More FORTUNE 1000 Plan Sponsors Freezing Their Defined Benefit Plans
The number of firms in the FORTUNE 1000 that sponsor one or more frozen or terminated defined benefit (DB) plans rose from 71 in 2004 to 113 in 2005. Watson Wyatt has been tracking DB plan terminations and freezes among the FORTUNE 1000 for the last five years. Delaware Supreme Court Upholds Chancery Court in Disney Case
On June 8, the Delaware Supreme Court upheld the Chancery Court’s decision that Walt Disney’s officers and directors did not violate their fiduciary duty in hiring and firing former president Michael Ovitz (Watson Wyatt Insider, September 2005). New Tax Law Affects Benefit Plans, IRAs — and Possibly Pension Reform
President Bush signed the Tax Increase Prevention and Reconciliation Act (H.R.4297, P.L.109-222) into law on May 17, 2006. The act removes income restrictions on converting traditional IRAs to Roth IRAs. It also imposes new penalties and reporting requirements on managers of
tax-exempt entities — including qualified plans, IRAs and other tax-favored arrangements, as well as charities and more traditional tax-exempt organizations — who engage in certain tax-shelter transactions. Legislation Aims to Make HSAs More Attractive
A recent Government Accountability Office (GAO) study concluded that consumer-directed health plans (CDHPs) — both health reimbursement arrangements (HRAs) and health savings accounts (HSAs) that are coupled with high-deductible health plans (HDHPs) — account for a small but growing share of private health care coverage in the United States. Court Rules Plan’s Recognition of Former Distributions Invalid
In Miller v. Xerox, a district court ruled that in coordinating earlier distributions with later
benefit accruals in a defined benefit floor offset plan, Xerox’s plan had violated ERISA. Floor offset plans coordinate benefits from a defined contribution plan and a defined benefit plan, typically reducing benefits under the defined benefit plan by the balance in the defined contribution plan. Congress Approves Legislation to Clarify Source Tax Law
The source tax law enacted in 1996 prohibits states from taxing the retirement income of former residents. However, at least one state held that the 1996 law did not apply to former partners. So, the House and the Senate approved legislation clarifying that the law does apply to the retirement income of former partners. Citizens’ Health Care Group Issues Interim Recommendations
The Citizens’ Health Care Working Group, established by the Medicare Prescription Drug, Modernization and Improvement Act of 2003, released its interim recommendations on June 1. The group recommends making affordable health care coverage for all Americans a matter of official U.S. public policy. The coverage should include a package of core services and financial assistance as necessary. The group suggests having an independent, nonpartisan group identify and periodically update the core benefit package. IRS Flooding May Delay Guidance
IRS National Headquarters is closed for the month of July because of significant flooding caused by unusually heavy summer rains in the Washington, D.C., area; some parts of the building may be closed until next year. IRS officials and personnel are being temporarily reassigned to other office space in the metropolitan area as available.
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