Month: March 2021

Vermont lawmakers seek pension reforms to stem funding shortfalls

Mary Pat Campbell

Link: https://www.pionline.com/pension-funds/vermont-lawmakers-seek-pension-reforms-stem-funding-shortfalls

Excerpt:

Vermont lawmakers are pushing a plan to reduce a widening shortfall in the state’s retirement systems by asking teachers and state employees to pay more into their pension plans and work more years.

During a March 24 meeting, the Vermont House Government Operations Committee proposed teachers base contribution rates be raised by 1.25% to 2.25% and that most state employees be increased by 1.1%, according to a proposal posted on the Vermont General Assembly website.

The proposal also bumps up the age at which most workers can qualify for retirement benefits, requiring them to reach full Social Security retirement age, which is currently 66 or 67. Some groups of teachers and state employees can now retire as early as 62 or with 30 years of service.

In addition, employees will receive a lower overall benefit as it would be based on the average of their seven highest consecutive years of salary rather than the three highest as is now the case, according to the proposal.

Author(s): Margarida Correia

Publication Date: 29 March 2021

Publication Site: Pensions & Investments

Canada’s Largest Federal Pension Plan Divests From US Private Prisons

Mary Pat Campbell

Link: https://www.forbes.com/sites/morgansimon/2021/03/29/canadas-largest-federal-pension-plan-divests-from-us-private-prisons/?sh=7f5ed23c230b

Excerpt:

In late 2020, Canada’s Public Sector Pension Investment Board (PSP), which invests $170 billion worth of pensions belonging to federal government employees like public service workers and employees, bought over 600,000 shares of US private prison companies GEO GEO -1% Group and CoreCivic. According to a February 12th 2021 report filed with the SEC, that totaled about $4.7 million to the companies who have been found to be key players in family separation and continued detainment of migrants suffering from Covid-19.

On March 15th, however, the public learned that PSP pledged to fully divest from the industry amidst public pressure — a financial blow to two companies who have already lost financial support and credibility from major bank financers over the past few years. This announcement by PSP adds them to the list of pension funds who have made an explicit commitment to no longer fund private prisons; joining New York City’s public pension system, The Philadelphia Board of Pensions Retirement, New Mexico Teachers’ Pension Fund, the California Public Employees’ Retirement System, The Canadian Pension Plan Investment Board, and many more who have also taken a stand against the industry. 

Author(s): Morgan Simon

Publication Date: 29 March 2021

Publication Site: Forbes

Goldman, Morgan Stanley Limit Losses With Fast Sale of Archegos Assets

Mary Pat Campbell

Link: https://www.wsj.com/articles/goldman-morgan-limit-losses-with-fast-sale-of-archegos-assets-11617062028?mod=djemwhatsnews

Excerpt:

The steep losses at Archegos come as a council of top U.S. regulators known as the Financial Stability Oversight Council is already scheduled to meet on Wednesday to discuss hedge-fund activity during the pandemic-triggered crisis. The meeting is the first for the risk council during the Biden administration, which has pledged to scrutinize financial weaknesses revealed by the pandemic-triggered market tumult from March 2020. The council is made up of the heads of the Treasury Department, Federal Reserve and other agencies.

Mr. Dweck, the consultant, pointed to a case that many on Wall Street are hearing echoes of this week: Long-Term Capital Management, a massive hedge fund that blew up in 1998. Firms learned the full extent of the hedge fund’s problems only when government officials summoned them to Long-Term’s offices to pore over its records, he said.

“The upshot is, you’re going to have stuff like this happen,” Mr. Dweck said.

Author(s): Maureen Farrell, Margot Patrick, Juliet Chung

Publication Date: 30 March 2021

Publication Site: Wall Street Journal

Pension and Executive Compensation Provisions in the American Rescue Plan Act

Mary Pat Campbell

Link: https://www.seyfarth.com/news-insights/pension-and-executive-compensation-provisions-in-the-american-rescue-plan-act.html

Excerpt:

Seyfarth Synopsis: On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), the $1.9 trillion COVID-19 relief bill.  ARPA includes various forms of multiemployer and single employer pension plan relief, as well as certain executive compensation changes under Section 162(m) of the Internal Revenue Code (“Code”), which are discussed further below. Please see our companion Client Alert on the other employee benefit items of interest in ARPA here.

