Back in the day – before ERISA – retirement plans had ‘bad boy” clauses. These were plan provisions under which a participant would forfeit his vested account balance if the participant was a “bad boy” for such actions as violating a non-compete clause or committing a criminal act. But ERISA did away with “bad boy” … Continue Reading
View larger image. Lost in the mass media focus on the Baby Boomers retiring is Generation X, the generation that follows. Depending on how they are defined, it’s the people born between 1965 and 1985 (age 23 to 43). I’ve written about them before, Not my generation that nobody seems to want. The "nobody" referred … Continue Reading
I’ve got that queasy feeling again in my stomach. The recent collapse of Bear Stearns gave me flashbacks to the 1990s during which we struggled with insolvency issues affecting ERISA plans. If you were around back then, you’ll remember the insurance companies that failed or were seized by insurance regulators as a result of failed … Continue Reading
This is one of those Good News/Bad News stories. The Wall Street Journal on March 27 reported that “Household Wealth Rises as Retirees Age” citing a paper posted on the Federal Reserve’s website. The Journal quotes the authors as saying that adjusted for inflation, The median’s household’s wealth declines more slowly than its remaining life … Continue Reading
Add one more trend to Boomer demographics. Recent research has revealed that Boomers continue to push the limits regarding the prevalence of divorce. While just 33% of married adults from the two preceding generations has experienced a divorce, almost half (46%) of all married Boomers have already been divorced. They will be almost certain to … Continue Reading
One of those wonderful tax benefits that a qualified retirement plan and IRA provide is the tax deferral of contributions and earnings. But nothing lasts forever including the payment of benefits (and the taxes thereon). So the tax laws require RBDs and RMDs. That’s tax talk for “required beginning date” and “required minimum distribution” respectively. … Continue Reading
See full-size image. “Decumulation”, in definitional terms, means the conversion of pension assets accumulated during an employee’s working life into pension income to be spent during retired life. But in practical terms, decumulation embodies a significant new risk for the record number of future retirees moving from the accumulation phase of their lives to the … Continue Reading
Employee owners in Europe and the U.S. now hold approximately 1.260 billions Euro (1.934 billion US Dollar) quite similar to the global capitalization of all hedge funds across the world in 2007 (1.160 billions Euro (1.780 billion US Dollar). Any further comparisons are a matter of opinion. Hat tip to our friend Marc Mathieu, Secretary … Continue Reading
They’re back! They’re employees who back in the day we called "rehires", those former employees who were hired back. Now they’re called "boomerang employees". Diane Stafford, the Kansas City Star’s workplace columnist, writes about the trend for employers to re-hire former employees as reported by Management Recruiters International, an executive search and recruiting firm. In … Continue Reading
That’s Jack Webb who played Sergeant Joe Friday of the LAPD, arguably the most popular police character in television history in the 1951-1959 series Dragnet. (The 1987 movie spoof of Dragnet in which Dan Aykroyd played the Joe Friday character didn’t do the original justice). Friday’s catch phrase used in his investigations, "Just the facts, ma’am," remains indelibly etched in … Continue Reading
ESOPs like other qualified retirement plans do terminate. For those of us who have been administering ESOPs for some time, we had the anecdotal evidence as to why. But not until recently has there been an actual study as to why ESOPs do terminate. The Employee Ownership Foundation today released the second phase of a … Continue Reading
We’ve been here before. Back when employers were freezing or terminating retiree medical care plans, affected employees were suing based on conflicts between plan documents and employee communication materials. Now, it seems that there’s been a flurry of litigation involving conflicts between plan documents and Summary Plan Descriptions. Two blogging lawyers have picked up on … Continue Reading
Conventional wisdom says that a plan sponsor cannot generally deduct more that 25% of eligible compensation to a qualified retirement plan. But “generally” means in ERISA terms that there are exceptions. And here’s a very interesting one. A C corporation – let’s call it “C” for short – that sponsored an ESOP wanted to deduct more than 25% … Continue Reading
Divorce, unfortunately, is a fact of life, and can affect an employee’s benefits in a retirement plan. Jimmy Verner, who practices family law, illustrates why there must be a Qualified Domestic Relations Order (QDRO) to divide those retirement benefits in his newly launched North Texas Divorce and Family Law Blog. But a QDRO only comes … Continue Reading
I’ve written about retirement plan data security – or lack thereof – in the past, but always in the context of employee data on laptops that had been stolen. But as I read about a recent study cited by AccountingWeb.com, Pogo’s famous words came to mind, “We have met the enemy, and he is us.” Are … Continue Reading
I recently wrote about retirees moving to Tibet, a metaphor for retirees moving from the “land of accumulation” to the “land of accumulation” and the new financial culture with which they will have to master. The “tour guides”, the financial industry, will have to solve the “annuity puzzle”, the investment industry term for the disconnect between … Continue Reading
Most of the media attention has been on the decline of defined benefit pension plans. That is, for large companies. Defined benefit plans are alive and well for small business owners. And in the same vein – but at a much faster pace – large publicly traded companies are terminating their ESOPs. According to Corey … Continue Reading
We have much in common with our friends, neighbors, and allies up north. And not surprisingly, both Canada and the U.S. have the common problem of our respective Baby Boomer business owners looking for an exit strategy. Old friend Perry Phillips, President of ESOP Builders, Inc., a Canadian valuation and ESOP consulting firm, cites studies that … Continue Reading
We are in the midst of a robust merger and acquisiton environment. Much of it is being fueled by private equity firms flush with cash. The other part of the equation has to do with demographics – those Boomer business owners looking to cash out. Two sets of issues can slow down or even derail … Continue Reading
Attorney Rush Nigot blogging about Document Retention and Electronic Discovery on his new Blog, Rush on Business, tells us that in today’s business environment, organizations need to respond to an increasing number of document requests, from regulatory compliance issues to internal investigations to full-scale litigation. And there’s certainly an ERISA component to that. So in … Continue Reading
The term "tax breaks" was used in a few instances in commentary on the Tribune/Sam Zell ESOP. We know that the major tax advantages include a deduction for principal and interest to payoff the ESOP debt, a tax free rollover for the selling shareholder, and the non-taxability of the ESOP’s share of corporate profits for … Continue Reading
First, the Chicago Tribune, and shortly thereafter financier Kirk Kerkorian has proposed using an ESOP as part of an effort to buy Chrysler. ESOPs are now being promoted as a tax efficient way to finance leveraged buyouts. The attraction, of course, is the ability to deduct principal (and interest) and "reasonable" dividends. There was a surge of large … Continue Reading
