EEOC amends regulations designating state and local FEP agencies as certified designated agencies.  The US Equal Employment Opportunity Commission (EEOC) has amended its regulations (Title 29, Chapter XIV, Part 1601) designating certain state and local fair employment practices (FEP) agencies as certified designated agencies. The designation permits the EEOC to accept the findings and resolutions of state and local FEP agencies in regard to most cases processed under contract without individual, case-by-case substantial weight reviews by the Commission. The agency's final rule amending its regulations was published in the Federal Register on August 12, 2005 (70 FR 47127-47128).

Publication of this amendment effectuates the designation of the following agencies as certified designated FEP agencies: (1) Georgia Commission on Equal Opportunity; (2) North Carolina Civil Rights Division, Office of Administrative Hearings; (3) North Dakota Department of Labor; (4) Lee County Office of Equal Opportunity; (5) City of Tampa Office of Human Rights; (6) Palm Beach County Office of Equal Opportunity; (7) Madison Equal Opportunity Commission; and (8) St. Paul Department of Human Rights. Additionally, publication of this amendment effectuates the designation of the City of Springfield (IL) Department of Community Relations and the Reading (PA) Human Relations Commission as a certified designated FEP agencies. For further information contact: Mary McIver, US Equal Employment Opportunity Commission, Office of Field Programs, State and Local Programs, 1801 L Street, NW., Washington, DC 20507, Telephone (202) 663-4205.

New EEOC publication addresses employment rights of people with cancer under the ADA.  The EEOC has issued a question-and-answer document on the application of the Americans with Disabilities Act of 1990 (ADA) to persons with cancer in the workplace. The new publication is available on the EEOC's website at: http://www.eeoc.gov/facts/cancer.html.

EEOC Chair Cari M. Dominguez released the document on July 26, 2005, during an event sponsored by the National Council on Disability commemorating the 15th anniversary of the passage of the ADA. President George H.W. Bush signed the landmark legislation on July 26, 1990, banning discrimination on the basis of disability in employment, state and local government programs, and places of public accommodation.

Noting that approximately 40 percent of the more than one million Americans diagnosed each year with some form of cancer are working-age adults, and nearly 10 million Americans have a history of cancer, Chair Dominguez said: "Because of the significant advances in detection and treatment, cancer no longer is the 'death sentence' it was a century ago. Yet people recently diagnosed with cancer and those with a history of cancer still experience discrimination at work based on old stereotypes and unfounded fears. Simple accommodations, like leave or a flexible schedule to allow for treatment, make it possible for many people with cancer to continue to be valuable contributors in the workplace."

The new question-and-answer document, which is the fourth in a series of publications on the ADA's application to specific disabilities, addresses such topics as:

• When cancer is a disability under the ADA;
• When an employer may ask an applicant or employee questions about cancer and how it should treat voluntary disclosures; and
• What types of reasonable accommodations employees with cancer may need.

EEO-1 survey period now open. Employers may log into their company's 2005 EEO-1 online database and key data immediately upon receipt of their Login ID and Password, announced the EEOC on its website. Companies that included an email address in their 2004 EEO-1 online filing should have received the Login ID via email during the week July 18, 2005. All other companies will receive this information directly by mail during the first week of August 2005. The deadline for filing the 2005 EEO-1 Survey is September 30, 2005.

The EEO-1 Survey must be filed by all private employers who are: (1) subject to Title VII with 100 or more employees excluding state and local governments, primary and secondary school systems, institutions of higher education, Indian tribes and tax-exempt private membership clubs other than labor organizations; or (2) subject to Title VII who have fewer than 100 employees if the company is owned or affiliated with another company, or there is centralized ownership, control or management (such as central control of personnel policies and labor relations) so that the group legally constitutes a single enterprise, and the entire enterprise employs a total of 100 or more employees. EEO-1 Reports are also required of all nonexempt federal contractors (private employers) with 50 or more employees and: (1) who are prime contractors or first-tier subcontractors holding a contract; subcontract, or purchase order amounting to $50,000 or more, or (2) who serve as a depository of Government funds in any amount; or (3) who are a financial institution which is an issuing and paying agent for US Savings Bonds and Notes. The preferred method for completing the 2005 EEO-1 Survey is through the EEOC's web-based filing systems (https://apps.eeoc.gov/eeo1/eeo1.jsp), although the EEOC will also accept a data file.

Questions may be addressed to: EEO-1 Joint Reporting CommitteeP.O. Box 19100, Washington, DC 20036-9100. Phone: 1-866-286-6440. TTY: 202-663-7184. Fax: 202-663-7185. Email: e1.techassistance@eeoc.gov. Additional information on the EEO-1 survey can be found at: http://www.eeoc.gov/eeo1survey/index.html.

