Bill Would Extend COBRA's Hand

November 2, 2009 (PLANSPONSOR.com) - Legislation has been introduced in the U.S. House of Representatives that would extend COBRA provisions for workers who are involuntarily terminated.

Under H.R. 3930, introduced last week by Congressman Joe Sestak (D-Pennsylvania), the COBRA subsidy contained in the recent economic stimulus bill would be provided for up to 15 months, and those laid off from January 1, 2010, through June 30, 2010, would also be eligible for subsidy, according to Business Insurance.   Under the current provision, the the federal government pays 65% of COBRA health care premiums of employees who are involuntarily terminated.

The current subsidy is available for up to nine months for employees who have lost their jobs since September 1, 2008 (see H.R. 1 Contains COBRA Provisions ). Unless the law is extended, the subsidy will not be available to employees laid off after December 31, 2009, and – without an extension of the current law, employees who began collecting the subsidy on March 1, when it first generally became available, will lose it at the end of this month.

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“Losing one’s job is difficult enough. But losing one’s health care along with it—and worrying about being able to get treatment for oneself and one’s family, or fearing bankruptcy in the event of injury or illness—is something Americans should not have to cope with in this difficult time,” Congressman Sestak said in statement, according to Business Insurance.

A recent analysis from Hewitt Associates clams that from March 2009 to June 2009, monthly COBRA enrollment rates for Americans eligible for the subsidy averaged 38%, up from 19% for the period of September 2008 through February 2009, while companies in the industrial manufacturing industry saw an 800% increase in COBRA enrollments since the subsidy was enacted, and enrollments for companies in the construction, leisure, and retail industries tripled (see  COBRA Enrollments Doubled Since Subsidy Enacted ).

Court Rejects State Street's Settlement Do-Over Request

October 30, 2009 (PLANSPONSOR.com) - A federal judge in New York has turned away a request by lawyers from State Street Bank & Trust to postpone preliminarily approving an $89.75-million settlement in a fiduciary breach case involving mortgage-related investments by State Street's bond funds.

U.S. District Judge Richard Holwell of the U.S. District Court for the Southern District of New York flatly rejected State Street’s request to wait until it resolves a parallel investigation by the U.S. Securities and Exchange Commission (SEC) into the same issue involving State Street’s subprime mortgage investments.

Securities regulators served State Street with a Wells notice in the SEC matter as part of a procedure to formally notify a potential enforcement target of its status and give it a chance to respond to allegations being made against it (see SEC to Consider SSgA Charges on Fixed Income Fund Activities ).    

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State Street’s contention, rejected by Holwell, who went on to grant the sought-after preliminary approval, was that members of the class represented in the 2007 lawsuit being settled in Holwell’s court couldn’t be certain the $90-million payment involved was the best the civil suit plaintiffs would be able to do to recoup more of what they said was a $150-million loss from their State Street bond fund investments.

The plaintiffs alleged State Street represented that the bond funds were comparatively low risk, but went on to take sizable positions in risky subprime-mortgage related securities without adequately disclosing that strategy (see Minn. Firm Slaps State Street with Subprime Mortgage Suit ).

"The ERISA settlement is, as plaintiffs point out, a bird in the hand," Holwell wrote in an order. "Upon preliminary approval, the settlement sum will be deposited into an escrow account and begin accruing interest. Pending only final fairness approval, the class will receive the net value of its $89-million settlement."

Although he said State Street should be applauded for its apparent concern for the plaintiffs, Holwell insisted there was no way to know that the civil suit settlement would hurt the plaintiffs' recovery through the SEC enforcement action. Settlements of SEC enforcement actions typically require targets to deposit payments in a special fund to reimburse victims.

"Through cryptic and selective reference to its discussions with the SEC, defendant suggests that a future SEC settlement might include a "fair fund" that would provide greater recovery to the prospective class members than would this proposed settlement," Holwell wrote. "The problem with this argument is that, by all indications, the ERISA settlement would not jeopardize any further recovery via a fair fund. Indeed, defendant does not seriously contend that an SEC fair fund would exclude those entities that choose to participate in this settlement."


The latest court ruling is available here .

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