Now You Can Have Your Cake and Eat It Too: New Pension Distribution Rules Allow More Flexibility

If you are one of the lucky few employees who participate in an employer’s defined benefit retirement plan, you previously had to choose between receiving your benefits in a lump sum or in annuity payments. However, in the final rule adopted by the Treasury Department, defined benefit plans are allowed to offer participants the choice of taking a portion of their benefit in a lump sum and the remainder in annuity payments.

These new rules are designed to increase a participant’s flexibility in designing his or her retirement income. As Treasury explained, on the one hand, for plans that permitted a distribution of either lump sum or annuity payments, many participants were reluctant to take the annuity payments and instead chose a lump sum to maximize their flexibility.  Read More ›

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The IRS Retirement Plan Determination Letter Program – The IRS Taketh and Then Giveth (Some Transition Guide)

Last July, in Announcement 2015-19, the IRS announced that it was terminating its determination letter program for individually designed qualified retirement plans, other than for new or terminating plans.  This week, in Notice 2016-03 the IRS provided us with specific transition guidance on the winding down of its program.  Specifically, the IRS announced that:

  • Controlled groups and affiliated service groups that maintain more than one plan are permitted to file determination letter requests during the “Cycle A” period beginning February 1, 2016 and ending January 31, 2017, only if the Cycle A election for the group was made by January 31, 2012;
  • The expiration dates included in determination letters issued before January 4, 2016 are no longer operative (the IRS plans on issuing guidance to clarify when an employer can rely on its determination letter after a subsequent change in the law or plan amendment);
  • To facilitate the plan sponsor’s transition from an individually designed plan to a pre-approved plan, the deadline for an employer to adopt a pre-approved defined contribution plan and to apply for a determination letter is extended from April 30, 2016 to April 30, 2017 (other than a plan that is adopted as a modification and restatement of a pre-approved defined contribution plan that was maintained before January 1, 2016).
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HIPAA “Phase 2” Audits: Are You Ready?

The Civil Rights Office of the Department of Health and Human Services announced a “Phase 2” audit program in the Fall of 2014.  That audit program was delayed due to funding issues, but appears to be back on schedule for 2015.  These Phase 2 audits are expected to be more in depth and focused on reviewing procedures and documentation related to the areas of HIPAA security and privacy risk management, breach notification and Notice of Privacy Practices.  Although the early Phase 2 audits are expected to target Covered Entities (employers sponsoring self-insured group health plans), Health Care Providers and Clearinghouses, the audits are also expected to expand to include HIPAA Business Associates. Read More ›

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November 5 Deadline to Obtain HPID Delayed by HHS

On October 31, 2014, HHS announced a delay, “until further notice,” in the enforcement of the regulations pertaining to Health Plan Identifiers (HPIDs) and their use in HIPAA standard electronic transactions.  For more information on the HPID requirements, please see our October 1, 2014 SW Benefits Update, “HIPAA Requires Many Health Plans to Obtain a Health Plan Identifier by November 5, 2014.”  This enforcement delay applies to all HIPAA-covered entities, including healthcare providers, health plans, and healthcare clearinghouses.

The decision to delay enforcement was based, in part, on a recommendation by the National Committee on Vital and Health Statistics (NCVHS), which is an advisory body to HHS.  Read More ›

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HIPAA Business Associates Agreements – Reminder of September 22 Deadline

On January 17, 2013, the U.S. Department of Health and Human Services (HHS) issued a final rule under HIPAA making substantial changes to the rules for vendors that provide services to HIPAA-covered plans, such as third-party administrators, pharmacy benefit managers and certain brokers – known in the HIPAA world as “Business Associates.” Under this final rule, Business Associates are required, for the first time, to comply with the HIPAA Security Rule, many provisions of the HIPAA Privacy Rule and are subject to direct enforcement by HHS. As a brief reminder, and as we discussed in our Employee Benefits Update 2013 End of Year Plan Sponsor “To Do” List Part 2 – Health and Welfare, existing agreements with Business Associates must be amended to comply with the requirements of this final rule on or before September 22, 2014. Read More ›

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Employers May Be Able to Exempt Severance Payments from FICA Tax under Quality Stores

The Supreme Court recently ruled in U.S. v. Quality Stores that severance paid to employees is considered wages for FICA purposes.  Before the Court’s decision, there was little doubt that employer-provided severance was wages for income tax purposes, but lower court cases were a mixed bag about whether severance was wages for FICA tax purposes.  Indeed, the Sixth Circuit in Quality Stores, held that the severance payments made by Quality Stores were not wages for FICA tax purposes because the payments fell within the statutory exclusion for Supplemental Unemployment Benefit (“SUB”) payments for FICA tax purposes.  The Supreme Court upheld the IRS’ position and disagreed with the Sixth Circuit’s analysis.  Read More ›

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