Civil Rights Commission report finds agencies fail at race-neutral alternatives. The United States Commission on Civil Rights, in a report on federal agency procurement practices, asserts that the federal government fails to seriously consider race-neutral alternatives as the Constitution requires. The report, entitled, “Federal Procurement After Adarand” describes the Supreme Court's 1995 decision in Adarand Constructors, Inc v Pena (66 EPD ¶43,556), which held that any federal procurement programs that base decisions on racial and ethnic factors must serve a compelling government interest and be narrowly tailored to serve that purpose. The Court also has said that agencies must consider race-neutral alternatives. In the report, the Commission examined relevant aspects of seven agencies' procurement programs: the Departments of Defense, Transportation, Education, Energy, Housing and Urban Development, State, and the Small Business Administration.

"Federal agencies are disregarding their constitutional obligation to seriously consider race-neutral alternatives," said Gerald A. Reynolds, Commission Chairman in a statement. "After ten years, they are still not complying with the Supreme Court's mandate, and they are not even complying with the Clinton Administration's guidance on race-neutral alternatives." He added, "Federal agencies do not independently evaluate, conduct research, collect data, or periodically review programs to determine whether race-neutral strategies will provide an adequate alternative to race-conscious programs. Instead, they continue to rely primarily on SBA-run programs, such as 8a, to achieve diversity in the contract awards they make. This does not meet the Supreme Court's standard for strict scrutiny."

The report also concludes that federal law does not specify protections for contractors who are the victims of discrimination, nor does any agency possess enforcement authority against violations. Among recommendations, the report: (1) urges the Justice Department to develop guidance for agencies on how to implement race-neutral alternatives; (2) asks the White House to assemble a task force charged with determining what data agencies need to collect in order to measure and assure the appropriateness of race-neutral or race-conscious procurement programs; and (3) asks Congress to enact legislation expressly prohibiting race discrimination in federal contracting, and establishing effective enforcement procedures.

Dissent. The Commission passed the report at its July 22, 2005 meeting. The report contains a dissenting statement by Commissioner Michael Yaki. In the preface of his dissent, Commissioner Yaki asserts: "The Commission Majority's report entitled “Federal Procurement After Adarand” is neither an enforcement report as mandated by Congress nor a document that stands up to legal and policy scrutiny."

Copies can be ordered by contacting the Commission's publications office at 202-376-8128 or by accessing http://www.usccr.gov/pubs/pubsndx.htm.

President nominates Griffin for EEOC, announces intention to nominate Earp for remainder of five year term. President George W. Bush announced on July 28, 2005, his intention to nominate Christine M. Griffin (of Massachusetts) to be a member of the EEOC for the remainder of a five-year term expiring July 1, 2009. Griffin currently serves as Executive Director of the Disability Law Center. She previously served as Attorney Advisor to the Vice Chairman of the Equal Employment Opportunity Commission, Paul Igasaki. Earlier in her career, Griffin served in the United States Army Medical Corps. She received her bachelor's degree from the Massachusetts Maritime Academy and her Juris Doctor from Boston College.

President Bush also announced his intention to nominate Naomi Churchill Earp, of Virginia, to be a Member of the EEOC, for the remainder of a five year term expiring July 1, 2010. Earp currently serves as Vice-Chair of the EEOC. She previously served as Director of Equal Employment Opportunity and Diversity at the National Institute of Health. Earlier in her career, Earp was Director of the Equal Opportunity Program at the Department of Agriculture. She received her bachelor's degree from Norfolk University, her master's degree from Indiana University, Bloomington, Indiana and her JD from Catholic University's Columbus School of Law.

Blackshear details OFCCP policy & regulatory developments at ILG national conference. Patsy Baker Blackshear, Director for Program Operations at the Office of Federal Contracts Compliance Programs (OFCCP) provided a policy and regulatory update to an audience at the Industry Liaison Group National Conference in Grapevine, Texas. Blackshear is also the Acting Regional Director for the OFCCP's Mid-Atlantic Region. During her address, she provided information regarding the agency's new initiatives, ongoing activities, and pending efforts.

Executive Order 13201 implementation. The OFCCP has just begun to implement its efforts to monitor compliance with Executive Order 13201 (EO 13201) regarding the "Notice of Employee Rights Concerning Payment of Union Dues or Fees." Department of Labor regulations implementing EO 13201 require nonexempt federal contractors to post a notice to inform employees that:

1. they cannot be required to join, or maintain membership in, a union in order to keep their jobs;
2. under certain conditions, the law permits a union and an employer to enter into a union-security agreement requiring employees to pay dues and fees to the union; and
3. even where such union-security agreements exist, employees who are not union members can only be required to pay their share of union costs relating to certain specific activities.

