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Employee Benefits Legal Resource Site
Employee Benefits Legal Resource Site
IRS Permits New Benefits in High Deductible Health Plans
(Posted on July 18, 2019 by Carol V. Calhoun)
The IRS has recently issued Notice 2019-45, which increases the scope of preventive care that can be covered by a high deductible health plan (“HDHP”) without eliminating the covered person’s ability to maintain a health savings account (“HSA”).
As background, since 2003, eligible individuals whose sole health coverage is a HDHP have been able to contribute to HSAs. The contribution to the HSA is not taxed either when it goes into the HSA or when it is used to pay health benefits. It can for example be used to pay deductibles or copays under the HDHP. But it can also be used as a kind of supplemental retirement plan to pay Medicare premiums or other health expenses in retirement, in which case it is more tax-favored than even a regular retirement plan.
As the name suggests, a HDHP must have a deductible that exceeds certain minimums ($1,350 for self-only HDHP coverage and $2,700 for family HDHP coverage for 2019, subject to cost of living changes in future years). However, certain preventive care (for example, annual physicals and many vaccinations) is covered without having to meet the deductible. In general, “preventive care” has been defined as care designed to identify or prevent illness, injury, or a medical condition, as opposed to care designed to treat an existing illness, injury, or condition.
Notice 2019-45 expands the existing definition of preventive care to cover medical expenses which, although they may treat a particular existing chronic condition, will prevent a future secondary condition. For example, untreated diabetes can cause heart disease, blindness, or a need for amputation, among other complications. Under the new guidance, a HDHP will cover insulin, treating it as a preventative for those other conditions as opposed to a treatment for diabetes. Read more.
IRS Revenue Procedure Eases Correction Procedures
(Posted on April 22, 2019 by Carol V. Calhoun)
The IRS has just issued a new revenue procedure, Rev. Proc. 2019-19, which limits the number of plans that have to make IRS filings under the Voluntary Correction Program (“VCP”) in order to correct past errors.
The guidance adds provisions allowing plans to be corrected under the Self-Correction Program (“SCP”), which does not require an IRS filing, in the case of two sorts of errors:
- Plan document failures
- Correction by retroactive plan amendment
The revenue procedure also loosens certain requirements for dealing with plan loan failures.
Read more.
New PowerPoint: Avoiding Fringe Benefit Pitfalls: Tax Traps, De Minimis Rules, Correction Procedures, Fiduciary Risks
(Posted on April 4, 2019 by Carol V. Calhoun)
A recent CLE webinar guided benefits counsel and advisers on recent rules and regulations in providing fringe benefits to employees and avoiding dangerous and costly issues that arise regarding such benefits including personal liability under ERISA. The panel discussed key considerations in structuring fringe benefits, tax traps, de minimis rules, effective correction procedures and methods to minimize fiduciary risks. The PowerPoint presentation for the portion of the webinar dealing with tax aspects is now available at this link.
New article: Section 403(b) Plan Design and Compliance
(Posted on December 5, 2018 by Carol V. Calhoun)
A new article, Section 403(b) Plan Design and Compliance, discusses the rules that apply when eligible tax-exempt organizations establish tax-sheltered annuities, custodial accounts, or retirement income accounts, as described in Section 403(b) of the Internal Revenue Code (403(b) plans).
This article addresses the following topics:
- 403(b) Plan Overview
- Eligible Employers and Employees
- ERISA Coverage of 403(b) Plans
- Qualification Requirements
- 403(b) Plan Contributions
- 403(b) Plan Distributions
- Implementation and Operation
- Correcting 403(b) Plan Errors
- Terminating 403(b) Plans
- EP Subcommittee Report: 403(b) Plan Issues and Recommendations
- Advantages and Disadvantages of 403(b) Plans
New Article: Pre-Approved 403(b) Plans
(Posted on November 29, 2018 by Carol V. Calhoun)
In March 2017, the Internal Revenue Service (IRS) began issuing advisory and opinion letters to the first preapproved retirement programs described in Internal Revenue Code (I.R.C.) § 403(b) (403(b) plans). A new article, Pre-Approved 403(b) Plans, discusses preapproved 403(b) plans, including their advantages, legal pitfalls, and other issues that an eligible employer may consider when determining whether to convert its existing 403(b) plan into a preapproved plan.
The major topics are:
- What Is a 403(b) Plan?
- What Is a Preapproved 403(b) Plan?
- What Are the Advantages of a Preapproved 403(b) Plan?
- What Are the Legal Pitfalls of a Preapproved 403(b) Plan?
- What Operational Issues Can Arise for a Preapproved Plan?
- What Practical Issues Can Arise for a Preapproved Plan?