Author(s): Seong Kim, Christina M. Cerasale, Kaley M. Ventura, Alan B. Cabral

Publication Date: 11 March 2021

Publication Site: Seyfarth

Senate Democrats Push for Capital-Gains Tax at Death With $1 Million Exemption

Mary Pat Campbell

Link: https://www.wsj.com/articles/senate-democrats-push-for-capital-gains-tax-at-death-with-1-million-exemption-11617046200?mod=djemwhatsnews

Excerpt:

Progressive Senate Democrats suggested that their new plan to tax unrealized capital gains at death should come with a $1 million per-person exemption, setting that line 10 times higher than an earlier Obama administration proposal and shielding a larger swath of upper income households.

A discussion draft released Monday by Sen. Chris Van Hollen (D., Md.) and others marks a first attempt to put details on an idea that President Biden endorsed during last year’s campaign. Capital-gains taxation is likely to spur significant debate in coming months as Democrats look to raise money from high-income households to pay for Mr. Biden’s proposed spending on infrastructure and social programs.

Under current law, someone who dies with appreciated assets—including homes, businesses and stocks in taxable accounts—doesn’t have to pay capital-gains taxes on that increase. Instead, the heirs have to pay capital-gains taxes only after they sell and only on gains after the original owner’s death. That “stepped-up basis” is a longstanding feature of the tax code, but it has come under increasing attacks from Democrats who see wealthy people’s profits escaping the income tax.

Author(s): Richard Rubin, Andrew Duehren

Publication Date: 29 March 2021

Publication Site: Wall Street Journal

Will American Rescue Plan Act Multiemployer Pension Provisions Bring Relief To Employers?

Mary Pat Campbell

Link: https://www.jdsupra.com/legalnews/will-american-rescue-plan-act-1713755/

Excerpt:

Since withdrawal liability represents the excess of the plan’s liabilities over its assets, some employers may expect that this massive influx of cash would reduce or eliminate their withdrawal liability. As of this date, however, the impact of EPPRA on an employer’s ultimate liability is unclear. The law as originally passed by the House of Representatives expressly excluded any financial assistance from the withdrawal liability calculus for a period of 15 years. However, this fund-friendly provision was struck from the bill during the Senate approval process and was not in the bill signed by President Joe Biden. In other words, under current law (e.g., EPPRA) and in the absence of anticipated regulations, an employer’s withdrawal liability could potentially be reduced or eliminated in its entirety. Unfortunately for employers, however, there is a catch.

Under EPPRA, PBGC is authorized to “impose, by regulation or other guidance, reasonable conditions on an eligible multiemployer plan that receives special assistance relating” to both “reductions in employer contribution rates” and “withdrawal liability.” The 15-year provision and the broad and express regulatory authority granted to PBGC by the statute has many practitioners (including the authors) expecting that PBGC will issue guidance similar to the excised provision. The most likely scenario is that an employer’s withdrawal liability will be calculated without regard to any EPPRA “special financial assistance” for a period of 15 years (consistent with the excised provision) or 10 years (the period for which MPRA benefit suspensions are disregarded for withdrawal liability purposes under ERISA Section 305(g)). Until PBGC issues this much-needed guidance, the exact impact of EPPRA on employers will be unknown.

Author(s): Paul Friedman, Robert Perry, David Pixley

Publication Date: 16 March 2021

Publication Site: JD Supra

Former IHS doctor stripped of federal pension and benefits

Mary Pat Campbell

Link: https://www.blackhillsfox.com/2021/03/16/former-ihs-doctor-stripped-of-federal-pension-and-benefits/

Excerpt:

RAPID CITY, S.D. (KEVN) – A former Indian Health Service doctor has been stripped from his federal pension after being convicted of sexually assaulting his patients while working on the Pine Ridge Reservation.

The doctor, Capt. (ret.) Stanley Patrick Weber, worked for IHS for three decades and was an officer for the U.S. Public Health Service Commissioned Corps.

In September 2018, Weber was convicted of sexually assaulting young boys under his care. That didn’t stop his government pension or benefits though. For the past year, a U.S. Public Health Service Commissioned Corps Board of Inquiry was formed to find grounds to strip Weber of his honorable-discharge status and federal pension in June 2019.

Publication Date: 16 March 2021

Publication Site: KEVN

Coronavirus Was Supposed to Drive Bankruptcies Higher. The Opposite Happened.

Mary Pat Campbell

Link: https://www.wsj.com/articles/coronavirus-was-supposed-to-drive-bankruptcies-higher-the-opposite-happened-11617010201?mod=djemwhatsnews

Graphic:

Excerpt:

The number of people seeking bankruptcy fell sharply during the pandemic as government aid propped up income and staved off housing and student-loan obligations.

