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Cypen & Cypen
NEWSLETTER
for
JANUARY 18, 2007

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. U.S. SUPREME COURT LETS IBM CASH BALANCE DECISION STAND:

The United States Supreme Court let stand last year’s Seventh U.S. Circuit Court of Appeals decision that IBM’s switch to a cash balance pension did not discriminate against older workers. In 2003, a federal trial judge handed down a decision finding that the plan did violate the Employee Retirement Income Security Act by favoring younger workers. That decision prompted IBM to offer a $1.4 Billion settlement -- if it eventually lost the case. Apparently, IBM will now escape that obligation. The recently-enacted Pension Protection Act of 2006 legitimatized new cash balance plans under ERISA, but the new provision does not apply to older plans.

2. IMPROVED, EXPANDED FREE FILE PROGRAM OPENS FOR 95 MILLION TAXPAYERS:

Internal Revenue Service and its private-sector partners announced opening of this year’s Free File program with a series of improvements and changes to help taxpayers. The free tax preparation and free electronic filing initiative begins its fifth year with more consumer-friendly features and expanded services for Spanish-speaking taxpayers. Seventy per cent of the nation’s taxpayers -- 95 million Americans -- qualify for Free File. This year, up to 20 Free File Alliance companies will participate in the program run by IRS and the Free File Alliance, a consortium of tax preparation software companies. The program is available only through IRS.gov. IR-2007-011.

3. GASB PROPOSES AMENDMENTS TO STATEMENTS NO. 25 AND NO. 27:

Governmental Accounting Standards Board of the Financial Accounting Foundation has proposed a statement that would more closely align the financial reporting requirements for pensions with those for other postemployment benefits (OPEB) and, in doing so, would enhance information disclosed in notes to financial statements or presented as required supplementary information (RSI) by pension plans and by employers that provide pension benefits. The proposed reporting changes would amend applicable Note Disclosure and RSI Requirements of Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, to conform with the requirements of Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. Defined benefit pension plans and sole and agent employers would be required to make the following changes related to note disclosures or RSI:

  • Notes to financial statements would disclose the funded status of the plan as of the most recent actuarial valuation date.
  • If the aggregate actuarial cost method is used to determine the annual required contribution of the employer, notes to financial statements would disclose the funded status of the plan, and a schedule of funding progress would be presented as RSI, using entry age actuarial cost method.
  • Notes to financial statements would include narrative disclosures of an informative nature regarding the actuarial measurement process and a reference linking the funded status disclosure in the notes to financial statements to the required schedule of funding progress in RSI.
  • If applicable, notes to financial statements would disclose legal or contractual maximum contribution rates.
  • If an actuarial assumption is different for successive years, notes to financial statements would disclose the initial and ultimate rates.

The deadline for submitting written comments is February 28, 2007. For your information, the Governmental Accounting Standards Board is responsible for developing standards of state and local governmental accounting and financial reporting that will (a) result in useful information for users of financial reports and (b) guide and educate the public, including issuers, auditors and users of those financial reports.

4. QUOTE OF THE WEEK:

“Honesty is the first chapter of the Book of Wisdom.” Thomas Jefferson

Copyright, 1996-2007, all rights reserved.

Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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