Contemplating a Severance Plan? Consider ERISA

A severance plan may be subject to the requirements of ERISA as an employee welfare benefit plan. The determination of whether a severance plan is subject to ERISA depends in large part on whether the plan is part of an “ongoing administrative scheme.”

Severance plans subject to ERISA have certain requirements, such as the obligation to file annual Forms 5500, to follow ERISA’s formal claims procedure, and to provide a summary plan description (“SPD”), a summary annual report (“SAR”), and any required summaries of material modification (“SMM”) to participants.

For a severance plan subject to ERISA, failure to comply with these requirements can carry a hefty fee – up to $110 per day for failure to provide required documents to participants on request and up to $1,100 per day for failure to file a Form 5500. Read More ›

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

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Late Or Incorrect Forms 1095-C: The IRS Provides Relief, But Only For Employers Acting In Good Faith To Comply Or Who Missed The Deadline Due To Reasonable Cause

Many employers struggled to furnish correct Forms 1095-C to employees by the March 31, 2016 deadline.  Section 6721(a)(2) of the Internal Revenue Code provides penalties for failure to furnish Forms 1095-C to individuals by the deadline.  Although the presumptive penalty is $250 for each delinquent or incorrect return, the penalty amount may be reduced if Forms are furnished or corrected within 30 days of the filing deadline.  Correction within 30 days lowers the presumptive penalty to $50 per return.  If a failure to correct is not made within 30 days, but is made by August 1, the presumptive penalty is reduced to $100 per return.  Read More ›

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

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Chief Counsel Memorandum Clarifies IRS Position on Informal 409A Corrections

On May 1, the IRS released a Chief Counsel Memorandum that clarifies the IRS’ position with respect to the correction of deferred compensation arrangements outside of the IRS’ formal Section 409A correction programs.

In the Memorandum the IRS analyzed a retention bonus that was granted in year 1, vested in year 3, and to the extent vested, would be paid in equal installments in years 4 and 5. The retention agreement contained a provision that gave the employer the discretion to accelerate and pay the retention bonus in a single lump sum payment in year 4.  As noted by the IRS, the employer’s discretion to accelerate and pay the retention bonus early violated Section 409A’s prohibition against acceleration.  Read More ›

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IRS Provides Relief for Correction of Elective Deferral Mistakes in 401(k) Plans

The IRS recently announced changes that make it significantly easier to correct employee deferral mistakes (also known as elective deferrals) in qualified retirement plans.  The changes make modifications to the IRS’ Employee Plans Compliance Resolution System (“EPCRS”), which is the IRS’ comprehensive correction program for qualified retirement plans.

Automatic Enrollment Correction Relief

If a qualified plan has automatic enrollment and it either (1) does not automatically enroll employees in accordance with the terms of the plan’s automatic enrollment feature or (2) does not implement an employee’s affirmative election, the new guidance provides that as long as the employee is enrolled in the plan within 9-1/2 months following the end of the plan year of the failure (or earlier if the employee notifies the employer of the mistake), the employer is not required to make a correction for the missed elective deferrals.  Read More ›

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

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