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Year-End Qualified Retirement Plan Checklist

Year-End Qualified Retirement Plan Checklist

October 31, 2012

Authored by: benefitsbclp

It’s time to ensure year-end qualified plan deadlines are satisfied. Below is a checklist designed to help employers with this process.


The deadline for adopting the amendments listed below is the last day of the plan year beginning on or after January 1, 2012.  For calendar year plans, the deadline is December 31, 2012.  Note that some of the provisions became effective and required operational compliance prior to 2012.  Plan sponsors should review their plans’ administration to ensure that the plans have been operated in compliance with the applicable provision.

          1.      DEFINED BENEFIT PLANS

□        Code § 436 Funding Based Benefit Restrictions.  The Pension Protection Act of 2006 (“PPA”) added Section 436, which imposes restrictions on distributions and benefit accruals based on the funding status of a defined benefit plan, to the Internal Revenue Code (“Code”).  Plans that do not

Proposed Changes to ISS Proxy Voting Policies

On October 16, 2012, Institutional Shareholder Services (ISS) issued for comment several proposed proxy voting policy changes.  The following would affect U.S. public companies:

Board Matters

Current Policy: Recommend vote against or withhold votes from the entire board (except new nominees, who are considered case-by-case) if the board failed to act on a shareholder proposal that received the support of either (i) a majority of shares outstanding in the previous year; or (ii) a majority of shares cast in the last year and one of the two previous years.

Proposed Policy: Recommend votes against or withhold votes from the entire board (with new nominees considered case-by-case) if it fails to act on any proposal that received the support of a majority of shares cast in the previous year.

The proposed change is intended to increase board accountability. ISS is specifically seeking feedback as to whether there are specific circumstances where

Private Health Insurance Exchanges: Look Before You Leap

Private Health Insurance Exchanges: Look Before You Leap

October 25, 2012

Authored by: benefitsbclp

Update December 12, 2012: See today’s post on this issue that provides additional insight.

In the wake of the Affordable Care Act’s public exchanges, large private employers and benefit consultants have been working on establishing private health insurance exchanges, which would permit employees of participating employers to purchase health insurance from a broader array of alternatives than are available under a single employer plan.  Generally, private exchanges are being marketed to large employers, many of whom self-insure, as a way to manage their health care costs through a defined contribution-style health program.  It is expected that the private exchange will have multiple levels of individual health insurance coverage provided by several different insurers, in contrast to employer plans, where there may be only one or two levels of coverage.

An employer who provides health coverage through a private exchange gives each employee sum of money, through

Updated Qualified Plan Limits

Updated Qualified Plan Limits

October 22, 2012

Authored by: Chris Rylands

Last week, the IRS updated various qualified plan limits for 2013 to reflect increases in the cost of living.  A table of those limits, along with a listing of limits from prior years, is below.

Disclaimer/IRS Circular 230 Notice


408(b)(2) Ruminations from the Field

408(b)(2) Ruminations from the Field

October 17, 2012

Authored by: benefitsbclp

The regulations mandating that covered service providers disclose information, particularly fee information, required that the first “explosion” of the disclosure information occur by July 1, 2012. Prior to July 1, 2012, we provided lots of information about the disclosure requirements in an effort to assist the fiduciaries in avoiding a prohibited transaction (including some prior blog posts). After July 1, 2012, we followed up and asked if there were questions or if we could assist in any fashion. We have now had three months to take a look at what happened as a result of this first round of plan level fee disclosure and discuss the effort with other advisors. Looking primarily at defined contribution plans, and particularly 401(k) plans and ESOPs, we culled some anecdotal information, and from it, there appear to be a number of pretty consistent patterns and results.


  • Diligent fiduciaries who

Potential Refund Claim for FICA Taxes on Severance Payments Made in a Reduction in Force

On September 7th, 2012, the 6th Circuit upheld the District Court’s decision in U.S. v. Quality Stores, holding that severance payments made to employees in connection with an involuntary reduction in force were not “wages” subject to FICA taxes.  United States v. Quality Stores, Inc. (In re Quality Stores, Inc.), 424 B.R. 237 (W.D. Mich. 2010), aff’d, 10-1563, 2012 U.S. App. LEXIS 18820 (6th Cir. September 7, 2012).   In so holding, the 6th Circuit reasoned that such severance payments were supplemental unemployment compensation benefits (“SUB Pay”) within the meaning of § 3402(o)(2) of the Internal Revenue Code (the “Code”) exempt from FICA taxes.

This holding is directly at odds with the position of the Internal Revenue Service (“IRS”), set forth in Revenue Ruling 90-72, that such severance payments are wages for FICA purposes and not SUB Pay.  According to the IRS, the definition of SUB Pay

Governmental Plans: Are Your Plan Fees Reasonable?

October 15, 2012


Governmental Plans: Are Your Plan Fees Reasonable?

October 15, 2012

Authored by: benefitsbclp

Have you recently received fee disclosures from your plan service providers?  Do you know the total compensation your service providers receive for their services?  Are you aware how these costs impact plan participants?  Are these fees reasonable?

All plan fiduciaries, including governmental plan fiduciaries, have the duty to make sure fees paid for services are reasonable. However, until now, there hasn’t been any formal regulatory disclosure requirement governing service provider compensation. In 2012, the Department of Labor (DOL) finalized fee disclosure rules applicable to ERISA plans.  Generally, these rules were issued to assist plan sponsors and fiduciaries in determining whether plan-related fees are reasonable for and to provide transparency for plan fiduciaries and participants.  Although these fee disclosure rules only apply to ERISA-governed private sector plans, governmental plans should consider following these new rules as a fiduciary best practice.

The DOL fee disclosure rules consists of

Sixth Circuit Allows Reasonable Modifications of Retiree Health Benefits

On September 13, 2012, the Sixth Circuit in Reese v. CNH Am. LLC, 11-1359, 2012 WL 4009695 (6th Cir. Sept. 13, 2012) reiterated its 2009 ruling in the same case that an employer could unilaterally modify a retiree health plan, as long as the modifications were reasonable. The September 13th ruling was the Court’s second review of the case on appeal; the sequel to an unfolding drama.

In this case, the employer and labor union entered a collective bargaining agreement which stated the employer would provide healthcare benefits for retirees and their eligible surviving spouses. The issue was whether the lifetime healthcare benefits had vested and, if so, whether, and to what extent, the employer could modify the benefits. In 2009, the Court found that the lifetime health care benefits had vested pursuant to the collective bargaining agreement, but that the employer could modify the benefits as long

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