Cypen & Cypen
DECEMBER 23, 2004
Stephen H. Cypen, Esq., Editor
As expected (see C&C Newsletter for December 2, 2004, Item 1), President Bush on December 10, 2004 signed into law the Veterans Benefits Improvement Act of 2004. The law requires employers to provide those eligible for rights and benefits under USERRA with a notice of said rights and benefits. The notice requirement may be satisfied by posting a notice where other required notices are customarily posted. The Secretary of Labor will provide the text of the notice within ninety days from enactment: by March 10, 2005. Among other things, USERRA has a COBRA-like law, which provides employees the right to continue with employer-provided health coverage for themselves and dependents for a period of up to 18 months. Employees who elect such coverage may be charged a premium of 102% of the regular cost. The law now expands the period of coverage from 18 months to 24 months, for elections made on or after December 10, 2004.
On October 15, 2004 the Government Finance Officers Association Executive Board approved a recommended practice for evaluating use of early retirement incentives. Governments occasionally offer early retirement incentives to employees as a strategy to reduce payroll costs or stimulate short-term turnover among staff. ERIs are temporary, offered during a window that usually covers a period of months. They increase the economic value of the standard retirement benefit. Historically, ERIs rarely have succeeded, since costs are often greater than initially anticipated by the government offering the incentive, and savings are lower than projected. GFOA recommends that governments exercise extreme caution if considering ERIs. Governments should take the following actions prior to the decision to offer an ERI:
GFOA emphasizes that the scope of this recommended practice does not cover Deferred Retirement Option Plans or other similar programs, which are often designed to promote employee retention.
Alfred Perreca sued his former company under the Employee Retirement Income Security Act of 1974, claiming pension credit as of 1959. The company claimed that Perreca should receive creditable service only from 1966. Although a federal jury found that Perreca was entitled to creditable service before January 1, 1965, it also found that he was not entitled to service back to his original start date of 1959. Thus, the court ordered that Perreca recover benefits from January 1, 1965. Meanwhile, Perreca sought fees under ERISA, which provides that in any action thereunder by a participant, beneficiary or fiduciary, the court in its discretion may allow reasonable attorney’s fees and costs of action to either party. At the outset, the court found that there were no special circumstances that warranted denial of the fees and that Perreca was, in fact, the prevailing party. However, the Second Circuit, in which the trial court was sitting, applies a five-pronged test to determine whether the prevailing party in an ERISA action can recover attorney’s fees: (1) the degree of the offending party’s culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney’s fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) relative merit of the parties positions and (5) whether the action conferred a common benefit on a group of pension plan participants. Finding that all factors (except financial ability to meet an award) favored defendants, the court “easily concludes that an award of attorney’s fees would be unfair to [defendants] and would not further ERISA’s goals.” Perreca v. Gluck, Case No. 99 Civ. 1779 (S.D. NY, December 3, 2004).
Following articles stating the pro-position for Social Security privatization (see C&C Newsletter for October 7, 2004, Item 5) and the contrary view (see C&C Newsletter for October 14, 2004, Item 4), the Century Foundation has come up with twelve reasons why privatizing Social Security is a not a good idea. Just by way of background, most people know that President Bush repeatedly has emphasized that one of his foremost second-term priorities will be to transform Social Security in a fundamental way. Since the program’s inception in 1935, the size of benefits has always depended on earnings of workers over the course of their careers. The President wants to change the system so that the amount each worker collects from Social Security upon retirement would hinge on the size of investments in his or her own personal account. Here’s why such change should not take place:
The Century Foundation says its mission is to persuade those who care
about issues such as economic inequality, population aging, homeland
security, discontent with government and politics and national security
that significant improvements are possible even when the conventional
wisdom says they are not.
Copyright, 1996-2004, 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.