The Markets January 8, 2010

Ohio Manufacturer Cuts 401(k) Match

With the prospect looming of the imposition of a federal medical device tax, an Elyria, Ohio, home-health products firm has suspended its 401(k) match and taken other cost-cutting measures.
Reported by

A news report on the medcitynews.com Web site said the company has also stopped management merit-pay hikes and imposed a hiring freeze because of the financial impact of the potential levy to be imposed as part of ongoing Congressional health-care reform efforts.

The news account said Invacare is warning that the tax could lead it to increase prices, shift more production overseas, reduce employee benefits, and cut research and development expenditures, according to a regulatory filing. The tax could result in an annual “impact” between $12 million and $14 million to the company.

The House and Senate passed different version of the tax in their health-overhaul bills. The Senate’s version would impose a sales-based tax on device firms that’s intended to raise $2 billion annually beginning in 2011, and $3 billion beginning in 2017. The tax would not be deductible by the manufacturer and the amount of tax payable by a manufacturer would be determined based on market share, Invacare said. The House’s version calls for a smaller tax on device makers.

Compliance January 7, 2010

St. Louis Gunman Reported to be 401(k) Fee Suit Plaintiff

The employee who went on a shooting rampage at a St. Louis manufacturing plant is reportedly one of four named plaintiffs in a 401(k) excessive fee class-action lawsuit.
Reported by

Police identified Timothy Hendron as the gunman who killed two people and injured five others with an assault rifle at a power transformer facility owned by Zurich, Switzerland-based ABB, according to news reports.

Police found a third fatality at the site that was presumed to be Hendron, 51, of Webster Groves, Missouri.  Police were told he carried a handgun, a rifle, and an ammunition belt, the reports said.

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The motive, and whether it was connected to Hendron’s involvement in a current 401(k) suit, is still unclear.

The 401(k) lawsuit went to trial before a federal judge earlier this week, according to reports. U.S. District Judge Nanette Laughrey had set aside four weeks to hear evidence in the case in which Hendron and other class representatives are alleging ABB, Fidelity Management Trust Company, and Fidelity Management & Research Company violated the Employee Retirement Income Security Act (ERISA) by subjecting the company’s defined contribution plans to improperly excessive fees (see “Excessive Fee Suit Against Fidelity Survives Initial Challenge”).

The St. Louis Post-Dispatch reported that the incident began at 6:30 a.m. CT, as the morning shift began at ABB Power. About 40 workers were at the facility. With employees panicking and racing to escape, police searched for the attacker for four hours, according to the newspaper. 

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