ERISA Archives - Page 20 of 48 - EMPLOYEE BENEFITS BLOG

Cracking the Code: Taxing Developments in Benefit Compliance

by McDermott Will & Emery | Sep 19, 2014 | Executive Compensation

When a nonqualified deferred compensation plan qualifies as a “top-hat” plan under the regulations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the benefits of that particular classification to an employer are that the plan is exempt from various reporting, disclosure and funding rules. These exemptions can significantly ease an employer’s administration and maintenance of a nonqualified deferred compensation plan. Because of this simplicity, employers are more willing to offer these types of nonqualified deferred compensation arrangements and thereby offer an additional tax deferral opportunity to the select group of employees participating in the plan. However, not appropriately qualifying for the top-hat exemption means that a non-qualified deferred compensation plan can be recharacterized as a tax-qualified plan and therefore, unintentionally being required to legally expand eligibility for the deferred compensation plan to a much larger, unanticipated group of employees. Therefore, getting the top-hat qualification right is critical for the plan sponsor’s protection.

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View From McDermott: Top IRS and DOL Audit Issues for Retirement Plans

by Jeffrey Holdvogt | Sep 4, 2014 | Retirement Plans

Every year the Internal Revenue Service (IRS) and Department of Labor (DOL) conduct thousands of audits of employee benefit retirement plans. While IRS audits focus on compliance with the Internal Revenue Code, and DOL audits focus on violations of the Employee Retirement Income Security Act of 1974, as amended (ERISA), a review of these audits over the last five years reveals that auditors at both agencies are increasingly focused on the internal controls employers maintain for their employer benefit plans.

Please click here to read the full article View From McDermott: Top IRS and DOL Audit Issues for Retirement Plans, published by Bloomberg BNA Pension & Benefits Daily on 8/13/14.

Developments Impacting Benefits for Same-Sex Spouses

by Brian Tiemann and Todd Solomon | Sep 2, 2014 | Employment, Health and Welfare Plans

As federal and state agencies and courts further examine the implications of the Supreme Court of the United States’ ruling on same-sex marriage in U.S. v. Windsor, the laws and regulations governing employee benefits for employees’ same-sex spouses continue to be clarified. As a result, employers should monitor additional guidance as it is issued and continue to reevaluate the same-sex spousal benefits offered under their employee benefit plans.

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PBGC Coverage May No Longer Apply to Puerto Rico-Only Qualified Retirement Plans

by Jeffrey Holdvogt | Aug 14, 2014 | Retirement Plans

Employers that sponsor defined benefit qualified retirement plans benefiting only Puerto Rico employees should be aware that Pension Benefit Guaranty Corporation (PBGC) coverage may no longer apply. Last year, the PBGC withdrew old prior opinion letters (Opinion Letters 77-172 and 85-19) regarding PBGC coverage in Puerto Rico and Guam. Those opinion letters articulated the PBGC’s position at that time, that Title IV of the Employee Retirement Income Security Act (ERISA) (providing for PBGC coverage), may apply to defined benefit plans covering only Puerto Rico participants if the Puerto Rico plan is either qualified under Section 401(a) of the U.S. Internal Revenue Code or has been operated in practice in accordance with the requirements of Section 401(a) for at least the five preceding years. Earlier this year, in remarks made at an enrolled actuaries meeting, PBGC officials stated that, going forward, PBGC will determine that a plan is not covered under Title IV of ERISA if (1) the plan’s trust is created or organized outside of the United States (e.g., Puerto Rico) and (2) no election under ERISA section 1022(i)(2) has been made. As a result, it appears the new PBGC position is that Puerto Rico-only qualified plans generally are not covered under Title IV of ERISA (although dual-qualified plans with Puerto Rico participants are covered). Since few Puerto Rico plans have made an election under ERISA section 1022(i)(2) due to the strict U.S. laws applicable to such arrangements, this new PBGC position will affect a number of Puerto Rico-only defined benefit plans. PBGC officials also stated that if the PBGC determines that a plan is not covered under Title IV of ERISA, it may refund up to six years of premiums.

Employers with Puerto Rico-only defined benefit plans should consider whether PBGC coverage of their plan is still possible or desired. If not, a refund of PBGC premiums should be sought.

Supreme Court Rejects “Presumption of Prudence,” Adopts New Pleading Standards in Fifth Third Bancorp v. Dudenhoeffer

by Wilber H. Boies, PC, Chris C. Scheithauer and Stephen Pavlick | Jul 15, 2014 | Employee Stock Ownership Plans (ESOPs), Retirement Plans

In a highly anticipated decision, the Supreme Court recently ruled that ESOP fiduciaries are not entitled to a presumption of prudence under ERISA in connection with their decisions to buy, hold or sell the employer’s securities. While the elimination of this presumption is a loss for ESOP fiduciaries, the decision imposes additional burdens on plaintiffs that will make it easier for plan sponsors and fiduciaries to defend so-called “stock-drop” cases. It also requires plan sponsors to reevaluate plan language requiring that certain funds be invested in employer securities and to reconsider hiring an independent fiduciary to manage the employer stock fund.

