Employee Benefits
July 03, 2019
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| Executive Order 13847 entitled “Strengthening Retirement Security in America” issued August 31, 2018 directs the Department of the Treasury and the Department of Labor to (i) update rules regarding association retirement plans (also known as multiple employer plans) to reduce the risk of disqualification for the acts of a single employer; (ii) find ways of making required disclosures and compliance costs less burdensome; and (iii) update the life expectancy and distribution tables used to determine minimum distributions. On September 25, 2018 it was reported that the Department of Labor submitted a proposed rule regarding multiple employer plans to the Office of Management and Budget. |
Date
| Executive Order on Enforcing the Regulatory Reform Agenda dated February 24, 2017, requires each agency to establish a Regulatory Reform Task Force that will, at a minimum, attempt to identify regulations that: (i) eliminate jobs, or inhibit job creation; (ii) are outdated, unnecessary, or ineffective; (iii) impose costs that exceed benefits; (iv) create a serious inconsistency with regulatory reform initiatives and policies; (v) are inconsistent with section 515 of the Treasury and General Government Appropriations Act or the guidance thereunder; or (vi) derive from or implement other Executive Orders or Presidential Directives that have been subsequently rescinded or substantially modified. Each Task Force is required to provide the agency head a report detailing the progress within 90 days of the order. The order extends to, among other agencies, the Department of Labor and the Department of the Treasury. Read More |
Date9/27/2018
| A bill, the Family Savings Act of 2018 (H.R. 6757), was passed by the House of Representatives on September 27, 2018 by a vote of 240-177 that would provide for, among other things, (i) Universal Savings Accounts, (ii) expansion of Section 529 education accounts and (iii) penalty-free withdrawals from retirement plans for individuals in case of birth or adoption. USAs are savings accounts into which after-tax dollars can be contributed (similar to Roth IRAs) but the funds can be withdrawn at any time and for any reason (not only after retirement, as is the case with Roth IRAs). Provisions that are part of this bill were also mentioned in one of the "framework" documents relating to "Tax Reform 2.0" issued by the House Ways & Means Committee. The bill was referred to the Senate on September 28, 2018. Read More
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Date12/2/2017
| A bill (S. 1) was passed in the Senate on December 2, 2017 by a vote of 51-49 that would: (i) (A) extend the period during which a qualified plan loan offset amount may be contributed to an eligible retirement plan as a rollover contribution, (B) repeal the special rule that allows IRA contributions to one type of IRA (either traditional or Roth) to be recharacterized as a contribution to the other type of IRA, (C) apply a single aggregate limit for contributions to 403(b) plans and 457(b) plans, (D) repeal current rules allowing additional elective deferrals and catch-up contributions to 403(b) plans and Section 457(b) plans, (E) repeal the rule allowing employer contributions to 403(b) plans for up to five years after termination of employment, and (F) allow Section 529 plans to be used for expenses relating to students at public, private and religious elementary and secondary schools, and for students that are home schooled; (ii) (A) repeal key exceptions to the $1 million limitation on the deductibility of compensation under Section 162(m), (B) impose an excise tax of 20% on compensation in excess of $1 million and on "parachute" payments paid by a tax-exempt organization to certain of its employees, (C) cause Section 83(b) elections to be no longer be available with respect to restricted stock units, (D) allow certain employees of certain non-publicly traded corporations that settle stock options to defer income recognition for five years and (E) generally require a three-year holding period in order for service providers to have long-term capital gains from carried interests granted with respect to real-estate and investment businesses; (iii) (A) repeal the exclusion from income for qualified moving expense reimbursement, (B) repeal the exclusion from income for qualified bicycle commuting reimbursements; and (iv) reduce the penalty for failure to purchase health insurance coverage enacted as part of the Affordable Care Act to zero. Read More |
Date11/16/2017
| A bill (H.R. 1) was passed by the House of Representatives on November 16, 2017 by a vote of 227-205 that would (i) (A) make certain modifications to the nondiscrimination rules governing tax-qualified retirement plans, (B) permit in-service distributions under tax-qualified "pension" plans and Section 457(b) governmental plans at age 59-½, (C) direct Treasury to modify regulations preventing a participant from continuing to make deferrals after the receipt of a hardship distribution, (D) allow earnings in certain plans to be distributed on account of hardship, (E) extend the period during which a qualified plan loan offset amount may be contributed to an eligible retirement plan as a rollover contribution, (F) repeal the special rule that allows IRA contributions to one type of IRA (either traditional or Roth) to be recharacterized as a contribution to the other type of IRA and (G) allow up to $10,000 per year under a Section 529 plan to be used for expenses relating to students at private elementary and secondary schools, and allow parents to establish Section 529 plans for unborn children; (ii) (A) repeal key exceptions to the $1 million limitation on the deductibility of compensation under Section 162(m), (B) impose an excise tax of 20% on compensation in excess of $1 million and on "parachute" payments paid by a tax-exempt organization to certain of its employees, (C) cause Section 83(b) elections to no longer be available with respect to restricted stock units and (D) generally require a three-year holding period in order for service providers to have long-term capital gains from carried interests granted with respect to real-estate and investment businesses; and (iii) (A) limit the amount that may be excluded from gross income for employer-provided lodging and (B) repeal the exclusions for (I) dependent care assistance programs, (II) qualified moving expense reimbursements, (III) adoption assistance programs and (IV) employee achievement awards (and repeal the deduction limitation for such awards). Read More |
Date5/23/2019 | On May 23, 2019, the House of Representatives voted 417-3 in favor of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, H.R. 1994. Among other features, the bill would allow certain unrelated employers to band together to offer a multiple-employer 401(k)-type plan, and may make it easier for employers to offer annuities to plan participants. The bill would also repeal the age cap for contributing to a traditional IRA and would increase the age to begin taking required withdrawals to 72. The bill would require employers to disclose an estimate of the monthly income that a 401(k) balance would support, would require 401(k) plans to allow certain long-tenured part-time employees to participate, would allow a penalty-free distribution from 401(k) plans and IRA of up to $5,000 within a year of the birth or adoption of a child to cover associated expenses, would require beneficiaries of IRAs to withdraw the money within a decade of the IRA owner’s death, and allow certain withdrawals from a 529 savings plan to repay some student loans. A similar bill known as the Retirement Enhancement and Savings Act (“RESA”) was introduced in the Senate in 2016 and received unanimous approval from the Finance Committee. RESA was reintroduced in the Senate in 2019. Read More |
Date12/19/2018 | The Retirement Parity for Student Loans Act, introduced in the Senate on December 19, 2018, would give plan sponsors the option of making a 401(k) matching contribution for employees who are paying back student loans. The Act would allow workers who are paying down student loans to receive employer matching contributions into their 401(k) plans as if those student loan payments were salary reduction contributions made into the 401(k) plan. (See also Private Letter Ruling 201833012.) The Act would also apply to 403(b) and SIMPLE retirement plans. The new rules would apply to contributions made for years beginning after December 31, 2019. Read More |
Date11/26/2018 | A bill, the Retirement, Savings, and Other Tax Relief Act of 2018, was introduced in the House of Representatives on November 26, 2018 that would, among other things, (i) simplify the establishment of tax-qualified plans run on behalf of private employers by “pooled plan providers”; (ii) eliminate the notice requirement for safe harbor status based on nonelective contributions under IRC Sec. 401(k)(12)(C); (iii) allow certain safe harbor Sec. 401(k) plans to amend nonelective status up to thirty days before the end of the plan year; (iv) amend the term “compensation” in IRC Sec. 219 to include any amount paid to an individual to aid in the pursuit of graduate or postdoctoral study allowing for graduate and postdoctoral students to use grants to make IRA contributions; (v) repeal the maximum age for traditional IRA contributions; (vi) prohibit participant loans made through credit cards and similar arrangements; (vii) provide that a plan will not be disqualified if it rolled to another qualified plan or IRA a lifetime income investment no longer available under the plan without a distribution triggering event; (viii) deem