1.
CONTRIBUTION SHORTFALL NOT COVERED BY INSURANCE:
In a suit
for declaratory judgment, an insurance company contended
that it had no duty to defend its insured, a municipality,
against a suit by firefighters claiming that the municipality
had, for decades, shortchanged its pension fund. The district
court granted summary judgment for the insurance company,
holding that the firefighters’ suit alleged intentional
conduct rather than a “negligent act, error, or omission” that
would be covered by the insurance policy. The general liability
insurance policy purchased by the municipality covered
claims arising from administering employee-benefit plans,
including the firefighters’ pension fund. The policy
included a duty to defend against some claims, and when
the firefighters sued, the municipality demanded that the
carrier defend it. The carrier denied coverage, and then
filed the federal court action for declaratory judgment
that it had no duty to defend the municipality against
the claim being asserted by the firefighters. On appeal,
the summary judgment for the insurance company was affirmed.
A settlement paid to remedy failure to make required contributions
to a pension plan is not a “loss” because the
money paid in settlement is money the insured had no right
to possess in the first place. Whatever caused the alleged
underfunding, the remedy would be for a municipality to
contribute money that it was legally required to contribute
all along. Even if the outcome of the firefighters’ suit
required the municipality to move amounts earmarked for
other uses or to collect more taxes, the municipality would
not suffer a loss under the policy because it would still
only be paying an amount offset by a benefit it had already
received -- either having use of extra tax money or having
ability to collect fewer taxes. Were the rule otherwise,
the municipality could avoid its pension fund obligations
entirely by levying no taxes and making no contributions.
It would be absurd to think that in such a situation, the
effect of a court finally requiring the municipality to
make contributions would be a covered loss that the insurance
company was required to cover. St. Paul Fire and Marine
Insurance Company v. Village of Franklin Park, Case No.
06-2924 (U.S. 7th Cir., April 23, 2008).
2. ERISA ADVISORY COUNCIL RELEASES REPORTS:
The
Department of Labor’s ERISA Advisory Council has
released final reports of the 2007 working groups on participant
benefit
statements, financial literacy for plan participants and
multiemployer plan expenses. The reports include several
recommendations. The benefit statement group recommends
development of a model pension benefits statement that
inspires sponsors to add information and education without
crossing the “advice” threshold. The plan expenses
group recommends that DOL propose regulations permitting
multiemployer plans to pay for professional services that
would generally be deemed settlor functions (for example,
plan design, merger, amendment and termination) without
requiring that such activities be artificially characterized
as fiduciary functions. The financial literacy group makes
the following recommendations:
1. Make Best Practices Available
to Plan Sponsors. For
plan sponsors that wish to craft their own program, a
best practices grid would point to core literacy skills
needed
for a successful retirement. The Working Group recommends
that the Department of Labor determine and publish best
practices for the plan sponsor and fiduciaries to consider
for use in educating plan participants with a focus toward
increasing financial literacy
2. Draw Attention to Publications Already in
Existence. For plan sponsors that wish to
incorporate generic material to accomplish literacy,
heightened awareness of existing
material is needed. The Working Group recommends that
the Department of Labor publish and continue to publish
information
and provides information regarding the unique needs
and requirements for managing finances in retirement.
3. Update, Expand and Amend
96-1. The Working Group recommends
that the Department of Labor expand the reach of IB 96-1
by changing and updating it. As innovation continues in
the financial marketplace, educational initiatives will
need to address items heretofore not necessarily addressed
in 96-1. That Interpretative Bulletin needs to address
information, education, and advice in the de-accumulation
stage as well as the accumulation phase. Further, as innovation
continues in this area, 96-1 needs to be updated continually.
4. Coordinate and Bring Together
Government Agencies, Private Sector and the Academic
World. The
Working Group
recommends that the Department of Labor initiate, engage
and facilitate interaction with regulatory agencies,
self-regulatory organizations, industry trade groups
and academic institutions
like Financial Industry Regulatory Authority, Investment
Company Institute, National Association of Insurance
Commissioners, IRS, SEC, Health and Human Services Department
and Department
of Education for the purpose of creating "partnerships" of
common understanding, materials and resources that employers,
plan sponsors and fiduciaries can draw upon to increase
financial literacy of employees and plan participants.
5. Encourage and Allow Use of
Income Replacement Formulas and Final Multiples. The Working Group recommends that
the Department of Labor encourage, allow and facilitate
plan communications that use retirement income replacement
formulas and final pay multiples in employee benefit statements
on a personal participant basis. Plan communications should
encourage participants to have a numerical goal, whether
as a result of a sophisticated or elementary formula, and
repeat that message. At the very least, participants should
be able to determine and have access to an estimated plan
account balance necessary for retirement.
ERISA Advisory Council was created by ERISA to provide
advice to the U.S. Secretary of Labor. In 2007 ERISA Advisory
Council formed the above working groups to study their
respective issues. The reports do not necessarily represent
the position of the Department of Labor.
3. MOMS WOULD “EARN” ALMOST
$117,000 A YEAR:
Salary.com, a leading
provider of on-demand compensation and talent management solutions, has announced
the results of its annual Mom Salary Survey. Salary.com has revised calculations
to reflect the impact of company size on mom’s compensation. For 2008,
Salary.com has determined that the time mothers spend performing the 10 most
popular “Mom job functions” would equate to an annual cash compensation
of $116,805 for a stay-at-home mom and $68,405 for a working mom, down from
last year’s calculations of $138,094 and $85,938. The job titles that
best match a mom’s definition of her work are (in order of hours spent
per week): housekeeper, day care center teacher, cook, laundry machine operator,
computer operator, psychologist, facilities manager, van driver, chief executive
officer and janitor. The prime mover of mom’s six-figure salary is the
amount of overtime work. This year, mom’s overtime averaged 54.4 hours
per week, according to the survey, stay-at-home moms work a 94.4 hour “work
week” -- over half of which is overtime. Working moms reported an average
54.6 hour “mom work week,” in addition to their paying jobs. Let
this piece also serve as a belated Happy Mother’s Day to all of our Mom
readers, who hopefully spend a little time each week reading this newsletter. 4. QUOTE OF THE WEEK:
“Every calling is great when
greatly pursued.” Oliver Wendell Holmes, Jr.
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