ERISA Archives - Page 16 of 48 - EMPLOYEE BENEFITS BLOG

Supreme Court to Hear Church Plan Litigation

by McDermott Will & Emery and Michael T. Graham | Dec 22, 2016 | Retirement Plans

On December 2, 2016, the Supreme Court of the United States granted the petitions for writs of certiorari to Advocate Health Care, et al. v. Stapleton, Maria, et al., St. Peter’s Healthcare, et al. v. Kaplan, Laurence and Dignity Health, et al. v. Rollins, Starla, all of which previously requested the Court review their arguments on whether the church plan exemption available under the Employee Retirement Income Security Act of 1974, as amended (ERISA), applies so long as a tax-qualified retirement plan is maintained by an otherwise qualifying church-affiliated organization, or whether the exemption applies only if, in addition, a church initially established the tax-qualified retirement plan. The three cases are being consolidated and will receive one hour total for oral argument.

Read the full article here.

Second Court of Appeals Win for State Street Bank in $200 Million Chrysler “Top Hat Plan” Class Action

by Andrew Liazos and Wilber H. Boies, PC | Dec 7, 2016 | Benefit Controversies, Retirement Plans

“Top hat plans” have many attractive features, but a new court decision is a reminder that top hat plan participants have limited protections under ERISA – and that assets held in a rabbi trust are not protected from the claims of creditors upon the employer’s bankruptcy or insolvency.

Our client, State Street Bank and Trust Company, served as the trustee of a top hat plan providing special retirement benefits for active and retired senior executives at Chrysler Automotive. When Chrysler was facing bankruptcy in 2008, $200 million in funds from the rabbi trust were used for company operations. Some 400 retired executives (including former chairman Lee Iacocca) were left with nothing in their accounts. After getting no relief in the Chrysler reorganization proceedings, the retirees filed a complaint against State Street and Chrysler’s parent company Daimler A.G. After considerable skirmishing in state and federal court, a federal judge ruled that the plaintiffs could not pursue state law claims of fraud and breach of trust about an ERISA benefits plan (because those claims were preempted by ERISA) – and that any breach of fiduciary duty claims under ERISA would be futile as the top hat plan did not protect retiree accounts in a bankruptcy. Those rulings were affirmed by the Sixth Circuit Court of Appeals.

Back in district court, the plaintiffs filed expanded ERISA claims about the rabbi trust and a new age discrimination claim, all of which were dismissed. In a second appeal, the Sixth Circuit Court of Appeals has ruled (again) that plaintiffs have no viable ERISA claims because the plan and trust operated as described in plan documents and ruled that the age discrimination claims were filed too late. In short, all of the claims have been defeated on pleading and procedural grounds without a trial on what happened during the Chrysler collapse.

This is the latest in a string of court victories for our trustee clients in class actions filed in Detroit and New York about auto industry benefit plans that were wiped out in the 2008 financial crisis, including those at Delphi Automotive, General Motors and now Chrysler litigation partner Bill Boies led the defense and argued for State Street on appeal; associate Jen Aronoff wrote much of the appeal brief. Employee Benefits partner Andrew Liazos provided insights and arguments about the top hat plan and rabbi trust.

ERISA Basics National Institute: Section 401(k) Plans

by Diane Morgenthaler | Nov 15, 2016 | Benefit Controversies, Fiduciary and Investment Issues, Retirement Plans

A 401(k) plan has a qualified cash or deferred arrangement that is part of a profit sharing plan or stock bonus plan. Under the Internal Revenue Code Section 401(k)(2), an employee may elect to make contributions to the plan, the covered employee’s contributions are not distributable before severance from employment, disability, death, attainment of age 59 ½, financial hardship, or termination of the plan, and under which the covered employee’s contributions are nonforfeitable.

This presentation will address the following objectives:

Who gets the money?
What money do they receive?
Where does the money go?
When do they get the money?
How is the money administered?

View the presentations slides.

Top Universities Hit with Retirement Plan Lawsuits: Lessons for Plan Sponsors

by Joseph K. Urwitz and Todd Solomon | Sep 20, 2016 | Benefit Controversies, Retirement Plans

The recent wave of 403(b) lawsuits against more than a dozen prominent US universities could herald similar suits for other 403(b) plan sponsors. Plan sponsors can minimize their risk by reviewing their plan governance procedures, investment policy statements, and plan investment lineup and fee structure.

Read the full article here to learn more.

Reports on Increase in Retirement Plan Audits Further Illustrate the Need for Plan Sponsors to Focus on Administrative Compliance

by Jeffrey Holdvogt | Sep 13, 2016 | Retirement Plans

Recent reports show that the number of retirement plan audits by government agencies is increasing. A survey released by Willis Towers Watson indicates that one in every three plan sponsors has experienced a retirement plan audit by a government agency in the past two years. Unofficial reports also indicate that the US Department of Labor (DOL) has added staff to conduct more retirement plan audits.

