Compliance July 20, 2005

House Panel Making EGTRRA Provisions Permanent

July 20, 2005 (PLANSPONSOR.com) - Congressional lawmakers are moving to make permanent the sweetening of permitted K plan contribution and catch-up provisions contained in a 2001 law.
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That was the word from a prominent House Republican in a speech to a Washington, DC meeting of the National Center for Policy Analysis, according to a Business Insurance report.

Representative Sam Johnson, (R-Texas), chairman of the Employer-Employee Relations Subcommittee of the House Education & the Workforce Committee, told the group that the move to make permanent the changes first introduced in the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) would take place in a budget reconciliation measure now being hammered out in the House Ways and Means Committee.

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EGTRRA boosted in $1,000 annual increments the maximum annual K plan deferral employees can make. Next year, the maximum deferral will be $15,000, compared with the 2002 maximum of $11,000.

That same law also allows employees age 50 and older to make extra contributions to the plans. This year, older employees can contribute an extra $4,000 to their 401(k) plans, and next year they can kick in an additional $5,000 in catch-up contributions. Without new congressional action, that sweetening of permitted 401(k) contributions will end in 2010 under EGTRRA sunset provisions.

Also possible in bills coming out of the Ways and Means panel, according to Johnson:

  • legislation to make it easier for employers to automatically enroll employees – unless they object – in their K plans.
  • legislation to make it more tax-advantageous for pension and savings plan participants to take benefits as an annuity paid in monthly installments rather than as a lump sum.
Compliance July 19, 2005

Appeals Judges Back Severance Benefits Denial

July 19, 2005 (PLANSPONSOR.com) - A federal appeals court has backed a lower court judge in ruling that IBM's severance plan was within its right to deny benefits to a participant who repeatedly threatened the plan administrator.
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The US 2 nd Circuit Court of Appeals said the plan rightfully denied the benefits request from plaintiff Richard Waksman, citing the “threatening conduct” exception to granting benefits.

“Here, it is rational and consistent with the plain language to interpret ‘threatening conduct’ as including Waksman’s conduct here,” the appeals judges wrote. “It is not uncommon in the modern vernacular to refer to violence against persons, and it might well be an abuse of discretion to construe ‘threatening conduct’ to include an isolated exclamation along the lines of ‘I could just kill her!’ Here, however, Waksman was unusually detailed in his wording, identifying a weapon and a mode of transport.”

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The fact that Waksman may have otherwise had a peaceful work history was not relevant because in the court’s opinion it was only important that the participant “chose to express his frustration by describing a deadly assault,” the appeals judges wrote.

The judges affirmed an earliler ruling by US District Judge Stephen Robinson of the US District Court for the Southern District of New York.

The opinion in Waksman v. IBM Separation Allowance Plan, 2d Cir., No. 04-4084-cv, unpublished 7/8/05 is  here .  

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