1. allows the OFCCP to identify and focus on patterns in a contractor's employment practices (thereby, allocating agency resources more efficiently);
2. provides consistency in the compliance evaluation process on the part of the agency in addressing a particular employment practice (for example, testing);
3. supports a focus on organizational wide priorities; and
4. permits the OFCCP to effect change throughout the contractor's organization (i.e. throughout multiple establishments) where employment practices are discriminatory.

1. compliance assistance training;
2. e-Technology laws (on the OFCCP website at: http://www.dol.gov/elaws/ofccp.htm);
3. a sample AAP for small employers (on the website at: www.dol.gov/esa/regs/compliance/ofccp/pdf/sampleaap.pdf);
4. policy directives;
5. partnerships; and
6. a series of Frequently Asked Questions (FAQs) on the website (http://www.dol.gov/esa/regs/compliance/ofccp/faqs/offaqs.htm). These FAQs cover various topics including: coverage; requirements; monitoring; how to get assistance in overall and in specific areas; support for creating AAPs; obtaining availability statistics; and proposed changes.

• submits an expression of interest in employment through the Internet or related electronic data technologies;
• the employer considers for employment in a particular open position;
• whose expression of interest indicates the individual possesses the "advertised, basic qualifications" for the position; and
• does not indicate that he or she is no longer interested in employment in the position for which the employer has considered him or her.

1. evaluation of the Equal Opportunity Survey;
2. the compensation protocol proposal ("Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination;" 69 FR 67246-67252 (November 16, 2004); CCH EMPLOYMENT PRACTICES GUIDE ¶5137); and
3. the self-audit process proposal ("Guidelines for Self-Evaluation of Compensation Practices for Compliance With Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination;" 69 FR 67252-67255 (November 16, 2004); CCH EMPLOYMENT PRACTICES GUIDE ¶5138).

Labor/Wage Hour     Top of Page

Dept of Transportation issues new truck driver hours-of-service rules. The US Department of Transportation's (DOT) Federal Motor Carrier Safety Administration (FMCSA) has issued a new hours-of-service rule that spells out the length of time commercial drivers can operate trucks before they are required to take a break. The new rule is the product of years of research meant to keep drivers healthy and make highways safer, officials said.

The rule replaces hours-of-service regulations that were last updated in 2003. A July 2004 court ruling found that the 2003 rules failed to consider the health of truck drivers, as was required by law. The court ruling was the result of a suit filed by Public Citizen, Parents Against Tired Truckers, and Citizens for Reliable and Safe Highways. Parts of the rule, including the maximum driving time and minimum rest limits, remain the same. However, the rule unveiled last week includes changes affecting short-haul operators and longer distance drivers who use in-cab sleeper-berths for their rest.

"This new rule will help keep drivers healthy and make our roads safer," said Secretary of Transportation Norman Y. Mineta. "Drivers that are well rested are less likely to lose control, crash, or injure others." "The research shows that this new rule will improve driver health and safety and the safety of our roadways," said FMCSA Administrator Annette M. Sandberg. "Ensuring drivers obtain necessary rest and restorative sleep will save lives."

As in the 2003 regulations, the new rule prohibits truckers from driving more than eleven hours in a row, working longer than 14 hours in a shift and driving more than 60 hours over a seven-day period or 70 hours over an eight-day period, Sandberg said. In addition, the new rule requires truckers to rest for at least ten hours between shifts and provides a 34-hour period to recover from cumulative fatigue. FMCSA says that it tasked driver health and safety experts to review over 1,000 health- and fatigue-related articles and studies and considered thousands of comments received from drivers, truck companies, safety advocates and researchers before settling on the new safety provisions. Based on this research, FMCSA concluded the new rule will keep drivers healthy and reduce the 5.5 percent of fatal truck crashes that are caused by driver fatigue.

The most important change under the new rule now allows short-haul operators who are not required to hold a commercial drivers license, like landscape crews and delivery drivers who work within a 150-mile radius of their starting point, to extend their work day twice a week. They also will no longer have to maintain logbooks. The change was prompted by safety data that show short-haul drivers make up over half the commercial fleet yet are involved in less than seven percent of the nation's fatigue-related fatal truck crashes, Sandberg said. Another change requires truckers who use sleeper-berths to rest for eight hours in a row, and take another two consecutive hours off duty before resetting their daily driving schedule. Studies show that drivers are less likely to be fatigued if they take a single eight-hour block of rest than if they break their rest into smaller periods of time as they were allowed under the previous rule.

