US Department of Labor

In a major victory for church-affiliated hospitals, the US Supreme Court overturned three appellate court rulings and decided unanimously that church-affiliated hospitals can maintain their pension plans as “church plans” exempt from the Employee Retirement Income Security Act of 1974, as amended (ERISA), regardless of whether a church actually established the plan. Impacted health systems, and especially their management, should evaluate how best to document and demonstrate their common religious bonds and convictions with the church.

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A federal district court judge in Texas issued an order granting a temporary injunction late Tuesday against the Department of Labor’s new overtime exemption rule that was scheduled to take effect December 1. This article contains some practical tips on what employers should do next.

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On October 11, 2016, the Occupational Safety and Health Administration published a final rule that establishes procedures and time frames for handling whistleblower complaints under the Affordable Care Act (ACA); for hearings before US Department of Labor (DOL) administrative law judges in ACA retaliation cases; review of those decisions by the DOL Administrative Review Board; and judicial review of final decisions.

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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.

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.

Continue Reading DOL Significantly Increases Some Penalties for ERISA Violations

The US Court of Appeals for the Second Circuit’s recent ruling addresses various issues that could arise during a plan administrator’s review of a participant’s benefit claim and appeal and any ensuing litigation, including the deference to be granted upon review in a federal court, civil penalties and the possibility of introducing additional evidence outside the administrative record. This decision demonstrates the need for employers to review their benefit plans’ claims procedures to ensure they comply with applicable law and best practices.

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The Department of Labor (DOL) recently announced its proposed regulations to implement Executive Order (EO) 13706, establishing paid sick leave for federal contractors. The proposed regulations describe the categories of contracts and employees covered by the EO, the rules and restrictions regarding the accrual and use of such paid sick leave, the obligations of contracting agencies, and the available remedies and enforcement procedures.

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