Archives: Defined Benefit Plans

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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

Not To Miss the Party, Department of Labor Joins the Place Of Celebration Approach Following Windsor

The Department of Labor issued a technical release today addressing the effect of the Supreme Court’s decision in U.S. v. Windsor on employee benefit plans.  The Windsor decision struck down section 3 of the Defense of Marriage Act, thereby requiring the federal government to recognize same-sex marriages that are recognized under state law.  The IRS … Continue Reading

Celebrating the Arrival of Windsor Guidance: Same-Sex Marriages Will Be Recognized For Federal Tax Purposes Based on Place of Celebration

The IRS issued guidance today defining same-sex marriage for purposes of federal tax rules.  Following the Supreme Court’s decision in United States v. Windsor last June invalidating section 3 of the Defense of Marriage Act (DOMA), federal law no longer limits the definition of marriage to opposite sex spouses.  However, the Windsor decision did not … Continue Reading

Private Investment Funds Face Potential Liability for Portfolio Companies’ Employee Benefits

A federal appeals court recently ruled that a private equity fund might be responsible for the unfunded pension liabilities of its bankrupt portfolio company.  This ruling could have broader repercussions for private investment funds and the companies they own.  If the companies are considered to be related employers under the rules that govern employee benefits, … Continue Reading

Federal Courts Decide Rights of Same-Sex Spouses After DOMA

More than a month after the Supreme Court struck down section 3 of the Defense of Marriage Act (“DOMA”) in United States v. Windsor, employers are still waiting for the federal government to answer fundamental questions about the rights of same-sex spouses in the post-DOMA world.  In the meantime, however, lower federal courts have begun … Continue Reading

PBGC Proposes to Simplify Premium Rules

The Pension Benefit Guaranty Corporation has released a proposed regulation that would set a uniform due date for all PBGC premiums.  Under current rules, the premium due date depends on the size of the plan and the type of premium.  For example, large calendar-year plans are required to pay fixed-rate premiums on February 28 and … Continue Reading

Supreme Court’s DOMA Decision Has Significant Implications for Employers and Employee Benefit Plans

Earlier today in United States v. Windsor, the Supreme Court struck down section 3 of the federal Defense of Marriage Act (“DOMA”).  Section 3 of DOMA limits the definition of marriage for purposes of federal law to marriage between individuals of the opposite sex.   The Court held that DOMA deprives same sex couples of due … Continue Reading

Verizon Prevails on Motion To Dismiss Challenge to $7.5 Billion Pension Settlement

Earlier today, a federal district court granted Verizon’s motion to dismiss a class action lawsuit challenging its recent transfer of $7.5 billion of pension liabilities to Prudential (Lee v. Verizon, N.D. Tex.).  The court concluded that plaintiffs had failed to state a claim that the transaction violated ERISA’s disclosure and fiduciary obligations.  The court granted … Continue Reading

Regulatory Safe Harbors Are Critical to Employee Benefit Plans

Regulatory safe harbors play a critical role in the design of employee benefit plans by: Providing concrete guidance on how to comply with the complex rules that govern plans; Facilitating efficient, effective and consistent plan administration; and Encouraging employers to establish and continue their employee benefit plans and furthering participants’ understanding of the rules. Without … Continue Reading

ERISA Advisory Council Holds Hearing on Pension De-Risking

The subject of pension de-risking continues to receive considerable attention.  Last week, the ERISA Advisory Council waded into the issue, holding a hearing on “Private Sector Pension De-risking and Participant Protections.”  The Council, which advises the Secretary of Labor on the Labor Department’s administration of ERISA, is examining the ways in which employers de-risk pension … 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

While the Supreme Court considers DOMA’s fate, what’s an in-house benefits lawyer or HR professional to do?

If the Supreme Court holds that the Defense of Marriage Act (“DOMA”) is unconstitutional, those involved with the administration of employee benefits plans will be very busy.  Under DOMA, a benefit plan is not required to recognize same-sex marriage and, in many cases, must treat same-sex spouses differently than opposite-sex spouses.  If DOMA is struck … Continue Reading

Plan Fiduciaries Might Need to File a Notice to Avoid Registration Requirements as Commodity Pool Operators

Several changes to the definition of “commodity pool operator” could require fiduciaries of retirement plans to file for an exemption from treatment as a “commodity pool operator,” or be subject to comprehensive registration and compliance requirements.  A “commodity pool operator” is generally a manager of a pooled investment vehicle that invests in commodity interests.  The … Continue Reading

Participants Lack Standing to Challenge Defined Benefit Plan Investment Decisions

The Fourth Circuit recently held that participants in a defined benefit plan lacked standing under Article III of the United States Constitution to challenge investment decisions made by the plan’s fiduciaries.  David v. Alphin, No. 11-2181 (4th Cir. Jan. 14, 2013).  The plan at issue was overfunded and the participants had not failed to receive … 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

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
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