Compliance January 15, 2009

Quebec Moves to Insure Private Pensions

January 15, 2009 (PLANSPONSOR.com) - The Quebec government is moving to guarantee benefits to pensioners and workers of companies whose plans go bankrupt, the Globe and Mail newspaper reports.
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According to the newspaper, under a proposed bill, the Quebec Pension Plan (known as the Régie des rentes du Québec) will take over the management of insolvent pension plans and guarantee retirement income for five years to those who are entitled. If the strategy is successful it could be extended beyond the five years and perhaps become permanent, the Globe and Mail quoted a senior government official as saying. The fund could also be transferred to an insurance company.

All opposition parties and Quebec’s major business and labor leaders support the bill, which is expected to be adopted on Thursday and will be retroactive to December 31, 2008.

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The legislation also gives the QPP the authority to improve benefits to workers if needed. If targeted pension plans have insufficient assets to cover benefits, the government will pay the required sums to make them solvent. In addition, Quebec companies will have 10 years rather than five years to replenish shortfalls in their pension plans.

Nearly a million workers and pensioners in Quebec are registered in more than 950 private company pension plans with assets worth about $100 billion, and a handful of those pension plans could become insolvent this year if the companies declare bankruptcy, Quebec Employment Minister Sam Hamad said, according to the news report. Currently, the market value of the assets of Quebec’s private pension plans is 70% of their total solvency liabilities, representing a C$22-billion shortfall to bring solvency levels up to 100%, and many companies are having serious problems meeting their pension contribution obligations in the current economy.

Hamad says Quebec is the first in Canada to take measure to protect private pensions.

Administration January 14, 2009

Capping Employer Health Premium Tax Break Could be Hard

January 14, 2009 (PLANSPONSOR.com) - Implementing a cap on the amount employers can exclude from income for employee health benefits would be difficult and potentially costly to administer, according to a new study.
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The Employee Benefit Research Institute (EBRI) said in the report released Wednesday that such a proposal – bandied about in Washington as part of ongoing health-reform discussions – would be particularly vexing for self-insured companies. Those who don’t pay insurance premiums would have to set a “premium equivalent” for each worker in order to comply with the cap in a process that EBRI said would be expensive and could create potential inequities for many workers.

Even with employers using more traditional insurance, complying with a cap would produce results that would vary by company based on the type of plan, the size and demographics of the workforce, and the worker’s home locations.   

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Because employer-based health coverage is the most common way Americans get such benefits by far, any change proposals would have “far-reaching implications,” according to the report authored by EBRI researcher Paul Fronstin.

Fronstin asserted that lawmakers should recall the lessons from Section 89 of the Tax Reform Act of 1986, which he said tried to make employee benefits more standard and fair. The researcher said it was repealed by Congress in 1989 in part because the regulations created regulatory burdens that were so complicated and costly as to be unworkable. 

“Similarly, valuation calculations under a health coverage tax cap could become overly burdensome if the lessons from Section 89 are not heeded,” Fronstin wrote.

The report is available  here .

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