Friday, July 17, 2009
Over the past 25 years, defined contribution plans – including 401(k) plans – have become the most prevalent form of employer-sponsored retirement plan in the United States. The majority of assets held in these plans are invested in stocks and stock mutual funds, and the decline in the major stock market indices in 2008 greatly reduced the value of many families’ retirement savings. The effect of stock market volatility on families’ retirement savings is just one issue of concern to Congress with respect to defined contribution retirement plans.
This report describes seven major policy issues with respect to defined contribution plans:
1. Access to employer-sponsored retirement plans In 2007, only 61% of employees in the private sector were offered a retirement plan of any kind at work. Fifty-five percent were offered a DC plan. Only 45% of workers at establishments with fewer than 100 employees were offered a retirement plan of any kind in 2007. Forty-two percent were offered a defined contribution plan.
2. Participation in employer-sponsored plans Between 20% and 25% of workers whose employer offers a defined contribution plan do not participate. Workers under age 35 are less likely than older workers to participate.
3. Contribution rates On average, participants in DC plans contributed 6% of pay to the plan in 2007. The median contribution by household heads who participated in a defined contribution plan in 2007 was $3,360. This was just 22% of the maximum allowable contribution of $15,500.
4. Investment choices At year-end 2007, 78% of all DC plan assets were invested in stocks and stock mutual funds. This ratio varied little by age, indicating that many workers nearing retirement were heavily invested in stocks and risked substantial losses in a market downturn like that in 2008. Investment education and target date funds could help workers make better investment decisions.
5. Fee disclosure Retirement plans contract with service providers to provide investment management, record-keeping, and other services. There can be many service providers, each charging a fee that is ultimately paid by participants in 401(k) plans. The arrangements through which service providers are compensated can be very complicated and fees are often not clearly disclosed.
6. Leakage from retirement savings Pre-retirement withdrawals from retirement accounts are sometimes called "leakages." Current law represents a compromise between limiting leakages from retirement accounts and allowing people to have access to their retirement funds in times of great need. In general, borrowing from a 401(k) plan poses less risk to retirement security than a withdrawal. Pre-retirement withdrawals can have adverse long-term effects on retirement income.
7. Converting retirement savings into income Retirees face many financial risks, including living longer than they expected, investment losses, inflation, and possible expenses for medical care and long-term care. Annuities can protect retirees from some of these risks, but they have not proved to be popular as a source of retirement income. Developing strategies to help retirees convert assets into income will be a continuing challenge for Congress and other policymakers.
You can download the full report here: Download Crs401k. Get it while it's hot!
Steven Greenhouse (New York Times) is reporting that a new EFCA bill looks to be coming together. It doesn't appear to be finalized yet (although please let me know if you've found draft language), but the basic outline seems to involve many of the features we've been posting about for a while: quick elections, union access rights, ban on captive audience speeches, arbitration, increased damages, and no card check. A brief summary of them:
Though some details remain to be worked out, under the expected revisions, union elections would have to be held within five or 10 days after 30 percent of workers signed cards favoring having a union. Currently, the campaigns often run two months.
Check out the entire article, which describes some of the political machinations involved--and stresses that it's not a done deal yet.
Hat Tip: Dennis Nolan, Rob Walkowiak, Jeff Wilson
Thursday, July 16, 2009
Count me among those who thought that Frank Ricci's appearance at Judge Sotomayor's confirmation hearings would provide some fireworks. However, based on what I've seen of the transcript, there wasn't much there. Dana Milbank agrees, as he explains in a recent Washington Post column. Among the more interesting comments he cites is this one from the Republican Senator Graham:
It's nice to hear an acknowledgment of the difficulties of the case, and the reasons for disparate impact liability, from someone who agrees with the Supreme Court's decision (even though I may be reading too much into that single sentence).
President Obama said, "Jacqueline Berrien has spent her entire career fighting to give voice to underrepresented communities and protect our most basic rights. Each of us deserves a fair chance to succeed in our workplace and make a contribution to this nation, and I’m confident that Jacqueline’s passion and leadership will ensure that the Equal Employment Opportunity Commission is living up to that mission. I look forward to undertaking this important work with Jacqueline in the months and years ahead."
