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Employee Benefits Legal Resource Site
Employee Benefits Legal Resource Site
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:
New article: Pre-approved Plan Design and Compliance
(Posted on August 13, 2018 by Carol V. Calhoun)
With the IRS cutting back on determination letters for individually designed plans, more and more employers are switching to pre-approved plans. An article recently published in the Lexis Practice Advisor discusses practical considerations involved with such plans. Topics include:
New Immigration Rules Create Issues for Employer Health Plans
(Posted on August 9, 2018 by Carol V. Calhoun)
A leaked draft of Proposed Department of Homeland Security (“DHS”) regulations indicates that certain non-US citizens may be disadvantaged in extending or adjusting their immigration status if they obtain health insurance coverage through the Health Insurance Marketplace (“Marketplace”) set up under the Patient Protection and Affordable Care Act (“ACA”) or Medicaid, or obtain benefits under the Children’s Health Insurance Program (“CHIP”) for their dependents (even US citizen dependents). From an employee benefits perspective, the proposed rules have three effects on employers:
- Employees may have questions about whether they can or should switch coverage from the Marketplace or CHIP to the employer’s health plan.
- Employers are required to give notices to employees on hiring about the availability of health insurance through the Marketplace, and annually about the availability of CHIP. Employers may want to consider adding information to these notices regarding the potential impact on immigration of accepting either of these benefits.
- Employers that wish to retain non-US citizen employees may wish to improve health benefits (particularly for dependents) to discourage use of the Marketplace or CHIP.
The change in regulations would have a number of effects on employers who hire non-US citizens, particularly in instances in which the employer is sponsoring them (such as for an H-1B visa or a green card) which are beyond the scope of this post. However, this post discusses the specific impact on employee benefits of the proposed regulations, and potential employer responses to them. Read more.