EEOC: Discrimination based on sexual orientation or transgender status is prohibited sex discrimination
(Posted on May 12, 2015 by )


Federal law contains provisions forbidding discrimination based on several classifications: race, sex, veteran status, etc. However, no federal law explicitly prohibits discrimination based on sexual orientation or transgender status. As a result, many employers in states which do not have their own legislation barring discrimination based on sexual orientation or transgender status have assumed that no laws prohibited such discrimination.

The Equal Employment Opportunity Commission (“EEOC”) has now called this assumption into question, by bringing several lawsuits treating discrimination based on sexual orientation or transgender status as a form of sex discrimination prohibited by Title VII of the Civil Rights Act of 1964. This issue is a focus of the EEOC’s Strategic Enforcement Plan for 2013-2016. Read more.

Can a state retirement system deny benefits to felons? It’s complicated.
(Posted on May 12, 2015 by )


Many state laws provide that an individual who commits a felony related to his or her official duties will forfeit benefits under the state retirement system. It is clear that such provisions in a pension plan are permissible if they were included in a pension plan on its adoption, or if they apply only to employees hired after the provision was adopted. However, two states (New York and California) have recently struggled with the issue of whether such a provision can be effective with respect to employees hired before the adoption of the provision. Read more.

IRS Clarifies That Plans Do Not Necessarily Have to Recoup Overpayments
(Posted on April 26, 2015 by )


What should a retirement plan sponsor do if it discovers that it has overpaid benefits to a retiree or other former employee? The question has recently arisen in the case of the pension plan of Pontiac, Michigan, which accidentally overpaid many of its retirees an average of $1,000 over a 16-month period. Read more.

Defined Benefit Versus Defined Contribution: Lessons from Utah
(Posted on April 26, 2015 by )


The Pension Research Council of The Wharton School of the University of Pennsylvania has done a study on the effects of Utah’s change in its pension system. Before the change, employees participated in a defined benefit plan. Employees hired after the change were given a choice between a hybrid (defined benefit/defined contribution) plan or a straight defined contribution plan. Those who failed to make a choice were automatically assigned to the hybrid plan. In general, either of the new plans was less generous than the old defined benefit plan.

In general, the Pension Research Council found that employees hired after the change had greater turnover than those hired before the change. Moreover, those electing into the hybrid plan were more likely to stay with the employer than those electing into the defined contribution plan. Those who defaulted into the hybrid plan had the highest turnover.

The Pension Research Council concluded that while the change may have saved the state money in pension costs, “public pension reformers must consider employee responses, in addition to potential cost savings, when developing and enacting major pension plan changes.”

Governmental Plan Determination Letters: Last Chance?
(Posted on April 22, 2015 by )


From February 1, 2015 through January 31, 2016, the Internal Revenue Service (“IRS”) is accepting requests for determination letters regarding the tax qualification of most governmental retirement systems, other than those which already filed during the period February 1, 2013 to January 31, 2014. As discussed under “Timing of a determination letter request,” below, this may be the last chance for state and local retirement systems and other governmental plans to obtain formal IRS reassurance that their plans are qualified. This article discusses why a determination letter is important, and what needs to be done to obtain one. Read more.

The period applies to all individually designed plans. There are separate periods applicable to volume submitter and prototype plans.

State Taxes for Married Same-Sex Couples
(Posted on March 5, 2015 by )


The chart, State Taxes and Married Same-Sex Couples, has been updated to reflect the fact 35 states plus the District of Columbia now allow same-sex marriage. One state (Missouri) recognizes same-sex marriages from other states. Missouri state and federal courts have both now ruled that it must allow such marriages in the state, and some jurisdictions in Missouri are allowing same-sex couples to get married there. In one state (Kansas), many counties are issuing marriage licenses to same-sex couples, but the state is still refusing to recognize such marriages for state law purposes. And in one state (Alabama), a federal court has struck down the ban on same-sex marriage, and the US Supreme Court has declined to issue a stay on the decision, but the state supreme court has issued a decision prohibiting probate judges from issuing marriage licenses to same-sex couples.

The pace of change became much more rapid after the Supreme Court denied certiorari in (refused to consider) any of the Circuit Court decisions striking down bans on same-sex marriage on October 6, and the Ninth Circuit struck down bans in Nevada and Idaho on October 7. On November 6, the Sixth Circuit upheld bans on same-sex marriage from four states (Kentucky, Michigan, Ohio, and Tennessee), creating a conflict among the Circuits. On January 16, 2015, the Supreme Court granted certiorari in the case.

Taxing authorities in all of the states that continue to have bans on same-sex marriage have announced their interpretation of the filing status that married same-sex couples must use for state income tax purposes. Moreover, there is now at least one challenge to the same-sex marriage ban in every state that has such a ban, and almost all of the decisions that have so far been issued have struck down the bans. Read more.

Family & Medical Leave Act regulations to protect same-sex spouses, regardless of domicile
(Posted on February 23, 2015 by )


Immediately after the Supreme Court’s decision in United States v. Windsor, the Department of Labor announced that for purposes of the spousal protections of the Family and Medical Leave Act of 1993 (FMLA), it would recognize a same-sex marriage only if it was legal in the jurisdiction of the couple’s domicile. It has now reversed that position, issuing final regulations which recognize a marriage a) within the United States, if it was valid in the state in which it took place, and b) outside of the United States, if it was valid in the jurisdiction in which it took place and if it could have been entered into in at least one state. The effective date for the final rule is March 27, 2015.

Carol Calhoun quoted in article on elimination of domestic partner benefits
(Posted on February 10, 2015 by )


Carol V. Calhoun was quoted in an article in Human Resources Online entitled “Fair Play… Or Not?” about companies’ actions to eliminate domestic partner benefits for unmarried employees who live in states in which same-sex marriage is now legal. With the majority of US states now allowing same-sex marriage, such actions are becoming more common. Ms. Calhoun is quoted both on why eliminating domestic partner benefits is popular among employers, and some of the pitfalls that may occur.

IRS opens determination letter process for governmental plans
(Posted on February 1, 2015 by )


In recent years, the Internal Revenue Service (“IRS”) has been allowing plan sponsors to request determination letters on the qualified status of their retirement plans only during certain periods (cycles). For individually designed governmental plans, such a cycle (Cycle E) opened on February 1, 2015, and will remain open until January 31, 2016. Read more

A “qualified” plan is a retirement plan that meets all of the requirements of Internal Revenue Code section 401(a) to obtain certain tax benefits. There are alternative ways of obtaining favorable tax status for a retirement plan, such as Internal Revenue Code section 403(b) (tax-sheltered annuities and custodial accounts), 457(b) deferred compensation plans, or individual retirement accounts or annuities. The determination letter process applies only to qualified plans.
Prototype (volume submitter) plans designed for adoption by a variety of employers are subject to different deadlines, which vary depending on whether they are defined benefit or defined contribution plans. However, such plans are rare in the governmental context.
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