terminating Sec. 403(b) plan custodial accounts to be IRAs; (ix) clarify that a retirement income account may cover ministers of a church in the exercise of their ministry regardless of the source of their compensation; (x) increase the cap in the qualified automatic contribution arrangement safe harbor under IRC Sec. 401(k)(13) from 10% to 15%; (xi) increase the tax credit available to a small employer for qualified costs paid or incurred when establishing a new eligible plan; (xii) add a tax credit available to small employers who adopt an automatic enrollment arrangement when sponsoring a new Sec. 401(k) plan or SIMPLE IRA; (xiii) waive the requirement to receive a required minimum distribution if a distribution would cause an individual’s aggregate balance (across retirement accounts) to be below $50,000; (xiv) allow members of the Armed Forces Ready Reserve to make elective deferrals beyond the Sec. 402(g) limits; (xv) provide that if a plan is adopted on or before the due date for the employer’s tax return, the plan will be treated as if it had been adopted on the last day of the taxable year to which the tax return relates; (xvi) modify nondiscrimination rules to provide relief for certain defined benefit plans that are closed to new participants; (xvii) provide a safe harbor for fiduciaries when selecting an annuity provider; (xviii) require a benefit statement provided to a defined contribution plan participant to include a lifetime income disclosure; (xix) modify PBGC premiums for cooperative and small employer charity plans; and (xx) provide for penalty-free withdrawals from retirement plans for individuals in case of birth or adoption. Read More |
Date11/15/2018 | A bill (S. 3636) was introduced in the Senate on November 15, 2018 that would open up the “Saver’s Credit” benefit to individuals who don’t earn enough to owe income tax. The bill would also direct the U.S. Department of Treasury to resurrect the MyRA accounts, which are Roth IRA-style savings accounts that are established by employers on behalf of employees. Read More |
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| A bill (H.R. 4219) was introduced in the House of Representatives on November 2, 2017 that would exempt employers from state and local paid leave obligations if they give workers a certain amount of general paid leave (varying from 12 to 20 days, based on the business's size and the time the worker has been on the job) that can be used for medical, family, bereavement and other reasons. Read More |
Date | H. J. Res. 66 and H. J. Res. 67, submitted by Reps. Francis Rooney (R-Fla.), Tim Walberg (R-Mich.) and Virginia Foxx (R.N.C.) (Feb. 7, 2017) - would overturn two Department of Labor rules (81 Fed. Reg. 59464 (Aug. 30, 2016), 81 Fed. Reg. 92639 (Dec. 20, 2016)) that were issued last year promoting the creation of certain types of IRA-style programs by cities and states. Both H.J. Res. 66 (for states) and H.J. Res. 67 (for political subdivisions of states) were passed by the House of Representatives on February 15, 2017. H.J. Res. 67 was passed by the Senate on March 30, and signed into law by the President on April 13, 2017. H.J. Res. 66 was passed by the Senate on May 3. Read More
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Date7/29/2019 | On July 29, 2019, the U.S. Department of Labor finalized a regulation concerning the so-called Association Retirement Plans, for the purpose of promoting greater adoption of "401(k)" and other similar retirement plans by small businesses. In general terms, the regulation clarifies the conditions under which different businesses may join together to form a multiple employer plan (a "MEP"), either by acting through a group or an association or through a professional employer organization. The applicable conditions include that the sponsoring employers have at least one unifying “substantial business purpose” unrelated to offering employee benefits to its employee members and that the sponsoring employers share a “commonality of interest” with respect to their industry or location. The regulation follows Executive Order 13847 (Aug. 31, 2018), which, among other things, directed the Secretary of Labor to examine policies that would “clarify and expand the circumstances under which U.S. employers . . . may sponsor or adopt a MEP as a workplace retirement savings option for their employees.” (See above in “Executive Orders and Memoranda” for an entry regarding the Executive Order.) In connection with finalizing the regulation, the DOL also issued a “Request for Information,” seeking input regarding whether to amend the regulation to facilitate the sponsorship of “open MEPs” by persons acting indirectly in the interests of unrelated employers whose employees would receive benefits under such arrangements. Read More |
