Archives: Defined Benefit Plans

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What Employers Need to Know About the Fiduciary Conflict Rule

Our colleague Jason Levy recently published an article in The Actuary Magazine on the Department of Labor’s fiduciary conflict rule.  More than six years in the making, this rule represents perhaps the most significant regulation from the DOL during the Obama Administration. The fiduciary conflict rule expands the definition of fiduciary to cover, with certain … 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

Pension De-Risking Gets New Rules: IRS Shuts Down Lump Sum Offers to Retirees While Connecticut Increases Safety of Group Annuity Contracts

The IRS issued a notice today stating that it intends to amend regulations to prohibit a pension plan from offering a lump sum distribution to participants who are receiving annuity payments. The new guidance would take effect today, except for certain lump sum offers already in progress. While de-risking through lump sum offers becomes more … Continue Reading

Marriage Equality Decision Is Big News (But May Have Little Impact on Private Sector Employee Benefit Plans)

The Supreme Court’s decision last week in Obergefell v. Hodges is big news: it held that the 14th Amendment requires states to license same-sex marriages and to recognize lawful out-of-state same-sex marriages, and thus legalized same-sex marriage throughout the country.  In a final section that begins with a philosopher’s take — “No union is more … Continue Reading

ERISA Advisory Council Considers Model Lump Sum Window Disclosures

The ERISA Advisory Council held a hearing last week on “Model Notices and Disclosures for Pension Risk Transfers.”  The Council, which advises the Secretary of Labor on the Labor Department’s administration of ERISA, is working to develop model disclosures to participants who receive lump sum offers in connection with de-risking transactions.  While the Council is … 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

ERISA Liability Insurance: Know What’s Covered . . . And What Isn’t

For sponsors and fiduciaries of employee benefit plans, the Amara case has presented many interesting and important issues that have been discussed at length in this blog and elsewhere. However, the most recent chapter in this long-running dispute has not garnered nearly as much attention as either the Supreme Court or Second Circuit decisions that … Continue Reading

Oral Misrepresentation Could Support Fiduciary Breach Claim, District Court Holds

In Lees v. Munich Reinsurance America, Inc., a federal district court in New Jersey recently held that an oral misrepresentation could serve as the basis for a fiduciary breach claim. The plaintiff in Lees worked for American Re-Insurance Company (a predecessor of the defendant), but was being paid by a related entity. Several years into … 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

New Law Reduces PBGC Exposure for Employers That Cease Operations at a Facility

The Consolidated and Continuing Appropriations Act, 2015 (or “Cromnibus”) revamped the notification and funding requirements under § 4062(e) of ERISA.  As interpreted by the Pension Benefit Guaranty Corporation (“PBGC”), § 4062(e) often required an employer to make substantial contributions or provide other financial commitments to a defined benefit plan when the employer ceased operations at … 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

PBGC Proceeds With Proposal to Collect Information on Pension Risk Transfers

The PBGC is proceeding with an initiative to collect information on what it calls “risk transfer activity” in defined benefit pension plans — essentially certain de-risking transactions — as part of the filing plan sponsors make when they pay PBGC premiums.  If approved by the Office of Management and Budget, the PBGC’s draft new premium … Continue Reading

District Court Opens Door to Suits by Defined Benefit Plan Participants

In the wake of investment losses from the 2008 market downturn, many fiduciaries of employee benefit plans faced lawsuits brought by plan participants.  Most cases involved defined contribution plans, in which participants sought to recover investment losses that had directly reduced their individual benefits.  In contrast, fewer cases were brought against fiduciaries of defined benefit … 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

Senators Identify Concerns and Call for Guidance on Pension De-Risking

The Chairs of the two Senate committees that govern pensions sent a letter last week to the heads of government agencies overseeing pensions requesting additional guidance on pension de-risking.  The letter was written by Senator Wyden (D-Or), as Chair of the Committee on Finance, and Senator Harkin (D-IA), as Chair of the Committee on Health, … Continue Reading

Motorola Solutions Announces Third-Largest Pension De-Risking Transaction

Earlier today, Motorola Solutions announced that it is transferring $3 billion of pension liabilities to Prudential.  The transfer covers approximately 30,000 plan participants who  currently receive monthly pensions.  In addition, former employees who have a vested benefit under the company’s pension plan but have not yet begun to receive benefits will be given a one-time … Continue Reading

Reducing Pension Costs By Increasing Defined Benefit Pensions: Kodak’s Innovative Approach

Kodak recently announced that it is increasing the benefits provided under its defined benefit plan.  Kodak will credit an additional 3% of pay each year under its cash balance pension plan instead of making a matching contribution of up to 3% of pay under its 401(k) plan.  In connection with this change, Kodak announced that … 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

Verizon Prevails (Again) on Motion to Dismiss Challenge to $7.5 Billion Pension Settlement

Seems like we’ve written this before, but this time we (actually a federal district court) really means it:  the court in Lee v. Verizon granted last Friday Verizon’s motion to dismiss a class action lawsuit challenging its transfer in late 2012 of $7.5 billion of pension liabilities to Prudential (Lee v. Verizon, N.D. Tex.).  The … Continue Reading

Will Windsor Apply Retroactively to Retirement Plans? IRS Provides Some (But Not All) the Answers

When the Supreme Court held in United States v. Windsor last June that federal law recognizes same-sex marriages, the question arose whether this ruling would apply to tax-qualified retirement plans retroactively.  Last week, the IRS answered that question, in part. For tax-qualification purposes, plans must generally recognize the Windsor decision as of the date of … Continue Reading

Another Large Pension Settlement Indicates Transfer Trend Will Continue

SPX Corporation recently announced it would transfer pension liabilities for 16,000 retirees to Massachusetts Mutual.  The amount of these liabilities is reported to be $625 million.  In addition, SPX will offer 7,500 former employees the option of taking a lump sum distribution from the SPX pension plan.  SPX expects that the two actions together will reduce … Continue Reading

Institutional Investor Names the 40 Most Influential People in Pensions

Who is most influential in shaping the future of the nation’s pensions?  Institutional Investor names the top 40 for 2013.  The list includes politicians (such as Rahm Emanuel and two U.S. senators), actuaries, hedge fund managers, government officials, academics − and two lawyers in private practice, David Boies (for his work defending Rhode Island’s pension … Continue Reading

ERISA Plans’ Valuation of Private Equity and Other Alternative Investments Draws Increased Scrutiny

The Department of Labor’s Office of Inspector General recently issued a report detailing concerns with the valuation of alternative investments (such as private equity funds, hedge funds, and real estate) held by ERISA plans.  ERISA requires plan sponsors and fiduciaries to value investments for several purposes, including to determine funding obligations, select investments, monitor investment … Continue Reading
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