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PBGC Announces 2014 Moratorium on ERISA Section 4062(e) Enforcement Actions

by McDermott Will & Emery, Michael T. Graham and Patrick Ryan | Jul 10, 2014 | Retirement Plans

On July 8, 2014, the Pension Benefit Guaranty Corporation (PBGC) issued a press release announcing a moratorium on its enforcement of Employee Retirement Income Security Act of 1974(ERISA) Section 4062(e) through the end of 2014. In general, ERISA Section 4062(e) allows PBGC to require that employers financially guarantee pension obligations in the form of plan contributions or a bond or escrow amount based on a plan’s unfunded termination liability when an employer with a pension plan shuts down operations at a facility and, as a result of the shutdown, more than 20 percent of the employer’s employees who are plan participants incur a separation from employment.

PBGC had recently been quite aggressive in its enforcement actions under ERISA Section 4062(e). As a result, ordinary business decisions, like asset deals and other business decisions impacting less than a facility’s full operations, were gaining PBGC’s attention. PBGC believes that the moratorium will enable it to target future enforcement efforts to those cases where employee pensions are genuinely at risk and allow it to continue to consult with businesses, labor and other stakeholders in developing a practical approach to enforcement. The moratorium runs through December 31, 2014, and applies to currently pending as well as new cases. Importantly, PBGC advised that companies must continue to report potential ERISA Section 4062(e) events to the PBGC during the period of the moratorium. Further, the moratorium does not preclude PBGC enforcing ERISA Section 4062(e) with respect to any reportable event that occurs during the moratorium period. The moratorium is not a safe harbor and there is no indication that it will continue past December 31, 2014.

New IRS Program for Delinquent Form 5500 Filers of Non-ERISA Plans

by Jeffrey Holdvogt, Patrick Ryan and Todd Solomon | Jun 17, 2014 | Retirement Plans

The Internal Revenue Service recently established a one-year pilot program that provides plan administrators and plan sponsors of certain non-ERISA and foreign plans subject to the annual Form 5500 reporting requirements relief from penalties under the Internal Revenue Code. The penalty relief is temporary and expires on June 2, 2015.

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View From McDermott: What Private Equity and Hedge Funds (and Their Benefit Plan Investors) Should Know About ERISA

by Joseph K. Urwitz | May 28, 2014 | Retirement Plans

ERISA imposes numerous obligations on fiduciaries holding assets of employee benefit plans. In addition to discharging its duties prudently and for the exclusive purpose of providing benefits to benefit plan participants and their beneficiaries, ERISA establishes other fiduciary obligations, including prohibiting fiduciaries from engaging in a variety of transactions with plan assets known as ‘‘prohibited transactions.’’ Failure to follow fiduciary duties can result in lawsuits, Department of Labor (DOL) investigations and penalty taxes for which fiduciaries may be personally liable, as discussed below. This article discusses ERISA issues of relevance to private equity and hedge funds and their benefit plan investors. The first part discusses issues and problems resulting from being an ERISA fiduciary, while the second describes ways private equity and hedge funds can escape ERISA coverage and some pitfalls to avoid when attempting to do so.

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Supreme Court Grants Certiorari to Review Sixth Circuit’s Pro-Union Inference in Retiree Health Insurance Benefits Cases

by Wilber H. Boies, PC | May 7, 2014 | Benefit Controversies, Health and Welfare Plans

The Supreme Court of the United States has agreed to resolve a circuit split about how courts should interpret collective bargaining agreements that provide for health insurance benefits for retired employees in M&G Polymers USA, LLC v. Tackett. The U.S. Court of Appeals for the Sixth Circuit says that such retiree health insurance benefits carry with them an inference that they are vested, or guaranteed to continue for life, while the majority of the other federal appellate courts require specific durational language to find that benefits are vested. Given the high cost of retiree health insurance on many employers’ balance sheets, M&G Polymers USA could represent a game changer for employers’ ability to modify retiree benefits going forward.

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Sixth Circuit to Revisit Unprecedented Expansion of ERISA Wrongful Denial of Benefits Remedies

by Michael T. Graham and Stephen Pavlick | Mar 6, 2014 | Retirement Plans

On December 6, 2013, in Rochow v. Life Insurance Company of North America, 737 F.3d 415 (6th Cir. 2013), the Sixth Circuit affirmed a district court ruling that an insurance company that improperly denied ERISA disability benefits must not only pay the benefits sought, but also disgorge its profits earned on those benefits. In that decision, a split panel of the Sixth Circuit held that ERISA’s remedial provisions did not preclude a participant from seeking recovery of his wrongfully denied benefits under ERISA Section 502(a)(1)(B) as well as other equitable relief under ERISA Section 502(a)(3). However, Judge McKeague wrote a stinging dissent, arguing that the majority’s ruling was “an unprecedented and extraordinary step to expand the scope of ERISA coverage” that was “contrary to clear Supreme Court and Sixth Circuit precedent.”

After that decision, the insurance company sought a rehearing and review of the majority’s ruling en banc, which involves a rehearing by all active Sixth Circuit judges. On February 19, 2014, a majority of the Sixth Circuit’s judges granted the motion for rehearing en banc, which serves to vacate the earlier panel’s December 6, 2013 decision. The parties are now set to file supplemental briefs by May 12, 2014, with an argument to the en banc panel expected for this summer. This decision will be important in determining whether ERISA’s remedial provisions provide for both recovery of benefits and disgorgement of profits (or other equitable relief) in the same lawsuit.

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