Joan Claybrook, President of Public Citizen (and former head of the National Highway Traffic Safety Administration from 1977-1981), expressed disappointment at the most recent FMCSA rulemaking. In a statement released Friday, Claybrook said the new rule is "virtually unchanged" from the rule struck down last year. "Like the 2003 rule, the [new] proposed rule makes permanent a dramatic increase in the allowable weekly driving time and on-duty hours for truckers," Claybrook said. "It reduces weekly off-duty time for the most exhausted drivers (truckers who drive the maximum number of allowable hours) and significantly weakens safety requirements for short-haul drivers. "While we support the portion of the rule that no longer allows drivers to split the time they spend in sleeper berths, the overall increased driving and working time is not supported by the vast body of scientific literature that exists about fatigue and driver safety. Nor does this proposal help drivers get on a 24-hour circadian schedule." "We sincerely hope that in the coming weeks the agency will reconsider this issue and redraft the rule," she added.

Last month Public Citizen and other highway safety groups called for an investigation into a meeting held between the head of the FMCSA and trucking industry representatives, which they believed was designed to plan amendments to a highway bill pending at the time. The hours-of-service provision was ultimately rejected, and did not make it into Highway Bill H.R. 3.

The revised rule will go into effect October 1, 2005. As in 2003, the new rule announced August 19 applies only to commercial truck drivers, and not to passenger motor coach operators. Motor coach drivers are still covered by the hours-of-service rules in effect prior to 2003. Sandberg pledged to work with states and the trucking community for the first three months the rule is in effect allowing them time to update educational materials, train employees and re-program driving schedules. During this transitional period, FMCSA and state law enforcement officials will monitor carriers for egregious violations of the new rule and pursue enforcement action where necessary, she said.

Labor Department streamlines process for National Guard & reserve service members to file employment rights complaints.  US Labor Secretary Elaine L. Chao has announced a new service to help ensure National Guard and reserve service members return to the jobs and benefits they are entitled to under the Uniformed Services Employment and Reemployment Rights Act (USERRA). The latest improvement by the Department of Labor is a Web site where a USERRA or veterans' preference complaint can be filed electronically at https://vets1010.dol.gov/Login.aspx?ReturnUrl--%2fDefault.aspx.

"America's soldiers who sacrifice so much for all of us, deserve every consideration and legal protection in returning to civilian life and careers," Chao said. "This new online form will make it easier for National Guard and Reserve service members to alert us to any job-related problems they may encounter because of their service to our country."

Developed by the Labor Department's Veterans' Employment and Training Service (VETS), the form is called the VETS Form 1010. It is easy to fill out and can be filed in seconds electronically. This is the latest in a series of compliance-assistance efforts undertaken by the Department of Labor to increase employee and employer awareness of USERRA. Others include:

• Providing a poster that spells out rights and responsibilities under USERRA for display in workplaces. It can be downloaded at: http://www.dol.gov/vets/programs/userra/poster.pdf;
• Providing briefings and technical assistance to more than 280,000 service members and others on USERRA;
• Distributing public service announcements to increase awareness of USERRA rights, and
• Publishing proposed USERRA regulations, which explain the law in plain English and are expected to be officially released in the fall.

Moskowitz appointed NLRB Assistant General Counsel, Gilbert named NLRB Acting Director of Information. Arthur F. Rosenfeld, Acting General Counsel of the National Labor Relations Board (NLRB), has announced the promotion of Eric G. Moskowitz to Assistant General Counsel in the Agency's Special Litigation Branch. In his new position, Moskowitz will be responsible for overseeing the Branch which conducts litigation in the District and Bankruptcy Courts of the United States and the United States Courts of Appeals when the Board or General Counsel is a party to a case not in the normal statutory enforcement scheme of Section 10(e) or (f) of the NLRA. These cases raise a wide variety of issues, including preemption, bankruptcy, EAJA, FOIA, Privacy Act and subpoena enforcement.

Moskowitz joined the NLRB in 1973 as an attorney in the Division of Advice. From 1975 to 1985, he served in the Agency's Appellate Court Branch, where he briefed and argued numerous enforcement cases before the Circuit Courts. In 1985, he transferred to the Special Litigation Branch, where he was promoted to Deputy Assistant General Counsel in 1987. Born in New York City, Moskowitz received a B.A. degree in economics from the University of Michigan in 1969. He received his J.D. degree with honors in 1973 from George Washington University School of Law.

