The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2016. Although some of the dollar limits currently in effect for 2015 will change, the majority of the limits will remain unchanged for 2016.
The U.S. Court of Appeals for the Seventh Circuit recently addressed the notice requirement of the federal successor liability doctrine where withdrawal from a multiemployer pension plan occurred after a sale of assets.
On September 4, 2015, the U.S. Court of Appeals for the Seventh Circuit ruled in Fontaine v. Metropolitan Life Insurance Company that the Employee Retirement Income Security Act of 1974, as amended (ERISA), does not preempt an Illinois state insurance regulation that prohibits discretionary authority clauses in health and disability plan insurance policies. The Seventh Circuit upheld the ruling of the U.S. District Court for the Northern District of Illinois, which decided that the Illinois regulation was not subject to preemption under precedent set forth in prior decisions by the Supreme Court of the United States.
Much has been written about the challenges that exist for the Employee Retirement Income Security Act of 1974 (ERISA) plan fiduciaries related to their investment of plan assets or review of plan administration fees related to those investments, and those challenges will continue for the foreseeable future given recent decisions of the Supreme Court in Dudenhoeffer and Tibble. However, before any litigation typically commences under ERISA, a claimant must exhaust their administrative claims review remedies under ERISA and the applicable benefit plan. In reviewing benefit claims, an ERISA plan administrator or their delegate must reasonably and timely jump through many hoops to decide benefit claims and notify the claimant of a benefit determination. If a plan administrator fails to clear any of these hoops (or just forgets to jump through them), the plan and the plan administrator can incur liabilities or waive defenses typically available in defending the claims in litigation.
This article, which was originally published by Bloomberg BNA’s Pension Benefits Daily, analyzes court cases that discuss how plan administrators should properly decide and administer ERISA benefit claims and what liability should attach to poor claims administration. Based on this case review, this article then suggests best practices to avoid mishandling the ERISA claims review process.
The Internal Revenue Service (IRS) recently issued two significant notices for employers that sponsor defined benefit pension plans, particularly those considering lump-sum windows as a “de-risking” option for their plans. In Notice 2015-49, the IRS notified plan sponsors that they are no longer permitted to offer retirees in pay status the option to take a lump-sum payment in lieu of ongoing annuity payments. Plan sponsors may, however, continue to offer a lump-sum payment option to deferred vested participants not in pay status. In Notice 2015-53, the IRS released updated mortality tables for 2016 and delayed the issuance of new regulations, which could incorporate new mortality assumptions recommended by the Society of Actuaries that many believe would increase pension funding liabilities and minimum lump-sum payments.
The availability of annuity options under defined contribution plans has increased in recent years due to the shift from defined benefit to defined contribution plans. The U.S. Department of Labor recently issued new guidance that clarifies the legal responsibilities for fiduciaries who select an annuity provider for a defined contribution plan.
Generally, any type of organization can offer a defined benefit pension plan under Section 4019a) in the Internal Revenue Code of 1986, as amended (the “Code) or a Code Section 401(k) Plan. However, only employers described in Code Section 501(a) and educational organizations described in Code Section 170(b)(A)(iii) are permitted to sponsor Code Section 403(b) plans. Equally, Code Section 457 plans can only be sponsored by governmental and other organizations exempt from tax under the Code. Until roughly 2009, both Code Sections 403(b) plans and Code Section 457 plans had been basically ignored or overlooked by the Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”). However, as these two plans have accumulated significant assets over the course of time (many occurring due to the consolidation of large plans in the healthcare sector through business combinations), the IRS and DOL have deemed it necessary to start taking a closer look. The audits of Code Section 403(b) plans and Code Section 457 plans has increased dramatically in the last few years to the point where the IRS has now issued its “top ten list” of issues which tax-exempt entities need to focus on when sponsoring these types of plans.
Read the full article from the Journal of Compensation and Benefits.
(c)2015 ThomsonReuters, reprinted with permission.
On July 21, 2015, the Internal Revenue Service (IRS) issued Announcement 2015-19 (the Announcement), which ends the five-year remedial amendment cycles for individually designed plans effective January 1, 2017. For remedial amendment cycles beginning after 2016, plan sponsors will no longer be able to apply for determination letters on their individually designed defined contribution and defined benefit plans, except for initial qualification and qualification upon termination. Effective on the Announcement date, off-cycle requests for determination letters will no longer be accepted. The IRS intends to publish additional guidance periodically, and seeks comments on the upcoming changes.
Click here to read the full On the Subject.
Recent cyber-attacks on health insurers have heightened awareness that sensitive participant and beneficiary information may not be adequately secure. There will undoubtedly be other attacks on databases maintained by service providers to employee benefit plans, which raises an important question for Employee Retirement Income Security Act of 1974 (ERISA) fiduciaries: what should be done now to protect participant and beneficiary information entrusted to service providers against future attacks and unauthorized disclosure? While the extent of a fiduciary’s responsibility to protect personal identifiable information of participants and beneficiaries is unclear, the fiduciary provisions of ERISA can be interpreted to impose a general duty to protect this information when it is part of a plan’s administration. In addition, plan fiduciaries also may have obligations under other federal and state laws governing data privacy and security that are not preempted by ERISA. This article addresses the nature of the problem, identifies the types of data breaches that can occur with employee benefit plans, provides an overview of relevant law that may apply, and sets forth practical steps that can be taken by plan fiduciaries with service providers to address privacy and security concerns.
Click here to read the full article from Benefits Law Journal.
The U.S. Department of Labor (DOL) issued proposed regulations on April 14, 2015 that would expand the types of investment advice covered by fiduciary protections under the Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code of 1986, as amended (the Code). The proposed regulations would require advisers to ERISA-governed retirement plans and individual retirement accounts (IRA) to act as ‘‘fiduciaries’’ within the meaning of ERISA and the Code, subject to certain carve-outs identified by the DOL for nonfiduciary adviser services. Advisers that become fiduciaries under the proposed regulations would be subject to ERISA fiduciary duties and prohibited from engaging in certain non-exempt transactions. The proposed regulations are accompanied by two new class prohibited transaction exemptions and amendments to several existing class exemptions, which recognize the expanded scope of ERISA’s fiduciary protections under the proposed regulations while allowing advisers to continue certain types of transactions and existing fee arrangements that would otherwise be prohibited for ERISA fiduciaries. While the proposed regulations likely would have the greatest impact on the IRA marketplace, advisers to plan sponsors, and therefore plan sponsors themselves, are likely to be impacted. Comments on the proposed regulations are due by July 21, 2015.
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