Compliance November 11, 2003

Law Prof: Cash Balance Amendments 'Constitutionally Unsound'

November 11, 2003 (PLANSPONSOR.com) - In an opinion prepared for a retirement industry trade group, a University of Chicago law professor asserts that legislative amendments blocking the government cash balance plan rules are "substantively and constitutionally unsound."
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>According to a news release from the American Benefits Council, the opinion from Richard Epstein argues that these amendments – as well as the underlying Cooper v. IBM federal district court case (See  Murphy’s Law: IBM Loses Cash Balance Ruling ) – threaten the “separation of powers” provisions of the Constitution because they “prevent the President from faithfully executing the laws and manipulates the appellate process to deny the judiciary access to the views of the Treasury Department.”

>A congressional conference committee is expected to produce a final Treasury/Transportation bill soon. The cash balance pension plan amendments to that bill – proposed by Representative Bernard Sanders (I-Vermont) and Senator Tom Harkin (D-Iowa) – would ban the Treasury Department from finalizing the proposed regulations on cash balance plans issued late last year (See  Senate OKs Harkin Cash Balance Amendment ). The amendments would also hinder a Treasury Department challenge to the IBM ruling, which claimed that cash balance plans were age discriminatory.

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>The Epstein opinion is available at:  http://www.americanbenefitscouncil.org/documents/epstein_treasltr.pdf .

Compliance November 10, 2003

SEC Fills in Sarbanes-Oxley Details

October 23, 2002 (PLANSPONSOR.com) - Congress may have laid out general reform measures to deal with the corporate world's financial scandals, but it is up to the US Securities and Exchange Commission (SEC) to fill in the details.
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That’s why SEC officials have scheduled two meetings for October 30 and October 31 to further consider proposals mandated by the Sarbanes-Oxley Act of 2002 passed as part of a sweeping corporate accounting reform, according to a Dow Jones news report.

In the October 30 session, the SEC will consider proposing rules for the use of pro forma financial information in company earnings reports. It will also consider a rule to require companies to discuss off-balance sheet arrangements in their Management’s Discussion and Analysis section in annual and quarterly reports.

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Under the new rules, companies may be required to provide a table of contractual obligations due in the short and long run, and either a table or text disclosure of total contingent liabilities and commitments in the short and long-term, the Dow Jones story reported.

Also scheduled for October 30, the SEC will look into rules that would prohibit a company’s directors and executives from purchasing, selling, or otherwise transferring any equity securities of the company during a pension plan blackout period in which line employees are also prohibited from making equity transactions in company stock, Dow Jones said.

This rule would also require companies to provide advanced notice of pension plan blackout periods.

New Attorney Standards

The next day, the SEC said it would consider rules establishing standards of professional conduct for attorneys who represent companies before the commission.

These standards would include a rule requiring an attorney to report evidence of a material violation of securities laws or breach of fiduciary duty by the company or its officers to the chief legal counsel or the chief executive officer of the company, the SEC said.

If these executives don’t respond appropriately, the attorney may be required to report the evidence to the audit committee, another committee of independent directors or the full board of directors, Dow Jones said.

Finally, the SEC will look into changing the definition of terms used in the definition of dealer for banks under certain securities laws. These proposals relate to the implementation of the specific exceptions for banks from the definitions of “broker” and “dealer” that were amended by the Gramm-Leach-Bliley Act, the SEC said.

On October 16, the SEC proposed new rules to  strengthen corporate controls and ethics .

According to the Dow Jones story, those proposals would require companies to designate a financial expert on their corporate boards, adopt internal controls, and disclose whether they have a code of ethics. Another proposed rule would bar corporate executives from coercing, manipulating, or misleading the firm’s auditor.

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