Archives: Defined Contributions Plans

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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

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

What to Do with Missing Participants: Department of Labor Provides Guidance

When a defined contribution plan terminates, the plan administrator must distribute participants’ accounts as soon as administratively feasible.  However, participants do not always update the plan administrator when their contact information changes, and some participants may not be responsive when the plan administrator requests directions on how to distribute their accounts. On August 14, 2014, … Continue Reading

Stock-Drop Decision Helpful to ESOP Fiduciaries

Yesterday, the Supreme Court issued its much anticipated decision in the stock-drop case, Fifth Third Bancorp v. Dudenhoeffer.  The Court vacated the lower court decision that was adverse to the employer, Fifth Third Bancorp, and remanded the case to the lower courts for further proceedings. Fiduciaries of employee stock ownership plans (ESOPs) had hoped 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

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

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

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

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

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

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

2014 Administration Proposal Would Eliminate ESOP Dividend Deduction

The Obama Administration’s 2014 budget includes a proposal to eliminate the deduction for dividends paid on employer stock held by an employee stock ownership plan (“ESOP”).  The proposal would be effective for dividends paid after the date the budget is enacted.  Under the proposal, the deduction would continue to be available to corporations with annual receipts … Continue Reading

IRS Announces § 403(b) Plan Document Review Procedure for Prototype and Volume-Submitter Plans

The Internal Revenue Service issued Revenue Procedure 2013-22 yesterday (March 28, 2013).  The Revenue Procedure describes the Service’s new procedure for issuing opinion letters and advisory letters for prototype and volume-submitter § 403(b) plans; it revises the proposed procedure that was released four years ago in Announcement 2009-34.  As part of the proposed procedure, the … 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

IRS Releases VCP Kit to Help 403(b) Plan Sponsors Who Failed to Timely Adopt a Plan Document

A § 403(b) plan that failed to adopt a plan document by December 31, 2009 is not entitled to favorable tax treatment.  However, under new guidance, a plan may regain its favorable tax treatment if it adopts a written plan document and requests a compliance statement through the Voluntary Compliance Program (“VCP”). The IRS recently released … 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

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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