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California’s Increased Paid Family Leave Benefits and San Francisco’s Paid Parental Leave Ordinance

Long considered to be at the forefront of providing benefits to employees who take family and medical leave, California recently enacted a new law aimed at increasing the benefits paid out to employees who take time off to care for an ill or injured family member or for new child bonding. Meanwhile, San Francisco’s Board … Continue Reading

Changes to IRS Determination Letter Program Raise Practical Questions

On July 21, the IRS announced that it is eliminating its current determination letter program for tax-qualified retirement plans. (IRS officials had been sending signals that this was coming for several months. It is now official.) Starting in 2017, the IRS will accept determination letter applications in only three circumstances: Initial qualification for a new … Continue Reading

Recent Case Illustrates Importance of Careful Plan Drafting

by Seth Safra and Jonathan Goldberg A recent appellate court decision, Cottillion v. United Refining Co. et al. (3d Cir. Mar. 18, 2015), is a good reminder of the high cost that a drafting error can have for a plan’s sponsor.  Although courts have recognized a “scrivener’s error” doctrine, the bar for establishing a scrivener’s error … Continue Reading

IRS Issues Warning on Documentation Requirements for 401(k) Plans

A recent post in the IRS’s Employee Plans News has two important tips for employers who sponsor 401(k) and similar plans: The plan sponsor is ultimately responsible for maintaining records that document compliance with tax-qualification requirements. Many employers rely on third-party administrators to maintain records of day-to-day transactions, such as loans, hardship withdrawals and distributions. … Continue Reading

Supreme Court Ruling on Agency Flip-Flopping Affects Rules for Benefit Plans

A recent Supreme Court decision, Perez v. Mortgage Bankers Ass’n, highlights two important points about the authority of the U.S. Department of Labor, IRS, and other administrative agencies to interpret rules: U.S. courts will generally follow administrative interpretations of statutes and an agency’s regulations, except in rare circumstances. This deference extends to “sub-regulatory” guidance, like … Continue Reading

Two Recent Cases Offer Cautionary Tale to Plan Sponsors Relying on IRS Guidance

Two cases decided in January—one by the Sixth Circuit and another by the District Court for the District of Columbia—offer a cautionary tale to plan sponsors who rely on a statute or regulation that allows retroactive amendments to tax-qualified plans. Both cases involved a change to the interest and mortality assumptions that pension plans use … Continue Reading

Action Required for Retirement Plans Covering Puerto Rico Residents

An eight-year transition period for U.S. tax-qualified retirement plans covering Puerto Rico residents is set to end in 2015.  Employers that cover Puerto Rico residents under U.S. tax-qualified plans should consider spinning off the Puerto Rico portion of the plan in 2015, to avoid subjecting Puerto Rico residents to U.S. federal income tax.… Continue Reading

Increase to Transit Reimbursement Limits Might Necessitate Corrective Tax Filings

The tax extenders legislation (formally called the “Tax Increase Prevention Act of 2014“) signed into law on December 17 included a one-year extension of “parity” for the limits on tax-exempt mass transit and parking benefits.  The change retroactively increases the limit on pre-tax mass transit benefits, which means that it affects the information that must … Continue Reading

Understanding Limits on PBGC Protection for Amounts Rolled Over From a Defined Contribution Plan

The Pension Benefit Guaranty Corporation (“PBGC”) recently finalized its rule on insurance for amounts rolled over from a defined contribution plan to a defined benefit plan.  Although amounts rolled over will be subject to greater protections than apply for most other benefits (i.e., benefits derived from employer contributions), the full rollover benefit will not necessarily … Continue Reading

Judges Disagree on Remedies for Pension Mistake

A recent Ninth Circuit decision, Gabriel v. Alaska Elec. Pension Fund, offers useful insight for deciding how to fix a pension overpayment. Virtually every employer that administers a pension plan has experienced (or will experience) discovering a calculation error after incorrect payments have been made for several years–resulting in thousands of dollars of overpayments.  Fixing … Continue Reading

Two HIPAA Settlements Follow Stolen Laptops

Recently, HHS Office of Civil Rights (OCR) announced that it has entered into settlement agreements with two entities following enforcement actions, both arising from stolen laptops that were not encrypted in accordance with the Security Rule. According to HHS, an unencrypted laptop was stolen from a physical therapy center in Springfield, Missouri.  The center was … Continue Reading

Appellate Court Affirms Fiduciaries’ Liability for Failure to Monitor Revenue Sharing Paid to Recordkeeper

On March 19, the Eighth Circuit addressed a long-running case involving alleged fiduciary duty breaches in the administration of 401(k) plans. (Tussey v. ABB, Inc.)  Although the Eighth Circuit emphasized that courts owe deference to choices entrusted by plan documents to fiduciary discretion – and reversed one finding of liability partly on that basis – … Continue Reading

Electronic Disclosure: Which Way Are We Going?

