IRS Updates Retirement Plan Correction Procedures

On September 28, 2018, the IRS released Revenue Procedure 2018-52. The Revenue Procedure makes changes to the IRS Employee Plans Compliance Resolution System (“EPCRS”), which is the IRS’ comprehensive correction program for qualified retirement plans.  The primary purpose of the Revenue Procedure is establishing the process for filing correction applications and paying the applicable user fee through the www.pay.gov website.

Beginning April 1, 2019, the IRS will no longer accept paper applications meaning that plan sponsors are required to use pay.gov to submit their application and pay their user fees.  During a transition period running from January 1 – March 31, 2019, plan sponsors may, but are not required to, file their EPCRS applications online. Read More ›

Posted in Qualified Retirement Plans | Tagged , ,

Share this Article:

A New Perspective on Student Loan Repayment Benefits

On August 17, 2018, the Internal Revenue Service (the “Service”) published a Private Letter Ruling (the “PLR”) describing a unique student loan repayment program in the context of a qualified retirement plan.

Proposed Student Loan Repayment Program

As described in the PLR, an Employer sponsors a Section 401(k) defined contribution plan that permits elective deferrals. The plan requires the Employer to make a matching contribution equal to 5% of an eligible employee’s compensation for a given pay period if such employee makes an elective contribution of at least 2% of his or her compensation during the same period.

The Employer proposed to amend the plan to incorporate a student loan repayment program (the “Program”). Read More ›

Posted in Employee Benefits, Qualified Retirement Plans | Tagged , , , , ,

Share this Article:

New Plan Year, New Wellness Program – Some Things to Keep in Mind

As a follow-up to our recent blog Count Down to Open Enrollment – Some Quick Thoughts, below is a little more detail on how seemingly simple wellness program design changes can have significant legal consequences.

  • HIPAA – Employers feeling extra generous this plan year may want to increase their wellness program’s financial incentive.  It is important that such employers remain mindful of the limitations under HIPAA, i.e., 30% of the total cost of health plan coverage, or 50% for programs designed to prevent or reduce tobacco use.  As noted in our previous blog “Wellness Rules Under the ADA – Will There Ever Be Certainty?
Read More ›
Posted in Employee Benefits, Health & Welfare Plans, Health Care Reform | Tagged , , , , , , , , ,

Share this Article:

Count Down to Open Enrollment – Some Quick Thoughts

As open enrollment approaches for the 2019 calendar year, below are some items employers may want to consider:

  • Wellness program changes – Many employers change their wellness programs during open enrollment.  This is a reminder that even small changes to a wellness program may have significant consequences.  For example, if an employer increases wellness rewards, it may impact not only whether a program complies with the 30% test under HIPAA but it may also impact affordability under Code Section 4980H.  Making changes to a wellness program structure may also create problems.  For example, employers with tobacco surcharges might allow people to avoid surcharges by attesting that they do not use tobacco. 
Read More ›
Posted in Health & Welfare Plans, Health Care Reform | Tagged , , , , , ,

Share this Article:

The 162(m) Transition Rule Guidance Has Arrived

On August 21, 2018, the IRS released Notice 2018-68 providing its initial guidance on the Tax Cuts and Jobs Act (Act) transition rule for changes under 162(m).  Before the Act, 162(m) limited a public company’s tax deduction to $1,000,000 for annual compensation paid to its “covered employees” (i.e., the CEO and the other three most highly compensated executives (excluding the CFO)).  Important pre-Act limitations/exceptions to this rule included (i) a more narrow definition of covered employee, and (ii) an exclusion for performance-based compensation.

