qualified retirement plans

When California’s Dynamex decision rolled out the “ABC test”, it placed the burden on the employer to prove independent contractor (IC) status. In a presentation at the Employment and Employee Benefits Forum in California, McDermott’s lawyers discussed the implications of Dynamex, as it applies to various types of employers as well as those using staffing companies. Additionally, they cover Dynamex’s impact on worker classification and employee benefits plans, particularly under ERISA.

Lastly, they provide best practices that employers can do now to prevent litigation.

View the full presentation.

Employers that sponsor defined benefit qualified retirement plans benefiting only Puerto Rico employees should be aware that Pension Benefit Guaranty Corporation (PBGC) coverage may no longer apply.  Last year, the PBGC withdrew old prior opinion letters (Opinion Letters 77-172 and 85-19) regarding PBGC coverage in Puerto Rico and Guam.  Those opinion letters articulated the PBGC’s position at that time, that Title IV of the Employee Retirement Income Security Act (ERISA) (providing for PBGC coverage), may apply to defined benefit plans covering only Puerto Rico participants if the Puerto Rico plan is either qualified under Section 401(a) of the U.S. Internal Revenue Code or has been operated in practice in accordance with the requirements of Section 401(a) for at least the five preceding years.  Earlier this year, in remarks made at an enrolled actuaries meeting, PBGC officials stated that, going forward, PBGC will determine that a plan is not covered under Title IV of ERISA if (1) the plan’s trust is created or organized outside of the United States (e.g., Puerto Rico) and (2) no election under ERISA section 1022(i)(2) has been made.  As a result, it appears the new PBGC position is that Puerto Rico-only qualified plans generally are not covered under Title IV of ERISA (although dual-qualified plans with Puerto Rico participants are covered).  Since few Puerto Rico plans have made an election under ERISA section 1022(i)(2) due to the strict U.S. laws applicable to such arrangements, this new PBGC position will affect a number of Puerto Rico-only defined benefit plans.  PBGC officials also stated that if the PBGC determines that a plan is not covered under Title IV of ERISA, it may refund up to six years of premiums.

Employers with Puerto Rico-only defined benefit plans should consider whether PBGC coverage of their plan is still possible or desired.  If not, a refund of PBGC premiums should be sought.

Employers that sponsor defined benefit qualified retirement plans benefiting only Puerto Rico employees should be aware that Pension Benefit Guaranty Corporation (PBGC) coverage may no longer apply. Last year, the PBGC withdrew old prior opinion letters (Opinion Letters 77-172 and 85-19) regarding PBGC coverage in Puerto Rico and Guam. Those opinion letters articulated the PBGC’s position at that time, that Title IV of the Employee Retirement Income Security Act (ERISA) (providing for PBGC coverage), may apply to defined benefit plans covering only Puerto Rico participants if the Puerto Rico plan is either qualified under Section 401(a) of the U.S. Internal Revenue Code or has been operated in practice in accordance with the requirements of Section 401(a) for at least the five preceding years. Earlier this year, in remarks made at an enrolled actuaries meeting, PBGC officials stated that, going forward, PBGC will determine that a plan is not covered under Title IV of ERISA if (1) the plan’s trust is created or organized outside of the United States (e.g., Puerto Rico) and (2) no election under ERISA section 1022(i)(2) has been made. As a result, it appears the new PBGC position is that Puerto Rico-only qualified plans generally are not covered under Title IV of ERISA (although dual-qualified plans with Puerto Rico participants are covered). Since few Puerto Rico plans have made an election under ERISA section 1022(i)(2) due to the strict U.S. laws applicable to such arrangements, this new PBGC position will affect a number of Puerto Rico-only defined benefit plans. PBGC officials also stated that if the PBGC determines that a plan is not covered under Title IV of ERISA, it may refund up to six years of premiums.

Employers with Puerto Rico-only defined benefit plans should consider whether PBGC coverage of their plan is still possible or desired. If not, a refund of PBGC premiums should be sought.

The Internal Revenue Code of 1986 (the Code), permits governmental and tax-exempt entities to sponsor tax-advantaged retirement plans meeting the Code Section 457(b).  Although governmental Section 457(b) Plans primarily operate and act like Code Section 401(k) plans and Code Section 403(b) Plans (i.e., a “qualified” retirement plan).  Section 457(b) plans maintained by tax-exempt entities must be “top-hat”  plans, thereby limiting participation to a select group of highly-compensated individuals and management employees.  Numerous non-profits sponsor Section 457(b) Plans as a means of providing additional nonqualified deferral opportunities for their highly-compensated executives.  The Internal Revenue Service (IRS) has decided to take a closer look at these arrangements, announcing recently that it would begin conducting “compliance checks” of Section 457(b) Plans maintained by non-governmental entities (e.g., health systems, educational institutions, museums, etc.).  Though the compliance checks are not full audits, plan sponsors can expect the IRS to request extensive information regarding written and operational plan compliance.

To read the full article, click here.

by Lisa K. Loesel, Mary K. Samsa and Kary Crassweller

The Internal Revenue Service (IRS) recently updated the Employee Plans Compliance Resolution System (EPCRS), the comprehensive system of correction programs for sponsors of qualified retirement plans.  The components of EPCRS continue to be the Self-Correction Program, the Voluntary Correction Program (VCP) and the Audit Closing Agreement Program.  This newsletter describes some of the significant changes to EPCRS, including revisions to the VCP submission procedures and enhanced access for 403(b) plans.

To read the full article, click here.