The United States Supreme Court’s recent landmark rulings on same-sex marriage have significantly changed employers’ options and obligations with respect to benefit coverage for employees’ same-sex spouses and partners. Until recently, some employers voluntarily extended benefits to same-sex partners in recognition of the fact that same-sex couples had limited ability to marry. However, now that same-sex marriage is legal in all 50 states and recognized under federal law, employers must extend certain spousal benefits to same-sex spouses and can do so without additional administrative complexity. In addition, some employers are phasing out unmarried partner benefits by requiring partners to marry in order to be eligible for spousal benefit coverage.
The recently enacted Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 includes provisions that will extend the deadlines for filing future Form 5500 and Form 990 series information returns. In addition, the legislation modifies rules relating to the ability of veterans to participate in health savings accounts (HSAs), allows employers to disregard employees receiving certain veterans benefits when determining whether they are subject to the shared responsibility requirements of the Affordable Care Act (ACA), and further extends the ability of employers to use excess pension assets to pay for retiree health and group-term life insurance.
The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2016. Although some of the dollar limits currently in effect for 2015 will change, the majority of the limits will remain unchanged for 2016.
The U.S. Court of Appeals for the Seventh Circuit recently addressed the notice requirement of the federal successor liability doctrine where withdrawal from a multiemployer pension plan occurred after a sale of assets.
On September 4, 2015, the U.S. Court of Appeals for the Seventh Circuit ruled in Fontaine v. Metropolitan Life Insurance Company that the Employee Retirement Income Security Act of 1974, as amended (ERISA), does not preempt an Illinois state insurance regulation that prohibits discretionary authority clauses in health and disability plan insurance policies. The Seventh Circuit upheld the ruling of the U.S. District Court for the Northern District of Illinois, which decided that the Illinois regulation was not subject to preemption under precedent set forth in prior decisions by the Supreme Court of the United States.
Much has been written about the challenges that exist for the Employee Retirement Income Security Act of 1974 (ERISA) plan fiduciaries related to their investment of plan assets or review of plan administration fees related to those investments, and those challenges will continue for the foreseeable future given recent decisions of the Supreme Court in Dudenhoeffer and Tibble. However, before any litigation typically commences under ERISA, a claimant must exhaust their administrative claims review remedies under ERISA and the applicable benefit plan. In reviewing benefit claims, an ERISA plan administrator or their delegate must reasonably and timely jump through many hoops to decide benefit claims and notify the claimant of a benefit determination. If a plan administrator fails to clear any of these hoops (or just forgets to jump through them), the plan and the plan administrator can incur liabilities or waive defenses typically available in defending the claims in litigation.
This article, which was originally published by Bloomberg BNA’s Pension Benefits Daily, analyzes court cases that discuss how plan administrators should properly decide and administer ERISA benefit claims and what liability should attach to poor claims administration. Based on this case review, this article then suggests best practices to avoid mishandling the ERISA claims review process.
The Internal Revenue Service (IRS) recently issued two significant notices for employers that sponsor defined benefit pension plans, particularly those considering lump-sum windows as a “de-risking” option for their plans. In Notice 2015-49, the IRS notified plan sponsors that they are no longer permitted to offer retirees in pay status the option to take a lump-sum payment in lieu of ongoing annuity payments. Plan sponsors may, however, continue to offer a lump-sum payment option to deferred vested participants not in pay status. In Notice 2015-53, the IRS released updated mortality tables for 2016 and delayed the issuance of new regulations, which could incorporate new mortality assumptions recommended by the Society of Actuaries that many believe would increase pension funding liabilities and minimum lump-sum payments.
The availability of annuity options under defined contribution plans has increased in recent years due to the shift from defined benefit to defined contribution plans. The U.S. Department of Labor recently issued new guidance that clarifies the legal responsibilities for fiduciaries who select an annuity provider for a defined contribution plan.
Generally, any type of organization can offer a defined benefit pension plan under Section 4019a) in the Internal Revenue Code of 1986, as amended (the “Code) or a Code Section 401(k) Plan. However, only employers described in Code Section 501(a) and educational organizations described in Code Section 170(b)(A)(iii) are permitted to sponsor Code Section 403(b) plans. Equally, Code Section 457 plans can only be sponsored by governmental and other organizations exempt from tax under the Code. Until roughly 2009, both Code Sections 403(b) plans and Code Section 457 plans had been basically ignored or overlooked by the Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”). However, as these two plans have accumulated significant assets over the course of time (many occurring due to the consolidation of large plans in the healthcare sector through business combinations), the IRS and DOL have deemed it necessary to start taking a closer look. The audits of Code Section 403(b) plans and Code Section 457 plans has increased dramatically in the last few years to the point where the IRS has now issued its “top ten list” of issues which tax-exempt entities need to focus on when sponsoring these types of plans.
On July 21, 2015, the Internal Revenue Service (IRS) issued Announcement 2015-19 (the Announcement), which ends the five-year remedial amendment cycles for individually designed plans effective January 1, 2017. For remedial amendment cycles beginning after 2016, plan sponsors will no longer be able to apply for determination letters on their individually designed defined contribution and defined benefit plans, except for initial qualification and qualification upon termination. Effective on the Announcement date, off-cycle requests for determination letters will no longer be accepted. The IRS intends to publish additional guidance periodically, and seeks comments on the upcoming changes.
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