President Obama announced his intent to nominate the following individual today:
Jacqueline A. Berrien, Nominee for Chair of the Equal Employment Opportunity Commission
Ms. Berrien has served as Associate Director-Counsel of the NAACP Legal Defense and Educational Fund (LDF) since September 2004. In that position, she assists with the direction and implementation of LDF’s national legal advocacy and scholarship programs. Ms. Berrien served from 2001 to 2004 as a Program Officer in the Ford Foundation’s Peace and Social Justice Program, where she administered more than $13 million of grants to promote greater political participation by underrepresented groups and remove barriers to civic engagement. Prior to joining the Ford Foundation, Ms. Berrien was an Assistant Counsel with LDF and directed the Fund’s voting rights and political participation work. For eight years before that, Ms. Berrien was a staff attorney with the Lawyers' Committee for Civil Rights and the American Civil Liberties Union. Berrien has also taught in trial advocacy programs at Fordham and Harvard law schools and served on the adjunct faculty of New York Law School. She began her legal career clerking for the Honorable U.W. Clemon, the first African-American appointed to the U.S. District Court in Birmingham, Alabama. Ms. Berrien is a graduate of Harvard Law School, where she served as a General Editor of the Harvard Civil Rights-Civil Liberties Law Review. She received her Bachelor of Arts degree with High Honors in Government from Oberlin College and also completed a major in English.
Jon Hyman over at Ohio Employer's Law Blog notes that the EEOC has issued guidance on waivers in severence agreements. With the large rise in layoffs in the last year or so, these waivers have become more and more common. The guidance document itself is pretty well written and fairly comprehensive. What I find most interesting about it is that it is designed not like the usual enforcement guidance and compliance manual documents, or even the documents designed to explain what practices are considered discrimination or how employees can file a charge. All of those are written fairly neutrally (referring to employers and employees both in the third person), and with enough legal jargon that they seemed designed for attorneys or for corporate HR professionals. The tone of this guidance is much more directed at employees--using "you" to refer to employee, and using significantly less legal jargon. I think, and feel free to correct me in the comments, that this is a first for the agency.
To be sure, the guidance is still pretty neutral in tone, not taking any sort of anti-employer or accusatory stance, beginning for example,
Employee reductions and terminations have been an unfortunate result of the current economic downturn. Even in good economic times, however, businesses of every size carefully assess their operational structures and may sometimes decide to reduce their workforce. Often, employers terminate older employees who are eligible for retirement, or nearly so, because they generally have been with the company the longest and are paid the highest salaries. Other employers evaluate individual employees on criteria such as performance or experience, or decide to lay off all employees in a particular position, division, or department. An employer’s decision to terminate or lay off certain employees, while retaining others, may lead discharged workers to believe that they were discriminated against based on their age, race, sex, national origin, religion, or disability.
The guidance then goes on to explain the contract principles and statutory law related to these kinds of waivers. The points made provide a good primer for employers, too, on how to make the waivers enforceable. And there are some examples of draft language, but as Jon points out, employers shouldn't just blindly adopt it without consulting an attorney of their own first.
Finally, most important for the EEOC and for employers, the guidance explains in several parts that these waivers do not bind the EEOC, that they cannot be used to limit employees from filing charges even if the waivers are enforceable against the employees in court proceedings, and that any effort to do so or recover the consideration (usually severence) could be considered retaliation, which the waiver won't cover.
The plainer language and the focus on employees are both good developments, in my view. I hope they keep it up.
Over at the ACS Blog, Paul Secunda (Marquette) has a post on judicial "activism." Focusing on a colloquy between Judge Sotomayor and some Senators over the Ricci case (which will heat up today when Frank Ricci testifies), Secunda decries the suggestion that Sotomayor and her colleagues on the Ricci case were the ones being activist. A taste of the post:
During the second day of the Sonia Sotomayor confirmation hearings, a telling exchange occurred between the Judge and the Senate Judiciary Committee. . . . As Judge Sotomayor pointed out, the state of Title VII employment discrimination law at the time her Second Circuit Court of Appeals panel heard the case did not embrace the Supreme Court's eventual chosen test. Indeed, the law in this area of disparate impact cases was sufficiently established that the Second Circuit panel was able to enter a per curiam decision affirming the factually-oriented, district court decision.
Of course, the Republican Senators on the Judiciary Committee, including Senators Sessions and Hatch, sought to portray Judge Sotomayor as an activist for joining the panel's decision in this case and attacked her on that basis. Nothing, however, could be further from the truth. In fact, whereas Judge Sotomayor followed established precedent in this area of the law, there is a much better argument that it was the Supreme Court, which relied on case precedent from non-Title VII case law to come to its surprising conclusion, that had engaged in judicial activism to reach a desired outcome in favor of the white firefighters challenging the city's decision to throw out the initial exam test scores. . . .
