits of employees called to service. The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) governs the reemployment, health care, pension and other benefit rights of such employees. [September 2001]

FMLA Concerns Prompt New Legislation
The Family and Medical Leave Act of 1993 (FMLA) provides up to 12 weeks of unpaid leave following the birth or adoption of a child, to care for an employee's own serious medical condition or to care for an ill family member. In recent years, bills and regulations have attempted to expand the FMLA. For example, some bills have proposed adding "parental involvement" leave that parents could use to attend their children's school activities, meet with teachers or take their children to doctors. [June 2001]

DOL Issues Guidance on Demutualization
The Department of Labor recently released several pieces of guidance with important information for employers on how an insurer's demutualization affects ERISA employee benefits plans. Demutualization is when a mutual insurance company, which is owned by policyholders, converts to a stock company, which is owned by shareholders. [April 2001]

Proposed Minimum Distribution Rules
This article highlights recent proposed changes to the 1987 proposed regulations under Section 401(a)(9). The 2001 proposed rules provide a uniform table for calculating annual minimum distribution amounts from individual account plans, allow more time to identify beneficiaries after an employee's death, extend the deadline for providing documentation to plan administrators on trust beneficiary designations, and propose other changes to the minimum distribution rules. [March 2001]

HHS Releases Final Privacy Rules
HHS issued regulations governing the use and disclosure of personal medical information. These complex and controversial regulations constitute the first comprehensive federal standards for protecting the privacy of health information. [February 2001]

Interim Final Regulations on HIPAA Nondiscrimination Provisions
Under HIPAA, group health plans and issuers may not discriminate against participants or beneficiaries based on health status. [February 2001]

DOL ''Clarifies'' Position on Paying Expenses from Plan Assets
The DOL has released new guidance on paying plan expenses from plan assets. [February 2001]

DOL Issues Final SPD Rules
The Department of Labor (DOL) has issued a final rule amending the labor regulations that govern the content of summary plan descriptions (SPDs) provided to employee benefit plan participants and beneficiaries under ERISA. [January 2001]

DOL Issues Final Regulations on Claims Procedures
The Department of Labor (DOL) recently issued final regulations on claims procedures for employee benefit plans governed by ERISA. Although these regulations focus mainly on group health and disability benefit plans, some changes apply to pension plans and other welfare benefit plans. [December 2000]

Disclosure Obligations—DOL Request for Information
Information disclosure by fiduciaries of employee benefit plans governed by ERISA—specifically what information must be disclosed to participants and when—is addressed by ERISA and has been the focus of various court cases as well. However, the DOL is concerned about whether all plan participants and beneficiaries are receiving the same protections.  [November 2000]

HHS Moves Toward Administrative Simplification
The Department of Health and Human Services (HHS) has issued a final standard for electronic health care transactions. This is the first of the final standards to be released under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HHS plans to finalize other standards later this year, including health plan and provider identifiers and privacy regulations.  [October 2000]

EEOC Issues Final Rule on ADA
In response to recent Supreme Court rulings, the EEOC has issued a final rule stating that mitigating measures may be taken into account in determining whether an individual has a disability under the Americans with Disabilities Act (ADA). [September 2000]

Electronic Signatures Could Affect Plan Administration
A new law designed to promote electronic commerce could also change benefits administration. The Electronic Signatures in Global and National Commerce Act was signed into law on June 30. More commonly known as the e-sign, e-signatures or digital signatures bill, it grants "electronic signatures" the same validity as traditional pen-and-ink signatures. Appropriately, President Clinton signed the bill using both a traditional signature and smart card technology. [August 2000]

Government Plans Get Green Light
In three recent Pension and Welfare Benefits Administration (PWBA) Advisory Opinion letters, the Department of Labor (DOL) has ruled that plans may continue to be classified as governmental plans, even if the plan is a collectively bargained plan negotiated between a labor union and a governmental employer, or the plan covers a certain de minimus number of nongovernmental employees.  [August 2000]

DOL Audit Program Targets Expenses Paid from Plan Assets
A Midwest DOL office is examining cases of plan sponsors using plan assets to pay expenses. So far, the examination program is operating only out of the Kansas City DOL office, which has jurisdiction over Colorado, southern Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming.  [August 2000]

DOL Issues Clarification and Provides Relief on MEWA Reporting
In February, the Department of Labor (DOL) issued an interim rule requiring Multiple Employee Welfare Arrangements (MEWAs) to comply with certain reporting requirements established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Under the rule, MEWAs that provide medical care coverage were supposed to file Form M-1 with the DOL by May 1, 2000. There may be civil penalties for not filing the form.  [August 2000]

