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Employee Benefits Legal Resource Site
Employee Benefits Legal Resource Site
New article: Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities (Section 457A)
(Posted on November 14, 2018 by Carol V. Calhoun)
Internal Revenue Code Section 457A restricts the ability of certain tax-indifferent entities (so-called nonqualified entities) to defer compensation for services provided by their service providers. A new article published in the Lexis Practice Advisor provides guidance on practical steps for attorneys advising such entities on nonqualified deferred compensation plans.
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.
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.
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 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.
Carol V. Calhoun quoted in “Will the Nick Sabin tax apply to Nick Sabin?”
(Posted on March 26, 2018 by Carol V. Calhoun)
Carol V. Calhoun was quoted in a March 12, 2018 article in Tax Notes, dealing with the issue of whether the new excise taxes on excess compensation and excess severance benefits will apply to public colleges and universities. The wording of the law makes it unclear whether the law should apply to the very governmental entities most likely to have employees that would otherwise be affected by it.
Sample Subrogation and Reimbursement Clauses for Summary Plan Description Now Available
(Posted on March 16, 2018 by Carol V. Calhoun)
A new article by Carol V. Calhoun, published by Lexis Practice Advisor, provides sample subrogation and reimbursement clauses to be used in a summary plan description. Such clauses are typically used in an instance in which an employer’s health or disability plan wants to avoid a situation in which a participant gets a double recovery for the same illness or injury. For example, an employee covered by both the employer’s health plan and a spouse’s health plan should not have the same medical expenses paid by both plans. Or an individual who is hit by a car, and recovers lost wages from the driver’s insurance company, should not also be able to receive disability benefits for the same period.
“Effect of the Tax Cuts and Jobs Act of 2017 on Nonprofits and Governments,” PowerPoint now available
(Posted on February 15, 2018 by Carol V. Calhoun)
The Tax Cuts and Jobs Act of 2017 made a number of changes affecting the compensation and benefits that governmental, church, and other tax-exempt organizations can provide to their employees. Given the short time between introduction and passage of the Act, it is not surprising that many of the new provisions are unclear in their application. Moreover, some of them may produce unintended consequences for these organizations.
As part of a symposium on “Recent Developments in Benefits/Executive Compensation Affecting Tax Exempt Organizations,” Carol V. Calhoun gave a presentation on the ways in which the Tax Cuts and Jobs Act of 2017 will affect the compensation and benefits of such organizations. A copy of the PowerPoint for her speech can be found at this link.
“Overview of the Tax Cuts and Jobs Act: What Individuals and Business Owners Need to Know,” PowerPoint now available
(Posted on February 1, 2018 by Carol V. Calhoun)
The PowerPoint slides for the presentation entitled “Overview of the Tax Cuts and Jobs Act: What Individuals and Business Owners Need to Know,” given at the offices of Venable LLP on February 1, 2018, are now available at this link.
Nonprofits and Governments Face Compensation and Benefits Issues under the New Tax Law
(Posted on January 11, 2018 by Carol V. Calhoun)
The recently passed tax bill imposes a 21% excise tax on excess compensation and excess severance benefits of certain executives of nonprofit and governmental employers. The provision has a substantial impact on the compensation and benefits that such organizations can provide for their executives. Moreover, the determination of which employers, and which executives, are covered includes several traps for the unwary.