In late December, US Senator Ron Wyden introduced the Retirement Parity for Student Loans Act (Student Loan Act), which would allow employers to make matching contributions under 401(k), 403(b) and SIMPLE plans with respect to student loan repayments made by employees. If enacted, this legislation would provide powerful new guidance for employers looking to offer student-loan-repayment-related benefits to their employees.

Last year, the Internal Revenue Service (IRS) released a groundbreaking private letter ruling (PLR) that helped to clear the way for employers to begin providing student loan repayment benefits as part of their 401(k) plans. More specifically, the PLR confirmed that, under certain circumstances, employers might be able to link the amount of employer contributions made on an employee’s behalf under a 401(k) plan to the amount of student loan repayments made by the employee outside the plan. However, the PLR only applied to the plan sponsor requesting the ruling and only addressed the specific issue and facts presented by the plan sponsor. As a result, although the PLR provided helpful guidance to employers, it also left many questions unanswered.

In response, many employers and industry groups have pushed for legislation that provides comprehensive guidance on how employers can and should structure student loan repayment benefits under their retirement plans. The Student Loan Act would address a number of the questions raised in response to the PLR and would provide employers more flexibility to offer student loan repayment benefits under their plans. In particular, the Student Loan Act would open the door for student loan repayments to be treated as elective deferrals under an employer’s plan and to qualify for corresponding matching contributions (rather than the special non-elective contributions described in the PLR). In addition, the Student Loan Act would clarify nondiscrimination testing requirements for student loan repayment benefits and address how student loan repayment benefits may be provided under not only traditional 401(k) plans, but also under safe harbor 401(k) plans, 403(b) plans and SIMPLE plans.

The Student Loan Act is part of the broader Retirement Security & Savings Act, which has bipartisan backing. The prospects for enactment of the Student Loan Act and Retirement Security & Savings Act are uncertain. Nevertheless, the release of the Student Loan Act, and its inclusion as part of the Retirement Security & Savings Act, shows that legislators are responding to employer demand and industry group efforts to seek further clarification on how they can provide employees with student loan repayment benefits under their tax-qualified retirement plans.

There is significant risk and exposure facing senior leaders charged with workplace and workforce management. As we launch into 2019, it is more critical than ever for in-house counsel and HR professionals to effectively manage ongoing risks and strategically plan for what’s ahead. To learn more, join our half-day forum and reception in one of our two locations this month.

January 29 – San Francisco, CA
January 31 – Los Angeles, CA

This interactive and forward-looking program fosters open discussion that will help you see around the corner and position your business to protect its interests. Key issues of focus will include:

  • Worker Classification: Complications Beyond the Front Page
  • Employee Mobility: Local Challenges with Global Implications
  • ERISA Plan Controversy: Rising Stakes for Those Unprepared
  • Your Attention, Please: Emerging Threats Lurk in Employment and Employee Benefits
  • #MeToo Take Two: Liability Beyond Title VII

Register today.

Late last year, the Ninth Circuit held that in order to trigger ERISA’s three-year statute of limitations a defendant must demonstrate that a plaintiff has actual knowledge of the nature of an alleged breach. Accordingly, the court held that merely having access to documents describing an alleged breach of fiduciary duty is not sufficient to cause ERISA’s statute of limitations to begin to run. Instead, the court rejected the standard embraced by other courts and ruled that participants should not be charged with knowledge of documents they were provided by did not actually read. The Ninth Circuit’s decision underscores circuit split over what is sufficient to demonstrate the existence of actual knowledge for purposes of triggering ERISA’s three-year statute of limitations.

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One of the more controversial and complex provisions of the Tax Cuts and Jobs Act has been the 21 percent excise tax on certain nonprofit executive compensation. On December 31, 2018, the IRS issued interim guidance that addresses how this tax will apply in various situations that commonly arise for tax-exempt employers. Establishing internal systems to comply with this guidance will be challenging.

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What to expect in 2019 and how to prepare now. Join McDermott lawyers Judith Wethall, Ted Becker and Rick Pearl for an interactive discussion regarding ERISA litigation trends.

Join our lively 45-minute discussion while we tackle the following items:

  • Plaintiffs’ law firm’s solicitations
  • Health & Welfare Fee Litigation
  • Defined-Benefit Plan Litigation – Actuarial Equivalence lawsuits and greater concern about discretionary decisions
  • Stock-Drop Cases – The Jander decision: Relaxing the Dudenhoeffer standard and the potential impact of a stock market decline
  • 401k/403b – Fee/investment update
  • ESOP transactions – New DOL and plaintiffs’ counsel’s theories

Friday, January 11, 2019
10:00 – 10:45 am PST
11:00 – 11:45 am MST
12:00 – 12:45 pm CST
1:00 – 1:45 pm EST

Register now. 

In certain cases of a facility sale, restructuring or cessation, recently released information by the Pension Benefit Guaranty Corporation (PBGC) leaves many unanswered questions about plan sponsor liability for single-employer defined benefit plans. Given the lack of clarity, these plan sponsors should continue to consult their lawyer in any type of transaction, restructuring or cessation that approaches a 15 percent demographic change in a plan sponsor’s controlled group over a three-year period.

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Andrew Liazos presented on 162(m) deduction limitations and transition rules at NYU’s 77th Institute on Federal Taxation. Amongst other topics, he discussed key changes for employers under the 2017 Tax Cuts and Jobs Act, the guidance provided under Notice 2018-68 and the potential impact of such changes on incentive compensation practices.

View the full presentation.

As part of its comprehensive 2017 tax reform bill, Congress repealed deductions for Qualified Transportation Fringes including for employer-provided parking, while also requiring that tax-exempt organizations increase their unrelated business taxable income by the nondeductible parking expenses. Recently released IRS Notice 2018-99 addresses some of the year-end tax filing and tax planning concerns for affected employers with rules of special interest to tax-exempt employers.

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Late in the afternoon on Friday, December 14, Federal US District Judge Reed O’Connor struck down the Affordable Care Act (ACA) in its entirety, a feat that was, for the past few years, unsuccessfully attempted by the Republican-led Congress. O’Connor reasoned that if the individual mandate is no longer valid, the entire ACA must also be scrapped, because the rest of the ACA is “inseverable” from the individual mandate. The opinion is likely to be appealed, and the final decision may ultimately lay with the US Supreme Court. Despite the ruling, Centers for Medicare & Medicaid (CMS) has stated that the exchanges remain open and 2018 and 2019 coverage will not be impacted.

Sponsors and fiduciaries of health and welfare plans should be aware of a recently filed class-action lawsuit against alleged fiduciaries of a health plan. It challenges health-plan fiduciary oversight and reasonableness of fees similar to actions against fiduciaries of defined-contribution retirement plans. The action highlights the importance of establishing and documenting prudent fiduciary processes for making decisions on behalf of health and welfare plans.

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