Date7/3/2019 | On July 3, 2019, the U.S. Department of the Treasury issued proposed regulations relating to the tax qualification of plans maintained by more than one employer (a “MEP”). Under 26 C.F.R. §1.413-2(a)(3)(iv) (sometimes referred to as the “unified plan rule”), the qualification of a MEP is determined with respect to all employers maintaining the MEP. Under the unified plan rule, the failure by one employer maintaining the plan (or by the plan itself) to satisfy an applicable qualification requirement will result in the disqualification of the MEP for all employers maintaining the plan. In accordance with President Trump’s Executive Order 13847 (83 FR 45321 (Sept. 6, 2018)), titled “Strengthening Retirement Security in America” (Executive Order), issued on September 6, 2018 (see description here), the proposed regulations would provide an exception to the unified plan rule for certain defined contribution MEPs. Under the proposed regulations, a defined contribution MEP would be eligible for the exception to the unified plan rule on account of certain qualification failures due to actions or inaction by a participating employer, if the conditions set forth in the proposed regulations are satisfied. The exception generally would be available if the participating employer in a MEP is responsible for a qualification failure that the employer is unable or unwilling to correct. It would also be available if the participating employer fails to comply with the section 413(c) plan administrator’s request for information about a qualification failure that the section 413(c) plan administrator reasonably believes might exist. For the exception to the unified plan rule to apply, certain actions are required to be taken, including, in certain circumstances, a spinoff of the assets and account balances attributable to participants who are employees of such an employer to a separate plan and a termination of that plan. Comments to the proposed regulation are due within 90 days of publication in the Federal Register. Read More |
Date11/9/2018 | On November 9, 2018, the U.S. Department of the Treasury issued proposed regulations relating to hardship distributions from Section 401(k) and Section 403(b) plans. The proposal would (i) modify the safe-harbor list of expenses for which distributions are deemed to be made on account of an immediate and heavy financial need (including, among other changes, clarifying that new casualty deduction limitations added by the Tax Cuts and Jobs Act do not apply); (ii) modify the rules for determining whether a distribution is necessary to satisfy an immediate and heavy need (including by eliminating requirements that an employee be prohibited from making elective contributions and employee contributions after receipt of a hardship distribution, and that an employee must take plan loans prior to obtaining a hardship distribution); (iii) replace the current facts-and-circumstances test for determining whether a distribution is necessary with one general standard (specifically, that a hardship distribution may not exceed the amount of an employee's need, the employee must have obtained other available distributions under the employer's plans and the employee must represent that there is insufficient liquid assets to satisfy the need), which the plan administrator may rely upon absent actual knowledge to the contrary; and (iv) expand the sources available for hardship distributions to include QNECs and QMACs (and related earnings). Read More |
Date10/23/2018 | On October 23, the Department of Labor issued proposed regulations concerning so-called Association Retirement Plans, for the purpose of promoting greater adoption of "401(k)" and other similar retirement plans by small businesses. The proposal would ease certain ERISA-based impediments to the adoption of multiple employer plans, with the intent of allowing small businesses to band together to obtain greater cost-effectiveness and to offer benefit packages more in line with those offered by large employers. A rule by the DOL allowing “Association Health Plans,” which makes it easier for small business to group together to buy health insurance was finalized on June 21, 2018. An entry regarding the final rule is provided on the Health and Welfare Plans page. Read More |
Date10/24/2018 | On October 23, 2018 the Department of Treasury, Department of Labor and the Department of Health and Human Services jointly issued proposed regulations concerning Health Reimbursement Arrangements, so-called HRAs, to enable HRAs to cover individual market premiums, with the intent of increasing the use of HRAs by small and mid-sized employers. The proposed rule is the third and final agency response to an October 2017 executive order on “increasing healthcare choice and competition.” Read More |