- When Should an Employer Adopt a Preapproved 403(b) Plan?
- Can the Employer Cure Past Plan Issues by Adopting a Preapproved 403(b) Plan?
- What Should an Employer Do If It Did Not Comply with the Written Plan Document Requirement in the Past?
2018 IRS Benefits & Contributions Limits Announced
(Posted on November 1, 2018 by Carol V. Calhoun)
On November 1, 2018, the IRS issued IRS Notice 2018-83, announcing the changes in pensions and benefits limits for 2019. The maximum limits on employee pretax contributions to 401(k), 403(b), and 457(b) plans (without catch-ups) increased from $18,500 to $19,000, the maximum limit on annual additions (primarily to defined contribution plans) rose from $55,000 to $56,000, and the maximum limit on benefits (when expressed as an annual benefit) under a defined benefit plan rose from $220,000 to $225,000. A variety of other limits, including the limits on annual compensation taken into account and the compensation used in the definition of a key employee, also increased.
A chart showing details, and limits from 1996 to 2019, can be found at this link.
New Article: Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities (Section 457A)
(Posted on October 26, 2018 by Carol V. Calhoun)
A new article, Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities (Section 457A), discusses the rules that apply to deferred compensation plans maintained by certain corporations located in tax haven jurisdictions and partnerships owned by such corporations and/or by tax-exempt organizations. Topics covered include:
- Purpose of Section 457A
- Application of Section 457A
- Substantial Risk of Forfeiture
- Nonqualified Entities
- Service Providers
- Nonqualified Deferred Compensation Plans
- Tax Effect of Section 457A
- Relationship between Section 457A and FICA Taxes
- Relationship between Sections 457A and 409A
- Effective Date and Transitional Rule
Social Security Wage Base for 2019 Updated
(Posted on October 11, 2018 by Carol V. Calhoun)
The Social Security Administration has now announced that the wage base (the maximum amount subject to Social Security taxes) for 2019 will be $132,900.
A chart showing Social Security limits from 1996 through 2019 can be found at this link.
New article: Executive Compensation Arrangements for Tax-Exempt Organizations
(Posted on September 14, 2018 by Carol V. Calhoun)
Tax-exempt organizations face special legal challenges in developing compensation packages for their executives. A new article published in the Lexis Practice Advisor provides practical guidance on developing benefits for executives of nonprofits.
This article is divided into the following main topics:
2018 Supplement to the Governmental Plans Answer Book Published
(Posted on September 12, 2018 by Carol V. Calhoun)
The 2018 supplement to the Fourth Edition of the Governmental Plans Answer Book has now been published.
The 2018 Supplement to Governmental Plans Answer Book gives subscribers the most relevant, current, and practice-oriented answers to the issues faced daily by plan administrators, attorneys, actuaries, consultants, accountants, and other pension professionals as they navigate the requirements and procedures involved in administering their plans. The 2018 Supplement to Governmental Plans Answer Book examines the following significant changes and case law in this area and includes:
- Recent state-level legislative developments affecting design, eligibility, and related issues (see Q 2:126) and investment, including divestiture (see Q 7:98) and fiduciary education requirements (see Q 7:32).
- Law sources and practical points to consider in discerning whether a participant is allowed to make a beneficiary designation by electronic means (see Q 12:5.1).
- Court decision that recognizes, even on interpleader, deference to a claims administrator’s discretionary authority (see Q 12:25).
- Updated explanations about community-property laws (see Chapter 12).
- How a provision in the Constitution of the United States and in many states’ constitutions might preclude applying a revocation-on-divorce statute to a beneficiary designation or contract made before the statute was enacted or took effect (see Q 12:54).
- Citations for the laws of three states that do not end a person’s minor status at age 18 (see Q 12:57).
- Recent court decision that an order that conditions a payment on whether the payee remains unmarried is not a qualified domestic relations order (see Q 13:10.1).
- Information about state laws that restrict a plan-approved domestic relations order to provisions more restrictive than those allowed for a non-governmental plan’s qualified domestic relations order (see Chapter 13).
- A 2018 ethics interpretation about a lawyer’s duties concerning the lawyer’s errors (see Chapter 13).
- Updated explanations about same-sex marriage and domestic partnerships (see Chapters 12 and 13).
- The Securities and Exchange Commission’s Regulation Best Interest applicable to broker-dealers that advise employee benefit plans (see Q 7:2).
- Expanded coverage of cases in text cross-referenced to Appendix E, Recent Court Decisions of Interest Involving Governmental Plans (see Appendix E).
For more information on this book, written by Carol V. Calhoun, Cynthia L. Moore, and Keith Brainard, you can use the following links: