For an update on the Families First Coronavirus Response Act, which requires coverage of testing without cost sharing effective March 18, 2020, see our blog entry.
In an effort to remove barriers to testing for and treatment of the 2019 Novel Coronavirus (COVID-19), the Internal Revenue Service today issued Notice 2020-15. The Notice
The Affordable Care Act contains a provision–the so-called “Cadillac tax”–providing for a 40% exci
se tax on high cost employer-sponsored health coverage. The bar for “high cost” is fairly low, and the Cadillac tax is ultimately expected to apply to a significant number of employer-sponsored health plans.
Since the passage of the Affordable Care Act, many employers and insurers (who would be responsible for paying the tax) have actively opposed the implementation of the Cadillac tax provisions, with moderate success. The Cadillac tax was originally slated to take effect in 2018, but its implementation has been delayed twice–most recently until 2022.
Each new year brings new limitations, and the Internal Revenue Service has released its annual cost-of-living adjustments applicable to employee benefit plans. A year-to-year comparison of limitations applicable to plan sponsors can be found here: 2019 Annual Limitations Chart.
Reflecting a slight increase in inflation over the past year, several benefit plan limitations will
In a case of first impression, a federal district court in the Southern District of Texas has ruled that a former parent company’s stock was not an “employer security” under section 407(d)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).[1] As a result, the ERISA exemption from the duty to diversify and the duty of prudence (to the extent the latter requires diversification) were not available where a plan held former parent company stock in a legacy single-stock fund. Although in this case plaintiff participants’ claims were ultimately dismissed, the decision should be on the radar of fiduciaries of plans holding significant amounts of former employer securities.
As background, in 2012, Phillips 66 Company, Inc. (“Phillips 66”) spun off from ConocoPhillips Corporation (“ConocoPhillips”) and sponsored a new defined contribution plan with an employee stock ownership plan (“ESOP”) component, as had ConocoPhillips. In addition to newly issued Phillips 66 stock, however, Phillips 66’s new plan also held more than 25% of its assets in a frozen ConocoPhillips stock fund that was transferred from the old plan in connection with the Phillips 66 spinoff.
When the value of ConocoPhillips stock held by the Phillips 66 plan dropped, participants sued the plan’s investment committee and its members, along with the plan’s financial administrator, alleging imprudence and failure to diversify plan assets in violation of ERISA. In reply, defendants argued that ConocoPhillips stock was not subject to the duty to diversify, as those shares were “employer securities” when issued; ConocoPhillips was previously the employer of the participants. Therefore, defendants argued, ConocoPhillips stock remained exempt from the duty to diversify despite Phillips 66’s spin-off from the ConocoPhillips controlled group.
The court rejected this aspect of defendants’ argument, holding that stock does not indefinitely retain its character as “employer securities” for purposes of ERISA’s diversification and prudence requirements. Ultimately ruling in favor of defendants, the court held that ERISA’s diversification and prudence requirements were not violated because the plan’s investment lineup overall was diversified, public information on the risks of ConocoPhillips stock was reflected in its market price, and because the claims about procedural imprudence lacked factual support in the complaint’s allegations. The Schweitzer court also emphasized that participants were free to shift their ConocoPhillips holdings to other investment options under the plan.
FICA’s special timing rule for account balance plans is oft-misunderstood – and misapplied – which can lead to unfavorable consequences for employers and employees alike. Partner Debbie Hoffman and senior associate Stephanie Vasconcellos recently revisited the rule, conducting an in-depth analysis for Bloomberg BNA’s Tax Management Compensation Planning Journal. Access the full article at www.bna.com
In welcome news, the IRS reversed its course on the maximum annual health savings account contribution for a family with high deductible health coverage. As you may recall, the IRS
initially set the maximum 2018 HSA contribution for family coverage at $6,900. In March 2018, the IRS lowered that maximum to $6,850. Via Rev. Proc.
On March 5, 2018, the IRS announced adjustments – effective immediately – to various annual limitations already in place for 2018. One such adjustment is to the maximum annual health savings account contribution for a family with high deductible health coverage. Previously set at $6,900 for 2018, the IRS has lowered the limit to $6,850,
The Tax Cuts and Jobs Act (Tax Act) did not directly modify the rules governing hardship withdrawals from 401(k) plans. However, one change enacted by the Tax Act does necessitate a careful review of 401(k) plan hardship withdrawal language and could impact the administration of hardship withdrawal requests. Further, the Bipartisan Budget Act of 2018,
As a follow up to our previous post, the Department of Labor announced earlier this month that its revised disability claims procedure regulations will indeed take effect on April 1, 2018. The DOL stated that it received few substantive comments with quantitative data on the burdens imposed by the regulations. Moreover, the DOL found
Although retirement plans and schemes are generally jurisdiction specific creatures, the governance of the retirement plans and schemes of multinational companies is very much a global issue. Retirement funds, whether defined contribution plans or defined benefit plans, are essentially large pots of money (frequently in the billions of dollars) located in jurisdictions around the world.