December 2011 | EMPLOYEE BENEFITS BLOG

IRS Extends Transition Relief for Puerto Rico Qualified Plans to Participate in U.S. Group Trusts and Deadline to Transfer Assets

by McDermott Will & Schulte | Dec 28, 2011 | Retirement Plans

by Nancy S. Gerrie and Jeffrey M. Holdvogt

On December 21, 2011, the U.S. Internal Revenue Service (IRS) issued Notice 2012-6, which provides welcome relief for U.S. employers with qualified employee retirement plans that cover Puerto Rico employees. Notice 2012-6 provides that the IRS will extend the deadline for employers sponsoring plans that are tax-qualified only in Puerto Rico (ERISA Section 1022(i)(1) Plans) to continue to pool assets with U.S.-qualified plans in group and master trusts described in Revenue Ruling 81-100 (81-100 group trusts) until further notice, provided the plan was participating in the trust as of January 10, 2011, or holds assets that had been held by a qualified plan immediately prior to the transfer of those assets to an ERISA Section 1022(i)(1) Plan pursuant to a spin-off from a U.S.-qualified plan under Revenue Ruling 2008-40.

Notice 2012-6 also extends the deadline for sponsors of retirement plans qualified in both the United States and Puerto Rico (dual-qualified plans) to spin off and transfer assets attributable to Puerto Rico employees to ERISA Section 1022(i)(1) Plans, with the resulting plan assets considered Puerto Rico-source income and not subject to U.S. tax.

There are now two separate deadlines:

First, in recognition of the fact that Puerto Rico adopted a new tax code in 2011 with significant changes to the requirements for qualified retirement plans, the IRS has extended the general deadline to December 31, 2012, for dual-qualified plans to make transfers to Puerto Rico-only plans, in order to give plan sponsors time to consider the effect of the changes made by the new tax code.
Second, in recognition of the fact that the IRS has not yet issued definitive guidance on the ability of an ERISA Section 1022(i)(1) Plan to participate in 81-100 group trusts, the IRS has extended the deadline for dual-qualified plans that participate in an 81-100 group trust to some future deadline, presumably after the IRS reaches a conclusion on the ability of a dual-qualified plan to participate in an 81-100 group trust, as described in Revenue Ruling 2011-1.

For more information on the issues related to participation of ERISA Section 1022(i)(1) Plans in 80-100 group trusts, see “IRS Permits Puerto Rico-Qualified Plans to Participate in U.S. Group and Master Trusts for Transition Period, Extends Deadline for Puerto Rico Spin-Offs.”

For more information on the issues plan sponsors should consider with respect to a dual-qualified plan spin-off and transfer of assets attributable to Puerto Rico employees to ERISA section 1022(i)(1) plans, see “IRS Sets Deadline for Transfers from Dual-Qualified to Puerto Rico-Only Qualified Plans.”

IRS Extends Year-End Deadline for Pension Plan Amendments Under Code Section 436

by McDermott Will & Schulte | Dec 22, 2011 | Retirement Plans

by Diane M. Morgenthaler, Natalie M. Nathanson and Maureen O’Brien

The IRS recently extended the deadline for defined benefit plan sponsors to adopt amendments to comply with Section 436 of the Internal Revenue Code of 1986, as amended (the Code). Code Section 436 was added by the Pension Protection Act of 2006 (PPA) and contains limitations on benefit payments and accruals for defined benefit plans that do not meet the funding targets required by PPA.

Please click here for a discussion of the new deadlines.

Workplace Violence

by McDermott Will & Emery | Dec 19, 2011 | Employment, Labor

by Heather Egan Sussman, Arthur G. Sapper and Bethany K. Hatef

During the holiday season, stress can run high. Holidays can bring less sleep, increased pressures and even family tension. This can affect the workplace and increase the risk of confrontation or even violence. The Occupational Safety and Health Administration (OSHA) recently issued its first guidance directive regarding how OSHA will enforce the Occupational Safety and Health Act against workplace violence hazards.

Over the past 15 years, OSHA notes, workplace violence has remained among the top four causes of occupational death. According to the Bureau of Labor Statistics, workplace homicide was responsible for more than 3,000 occupational deaths between 2006-2010.

The directive defines “workplace violence” as “violent acts (including physical assaults and threats of assaults) directed toward persons at work or on duty.” OSHA states that it will inspect workplaces based on whether there are known risk factors for workplace violence. OSHA will focus on industries with high rates of workplace violence, particularly the healthcare and social services industries and late-night retail establishments.

Although OSHA has no regulations on workplace violence, OSHA may cite employers for workplace violence hazards under the general duty clause [Section 5(a)(1) of the Occupational Safety and Health Act], and will require employers to consider workplace violence when complying with OSHA regulations governing the availability of medical services and first aid, and in writing emergency action plans.

As a result, employers, particularly those in high-risk industries, should ensure that they have a strong written workplace violence prevention program that includes training on violence prevention, and periodic auditing of measures designed to detect and prevent workplace violence.

To mitigate the risk of violence in your workplace, consider these tips:

Find ways to help employees manage stress during the holiday season.
Remind employees of Employee Assistance Program (EAP) benefits.
Have procedures in place to quickly respond to and defuse incidents.
Ensure employees feel comfortable reporting workplace violence incidents.

Illinois Supreme Court Clarifies and Broadens Noncompete Enforceability

by McDermott Will & Schulte | Dec 15, 2011 | Employment

by Linda M. Doyle, Monica Quinn Halloran and Nathaniel L. Whalen

A recent Illinois Supreme Court opinion clarifies and broadens the scope of enforceable noncompete agreements for Illinois employers. For a summary of the court’s opinion and the resulting changes regarding the enforceability of noncompete agreements, click here.

Transit Pass and Vanpool Benefits to Shrink to $125 Per Month in 2012

by McDermott Will & Emery | Dec 7, 2011 | Employment

by Ira B. Mirsky and Ralph DeJong

Millions of people across the United States will experience a significant increase in the cost of their daily commute to work, and many employers will suffer a corresponding increase in payroll taxes for 2012 and beyond, unless U.S. Congress acts before the end of 2011. The reduction will also restore a significant gap between the exclusion limit for employer-provided transit pass or vanpool benefits and qualified parking benefits, and creates an unintended economic subsidy that may influence some commuters’ choice to drive themselves to work over using mass transit.

To read the full article, click here.