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Maureen O'Brien advises clients on a broad range of employee benefits matters, including qualified plan design, welfare plan design, employee benefit plan compliance issues, fiduciary matters, multi-employer pension plan issues and nonqualified deferred compensation plans. Read Maureen O'Brien's full bio.

The Department of Labor announced increased penalties for employee benefit plans under ERISA. The increases generally apply to penalties that involve employee benefit reporting and disclosure failings if the penalty is assessed after January 2, 2018, and if the violation occurred after November 2, 2015. We’ve compiled a resource outlining the ERISA penalty amounts assessed for violations on or before January 2, 2018, and those amounts assessed after January 2.

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The US Department of the Treasury recently issued guidance that retirement plan sponsors should consider as part of their obligation to take reasonable steps to locate missing participants. Specifically, the Treasury issued a memorandum which sets forth guidelines that prohibit auditors from challenging qualified plans as failing to satisfy the required minimum distribution standards under Internal Revenue Code (IRC) Section 401(a)(9) if the plan has fulfilled all of the following with respect to participants that cannot be located:

  • Searched for alternative contact information in plan, plan sponsor and publicly available records for directories;
  • Used a commercial locator service, credit reporting agency or a proprietary internet search tool for locating individuals; and
  • Sent mail via United States Postal Service (USPS) certified mail to the last known mailing address and attempted contact “through appropriate means for any address or contact information,” which includes email addresses and telephone number.

The Treasury guidance is similar to, but also expands upon, prior guidance provided by the US Department of Labor, which addresses locating missing participants for terminated retirement plans.

Locating missing participants and beneficiaries can be challenging for plan sponsors. Many plan sponsors find that they are unable to locate participants who left employment many years prior and, as a result, are unable to make required minimum distributions. Both the IRS and Department of Labor have stepped up their enforcement of these requirements in recent years. In particular, the Department of Labor has made locating missing participants an enforcement priority for plan audits.

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On Tuesday night, Senate Finance Committee Chairman Orrin Hatch (R-UT) released a new modified mark of the Senate version of the Tax Cuts and Jobs Act that modifies provisions related to Internal Revenue Code (Code) Sections 409A and 162(m).

The Chairman’s modification adds a transition rule for the elimination of employer deductions for payments over $1 million to certain executives under Code Section 162(m). The transition rule provides that elimination of the employer deduction does not apply to payments under a written and binding contract in effect on November 2, 2017, provided that the contract was not materially modified after that date.

In addition, the Chairman’s modification eliminates the provision that would have replaced Code Section 409A with a new Section 409B, which would have required payments under non-qualified deferred compensation plans to be taxed when they vested. Currently, Section 409A allows employees to defer taxation on such fully-vested payments, provided they meet other requirements under Section 409A. The proposed replacement of 409A with 409B would have had significant tax implications for those employees with non-qualified deferred compensation plans.

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The IRS recently issued new mortality tables for 2018, which will likely increase pension funding liabilities for many plan sponsors. Plan sponsors should consider options to delay the use of the new mortality tables for funding purposes, while large plan sponsors should consider the option to utilize plan-specific mortality tables instead.

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Since the announcement by the Internal Revenue Service (IRS) that sponsors of individually designed retirement plans may no longer receive a periodic determination letter, plan sponsors have faced uncertainty about how to demonstrate compliance for their retirement plans. Our McDermott Retirement Plan Compliance Program, a new opinion letter and operational review program for individually designed 401(a) and 403(b) retirement plans, will allow plan sponsors to document their plans’ compliance with tax code requirements in response to the curtailment of the IRS’ determination letter program.

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In early 2017, the IRS updated its Golden Parachute Payments Audit Technique Guide for the first time since its 2005 issuance. While intended as an internal reference for IRS agents conducting golden parachute examinations, the Audit Technique Guide offers valuable insight for both public and private companies, and recipients of golden parachute payments, into how IRS agents are likely to approach golden parachutes when conducting an audit.

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On February 28, Todd Solomon and Maureen O’Brien presented a Strafford live webinar, “Private Equity Compliance With ERISA: Navigating Manager Fiduciary Duties for Funds Holding ERISA Plan Assets”. ERISA imposes fiduciary obligations on funds that hold employee benefit plan assets, including private equity managers responsible for investing fund assets. Managing those fiduciary obligations requires knowledge of the ERISA plan asset requirements. In addition, last year’s Sun Capital decision has broad implications for private equity funds and their investors. The ruling subjects funds to joint and several liabilities for the ERISA pension obligations of their portfolio companies. These slides discuss the ERISA fiduciary issues relevant to private equity funds and the implications of the most recent Sun Capital case.

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Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund has been analyzed extensively over the past four years, as it has made its way from the US District Court for the District of Massachusetts to the First Circuit Court of Appeals and back again. With the case once again on appeal, we must wait to see how the latest court decision will further influence the structure of private equity deals. In the meantime, private equity funds should use the most recent District Court and First Circuit Sun Capital decisions as a road map for structuring deals where the target portfolio company has defined benefit pension plan or multiemployer pension plan liabilities.

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Effective January 1, 2016, the Pension Benefit Guaranty Corporation (PBGC) altered the reportable event rules for defined benefit pension plans. Although new PBGC regulations make electronic filing of all reportable event notices mandatory, the regulations also substantially reduce the reporting requirements for pension plan administrators, sponsors and contributing employers.

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