A recent GAO Report offers interesting insight into the Department of Labor’s thinking on electronic disclosure. For the better part of the last ten years, many plan sponsors and service providers have been pushing for more flexibility to provide required disclosures electronically.  In particular, they have asked the Labor and Treasury Departments to replace an … Continue Reading

Potential Savings Opportunity for Sponsors of Self-Insured Medical Plans

By now, employers who sponsor self-insured medical plans are familiar with the fees they must pay to fund Patient-Centered Outcomes Research (“PCORI”) and the Transitional Reinsurance Program. This post describes a detail that can have a significant effect on the amount that each sponsor must pay. Both fees are calculated as a dollar amount per covered … Continue Reading

Second Circuit Reinforces Plan Drafting Opportunity for Employers

We recently observed that ERISA gives employers considerable leeway to design plan rules that fill in gaps in ERISA.  A recent Second Circuit case, Thurber v. Aetna Life Ins. Co., illustrates two important ways that plan drafting can meaningfully affect the outcome of litigation involving the plan: First, a plan may specify the standard of … Continue Reading

Employers Increasingly Allow Use of Personal Devices, Raising Tax Issues

Our colleagues at InsidePrivacy recently observed that employers are increasingly giving employees access to work email and apps on their personal devices.  In a recent survey, 38 percent of CIOs said that their organizations will stop providing laptops, smartphones, and tablets to workers by 2016.  As our colleagues noted, Bring Your Own Device (“BYOD”) policies … Continue Reading

Providing Erroneous Information to Participants May Expose Plan Fiduciaries to Liability for “Make Whole” Relief

Employees and retirees frequently receive information relating to benefits – eligibility to participate, coverage for certain medical treatment, enrollment status, anticipated benefits at retirement, and so forth.  Sometimes that information appears in formal documents published by named plan fiduciaries.  Other times it comes in response to one-off inquiries made to persons working in the HR … Continue Reading

When Does a Plan Document “Encourage” an Employer Stock Fund Enough to Justify the Presumption of Prudence?

Many appellate courts have ruled that fiduciaries who allow plan investment in employer stock are entitled to deferential judicial review or a “presumption of prudence” when the plan document requires or encourages the offering of employer stock as an investment option.  But a new Second Circuit decision demonstrates that references to an employer stock fund … Continue Reading

Something to Watch This Proxy Season: Next Generation Executive Compensation Lawsuits

As recently reported in a Wall Street Journal article, plaintiffs’ lawyers hatched a new generation of executive compensation lawsuits in 2012, which are expected to be rolled out again in 2013.  These lawsuits are distinct from the first generation of “say-on-pay” lawsuits in 2011, which generally were filed against companies following shareholder meetings based on … Continue Reading

New HIPAA / HITECH Rule Requires Health Plan Changes

The HIPAA / HITECH omnibus rule published in the Federal Register late last week includes a number of changes that will require action by employers, health plans, and business associates in the coming months.  The new requirements take effect on March 26, although group health plans and business associates have until September 23, 2013, to … Continue Reading

IRS Updates Voluntary Compliance Program for Retirement Plans

The IRS recently updated its voluntary compliance program for tax-qualified retirement plans.  The Employee Plans Compliance Resolution System (“EPCRS”) allows plan sponsors to correct many operational and plan document errors that otherwise might jeopardize the plan’s tax-qualified status.  The updated version of EPCRS appears in Revenue Procedure 2013-12.  Plan sponsors will be required to follow … Continue Reading

Worker (Mis)Classification: IRS Expands Voluntary Settlement Program

Misclassification of workers remains a hot button issue.  The IRS continues to scrutinize employers’ worker classification practices, and it is likely that health reform will cause the Department of Labor to review classification issues even more closely than it has in the past.   In an effort to encourage employers to reclassify independent contractors as employees, … Continue Reading

2013 Preview of Expected Developments in Employee Benefits and Executive Compensation

In the coming year, we expect to see continued activity on the part of the agencies and Congress with respect to employee benefits and executive compensation.  The following is a preview of major guidance anticipated in 2013. … Continue Reading

Are the Educational and Adoption Assistance Tax Exclusions Going to Expire?

Regardless of how the so-called fiscal cliff is “resolved” – and whether this occurs before the end of 2012 – the expiration of educational assistance and adoption assistance tax provisions at the end of this year is already causing headaches for employers who provide (or hope to provide) their employees with these tax-advantaged benefits.  However, … Continue Reading
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