By Porter Wright on The United State Supreme Court issued an opinion on June 12, 2014 in Clark v. Rameker dealing with a relatively simple issue at the intersection of bankruptcy law and retirement policy. The case dealt with the ability to exempt “retirement funds” as a category of assets from a bankruptcy estate when an individual files for bankruptcy. The … Continue Reading
By Porter Wright on Plan administrators who fail to timely file Form 5500 annual returns/reports are subject to penalties under both Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code (the “Code”). The Department of Labor (the “DOL”) has the authority to assess civil penalties of up to $1,100 per day … Continue Reading
By Porter Wright on My assistant informed me that my patience is shot and I need to do something about that, so I am channeling my energy into one issue. Since health care reform was enacted, I have been hearing about how we should anticipate a flood of ERISA Section 510 (29 U.S.C. Section 1140) discrimination cases from people … Continue Reading
By Porter Wright on The U.S. Supreme Court has agreed to hear a Sixth Circuit retiree health care case, M&G Polymers USA, LLC v. Tackett. The issue is: Whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits … Continue Reading
By Greg Daugherty on When I first started practicing law, a veteran in this area told me that the only way to make sense of the Internal Revenue Code was to understand that each provision existed so that Congress could make money. Does that explain why, as we reported last year, the American Taxpayer Relief Act of 2012 allowed any amount in a non-Roth account in eligible retirement plans (401(k) plans, 403(b) plans, and governmental 457(b) plans) to be converted to a Roth account in the same plan, whether or not the amount was distributable? Previously, plans could allow participants to convert their pre-tax accounts to Roth accounts only with respect to amounts the participants had a right to take out of the plan. Well, by taxing the amounts so converted from pre-tax to Roth, this change in the tax law is expected to produce an extra $12 billion in revenue for the federal Treasury. Does that make participants who convert their pre-tax amounts to Roth amounts suckers? Not at all.… Continue Reading
By Porter Wright on If you are a board member or senior executive of a company that is rapidly failing, what do you about employee benefits? No one has ever liked my answer: freeze the benefits. This is counterintuitive advice for someone who is trying to keep the company afloat, and who would be personally affected by the loss of benefits. But let me explain why this is so important, using a complaint that was recently filed by the DOL, and the facts as they were alleged.… Continue Reading
By Porter Wright on I am not a fan of binding arbitration in the context of ERISA plans, and a new Sixth Circuit decision, Schafer v. Multiband Corp., demonstrates why.
Two individuals (Schafer and Block) founded a company. As part of a series of corporate transactions, two employee stock ownership plans (“ESOPs”) were formed. Schafer and Block were appointed as trustees of the ESOPs, and entered into indemnification agreements with mandatory arbitration clauses. While the DOL was investigating its suspicion that the ESOPs had purchased stock at inflated prices, and with knowledge of this, Multiband entered into a purchase agreement to buy the holding company. As part of the transaction, Multiband entered into indemnification agreements that contained essentially the same provisions as the prior agreements.… Continue Reading
By Porter Wright on Frommert v. Conkright, the Xerox “actuarial heresy” floor-offset plan case is back. This time, the Second Circuit has ruled that the new interpretation of the plan is unreasonable, and that ERISA’s “notice provisions” were violated.
Stating, “SPDs are central to ERISA,” the Court concluded that the SPD (summary plan description) did not satisfy 29 C.F.R. § 2520.102-3(l) because the SPD did not describe the offset provision in question in more detail. The Court held, “the Plan and its related SPDs violate ERISA’s notice provisions” and “Plaintiffs’ notice claims fall under Section 502(a)(3).” … Continue Reading
By Porter Wright on I have been blogging about ERISA basic principles and respect for boundaries, and just got a little help from the U.S. Supreme Court. In Heimeshoff v. Hartford Life Accident Insurance Comany, a unanimous decision, the Court upheld the three-year statute of limitations set forth in the terms of the ERISA benefit plan document. The Court held that while a cause of action does not commence until the plan issues a final denial in the claims appeal process, the plan and its participants can agree to commence the limitation period before that time (here, at the proof of loss due date).… Continue Reading
By Porter Wright on During the most recent recession (some might say a mini depression), many employers requested greater flexibility to reduce or suspend safe harbor non-elective contributions to their 401(k) plans. They felt that a temporary reduction or suspension of contributions would be a better alternative than outright terminating their plans. Although the applicable regulations contained procedures for reducing or suspending safe harbor matching contributions, it wasn’t until Treasury issued proposed regulations on May 18, 2009, that a procedure was available to reduce or suspend safe harbor non-elective contributions. Recently, Treasury issued final regulations that revise the requirements for permitted mid-year reductions or suspensions of safe harbor non-elective contributions. Somewhat surprisingly, the final regulations also modified the procedures for mid-year reductions or suspensions of safe harbor matching contributions to 401(k) plans. They also suggested that some relief may be on the way with respect to other types of mid-year plan amendments.… Continue Reading
