The US Court of Appeals for the First Circuit has solidified a circuit split on who has burden of proving loss causation in ERISA breach of fiduciary duty cases. The First Circuit joined the Fourth, Fifth and Eighth Circuits holding that once a plaintiff demonstrates a fiduciary breach, the defendant has the burden to negate loss causation. Other circuits, including the Sixth, Ninth, Tenth and Eleventh Circuits, have held that a plaintiff bears to burden to establish loss causation. This issue is ripe for Supreme Court review.
One of the busiest times of year for an employee benefits professional is open enrollment. It is a crucial and yet stressful time of year that typically results in numerous employee questions and complaints and is a time of year with high potential for both employer and employee mistakes. Despite the stress and potential for problems, open enrollment provides an opportunity for a company to set itself up for success for the following year.
The Employee Retirement Income Security Act (ERISA) does not require an annual opportunity for employees to change benefit plan elections. However, because of compliance issues that can spring from not offering a regular enrollment period, most companies choose to offer an “open enrollment” period, usually taking place in mid- to late fall for calendar-year health and welfare benefit plans.
Employee attention to employer communications during this period is often high, and attention to detail in participant communications behooves an employer during this period. Well-written and timely notices may be relied upon to satisfy many compliance obligations. Inaccurate or incomplete open enrollment materials, however, can create employee confusion and result in legal liability under the complex network of federal laws governing employer-sponsored benefit programs.
Read the full article here for a sampling of key issues to consider to help you avoid compliance missteps during this year’s open enrollment period.
Originally published in BenefitsPRO.com, October 2018.
Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2019. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2018 and 2019.*
|RETIREMENT PLAN LIMITS||2018||2019|
|Annual compensation limit||$275,000||$280,000|
|401(k), 403(b) & 457(b) before-tax contributions||$18,500||$19,000|
|Catch-up contributions (if age 50 or older)||$6,000||$6,000|
|Highly compensated employee threshold||$120,000||$125,000|
|Key employee officer compensation threshold||$175,000||$180,000|
|Defined benefit plan annual benefit and accrual limit||$220,000||$225,000|
|Defined contribution plan annual contribution limit||$55,000||$56,000|
|Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period||$220,000||$225,000|
|ESOP limit for determining the maximum account balance subject to the general five-year distribution period||$1,105,000||$1,130,000|
|HEALTH AND WELFARE PLAN LIMITS|
|High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA)|
|HDHP – Maximum annual out-of-pocket limit (excluding premiums):|
|HDHP – Minimum annual deductible:|
|HSA – Annual contribution limit:|
|Catch-up contributions (age 55 or older)||$1,000||$1,000|
|SOCIAL SECURITY WAGE BASE|
|Social Security Maximum Taxable Earnings (dollars)||$128,400||$132,900|
Plan sponsors should update payroll and plan administration systems for the 2019 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.
For further information about applying the new employee benefit plan limits for 2019, contact your regular McDermott lawyer.
*The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.
President Trump signed an executive order last year directing the Secretaries of Labor, Treasury and Health and Human Services to consider proposing regulations to “increase the usability of HRAs.” This month, the collective departments issued proposed regulations containing changes to the prohibition on pairing HRAs with individual health policies, as well as other changes to the current HRA rules.
Proposed effective date January 1, 2020; comments due December 28, 2018.
Join us Friday, November 2 for our monthly Fridays with Benefits webinar. With 2019 right around the corner, now is the time to dust off your year-end checklist and take stock of changes we have seen in 2018, and how they project to impact planning for the new year. Join us for an interactive discussion designed to draw attention to the key employee benefits issues you should tackle before New Year’s Eve. Our lively 45-minute discussion will include a tax reform update, an overview of retirement plan disaster relief, responding to new disability regulations from the DOL, and how to implement final regulations on QNECs and QMACs.
Friday, November 2, 2018
10:00 – 10:45 am PDT
11:00 – 11:45 am MDT
12:00 – 12:45 pm CDT
1:00 – 1:45 pm EDT
During the Tax in the City event held in Dallas, Erin Turley and Allison Wilkerson gave an overview of benefit plan audits and the IRS examination process. They discussed various areas of focus, including, required minimum distributions, investment issues, benefit calculations and appropriate tax reporting. They provided attendees with best practices before an audit, as well as helpful resources from the IRS and DOL.
Late last month, the IRS released the latest version of its Employee Plans Compliance Resolution System, the IRS’s program for correcting retirement plan errors. The newest version of the correction program—effective beginning in 2019—includes mostly minor changes and clarifications. Most importantly, however, it requires electronic filing of Voluntary Correction Program submissions beginning April 1, 2019.
On October 10, 2018 President Trump signed two bills that ban “gag clauses” in pharmacy contracts. Congress passed the two bills—one for Medicare prescription drug plans (“Know the Lowest Price Act”) that will go into effect in January 2020, and another for commercial employer-based and individual policies (“Patient Right to Know Drug Prices Act”) effective immediately—by almost unanimous vote in September 2018.
While many states have already prohibited the use of these clauses, this is the first such action on a federal level.
Gag clauses are sometimes found in contracts between pharmacies and insurance companies, pharmacy benefit managers or group health plans and bar pharmacists from telling customers that they could save money by paying cash for their prescriptions rather than using their health insurance. If pharmacists violate the gag rule, they risk penalties and/or contract termination. Under the new legislation, pharmacists are not required to tell patients about the lower cost option, but they also cannot be contractually prohibited from engaging in the cost conversation.
The legislation is consistent with the position of the Centers for Medicare & Medicaid Services (CMS), which, in May of this year, issued guidance stating that “gag clauses” are unacceptable in the Medicare Part D program.
Originally published in the Health & Life Sciences News blog.
The Internal Revenue Service and the Security Summit partners recently issued a news release outlining the “Security Six,” a list of essential steps to protect stored employee information on networks and computers. Employee benefits professionals, including those who administer welfare and retirement plans for employees and beneficiaries, should review and implement the “Security Six” in order to protect sensitive data from cyberattacks.
We would also like to thank law clerk Charnae Supplee for contributing to this article.
Tax reform made many structural changes to our tax system. Changes to Code Section 274, however, sent shudders through corporate America. As amended, Code Section 274 eliminated the 50 percent deduction for “entertainment” expenses that are related to business activities. Sadly, gone are the days of companies deducting the cost of box tickets to games for the local sport’s team. Gulp! But, in its haste, Congress left what constitutes entertainment expenses substantially undefined. Accordingly, a strict reading of the statute meant—along with the box seats—went the hot dogs and beer! Ugh! So, under this strict interpretation, taking your client to the fancy restaurant to encourage her to buy your product or services would no longer be deductible.
Thankfully, the IRS has recently clarified that meals are not entertainment under amended Code section 274. IRS Notice 2018-76 explains that business meals arestill eligible for the 50 percent deduction if they are not lavish and extravagant. And an IRS press release, IR-2018-195, explains that the IRS will release proposed regulations explaining what “entertainment” means.
Practice Point: We can all sigh with relief that Uncle Sam will continue to underwrite the “wining and dining” of our clients. Although eating is officially not entertainment (at least for tax purposes), the recent IRS guidance acknowledges that America does a lot of its business while breaking bread.