Patricia M. Gilbert has been named Acting Director of Information of the NLRB by Chairman Robert J. Battista. A career NLRB employee, Gilbert has served in the Division of Information since 1986, first as a Writer-Editor. She was promoted to Supervisory Writer-Editor in 1992, and to Associate Director of Information in 2000. From 1985-1986, Gilbert was Assistant Chief of the Docket, Order and Issuance Section of the Executive Secretary's Office. She joined the NLRB in 1973 as a clerk in the Division of Judges, transferring in 1974 to the Executive Secretary's Office.

The Division of Information is responsible for media relations, public information and the NLRB Web site. Among her responsibilities, Ms. Gilbert has supervised the Weekly Summary of NLRB Cases, coordinated editing and production of the NLRB annual report, and assisted in managing the Web site.

The following bills introduced over the month would: 

• promote employment of individuals with severe disabilities through federal Government contracting and procurement processes. (Employer Work Incentive Act for Individuals with Severe Disabilities, S. 1570. Introduced 7/29/05, by Sen. Pat Roberts, R-KS. Referred to Government Affairs Committee).

Benefits Top of Page

Treasury Department releases proposed regulations on valuation of annuities involved in Roth conversions. The Treasury Department and the IRS issued proposed and temporary regulations today clarifying the amount of income that must be reflected when a traditional IRA account that holds an annuity contract (or a traditional IRA that is itself an annuity) is converted into a Roth IRA.

Generally, when a traditional IRA is converted into a Roth IRA, the fair market value of the account is included in the individual's income, as if it were distributed. However, the absence of a specific rule addressing converted annuity contracts has led some taxpayers to believe that the amount includable in income upon conversion is the cash surrender value (i.e., that amount that would be available upon immediate surrender of the contract). This in turn has led to the development and promotion of specially-designed annuity contracts that are intended to suppress the amount of income which must be recognized upon conversion. These contracts provide for temporarily depressed cash surrender values that later "spring" up to a more realistic value. Under the rules applicable to Roth IRAs, the amounts received under those contracts will ultimately be tax-free, if they are paid after a 5-year holding period and attainment of age 59.

The regulations specify that the full fair market value must be included in income upon conversion and provide standards for determining that fair market value. For example, if the conversion occurs soon after the contract was sold, the fair market value is generally its original purchase price. These regulations, which will be effective for transfers made on or after August 19, 2005, will prevent taxpayers from using artificial devices to understate the value of the contract.

IRS Issues final and proposed regulations on anti-cutback rules for qualified plans. The Internal Revenue Service (IRS) has issued final regulations that provide general guidance regarding the anti-cutback rules of Code Sec. 411(d)(6) and also allow for the elimination of certain forms of benefit, as required by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (P.L. 107-16). Also issued are proposed regulations under Code Sec. 411(d)(6) reflecting the Supreme Court's decision in Central Laborers' Pension Fund v Heinz, and allowing for the elimination of forms of benefit that have not been popular with participants. The final regulations describe the conditions under which a plan amendment may eliminate or reduce an early retirement benefit, a retirement-type subsidy, or an optional form of benefit (Code Sec. 411(d)(6)(B) protected benefits) with respect to a participant's benefits attributable to service before the amendment. They also provide guidance concerning how the notice requirements of Code Sec. 4980F apply with respect to such plan amendments. The final regulations generally apply to plan amendments adopted and effective after August 12, 2005. The proposed regulations on which the final regulations are based were issued in 2004 and were the subject of public hearings at that time.

A public hearing on the proposed regulations is scheduled for Tuesday, December 6, 2005, at 10:00 a.m. in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, D.C. Written or electronic comments must be submitted by November 10, 2005. Send submissions to: CC:PA:LPD:PR (REG-156518-04), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. Taxpayers may also submit comments electronically, via the IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG 156581-04).

Application period for retiree drug subsidy under Medicare Part D began August 1st. The Centers for Medicare & Medicaid Services (CMS) has indicated that the application period for plan sponsors seeking retiree drug subsidies (RDS) for plans with benefit years ending in calendar year 2006, began August 1, 2005 and ends on September 30, 2005. Applications must be received during this period to be considered for subsidy payments beginning January 1, 2006. For plan years ending in 2007 and beyond, plan sponsors must submit an application no later than 90 days prior to the beginning of the plan benefit year.

The RDS Application and Instructions are now available electronically on the new RDS website (http://rds.cms.hhs.gov).

