Cypen & Cypen
MAY 4, 2006
Stephen H. Cypen, Esq., Editor
H. C. Foster & Company’s Retirement and Welfare Plans Newsletter believes there is positive news about defined benefit pension plans. Positive signs have emerged over the past few months for defined benefit pension plans at what may be the high point of the Section 401(k) fad, including:
Several recent publications address retirement and welfare plan issues, setting forth the following:
Foster observes the following about the current retirement and welfare plan debate, which has finally emerged from the shadows:
Governmental employee organizations seem to have taken the lead in the fight for defined benefit pension plans, which may indicate that similar sentiments fester within private sector employee groups.
How would you like it if your employees started hanging “Do Not Disturb” signs outside their offices? Well, according to Entrepreneur, many companies would be all for it. In fact, some cutting-edge employers are enforcing rules that provide days of peace and quiet for employees. Such days (or half-days) have all kinds of names: alone days, free days, focus days, buffer days, thinking days. The goal can be to work on the business instead of in it. Letting employees use the days as they wish or for a specific reason can also boost the staff’s overall performance. Some companies use the days for brainstorming, thinking or catching-up sessions. Hmmmm.
National Conference of State Legislatures has released a report summarizing selected pension and retirement legislation that state legislatures enacted in 2005. The sources are retirement systems’ web sites and direct communication with legislative and retirement system staff. The report’s goal is to help researchers and policy makers know how other states have addressed issues that could arise in any state. The report is organized according to topics that legislatures addressed in 2005. The long-term security of defined benefits was the issue of broadest concern to state legislatures last year. Action on it took many forms, including, among others:
Employees of Detroit Edison Company appealed the district court’s determination that Detroit Edison paid them on a salary basis, making them ineligible for time-and-a-half overtime compensation. Because Detroit Edison had established that plaintiffs “regularly receive a predetermined amount constituting all or part of” their compensation, and because that amount was “not subject to reduction because of variations in the quality or quantity of work performed,” the company satisfied Fair Labor Standards Act’s salary-basis exemption. And because “an employee’s time-entry error or omission that results in an initial payment by the Company to an employee of less than” the predetermined amount “is not an unlawful ‘docking’ or deduction,” pay variations caused by sporadic under-reporting of plaintiffs’ hours do not alter their exempt status. In affirming, the United States Court of Appeals relied in part on a U.S. Department of Labor Wage and Hour Division Opinion Letter dated July 9, 2003: an employee’s time-entry or omission or other clerical or mechanical error or omission that results in a partial payment by the Company to an employee of less than 1/26th of the employee’s annual salary in a biweekly pay period is not an unlawful “docking” or deduction in the typical sense (such as a prohibited disciplinary deduction), does not call into question the Company’s intention to pay on a salary basis and does not affect exempt status. Any shortfall that results from the employee’s error or omission may be adjusted by completing an adjustment form. The fact that an adjustment process exists to correct such errors indicates that any initial underpayments caused by time-entry errors, like clerical and mechanical errors, are inadvertent and may be part of any payroll system that is subject to human error. Acs v. The Detroit Edison Company, Case No. 05-1042 (U.S. 6th Cir., April 24, 2006).
The 2006 Social Security Trustees Report shows little change in the projected financial status of the Social Security program over last year. The Trustees Report projects that the Social Security Trust Funds will be exhausted in 2040 -- one year sooner than last year’s projection. And, as they have done for more than a decade, the Trustees recommend that projected trust fund deficits be addressed in a timely way to allow for gradual changes and advance notice to workers. In the annual report to Congress, the Trustees announced:
Other highlights of the report include:
The entire report is posted at www.socialsecurity.gov/OACT/TR/TR06/.
As is evident from the previous item, Social Security Trustees have just issued their 2006 Report on the financial outlook for the system. The report uses three sets of cost assumptions -- high, low and intermediate. A new Issue in Brief from Center for Retirement Research at Boston College focuses on the intermediate assumptions and puts this year’s numbers in perspective. The 2006 Trustees’ Report reconfirms what has been evident for two decades; namely, Social Security is facing a long-term financing shortfall. Changes in the underlying assumptions are unlikely to eliminate the problem. Although future rates in immigration, disability, mortality and real wage growth are uncertain, switching any of the individual assumptions to the Trustees’ “low cost” scenario closes only part of the gap. Therefore, this problem can be solved only by putting more money into the system or by cutting benefits. There is no silver bullet. Mmmmmmm Kemo Sabe.
“The future has a way of arriving
unannounced.” George Will
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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.