Congress Takes a Look at "Super Stock Options"
The increasing popularity of stock options has attracted attention on Capitol Hill, where lawmakers are considering a bill to create a "super stock option." The Wealth Through the Workplace Act (H.R.3462), sponsored by Representative John Boehner (R-Ohio), would create a new type of stock option that provides favorable tax treatment to both employers and employees. [July 2000]

FASB Releases Accounting for Stock Compensation Interpretation
The interpretation provides guidance on issues that have emerged as stock compensation practices have changed since APB 25 was issued in 1972 [May 2000]

Bill Would Exempt Stock Options from Overtime Rules
Employers offering broad-based stock options or other stock compensation plans would face considerably higher overtime costs, not to mention the administratively complex task of recalculating the overtime pay of each overtime-eligible employee.  [May 2000]

Merger Integration: The Ultimate Change-Management Challenge
An excerpt from The Complete Guide to Mergers and Acquisitions, writen by M&A consultants Timothy Galpin and Mark Herndon and available from Jossey-Bass Publishers. [February 2000]

DOL Proposes Using Unemployment Insurance to Fund Paid Parental Leave
On November 30, 1999, President Clinton announced proposed Department of Labor (DOL) regulations to allow states to use their unemployment insurance to offer paid leave to new parents. [January 2000]

FASB Reverses Course (Again) on Director Grants
Over the past two months, FASB has been revisiting its Proposed Interpretation of APB Opinion No. 25 (Exposure Draft 195-B), Accounting for Certain Transactions Involving Stock Compensation (Watson Wyatt Insider, May 1999). The redeliberative process has included a key change that would provide the same accounting treatment for director stock grants as for employee stock grants. [October 1999]

Appeals Court Rules That FMLA Regulation Is Invalid
In Cox v. AutoZone, Inc., the U.S. Court of Appeals for the Eleventh Circuit ruled that a portion of the Family and Medical Leave Act (FMLA) regulations was invalid. The court held that a notification requirement in the FMLA regulations effectively added requirements and granted entitlements beyond those in the law, and that the provision was inconsistent with the stated purpose of the FMLA. [September 1999]

Supreme Court Narrows Application of ADA
On June 22, 1999, the Supreme Court ruled in three cases dealing with the effect of the Americans with Disabilities Act (ADA) on employees who can correct or compensate for their impairments. Ruling that the ADA was not intended to protect workers with treatable impairments or medical conditions such as bad eyesight or hypertension, the Court narrowed the application of the ADA. [August 1999]

Newborns' and Mothers' Health Protection Act Guidance
The Newborns' and Mothers' Health Protection Act of 1996 (NMHPA) was enacted to provide minimum hospital stays for mothers and newborn children following childbirth.  [December 1998]

NMHPA Notice Requirements
The Newborns’ and Mothers’ Health Protection Act of 1996 (NMHPA) was enacted to provide minimum hospital stays for mothers and newborn children following childbirth. The NMHPA amended the Internal Revenue Code, ERISA and the Public Health Service Act (PHSA). The IRS, Department of Labor (DOL) and Department of Health and Human Services (HHS) share oversight and enforcement. On September 9, the DOL issued an interim rule amending the summary plan description (SPD) requirements for ERISA-covered group health plans regarding the NMHPA. [December 1998]

FASB Continues Its Tinkering with Stock Options
The Financial Accounting Standards Board (FASB) is making progress on its project on how to account for stock-based compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees. Key tentative decisions to date would (1) preserve favorable accounting for §423 Employee Stock Purchase Plans, and (2) apply variable plan accounting to option repricings, which would increase the compensation expense and therefore change the practice of option repricings. FASB plans to publish an exposure draft of a proposed Technical Bulletin in early 1999. [November 1998]

Congressional Update
As this issue of the Watson Wyatt Insider went to press, Congress was preparing to recess for the November elections. A new health mandate was included in the omnibus spending bill, and a bankruptcy reform bill, which would help protect retirement savings in cases of personal bankruptcy, was awaiting action from the President. Otherwise, it appeared that few benefits-related provisions would be addressed before the end of the session. [November 1998]

Health Care Quality Debate Advances Again
When Congress returns to work this month after its traditional August recess, health care quality will be at the top of the Senate's agenda.  [September 1998]

EEOC Finalizes Age Discrimination Waiver Regulation
The Equal Employment Opportunity Commission (EEOC) has finalized a regulation governing individual waivers of rights and claims under the Age Discrimination in Employment Act (ADEA), as amended by the Older Workers Benefit Protection Act of 1990 (OWBPA). The OWBPA required that waivers be "knowing and voluntary" in order to be valid. [July 1998]

DOL Urges Plan Administrators to Address Year 2000 Software Problem
In a recent press release, Olena Berg, Assistant Secretary for the DOL's Pensions and Welfare Benefits Administration, said that employee benefit plan administrators have a fiduciary responsibility to address the Year 2000 software problem. [May 1998]