Application process. CMS indicates that the application must include:

• organization identification and contact information (Employer Identification Number, name, address, etc.);
• a list of designated individuals authorized to assist the plan sponsor in submitting application information;
• a list of benefit options included in the drug plan, including identifying information and contact information for each option;
• the name and contact information for each actuary involved in attesting to the value of benefit options under the plan;
• a list of proposed qualifying retirees for whom the sponsor is seeking the retiree drug subsidy;
• an electronically signed Attestation(s) of Actuarial Equivalence certifying that the plan sponsor's retiree drug plan is, at a minimum, actuarially equivalent to the standard Medicare Prescription Drug Coverage;
• bank routing and contact information (to receive RDS payments), and
• a Plan Sponsor Agreement electronically signed by the authorized representative from the plan sponsor.

Payroll Top of Page

IRS issues guidance on employee-owned tools. The Internal Revenue Service (IRS) has issued guidance regarding the circumstances under which a tool allowance paid by an employer to an employee can be excluded from the employee's gross income and exempt from the withholding and payment of employment taxes. The guidance clarifies that an accountable plan may not use estimates to substantiate the amount of such expenses. Instead, a reimbursement arrangement must meet the requirements for an accountable plan set forth in Reg. §1.62-2(c)(1), which provides that a reimbursement or other expense allowance arrangement will be excluded from the employee's gross income if the reimbursed expense has a connection to the employer's business, the employee complies with substantiation requirements and the employee must return amounts in excess of substantiated expenses.

Therefore, a reimbursement arrangement under which an automobile repair business paid employees a tool allowance that was based on a national survey of average tool expenses and a questionnaire completed by the employees did not meet the requirements for an accountable plan. In addition, an arrangement in which the employee reports hours worked requiring the use of tools is not the equivalent of substantiating actual expenses incurred. Furthermore, an arrangement is not an accountable plan if it includes amounts paid in excess of substantiated expenses in the employee's wages rather than requiring that the amounts be returned.

IIR Program Submissions. The IRS also issued a notice providing information about criteria for considering proposals involving employer reimbursements of equipment expenses for the IRS's Industry Issue Resolution (IIR) program. Because industry practice has, in the past, made compliance with specific accountable plan requirements unworkable, the IRS released guidance specifying issues that will be considered when it reviews requests for relief based on industry practice. However, the cost of collecting records, substantiating expenses and reconciling the expenses against reimbursements will not, absent more, constitute grounds for relief from the requirements of the accountable plan rules. (IRS Notice 2005-59 and Rev. Rul. 2005-52, IRB 2005-35, August 3, 2005.)

IRS issues guidance for educational institutions. The IRS has issued procedures for eligible educational institutions to follow to obtain automatic consent to change their method of reporting qualified tuition and related expenses. The new procedure is effective as of August 8, 2005. Expenses are reported using one of two methods: reporting the aggregate amount of payments received or reporting the aggregate amount billed. If an eligible institution changes its reporting method, all locations and branch campuses of the institution to which the eligibility determination extends must also change to the new method, beginning with the year of the change. An institution may not change its method of reporting more than once every five years unless it can show extraordinary circumstances. In order to obtain automatic consent, the institution must file a written statement with the IRS at least three months before the due date for the information returns for the year of the change. That statement must provide:

• The institution's name and EIN;
• All locations and branch campuses and their EINs;
• The method of reporting to which the institution, its locations and branch campuses are changing;
• The calendar year in which the change is effective; and
• A statement as to whether the institution, its locations or branches have changed reporting method within the four-year period prior to the year of the change. If there was a change, the statement must also include the year of the previous change and an explanation of the extraordinary circumstances. (IRS Rev. Proc. 2005-50, IRB 2005-32, 272, August 8, 2005.)

IRS issues automobile values. The IRS has issued the annual values for employer-provided automobiles made available for personal use under the (1) cents-per mile and (2) fleet-average valuation rules. The annual value under the cents-per-mile rule for a passenger automobile is $14,800 ($16,300 for a truck or van). The annual value under the fleet-average valuation rule for a passenger automobile is $19,600 ($21,300 for a truck or van). (IRS Rev. Proc. 2005-48, IRB 2005-32, 271, August 8, 2005.)

Pension Law Top of Page

Treasury/IRS release 2005-2006 Priority Guidance Plan.   The Treasury Department and the Internal Revenue Service have released the 2005-2006 Priority Guidance Plan containing action items for the next fiscal year, July 2005 through June 2006. In addition to the projects slated for completion this year in retirement benefits, executive compensation, and health care, the Appendix includes the more routine guidance that is published regularly.

Among the specific Plan priorities relating to retirement are:

• guidance on the tax treatment of distributions from Roth retirement plans;
• final regulations on compliance with restrictions on in-service distributions from pension plans and related topics in connection with phased retirement arrangements;
• revenue procedure amending and restating the employee plans compliance resolution system (EPCRS);
• revenue procedure implementing the staggered remedial amendment procedures for determination letters;
• guidance on annuity valuation issues in conversions from a traditional IRA to a Roth IRA under Code Sec. 408A;
• guidance on consistency between tax benefits to employers and allocations to participants in employee stock ownership plans (ESOPs);
• proposed regulations updating the mortality tables used to determine current liability under Code Sec. 412(l); and
• update of the regulations on the definition of "highly compensated employee" under Code Sec. 414(q).