The increase in audit activity is not surprising after the DOL released its report last year on the quality of audit work performed by independent qualified public accountants. That report—“Assessing the Quality of Employee Benefit Plan Audits”—found that nearly four out of 10 (39 percent) employee benefit plan audits completed by independent qualified public accountants for the 2011 filing year contained “major deficiencies with respect to one or more relevant GAAS requirements” which “would lead to rejection of a Form 5500 filing.” Common audit deficiencies cited in the DOL report include insufficient review of plan documents and administration, failure to obtain evidence of required communications to participants, inadequate review of employee eligibility, participant accruals and non-discrimination testing, and failure to obtain evidence of adequate internal controls.

The reports of increased audit activity and the DOL findings on the quality of plan audits illustrate the importance for plan sponsors to continually monitor their employee benefit plans for compliance with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. Plan sponsors and fiduciaries may erroneously assume that once the independent audit is complete they can rest assured that the plan complies with legal requirements. However, an independent audit is not enough—plan sponsors have a fiduciary obligation to ensure their plans are properly maintained and administered beyond what is required to complete the annual audit.

For a summary of the most common issues under audit examination, please see our article on the “Top IRS and DOL Audit Issues for Retirement Plans.” The article describes numerous steps plan sponsors should take to review their plans to identify problems that come up on Internal Revenue Service and DOL audits, and to make sure they have proper internal controls to avoid those problems in the future. Regular review of these issues and proper focus on internal controls can help prevent costly fines and fees when a government agency audits a plan.

Michigan Health Insurance Claims Assessment Act is Not Preempted by ERISA

by McDermott Will & Emery | Aug 23, 2016 | Health and Welfare Plans

The Sixth Circuit, has decided, on remand from the Supreme Court, that the Michigan Health Insurance Claims Assessment Act (Act) is not preempted by ERISA. The Act imposes a 1 percent tax on all paid claims by insurers or third party administrators (TPAs) for health services rendered in Michigan to Michigan residents. The case was brought by the Self-Insurance Institute of America (SIIA), a trade association representing the sponsors of self-insured health plans and their TPAs, alleging the Act was preempted by ERISA. The trial court dismissed the case, concluding that the law was not preempted by ERISA. The Sixth Circuit also held that the Act was not preempted. After granting certiorari, the Supreme Court vacated this judgment and remanded the case to the Sixth Circuit for further consideration in light of the Supreme Court’s decision in Gobeille v. Liberty Mut. Life Ins. Co., which invalidated a Vermont statute that required an ERISA plan to report health care information to an all-payer claims database, since the Vermont law interfered with nationally uniform plan administration. On remand, the Sixth Circuit reaffirmed its original decision, finding that nothing in Gobeille warranted overturning its decision.

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

by Joseph K. Urwitz and Megan Mardy | Aug 16, 2016 | Health and Welfare Plans

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.

Read the full article here.

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

by Joseph K. Urwitz, Megan Mardy and Sarah L. Engle | Aug 11, 2016 | Health and Welfare Plans, Retirement Plans

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.

Read the full article here.

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

by Allison Wilkerson | Jul 28, 2016 | Employee Stock Ownership Plans (ESOPs), Labor, Retirement Plans

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.

View full report.

DOL Significantly Increases Some Penalties for ERISA Violations

by Alan D. Nesburg, PC and Diane Morgenthaler | Jul 26, 2016 | Health and Welfare Plans, Retirement Plans

The US Department of Labor increased the penalties for specified violations of the Employee Income Retirement Security Act of 1974. Most of the penalty increases involve reporting and disclosure failures related to benefit plans and will be effective for penalties assessed after August 1, 2016, if the violation occurred after November 1, 2015.

Under the Federal Civil Monetary Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Inflation Adjustment Act), the US Department of Labor (DOL) increased the penalties for specified violations of the Employee Income Retirement Security Act of 1974 (ERISA), published in an interim final rule (IFR). Most of the penalty increases involve reporting and disclosure failures related to benefit plans. After the 45-day comment period on the IFR lapses, the DOL will publish final regulations.

Penalty Adjustments for Inflation

The IFR adjusts ERISA reporting and disclosure penalties for inflation. The IFR’s adjustments apply only to penalties assessed after August 1, 2016, if the violation occurred after November 2, 2015. If the violation occurred on or before November 2, 2015, the current penalty amounts apply.

Annual Penalty Adjustments for Inflation

The 2015 Inflation Adjustment Act directs the DOL to adjust penalties annually for inflation. Beginning in 2017, DOL will adjust penalty amounts no later than January 15 of each year. By January 15, 2017, DOL will adjust penalty amounts to reflect any increase in inflation that occurred between October 2015 and October 2016. Future annual inflation adjustments are not subject to regulatory notice and rulemaking requirements. The DOL will post any changes to penalty amounts on its website.

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