If the critics of Judge Sotomayor are truly concerned about judicial activism, they have nothing to fear from Sonia Sotomayor who steadfastly applied binding precedent at the time from her circuit and the Supreme Court to come to her decision in the case. She also pointed out during her confirmation testimony that if she were a circuit judge in a similar case post-Ricci, she would follow the new "strong basis in evidence" test.
These Republican Senators would do better to turn their attention to the Supreme Court decision in Ricci and ask whether the majority's decision in that case was not in fact an example of conservative judicial activism. Another way of viewing this question is to ask whether there was any way that Judge Sotomayor, or her fellow Second Circuit panelists, could have predicted that the Supreme Court would have come to this legal outcome. Because the answer is clearly "no" based on the pre-Ricci tenets of employment discrimination law, the only explanation is that activism existed, but at the level of the United State Supreme Court.
Check out the full post, which includes some of Mike Zimmer's (Loyola-Chicago) analysis of the case.
Wednesday, July 15, 2009
The Doe v. Wal-Mart decision is in, with the Ninth Circuit ruling against all the claims asserted by workers of Wal-Mart's foreign suppliers in Bangladesh, China, Indonesia, Nicaragua, and Swaziland. (Doe v. Wal-Mart, 9th Cir., No. 08-55706, 7/10/09/ link here at the website for THE GLOBAL WORKPLACE: INTERNATIONAL AND COMPARATIVE EMPLOYMENT LAW -- Cases and Materials). Based on Wal-Mart's Code of Conduct, which provided that the company or a third party would undertake on-site inspection of suppliers' production facilities to monitor supplier compliance with local laws and labor standards, the workers sought to tie the suppliers' routine violation of those standards to Wal-Mart. Four legal theories were asserted to hold Wal-Mart liable for adverse working conditions flourishing in its global supply chain. First, the workers argued that they were third party beneficiaries of Wal-Mart's supply contracts and were owed compensation for breach of contract. Next, they argued that Wal-Mart was their joint employer and thus liable for the substandard conditions in which they worked. Third, the workers asserted that Wal-Mart was negligent in carrying out its duty to monitor workplace conditions and protect the workers. Finally, they claimed the company was unjustly enriched at the workers expense. Rejecting each claim in turn, the Ninth Circuit concluded Wal-Mart had no duty arising under the Code of Conduct or in common law negligence to monitor or protect the workers from substandard working conditions. Wal-Mart is not the workers' joint employer, noted the court, and the relationship between the parties too attenuated to support an unjust enrichment claim.
When filed in 2005, the case attracted media notice as a test case to determine whether voluntary codes of conduct are enforceable. While given the right factual circumstances a code might constitute a legally binding contract, Doe v. Wal-Mart indicates courts considering such claims will apply common law principles very narrowly. Nonetheless, Doe v. Wal-Mart is an example of creative, though in this case unsuccessful, transnational advocacy aimed at holding TNCs responsible for the conditions from which they profit. For employers, the case represents both the promise and perils of corporate self regulation.
Thanks for the great analysis, Susan!
The National Law Journal has an article today about the way that texting has become a more common medium for workplace harassment, creating a headache for employers and a wealth of evidence for employees who sue. Employers are may have some particularly tricky issues to deal with in this context (although maybe not more than with smartphone e-mail), because employers are likely to provide phones or reimburse for some of the service. And even if employers can monitor the texts without privacy issues, the volume of material can make that monitoring impractical. I probably should not be so surprised that this is a trend significant enough to be newsworthy, but it seems like we all should have learned this lesson with e-mails. Is the act of texting significantly different from e-mail? I have to confess that I don't know because I refuse to text. Social networking (Facebook, Twitter, etc.) also give rise to these same kinds of problems, I'm sure. But there the privacy issues may be less tricky, since employers are not (usually) actually providing the account. Still, employees will use work computers on work time to post things, so there still will be plenty of complications. MM
The National Law Journal has an article today about the way that texting has become a more common medium for workplace harassment, creating a headache for employers and a wealth of evidence for employees who sue. Employers are may have some particularly tricky issues to deal with in this context (although maybe not more than with smartphone e-mail), because employers are likely to provide phones or reimburse for some of the service. And even if employers can monitor the texts without privacy issues, the volume of material can make that monitoring impractical.
I probably should not be so surprised that this is a trend significant enough to be newsworthy, but it seems like we all should have learned this lesson with e-mails. Is the act of texting significantly different from e-mail? I have to confess that I don't know because I refuse to text. Social networking (Facebook, Twitter, etc.) also give rise to these same kinds of problems, I'm sure. But there the privacy issues may be less tricky, since employers are not (usually) actually providing the account. Still, employees will use work computers on work time to post things, so there still will be plenty of complications.