Grassley, Baucus, unveil Pension Reform Bill.  The lingering effects of the Enron scandal, where thousands of employees lost their retirement savings, has prompted Senate Finance Committee Chairman Charles E. Grassley, R-Iowa and ranking member Max Baucus, D-Mont., to forge ahead with pension reform measures to help shore-up retirement savings security As a result, the two lawmakers on July 22, 2005 released a draft of a bill that focuses mainly on pension funding issues.

One of the key provisions, according to Senate Finance Committee staff, is a proposal allowing employees the right to diversify their 401(k) plans. In contrast, a House pension reform bill introduced by Rep. John A. Boehner, R-Ohio, does not include similar language. Enron employees saw their pensions wiped out because their 401(k) plans held only company shares. Moreover, Grassley and Baucus address so-called "smoothing" techniques by proposing the use of a "yield curve" formula for calculating how much companies must contribute to their pension plans. Under "smoothing" practices, companies may value their liabilities based on interest rates going back as far as four years and asset values going back as far as five years. "Smoothing" techniques hide the true financial condition of pensions, and allowed United Airlines and other companies to avoid making pension contributions even while the pension plans were going down the tubes," said Grassley. "We need to protect workers from bad actors and give them more, timely knowledge about their pension funding status."

Staffers also highlighted a provision allowing companies the right to offer employees investment advice from an independent financial firm to help manage their retirement accounts. Again, the provision contrasts with Boehner's bill which allows investment advice for employees from companies that also offer retirement plans.

The Chairman's Mark also draws heavily from the National Employee Savings and Trust Equity Guarantee Act of 2005 ("NESTEG"), which had been approved by voice vote by the Committee in February 2004 and re-introduced by Grassley and Baucus in January 2005. NESTEG includes the following key provisions, which are incorporated in the Chairman's Mark:

• requiring plans to allow workers to diversify their contributions out of employer stock;
• increasing disclosure to participants;
• improving portability and distribution rules;
• providing fiduciary relief for employers designating independent investment advisors;
• simplifying plan administration;
• improving spousal protections;
• addressing COLI; and
• changing tax court pensions and compensation.

1. The structure of the funding to make them simpler and smoother;
2. The measurement of liabilities and assets to make them more meaningful and more consistent with financial measurements;
3. The liability target so that a plan's goal must be 100 percent funding;
4. The liability measurement to reflect the costs of early retirement in companies with below investment grade bond ratings;
5. The required contribution – shortfalls must be amortized over seven years;
6. The amount employers can contribute and deduct so that they can pre-fund in good economic times;
7. The funding requirements so that employers must fund plans to 60 percent or else excise taxes and benefit restrictions will be imposed;
8. The ability to provide benefit increases, other than cost of living increases in flat-benefit plans, unless the plan is 80 percent funded;
9. The phase-in rules for shutdown benefits so these benefits are phased in from the time of the shutdown;
10. The rules governing plan accruals and PBGC guarantees when an employer goes into bankruptcy; and
11. The rules governing PBGC premiums, including increasing the flat-rate premium to $30.

House Education and Workforce Committee Passes Broad Pension Legislation.  The House Education and Workforce Committee passed the Pension Protection Bill of 2005 (HR 2830) on June 30, 2005. This legislation is designed to improve plan funding and financial disclosures to workers and retirees.

All 27 Republicans on the committee voted to pass the bill, while all 22 Democrats voted "present" in order to protest the lack of information on how the legislation will affect employer contributions to pension plans and how it would address the $23 billion shortfall in the Pension Benefit Guaranty Corporation (PBGC). Committee Chairman John A. Boehner, R-Ohio, expressed dismay over Democratic criticisms of the bill, but said Congress "is a giant step closer to fundamental reform of the outdated pension laws that have left workers and taxpayers vulnerable." Ranking Member George Miller, D-Calif., explained that Democrats were unable to support the final bill because of a lack of information. "Improving private pension law is critically important, but we cannot even tell our constituents what the impacts of this legislation will be because that information has not been provided to the committee," Miller said.

The next stop for the legislation will likely be the House Ways and Means Committee, where it could be wrapped up into a broader retirement security proposal.