The Act substantially broadened the definition of covered employee and eliminated the performance-based compensation exception. However, the Act offered a transition rule for compensation paid under a written binding contract that was in effect on November 2, 2017 and that is not materially modified after that date. Read More ›

Posted in Employee Benefits, Executive Compensation | Tagged , , , , , ,

Share this Article:

Settlement of Solak v. Barrett May Provide Additional Guidance on Setting Director Pay

I’ve stressed how important it is for public company executives and directors to stay apprised of developments in the director pay area, including developments/settlements of director pay lawsuits.  Earlier this summer, the Delaware Chancery court approved a settlement of Solak v. Barrett, a case in which the plaintiffs alleged that the directors of Clovis Oncology breached their fiduciary duties by adopting a compensation plan that overcompensated themselves, in relation to companies of comparable market capitalization and size. In their complaint, the plaintiffs cited as evidence, the fact that the non-employee directors of Clovis each had been paid an average of $429,163 annually between 2012 and 2016, while Fortune 50 companies pay their directors a median total of $281,667 a year and S&P 500 companies pay an average $277,237 a year.  Read More ›

Posted in Employee Benefits, Executive Compensation | Tagged , , , , ,

Share this Article:

The 95 Percent Test: Gearing up for Another Round of Employer Shared Responsibility Penalties

Late last year, the Internal Revenue Service (the “Service”) began enforcing penalties with respect to failures to comply with the employer shared responsibility provisions of Section 4980H of the Internal Revenue Code.  In the coming months, the Service is expected to begin assessing penalties with respect to such failures occurring in calendar year 2016.  These penalties are of two varieties:

  1. Section 4980H(a) penalties are assessed for any month in which an applicable large employer (“ALE”) does not offer minimum essential coverage to substantially all (95% for 2016 and future years) of its full-time employees and their dependents and at least one full-time employee receives a premium tax credit. 
Read More ›
Posted in Employee Benefits, Health & Welfare Plans, Health Care Reform | Tagged , , , , ,

Share this Article:

The Family Medical Leave Act and Benefit Plans: What comes first – the Law or the Employer’s Established Policy?

An employer that employs 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year is subject to the Family Medical Leave Act (“FMLA”). Therefore, often when I am reviewing an employee benefits plan or policy I flag language that states something like: “You may be eligible to continue your coverage pursuant to the FMLA. Contact the company for more information.”  What does this mean?

Group Health Plan

For purposes of the FMLA, a group health plan is generally a plan that provides health care to employees, former employees, or families of such employees or former employees. Read More ›

Posted in Employee Benefits, Health & Welfare Plans | Tagged , , , ,

Share this Article:

Association Health Plans – A New Frontier?

On June 21, 2018, the Department of Labor published the final association health plan (“AHP”) rule, which can be accessed at: https://www.gpo.gov/fdsys/pkg/FR-2018-06-21/pdf/2018-12992.pdf.  83 FR 28912 (June 21, 2018).  The final rule is short, just shy of three pages in length (see page 28961 to 29964), and provides that a bona fide group or association shall be deemed to be able to act in the interest of an employer within the meaning of section 3(5) of ERISA by satisfying the criteria set forth in the final rule.  The requirements are relatively straightforward and are summarized below:

  • Bona fide group or association of employers – There are eight requirements that must be met to satisfy this standard. 
Read More ›
Posted in Employee Benefits, Health & Welfare Plans, Health Care Reform | Tagged , ,

Share this Article:

Yet Another Reason to Focus on Director Pay

We have previously encouraged our readers to focus on the size of their director pay packages and the processes their boards undertake in setting director compensation.  Prior focus on these issues was recommended largely as a way to mitigate the risk of litigation for excessive pay.  In their current U.S. Compensation Policies FAQ, Institutional Shareholder Services Inc. (“ISS”) has given boards yet another reason to focus on director compensation. In the FAQ, ISS indicates the following:

  • In evaluating non-employee director pay, ISS will look for “reasonable practices” that “adequately align the interests of directors to those of shareholders.”
  • A director pay program should incorporate “meaningful” stock ownership and/or holding requirements.
Read More ›
Posted in Executive Compensation | Tagged , , , ,

Share this Article: