E M P L O Y E E B E N E F I T S , C O
M P E N S A T I O N
A N D P E N S I O N L A W
Vol. 1, No. 1: November 27, 2000
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T A B L E of C O N T E N T S
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NEW and FORTHCOMING ARTICLES
"The Cash Balance Controversy"
Virginia Tax Review, Vol. 19, P. 683,
2000
EDWARD A. ZELINSKY
Yeshiva University
Benjamin Cardozo School
of Law
"Microsoft, Time Warner amd the Perils of Worker
Misclassification"
Tax Management Memorandum, Vol. 41,
P. 287, 2000
ALDEN J. BIANCHI
Mirick, O'Connell, Demallie
& Lougee, LLP
Worcester Office
"Lessons to be Learned From Harvard Pilgrim HMO's Fiscal Roller
Coaster Ride"
Journal of Law, Medicine & Ethics,
Vol. 28, No. 3, 2000
FRANCES H. MILLER
Boston University School
of Law
WALTER W. MILLER, JR.
Boston University School
of Law
"Rethinking the Risk of Defined Contribution Plans"
Tax Notes, August 28, 2000
REGINA T. JEFFERSON
Catholic University of America
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EDITORIAL POLICIES
To provide the broadest coverage of research in Employee
Benefits, Compensation and Pension Law we do not referee working
papers. We accept abstracts of working papers in Employee
Benefits, Compensation and Pension Law whose topics suit the
coverage of the journal and which are part of the worldwide
scholarly discourse.
N E W and F O R T H C O M I N G
Articles
_________________________________________________________________
"The Cash Balance Controversy"
Virginia Tax Review, Vol. 19, P. 683,
2000
BY: EDWARD A. ZELINSKY
Yeshiva University
Benjamin Cardozo School of Law
Paper ID: Cardozo Law School, Public Law Research Paper No. 25
Contact: EDWARD A. ZELINSKY
Email: Mailto:zelinsky@ymail.yu.edu
Postal: Yeshiva University
Benjamin
Cardozo School of Law
55 Fifth
Ave
New York,
NY 10003 USA
ABSTRACT:
This article provides an overview of cash balance pension plans
and of the controversies surrounding them. The article describes
the cash balance format and contrasts that format with the
traditional defined benefit pension. The article also reviews
the legal framework currently governing cash balance plans and
discusses the critique and the defense of cash balance
arrangements.
This article concludes that, as a matter of law, the typical
cash balance plan violates the statutory prohibition on
age-based reductions in the rate at which participants accrue
their benefits. However, as a matter of policy, there is no
sound reason to bar cash balance plans nor is there a logical
basis for the resentment engendered by the conversion of
traditional annuity providing pension plans to the cash balance
format. Moreover, the article suggests, the proponents of cash
balance plans are correct to contend that such plans permit
employers to remain within the defined benefit system rather
than debark to the defined contribution universe.
As a matter of psychology, the resentment against cash balance
conversions, deeply and sincerely held, largely stems from
psychological expectations in the continuation of the status
quo, rather than any legal or logical entitlement to the
continuation of existing pension coverage.
In the best of all worlds, this article argues, the proper
resolution of the cash balance controversy would be to amend
the
statutory prohibitions on age-based reductions in benefit
accrual rates to legitimate cash balance plans and to permit
private ordering between employers and employees (or their
unions) to govern such conversions. However, as a matter of
politics, the article presents a package of legislative
compromises which, given the political realities of the
situation, is the best likely outcome of the cash balance
controversy.
______________________________
"Microsoft, Time Warner amd the Perils of Worker
Misclassification"
Tax Management Memorandum, Vol. 41,
P. 287, 2000
BY: ALDEN J. BIANCHI
Mirick, O'Connell, Demallie & Lougee, LLP
Worcester Office
Contact: ALDEN J. BIANCHI
Email: Mailto:ajbianchi@modl.com
Postal: Mirick, O'Connell, Demallie & Lougee, LLP
Worcester
Office
100 Front
Street
Worcester,
MA 01608-1477 USA
Phone: (508) 791-8500
Fax: (508) 791-8502
ABSTRACT:
Alden Bianchi, Esq. describes the tax and benefit issues
presented by the newly-emerging contingent workforce and how
employers who rely on contingent workers can best reduce their
exposure to claims such as those confronting Microsoft
Corporation and Time Warner in two recent, high profile cases.
He reviews the fundamentals of a worker's status as a common
law
employee vs. an independent contractor and then compares these
employment categories to a litany of so-called "contingent"
employment arrangements including leased employees, independent
contractors, freelancers, employees retained though
intermediaries (such as Professional Employer Organizations),
and part-time, seasonal and temporary workers. He stresses that
the label attached to a worker does not count, and that
employment status is for the most part functionally determined.
He also notes that many of the labels the have attached to
contingent workers have no precise legal definition. One of the
fundamental issues addressed in the article is the extent to
which classes of employees can be excluded from plan
participation even where a previously excluded contingent worker
is reclassified as a common law employee. Or, to the matter
another way, to what extent can an employer cover employees
wearing blue badges and exclude those wearing orange badges?
Mr.
Bianchi concludes that plans can be selective in their coverage
but that, even with careful plan design, drafting and
administration, the employers and plan sponsors will still have
face some residual exposure.
______________________________
"Lessons to be Learned From Harvard Pilgrim HMO's Fiscal Roller
Coaster Ride"
Journal of Law, Medicine & Ethics,
Vol. 28, No. 3, 2000
BY: FRANCES H. MILLER
Boston University School of Law
WALTER
W. MILLER, JR.
Boston University School of Law
Contact: FRANCES H. MILLER
Email: Mailto:fmiller@acs.bu.edu
Postal: Boston University School of Law
765 Commonwealth
Avenue
Boston,
MA 02215 USA
Co-Auth: WALTER W. MILLER, JR.
Email: Mailto:wmiller@bu.edu
Postal: Boston University School of Law
765 Commonwealth
Avenue
Boston,
MA 02215 USA
ABSTRACT:
The recent high-profile financial difficulties of Harvard
Pilgrim Health Care, the largest HMO in Massachusetts and
consistently rated as one of the top ten HMOs in the nation,
shed light on many problems common to health insurers throughout
the country. This article explores those difficulties in the
context of the short but complicated history of Harvard Pilgrim,
and its structural, regulatory and competitive environments.
The
state legislation which made a receivership proceeding possible
for Harvard-Pilgrim offered some protection for subscribers,
but
failed to provide the means for achieving a long term solution.
The statute merely presented a method for staving off immediate
collapse by temporarily protecting the plan from dissolution,
and forcing the plan's contracting providers to continue
delivering care even if owed money by the plan. The article
concludes by drawing lessons for understanding and ideally
avoiding similar managed care near-fatalities in the future.
______________________________
"Rethinking the Risk of Defined Contribution Plans"
Tax Notes, August 28, 2000
BY: REGINA T. JEFFERSON
Catholic University of America
Contact: REGINA T. JEFFERSON
Email: Mailto:Jefferson@Law.CUA.edu
Postal: Catholic University of America
Columbus
School of Law
Washington,
DC 20064 USA
Phone: 202-319-5025
Fax: 202-319-4459
ABSTRACT:
This article analyzes the risk of shortfall in the expected
retirement benefits in defined contribution plans, as regulated
by the Employee Retirement Income Security Act of 1974 (ERISA).
The article compares and contrasts the allocation of investment
risks between defined benefit and defined contribution plans.
This article demonstrates that current pension law offers
inadequate protection of the expected retirement benefit in
defined contribution plans and proposes additional fiduciary,
insurance, and funding protection for defined contribution
plans.