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Health Care Disclosure Bill Passes House
The Health Insurance Restrictions and Limitations Clarification Act of 2009 passed the House on March 31 with overwhelming support. The bill aims to provide more transparency about benefit exclusions in group health plans to health care consumers. |
Treasury Unveils Public-Private Investment Program
On March 23, the U.S. Department of the Treasury outlined its Public-Private Investment Program aimed at removing troubled assets from the balance sheets of financial institutions, thereby reopening credit flows. The Treasury Department is particularly encouraging pension plans, insurance companies and other long-term investors to participate. 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. Economic Crisis Brings Job Losses, Delayed Retirement, Benefit Reductions and Stagnant Pay
The recession began in late 2007, and during the last quarter of 2008, there were 6,327 mass layoffs, generating 922,807 initial claimants for unemployment insurance. In January 2009 alone, 598,000 jobs were lost. But the statistics and news reports reflect only part of the picture. Many of those still working are receiving little or no increase in overall benefits and salary. In private industry, overall benefits and salary increased by 2.4 percent in 2008 — a 20 percent decline from the increase in overall benefits and salary in 2007, and a 40 percent drop from the increase in 2003. Expectations for benefits and pay increases are even less optimistic for 2009. New Relief From IRS Reduces Required DB Plan Contributions for 2009, but Large Increase Looms for 2010
The IRS is allowing defined benefit (DB) plans to use a reasonable interpretation in selecting a yield curve for determining a plan’s liabilities for funding purposes. The guidance, which appeared in a March 31, 2009, special edition of Employee Plans News, says that “for a calendar year plan with a January 1, 2009 valuation date, the IRS will not challenge the use of the monthly yield curve for January 2009, or any one of the four months immediately preceding January 2009.” Watson Wyatt Pension 100 — 2008 Disclosures of Funding, Discount Rates, Asset Allocations and Contributions
During the latter months of 2008, Watson Wyatt projected year-end pension funding status for accounting purposes at various times, capturing different interest rate and market environments. Now Watson Wyatt has analyzed actual funded status for the 100 largest pension sponsors among publicly traded companies with year-end 2008 fiscal dates, as disclosed in their Securities and Exchange Commission (SEC) 10-K filings. During 2008, actual funding ratios in this group declined by an average of 28 percentage points.
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