Social Security Top of Page

SSA seeks input for revision of endocrine disorder criteria.  The Social Security Administration (SSA) has announced its intention to update and revise the criteria used in the Listing of Impairments for evaluating endocrine disorders, and the agency is seeking public input in advance of issuing these proposed amendments. All comments must be received by October 11 and may be sent by letter, fax, hand delivery or the Internet to one of the addresses listed in the announcement.

The current listings, §9.00 and §109.00, will expire on July 2, 2007. The last major revision to these listings was on December 6, 1985, although revisions to some endocrine disorders were published on August 24, 1999. In seeking comments in advance of proposing specific revised rules, the SSA is interested in any suggestions about these sections, but specifically indicates interest about whether a listing is difficult to use or understand; whether the listings should include conditions or new medical criteria not currently present in them; and whether the listings should include criteria for functional limitations and, if so, what those criteria should be.

CRS releases updated issue brief on Social Security reform. The Congressional Research Service (CRS) has released an updated "issue brief" that summarizes and reviews the issues and legislation before Congress surrounding the restoration of solvency to the Social Security program. In the current Congress, nine bills have been introduced to reform the Social Security program. With the exception of legislation introduced by Rep. Robert Wexler (D., Fla.), each of the remaining proposals would establish personal accounts to supplement or replace part of the Social Security system. Under Wexler's proposal, workers and employers each would be required to contribute three percent of earnings above the Social Security taxable wage base.

The CRS report reviews how and why the Social Security Old-Age, Survivors, and Disability Insurance trust funds are expected become insolvent in 2041; identifies issues of contention, including privatization, retirement age and cost of living adjustments; and outlines the proposals for reform that have been submitted to date. The full text of the CRS report appears at CCH Unemployment Insurance DDU ¶10,702.

Finalized coverage regulations conform Social Security Act to 2004 legislation. The Social Security Administration has amended several regulations to conform their provisions to provisions of the Social Security Protection Act of 2004 (SSPA). The amended regulations relate to what constitutes covered wages for Social Security purposes and updates a provision regarding divided retirement systems.

Technical amendments fix covered wages provisions. Section 423 of the Social Security Protection Act of 2004 (SSPA) clarified that domestic service in the private home of an employer on a farm operated for profit is not included within the definition of "agricultural labor." However, compensation for such service is treated as covered wages, like all other domestic service, if it exceeds the applicable dollar threshold under Internal Revenue Code §3121(x). The amended regulation is Reg. §404.1056.

SSPA Section 425 also clarified that, for purposes of the definition of net earnings from self-employment under the Social Security Act, nonpartnership income from a trade or business that is community income under the laws of a community property state is treated as gross income and a deduction of the spouse carrying on the trade or business. However, if the spouses operate the business jointly, then such income is treated as the gross income and deduction of each spouse on the basis of his or her respective share of the income and deduction. The regulation amended to conform to this provision is Reg. §404.1086.

Section 422 of the SSPA also excluded the parsonage and housing allowance included in the retirement pay of a clergy person or member of a religious order from the definition of "net earnings from self-employment." An amendment to Reg. §404.1091 reflects this clarification.

The amended regulations took effect on July 21, 2005. The full text of the announcement appears in CCH’s Unemployment Insurance Reporter with Social Security at ¶17,451B and at CCH Unemployment Insurance DDU ¶10,666.

SSA seeks comments on proposed information gathering activities. The Social Security Administration (SSA) has issued an emergency request for clearance by the Office of Management and Budget (OMB) of a proposed information gathering activity related to subsidy determinations under Medicare Part D. Under the Medicare Modernization Act of 2004, the SSA is charged with determining a claimant's eligibility for a subsidy under Medicare Part D. In conjunction with the Centers for Medicare and Medicaid, the SSA will also administer the subsidy program, which begins in January 2006.

Forms to be mailed to 19 million. The SSA plans to mail application forms to approximately 19 million Medicare recipients who are not automatically enrolled in the subsidy program. The subsidy determination will be based on self-reported answers to questions on these forms regarding household size, income and assets. The SSA plans to conduct a telephone survey of individuals who received the form but did not return it to the agency in order to encourage them to return it. Although the SSA has previously sought approval for the application form (see story CCH’s Unemployment Insurance Reporter with Social Security 556, dated July 18, 2005, and ¶17,444B ), it now needs approval for the follow-up calls.

Feedback requested. The notice states that the SSA wants feedback on the need for the information solicited; its practical utility; the accuracy of the agency's burden estimate; ways to enhance the quality, utility and clarity of the manner in which the information is collected; and ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Comments may be mailed or faxed to the OMB or the SSA using the addresses published in the notice.

The full text of the official notice appears in CCH’s Unemployment Insurance Reporter with Social Security at ¶17,455B).