by Jonathan J. Boyles, Karen A. Simonsen and Ashley McCarthy
The U.S. Department of Labor recently withdrew a proposed regulation that would have substantially expanded the definition of “fiduciary” under federal employee benefits law. The regulation will be re-proposed in early 2012, although it is unclear whether any proposal will be finalized prior to the 2012 presidential election.
To read the full article, click here.
by Joseph S. Adams, Anne S. Becker and Stephen Pavlick
In October 2011, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued Notice 2011-85 (Notice), announcing their intent to extend certain requirements applicable to hybrid pension plans such as cash balance plans. Given the highly technical nature of cash balance plans and the related government guidance, it is important to carefully understand the scope of the relief. In a separate matter affecting cash balance plans, the Pension Benefit Guaranty Corporation also recently published a proposed rule on terminating cash balance and hybrid plans. The proposed rule is intended to implement changes made by the Pension Protection Act of 2006. Comments on the proposed rule are due December 30, 2011.
Please click here for more information on this recent guidance.
Friday, November 18, 2011
10:00 – 11:00 am CST
As the year draws to a close, please join us for a focused and concise update on the most important employee benefit issues.
Mark your calendars
McDermott Will & Emery will present a 60-minute complimentary webcast, hosted by the leaders of our employee benefits and compensation practice, that will highlight key year-end considerations for:
Who should attend
All vice presidents of human resources, in-house counsel, compensation and benefits directors, chief financial officers and others responsible for overseeing corporate or executive benefits and/or retirement plans.
To register, please click here.
For more information, please contact McDermott Events.
by Ralph E. DeJong, Todd A. Solomon and Patrick D. Ryan
Revenue Procedure 2011-44 modifies the procedures for submitting a private letter ruling request that a retirement plan constitutes a church plan to include a requirement that the applicant provide a notice to certain interested persons. The guidance provides rules regarding the timing and method for providing the notice as well as a Model Notice that applicants can modify as required.
Letter ruling applicants are required to provide a notice to each plan participant, beneficiary, QDRO alternate payee, and any employee organization representing employees who are plan participants (the interested parties). The notice informs recipients that the plan is not protected by ERISA’s statutory protections, including eligibility rules, vesting rules and minimum funding requirements.
A request for a letter ruling filed on or after September 26, 2011 must include a copy of the notice along with a statement that the notice was provided interested parties. An applicant whose letter ruling request is pending with the Internal Revenue Service (IRS) on September 26, 2011 must submit by November 25, 2011, a copy of the notice along with a cover letter containing a statement that references the pending request and the date the notice was provided to interested persons. The IRS may consider the letter ruling request as withdrawn if the notice is submitted after the November 25, 2011 deadline. If the applicant fails to submit the notice, the IRS will not rule on the pending request.
Plan sponsors with pending letter ruling requests should provide the notice to interested parties as soon as possible, and provide a copy to the IRS no later than November 25, 2011.
To read the full article, click here.
by Raymond Fernando, Michael Graham, Maureen O’Brien and Maggie McTigue
Recently, the Third Circuit held that withdrawal liability triggered after a bankruptcy filing date may be apportioned to pre- and post-petition service for the debtor, and that the withdrawal liability attributable to post-petition service may be entitled to priority over general unsecured claims under the Bankruptcy Code. Employers that participate in a multiemployer pension plan should determine the claims impact of withdrawal in light of this court decision and also assess whether filing for bankruptcy protection outside of the Third Circuit is appropriate.
Please click here for more information.
by Joseph S. Adams, Maureen O’Brien and Patrick D. Ryan
On September 14, 2011, the Pension Benefit Guaranty Corporation (PBGC) issued a notice (Notice) that provides relief to pension plans from penalties associated with certain late payment of premiums and situations involving the failure to properly elect the alternative premium funding target (APFT) to calculate the variable rate premium (VRP). According to PBGC’s press release, the agency was granting premium-related relief as part of a continuing effort to ease regulatory burdens on its customers. Plan sponsors and industry groups continue to request that the PBGC expand premium penalty relief.
Click here for additional information.
by Jilali Maazouz and Sébastien Le Coeur
Background
In 2004, the Fédération Nationale du Crédit Agricole (FNCA) hired Mr. Rossi as one of its senior managers. Mr Rossi. was entitled to a defined-benefit pension, provided he was still employed by FNCA upon retirement. In 2006, FNCA dismissed Mr. Rossi for poor performance.
The Paris Court of Appeals held his dismissal unfair, but refused to award him damages for the lost opportunity to receive a defined-benefit pension. Mr. Rossi appealed to the Cour de Cassation, the French Supreme Court.
Decision
The French Supreme Court upheld the condition that the employee must still be employed by the company upon retirement in order to benefit from a pension. On this basis, Mr. Rossi’s claim to a pension was dismissed. However, the French Supreme Court held that, where the dismissal is found to be unfair, the employee sustains a loss caused by the lost opportunity to remain employed until retirement and benefit from a pension. On this basis, Mr. Rossi’s claim was allowed.
The Paris Court of Appeals will decide within the next couple of months the amount of damages Mr. Rossi is entitled to as compensation for that lost opportunity.
What Does This Mean for Employers?
When assessing the cost of dismissing a manager and preparing a settlement negotiation, the employer must now evaluate damages for the lost opportunity to benefit from a defined-benefit pension. The French Supreme Court offers no guidelines on this, which makes it a rather difficult task. The employer will first need to assess the probability that the employee would have stayed with the company until retirement. This will then have to be balanced with the amount the employee would have been entitled to. In many cases, the employee may also claim damages for the lost opportunity to make a profit on stock options.
Settlement claims with senior managers look likely to become more challenging. To avoid disputes and future, additional expense, it is worth seeking expert advice at the beginning of the dismissal process.
by Karen A. Simonsen, Todd A. Solomon and Patrick D. Ryan
The Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department, and the Internal Revenue Service (IRS), recently issued three notices, FinCEN Notices 2011-1 and 2011-2 and IRS Notice 2011-54. Each notice granted an extension of the filing deadline for the Report of Foreign Bank and Financial Accounts (FBAR), IRS Form TD-F 90-22.1 to different groups of individuals with signature or other authority over certain foreign financial accounts for various filing years. Refer to our previous On the Subject for a discussion of whether an individual has signature or other authority over a foreign financial account.While the extensions provide welcome relief, some June 30, 2011 filing obligations still remain.
FinCEN Notice 2011-1
On May 31, 2011, FinCEN issued Notice 2011-1 (subsequently clarified on June 6, 2011), which grants a one-year extension of the filing deadline for the FBAR for the 2010 tax year, from June 30, 2011 to June 30, 2012, to some individuals with signature or other authority over certain foreign financial accounts.
The one-year extension relief provided in FinCEN Notice 2011-1 is limited to certain employees and officers of a publicly traded company or U.S. Securities and Exchange Commission (SEC) registrant who have signature or other authority over, but no financial interest in, a foreign financial account. The relief does not apply to an employee or officer of an entity that is not a publicly traded company or of a non-SEC registrant that has signature or other authority, but no financial interest in, a foreign financial account.
IRS Notice 2011-54
On June 16, 2011, the IRS issued IRS Notice 2011-54, granting additional relief to persons with signature or other authority over, but no financial interest in, a foreign financial account held during calendar year 2009 or earlier calendar years. Previously, the IRS extended the FBAR filing deadline to June 30, 2011 for persons with signature or other authority over, but no financial interest in, a foreign financial account for 2009 and earlier calendar years. The IRS issued IRS Notice 2011-54 in reaction to concerns that individuals with signature authority over, but no financial interest in, a foreign financial account were encountering difficulty compiling the data necessary to complete the FBAR for 2009 and earlier calendar years.
IRS Notice 2011-54 extends the FBAR filing deadline from June 30, 2011 until November 1, 2011 for all persons with signature authority over, but no financial interest in, a foreign financial account in 2009 or earlier calendar years. The deadline for the 2010 calendar year remains June 30, 2011.
FinCEN Notice 2011-2
On June 17, 2011, FinCEN issued FinCEN Notice 2011-2, which grants a one-year extension of [...]
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by Alan D. Nesburg, PC and Maureen O’Brien
On June 14, 2011, the Pension Benefit Guaranty Corporation (PBGC) issued final regulations that apply to single-employer pension plans maintained by employers in bankruptcy. These regulations implement a change made by the Pension Protection Act of 2006 (PPA). The change affects the amount of benefits payable by the PBGC to participants.
If an underfunded pension plan terminates during the plan sponsor’s bankruptcy, the termination date is either agreed to by the plan administrator and the PBGC, or the date is set judicially. Before the PPA, the plan termination date was used to determine both the amount of and eligibility for benefits guaranteed by the PBGC to participants.
The PPA amended the Employee Income Retirement Security Act of 1974 (ERISA) to substitute the bankruptcy filing date for the plan termination date for these two important purposes: determining the amount of participants’ guaranteed benefits under Section 4022 of ERISA and determining whether benefits are guaranteed under Section 4044 of ERISA.
The new PBGC regulations include these provisions:
Importantly, under PPA the bankruptcy filing date was not substituted for the plan termination date for all purposes. The termination date still controls for purposes of determining both the amount of a plan’s unfunded liabilities and the parties responsible for those liabilities under Section 4062 of ERISA.
The regulations have an effective date of July 14, 2011, but the PPA change applies if bankruptcy proceedings were initiated on or after September 16, 2006. Plan sponsors that have filed for bankruptcy or are considering such a filing should contact their regular McDermott attorney to discuss the effect of the new regulations.
by Stephen Pavlick and Nancy S. Gerrie
The Supreme Court of the United States in the CIGNA decision confirms, in what may be hailed as a victory for plan sponsors, that information contained in a summary plan description does not itself constitute the “terms” of a benefit plan for purposes of filing claims for benefits. However, the majority’s assertion that participants have a vast arsenal of equitable relief under ERISA section 502(a)(3) will likely invigorate both participants and plaintiffs’ attorneys. Because the surcharge remedy is one of the few equitable remedies that provide monetary relief, a likely increase in claims alleging notice violations and seeking a surcharge to plan participants is anticipated.
To read the full article, click here.
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