By Porter Wright on The Internal Revenue Code sets forth various dollar limitations on benefits, contributions, compensation under employee benefit plans. The IRS has announced limits for 2014 tax years. For your reference, the IRS Cost-of-Living Adjustments summarizes these dollar limitations, as modified by the IRS for cost-of-living adjustments (COLAs), for 2014 and prior years.… Continue Reading
By Greg Daugherty on I thought I would share the following link to an article I recently published in Bloomberg Law. The article discusses recent litigation involving nonqualified deferred compensation plans, particular in cases involving a change in control or bankruptcy. It also discusses strategies that employers and executives should consider to avoid this type of litigation in the future. … Continue Reading
By Porter Wright on In a 5-4 opinion written by Justice Kennedy, the United States Supreme today held in United States v. Windsor that the provisions contained in the Defense of Marriage Act (“DOMA”) that exclude same-sex relationships from the definition of marriage and spouse for federal law purposes is unconstitutional as a deprivation of the liberty of persons that is protected by the Fifth Amendment of the Constitution of the United States. In doing so, Justice Kennedy has highlighted once again his role as a critical swing vote on the Court. He also has rendered a decision that seems likely to have far reaching implications for the design and administration of employee benefit plans in this country.
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By Greg Daugherty on Legendary UCLA Men’s Basketball Coach John Wooden once asked, “If you don’t have time to do it right, when will you have time to do it over?” If you sponsor a 403(b) plan, the IRS may have helped answer this question for you. In our prior blog, we highlighted the new Employee Plans Compliance Resolution … Continue Reading
By Greg Daugherty on Do you sponsor a qualified retirement plan? If you're a tax-exempt or governmental employer, do you sponsor a 403(b) plan? If you answered yes to either of these questions, you know that despite having the best administrative procedures in place, it is easy to make mistakes with respect to the plan. If the IRS were to catch these mistakes on audit, it has the potential to disqualify the plan. … Continue Reading
By Greg Daugherty on Employers with 403(b) arrangements have asked whether they are required to provide annual "university availability" notices. The statute and regulations do not explicitly require this. Code Section 403(b) contains a universal availability requirement, whereby participation is made available to all nonexcludable employees. This includes providing all eligible employees with an effective opportunity to participate.… Continue Reading
By Porter Wright on If you are the fiduciary of an ERISA plan that invested in John Hancock group variable annuity contracts, we hope you have heard that three individuals have filed a lawsuit, claiming to be representing your plan and its participants and beneficiaries. You will not be receiving service of process.… Continue Reading
By Deb Boiarsky on The IRS has issued proposed regulations relating to the submission of Form 8955-SSA and automatic extensions of the time to file this Form. Effective for any automatic extension filed on Form 5558 on or after June 21, 2012, any application for extension for the Form 8955-SSA will not require a signature. … Continue Reading
By Porter Wright on The Patient Protection and Affordable Care Act (“PPACA”) contained a provision that established the Early Retiree Reinsurance Program (“ERRP”), the goal of which was to encourage plan sponsors to retain health care coverage for retirees through at least 2013. The ERRP was designed to provide reimbursement to eligible sponsors of employment-based plans for a portion … Continue Reading
By Porter Wright on The Sixth Circuit has reversed the district court's dismissal of the GM ERISA stock-drop suit, Pfeil v. State Street Bank & Trust Co., and is allowing the case to proceed. You may recall that we cautioned fiduciaries of ESOPs and 401(k) plans allowing investment in employer stock to keep an eye on this case because it could be a game-changer. And now it is.… Continue Reading
By Porter Wright on Consideration of our country's annual budget has begun. On Monday, February 13, 2012, President Barack Obama released his proposed budget for fiscal year 2013 (which starts on October 1, 2012). … Continue Reading
By Porter Wright on The Treasury has announced proposed regulations and rulings regarding lifetime income choices. This guidance presumes that employers want to adopt more pension risk by providing more annuity options in their defined contribution and defined benefit retirement plans. … Continue Reading
By Porter Wright on Plan administrators need to take steps to ensure that the information they provide to plan participants is accurate. Otherwise, plan participants may use this misinformation to bring an estoppel claim.… Continue Reading
By Greg Daugherty on Several important changes will take effect in the determination letter program beginning in 2012. The IRS has stated that these changes are intended to (1) reduce the burden on employers for filing determination letter applications (and in some cases, eliminate the need to file an application) and (2) reduce the time it takes for the IRS to process determination letter applications. … Continue Reading
