EMPLOYEE BENEFITS BLOG
EMPLOYEE BENEFITS BLOG
Insights on Employee Benefits and Executive Compensation
EMPLOYEE BENEFITS BLOG
Insights on Employee Benefits and Executive Compensation
Employee Retirement Income Security Act
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What the Demise of the DOL’s Fiduciary Rule Means for Plan Sponsors

by | May 29, 2018 | , , ,

The Department of Labor’s fiduciary rule has recently been rendered unenforceable following a recent 5th Circuit Court of Appeals decision. In an article published by the Society for Human Resource Management, McDermott partner Brian Tiemann weighs in on what this means for plan sponsors. “As a result of the Fifth Circuit’s ruling, the suitability standard is effectively restored” for advising plan participants on investments, distributions and rollovers, Tiemann observed. He also points out that advisors may want to revise service agreements with plan fiduciaries to clarify the scope of advice that fiduciaries will provide participants.

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Originally published by the Society for Human Resource Management, May 2018.



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White House Urges Suspension of DOL Fiduciary Rule

by | Feb 21, 2017 | , ,

The future of the fiduciary rule—originally set to be implemented this upcoming April—remains uncertain after the White House directed the United States Department of Labor (DOL) to reevaluate, defer implementation and consider rescinding the controversial new fiduciary rule on February 3, 2017. In response to the White House, the acting US Secretary of Labor announced that the DOL will now consider its legal options to delay the applicability date to comply with the President’s directive. McDermott’s ERISA practice will closely monitor these developments and provide additional guidance as it becomes available.

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White House Urges Suspension of DOL Fiduciary Rule

by | Feb 8, 2017 | , ,

The future of the fiduciary rule—originally set to be implemented this upcoming April—remains uncertain after the White House directed the United States Department of Labor (DOL) to reevaluate, defer implementation and consider rescinding the controversial new fiduciary rule on February 3, 2017. In response to the White House, the acting US Secretary of Labor announced that the DOL will now consider its legal options to delay the applicability date to comply with the President’s directive. McDermott’s ERISA practice will closely monitor these developments and provide additional guidance as it becomes available.

Read full article here.



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Proposed Changes to Form 5500 Would Significantly Increase Reporting Obligations for Health and Welfare Plan Sponsors

by and | Aug 16, 2016 |

On July 11, 2016, the Department of Labor (DOL) and Internal Revenue Service (IRS) announced a proposal to implement significant changes to the forms and regulations that govern annual employee benefit plan reporting on Form 5500. The proposed changes, which were published in the Federal Register on July 21, 2016, would considerably increase the annual reporting obligations for nearly all health and welfare plans. The changes would also have a considerable impact on annual retirement plan reporting obligations.  For more information about the effect of the proposed changes on retirement plan sponsors, see Proposed Changes to Form 5500 Reporting Requirements May Have Significant Impact on Retirement Plan Sponsors.

The DOL is seeking written comments on the proposed changes, which must be provided by October 4, 2016. The revised reporting requirements, if adopted, generally would apply for plan years beginning on and after January 1, 2019.

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Proposed Changes to Form 5500 Reporting Requirements May Have Significant Impact on Retirement Plan Sponsors

by , and | Aug 11, 2016 | ,

On July 11, 2016, the Department of Labor (DOL), Internal Revenue Service (IRS) and Pension Benefit Guaranty Corporation (PBGC) announced a proposal to implement sweeping changes to the forms and regulations that govern annual employee benefit plan reporting on Form 5500. The proposed changes, which were published in the Federal Register on July 21, 2016, would significantly increase the annual reporting obligations for nearly all retirement plans. The changes also would have a considerable impact on employer-sponsored group health plans.  For more information about the effect of the proposed changes on health and welfare plan sponsors, see Proposed Changes to Form 5500 Would Significantly Increase Reporting Obligations for Health and Welfare Plan Sponsors.

The DOL is seeking written comments on the proposed changes, which must be provided by October 4, 2016. The revised reporting requirements, if adopted, generally would apply for plan years beginning on and after January 1, 2019. Certain compliance questions will, however, be effective for Form 5500 series returns filed for the 2016 plan year.

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View From McDermott: Fifth Circuit Focuses on Process in ESOP Valuations

by | Jul 28, 2016 | , ,

Though the Supreme Court’s 2014 unanimous ruling in Fifth Third Bank v. Dudenhoeffer announced the Employee Retirement Income Security Act (ERISA) standards for stock valuation in the context of a large public employee stock ownership plan (ESOP), the vast majority of ESOPs are still grappling with valuation issues. ESOPs that hold stock of closely-held corporations—approximately 90% of all ESOPs— remain almost unaffected by Dudenhoeffer’s valuation discussions, and face continued scrutiny by the Department of Labor (DOL). Appraisal of closely-held stock is an inexact science that involves an inherent level of uncertainty in assessing a variety of potential fact patterns.

This article summarizes valuation issues in acquisitions of closely-held corporation stock by ESOPs in the context of Perez v. Bruister, a recently decided Fifth Circuit case. The case stressed the importance of ‘‘process’’ in valuation determinations being utilized for acquisitions of a corporation’s stock by an ESOP. In reviewing the case, this article provides a detail of the process that should be followed to ensure consideration of the appropriate factors by fiduciaries in reviewing valuations for ESOP transactions. The article concludes with a discussion of guidance provided by the court in Bruister that may be instructive as to best practices for ESOP fiduciaries charged with establishing the value to be used by an ESOP holding shares of stock of a private company.

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Recent Government-Issued FAQs Cause Plan Sponsors to Clarify Preventive Care and Wellness in Health Plan Communications

by | Nov 5, 2015 | , ,

On October 23, 2015, the U.S. Departments of Labor (DOL), Health and Human Services (HHS) and Treasury issued frequently asked questions (FAQs) on the implementation of preventive care and wellness provisions of the Affordable Care Act (ACA) and mental health parity disclosure, adding to the existing list of 28 previous editions of FAQs on the implementation of ACA.

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View From McDermott: DOL Re-Proposes Regulations to Expand ERISA ‘Fiduciary’ Definition

by and | Jul 7, 2015 |

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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The Directed Trustee in the Post-Dudenhoeffer World

by | Jan 22, 2015 | , ,

Court cases challenging the actions of Employee Retirement Income Security Act fiduciaries have continued unabated since the scandal of Enron in 2002.  Since then, a large number of cases are in the “stock drop” area, which encompasses cases relating to employer securities investments when the stock price drops severely.  The litigation has focused on whether a presumption of prudence exists that protects fiduciaries holding employer securities investments on behalf of a retirement plan.  In June 2014, the U.S. Supreme Court ruled in the case of Fifth Third Bancorp v. Dudenhoeffer that ERISA doesn’t provide a presumption of prudence to protect fiduciaries of plans investing in employer securities.  Now that the Dudenhoeffer decision resolves the presumption issue, it is reasonable to expect that ERISA cases may return to focus on the fiduciary duties of a directed license.

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