Bankruptcy filings by consumers under chapter 7 were down 22% last year compared with 2019, while individual filings under chapter 13 fell 46%, according to Epiq data. After holding above 50,000 filings a month in 2019 and in the first quarter of 2020, bankruptcy filings have remained below 40,000 a month since last March when the pandemic hit.

By contrast, commercial bankruptcy filings rose 29%, with more than 7,100 businesses seeking chapter 11 protection last year, according to Epiq.

Author(s): Soma Biswas, Harriet Torry

Publication Date: 29 March 2021

Publication Site: Wall Street Journal

New York business leaders push Biden, Schumer to ditch the cap on SALT deductions

Mary Pat Campbell

Link: https://www.cnbc.com/2021/03/29/new-york-business-leaders-push-biden-schumer-to-remove-cap-on-salt-deductions.html

Excerpt:

Leaders of the finance industry and other businesses in New York are pushing President Joe Biden and Senate Majority Leader Chuck Schumer to bring back the full state and local tax deduction.

Schumer, who is up for reelection in 2022, has heard from business leaders across New York on multiple calls in recent weeks. Some of these people have also held talks with advisors to Biden.

The so-called SALT deduction was capped at $10,000 by former President Donald Trump’s tax reform bill, which became law in late 2017.

Author(s): Brian Schwartz

Publication Date: 29 March 2021

Publication Site: CNBC

COVID-19 vaccine protects mothers — and their newborns

Mary Pat Campbell
Study shows COVID-19 vaccinated mothers pass antibodies to newborns

Excerpt:

In the largest study of its kind to date, researchers at Massachusetts General Hospital (MGH), Brigham and Women’s Hospital and the Ragon Institute of MGH, MIT and Harvard have found the new mRNA COVID-19 vaccines to be highly effective in producing antibodies against the SARS-CoV-2 virus in pregnant and lactating women. The study also demonstrated the vaccines confer protective immunity to newborns through breast milk and the placenta.

The study, published in the American Journal of Obstetrics and Gynecology (AJOG), looked at 131 women of reproductive age (84 pregnant, 31 lactating and 16 non-pregnant), all of whom received one of the two new mRNA vaccines: Pfizer/BioNTech or Moderna. The vaccine-induced titers — or antibody levels — were equivalent in all three groups. Reassuringly, side effects after vaccination were rare and comparable across the study participants. 

Author(s): Julie Cunningham

Publication Date: 25 March 2021

Publication Site: Harvard Gazette

Pandemic Accelerates Retirements, Threatening Economic Growth

Mary Pat Campbell

Link: https://www.wsj.com/articles/pandemic-accelerates-retirements-threatening-economic-growth-11616940000

Excerpt:

The labor force participation rate—the proportion of the population working or seeking work—for Americans age 55 and older has fallen from 40.3% in February of 2020 to 38.3% this February—representing a loss of 1.45 million people from the labor force.

The participation rate initially fell much more for prime-age workers, those between ages 25 and 54, from 82.9% in February last year to 79.8% in April, but has since jumped 1.3 points, to 81.1% in February of this year. By contrast, participation for older workers has shown no rebound from last spring.

Lydia Boussour, lead U.S. economist at Oxford Economics, said the unique health risk to older people during the pandemic has likely deterred them from rejoining the workforce in greater numbers. Public-health officials have warned that the risk of severe illness from Covid-19 increases with age. Among those who contract the virus, the death rate for those age 50-64 is nearly nine times that of those age 30-39, according to the Centers for Disease Control and Prevention.

Author(s): Amara Omeokwe

Publication Date: 28 March 2021

Publication Site: Wall Street Journal

Financial Report of the United States Government, 2020

Mary Pat Campbell

Link: https://www.fiscal.treasury.gov/files/reports-statements/financial-report/2020/fr-03-25-2021-(final).pdf

Graphic:

Excerpt:

The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY 2020
“bottom line” net operating cost of $3.8 trillion.
o From Chart 4, total government tax and other
revenues decreased slightly by $49.4 billion (1.4
percent) to about $3.6 trillion for FY 2020. This
net decrease was due primarily to a $51.6 billion
decrease in individual tax revenue, compared with
an offsetting decrease and increase in corporate
and other tax revenue, respectively.
o Together, individual income tax and tax
withholdings, and corporate taxes accounted for
about 88.8 percent of total tax and other revenues
in FY 2020. Other revenues include Federal
Reserve earnings, excise taxes, and customs
duties.

Publication Date: March 25, 2021

Publication Site: Treasury Department