Paul Caron at Tax Prof Blog has the latest rankings of law-professor-edited blogs over the last 12 months. Pardon the self-congratulation, but this blog did well. We had over 400,000 visits and moved up a couple of spots from last year to become #14 out of all of the ranked sites. We're also #5 out of 17 ranked subject-specific sites.
Most important, thanks to all of you for your support. And although the quantity is nice, I've been far more impressed with the quality of our readership. So keep reading, writing comments, and forwarding news (even if we don't have time to post them all).
-JH and the rest of the crew
Tuesday, July 14, 2009
The New York Times has a recent article on a subject I've noted quite a bit amidst all the unemployment data: underemployment. This term refers to workers who have jobs--so are not technically unemployment--but who are working less than the full time schedule that they desire. This group was particularly relevant in the earlier stages of the recession when the unemployment numbers were relatively stable, but only in part because employed workers were on the job a lot less than before:
In California and a handful of other states, one out of every five people who would like to be working full time is not now doing so. It is a startling sign of the pain that the Great Recession is inflicting, and it is largely missed by the official, oft-repeated statistics on unemployment. The national unemployment rate has risen to 9.5 percent, the highest level in more than a quarter-century. Yet it still excludes all those who have given up looking for a job and those part-time workers who want to be working full time.
Include them — as the Labor Department does when calculating its broadest measure of the job market — and the rate reached 23.5 percent in Oregon this spring, according to a New York Times analysis of state-by-state data. It was 21.5 percent in both Michigan and Rhode Island and 20.3 percent in California. In Tennessee, Nevada and several other states that have relied heavily on manufacturing or housing, the rate was just under 20 percent this spring and may have since surpassed it. . . .
Various indicators suggest the nation’s economic output could start growing again this summer, which would mean the end of the recession. But the economy will still be weighed down by troubled credit markets and huge household debts. So it may be awhile before growth is fast enough to persuade companies to hire large numbers of workers. This would make for an odd contrast, in which the economy was getting better but feeling worse. These broad measures of unemployment and underemployment could approach a hard-to-fathom 25 percent in California, up from 12 percent a year ago. In several other states, including Florida, North Carolina and Washington, the rate could yet reach 20 percent — and, unfortunately, the stimulus bill does not do a good enough job of targeting the hardest-hit states. . . .
For starters, this rate does include part-time workers who want to be full time. Such people are not quite unemployed or fully employed.
On average, they are working three days a week, and many are struggling to get by. . . . Part-time workers . . . make up about one-third of those counted in the broader rates, which leaves roughly 13 percent of the work force in states like Oregon and Michigan who are completely out of work. And even that is probably an understatement, because it includes only people who have looked for work at some point in the last year. (To be counted in the official jobless rate, someone must have looked in the last four weeks.) Anyone who has spent time in old industrial areas knows that plenty of former factory workers would like a decent-paying job but haven’t looked for one in more than a year.
Remember this group of workers for another reason: my guess is that we'll see the number of such workers drop before we see improvements in the more widely cited unemployment figures (it's usually cheaper to give more hours to incumbent part-time employees than hire new ones).
Updating our earlier post on a meeting with labor leaders and the White House, the Detroit News's description is about what you'd expect, with a lot of stress on the need to work together. The participants in the meeting organized by David Bonior were all the heavy hitters on the union side, with government officials including Obama and Hilda Solis. One interesting aspect was health care's prominent role--according to some (including AFL-CIO President Sweeney), it's even some unions' number one priority. I don't know if this just reflects current politics, but I like the connection between health care coverage and employment/business competitiveness, as it's often been overlooked.
We'll hear more later, but this morning during her confirmation hearing, Judge Sotomayor gave a brief take on the Ricci case (according to the New York Times):
Also, in response to hostile questions from Sen. Sessions, Sotomayor talked about the use of a per curiam opinion (again, from the NYTimes Caucus blog)
She defends her panel’s decision, saying that it relied on a 78-page, very thoughtful, thorough decision reached at the district court level.
Monday, July 13, 2009
This past Friday, Phyllis Borzi was confirmed without debate by voice vote by the Senate to be the head of the Employee Benefits Security Administration (EBSA) at the Department of Labor. In that position, she will tackle the myriad of issues that face employers and participants in the area of pension benefit plans and welfare benefit plans.
If I had the ability to whisper in Phyllis' ear, I would ask here first to take on the inequitable state of ERISA law in the area of remedies. There are too many rights without remedies cases. Second, I would ask her to help clarify the scope of the 404(c) safe harbor for participant-directed 401(k) plans.
I'm not asking for much, am I?