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| One of three concurrently issued "framework" documents from the House Ways & Means Committee signals the inclusion in "Tax Reform 2.0" of provisions relating to (i) Universal Savings Accounts, (ii) expansion of Section 529 education accounts and (iii) penalty-free withdrawals from retirement plans for individuals in case of birth or adoption. These concepts had been included in the Family Savings Act of 2018 that was previously introduced in the House. Read More |
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| The U.S. Department of the Treasury issued a report on October 27, 2017, pursuant to Executive Order 13772, titled “A Financial System that Creates Economic Opportunities, Asset Management and Insurance,” which addresses, among other things, the promotion of long-term care insurance. The report states that (i) over the past several years long-term care insurance has “experienced a steep decline based primarily on the business decisions of numerous insurers to exit the market," (ii) the Treasury Department has determined that, given the “growing social need for [long-term care insurance] and the resulting strain on public resources, state and federal officials should collaborate on addressing the challenges of financing LTC,” and (iii) Treasury will convene an inter-agency task force to develop policies to complement reforms at the state level relating to the regulation of long-term care insurance, particularly as it relates to certain potential changes including allowing participants in employer-sponsored retirement plans to make penalty-free withdrawals to purchase long-term care insurance, creating long-term care savings accounts similar to Health Savings Accounts and establishing more generous tax incentives for long-term care insurance. Read More |
Date10/27/2017 | The U.S. Department of the Treasury issued a report on October 27, 2017, pursuant to Executive Order 13772, titled “A Financial System that Creates Economic Opportunities, Asset Management and Insurance,” which addresses, among other things, the promotion of in-plan annuity options. The report (i) states that, despite the unique benefits that annuities offer to retirement savings (including that they are, “apart from Social Security and pensions, the only retirement savings product that offers a guaranteed income stream that cannot be outlived”), they are not widely offered in defined contribution plans, in part because of concerns of legal liability to the employer under ERISA’s fiduciary rules, (ii) notes that the DOL adopted a “safe harbor” rule in 2008 to address these concerns, but that “many employers and their professional advisors are not comfortable relying on the safe harbor,” and (iii) recommends that the DOL and Treasury “develop proposals” that would address the fiduciary issues that concern employers in this regard. Read More |
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| Report of the House Freedom Caucus (Dec. 14, 2016) recommendation #139 (remove the NLRB’s standard to determine joint-employer status as articulated in its decision in Browning-Ferris Industries). Report of the House Freedom Caucus (Dec. 14, 2016) recommendation #142 (remove “Annual Reporting and Disclosure” at 81 FR 47495)). Report of the House Freedom Caucus (Dec. 14, 2016) recommendation #143 (remove Administrator’s Interpretation 2015-1, The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who are Misclassified as Independent Contractors). |
Date3/28/2019 | Decision in Howard Jarvis Taxpayers Ass’n et al. v. Calif. Secure Choice Ret. Sav. Program, 2:18-cv-01584, dated March 28, 2019, in which the United States District Court for the Eastern District of California granted a motion to dismiss claims that ERISA preempts the California state-run CalSavers Retirement Savings Program ("CalSavers"), under which a portion of California workers' earnings would automatically be transferred into individual retirement accounts unless they opt out. The court stated that, because CalSavers does not force employers to alter existing ERISA plans, CalSavers is outside of ERISA’s preemptive scope (but granted plaintiffs “one final” leave to amend). Read More |
General Fiduciary (ERISA) Items
Date4/10/2019 | Executive Order on Promoting Energy Infrastructure and Economic Growth, issued on April 10, 2019 (the “Executive Order”), directs the Department of Labor to, within 180 days of the date of the Executive Order, “complete a review of available data filed . . . by retirement plans subject to [ERISA] in order to identify whether there are discernible trends with respect to such plans’ investments in the energy sector” and “complete a review of existing Department of Labor guidance on the fiduciary responsibilities for proxy voting to determine whether any such guidance should be rescinded, replaced, or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets.” |
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