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A New Method to Incentivize Young Workers?

A New Method to Incentivize Young Workers?

September 4, 2018

Authored by: Jennifer Stokes and Adam Braun

Companies have considered various ways to retain and incentivize their younger, and increasingly mobile, workforce.  A recent PLR offers another option: using a 401(k) plan to provide additional benefits (in the form of a nonelective contribution) to employees who pay down their student debt during the plan year.

On August 17, 2018, the IRS released a private letter ruling (PLR 201833012) in which it ruled that a proposed student loan repayment program included in a 401(k) plan does not violate the contingent benefit rule in Internal Revenue Code Section 401(k)(4)(A) and Treas. Reg. 1.401(k)-1(e)(6).  The requesting company’s 401(k) plan and proposed student loan repayment program included the following features:

  • An employee may elect to contribute eligible compensation to the 401(k) plan as pre-tax or Roth elective deferrals, or after-tax employee contributions.
  • If an employee makes an elective contribution during a payroll period equal to at least

Benefit Plan Disclosure affected by SEC Staff Compliance and Disclosure Interpretations of Proxy Rules and Schedules 14A/C

The SEC staff regularly publishes “Compliance and Disclosure Interpretations” (C&DIs) on various securities matters. Recently, the staff issued new C&DIs related to the SEC’s proxy rules. Previously, the interpretations relating to proxy rules were contained in a “Manual of Publicly Available Telephone Interpretations” which had not been updated since 1999. Included in the new C&DIs are interpretations that affect compensation and benefit plan disclosure in proxy statements filed on Schedule 14A. Most of the new compensation and benefit plan related C&DIs continue the prior Telephone Interpretations, but the following C&DI includes a new substantive interpretation:

  • C&DI Question 161.03: If a registrant is required to disclose the New Plan Benefits Table called for under Item 10(a)(2) of Schedule 14A, the table should list all of the individuals and groups for which award and benefit information is required, even if the amount to be reported is “0”. Alternatively, the

Seventh Circuit Holds that ERISA does not Preempt State “Slayer Statute”

We turn once again to the sad and difficult task that plan administrators face when distributing the benefits of a participant who has been murdered by his or her designated beneficiary. Sad for obvious reasons.  Difficult because ERISA and state law may provide different answers.  ERISA directs a plan to honor a participant’s beneficiary designation—meaning that the murderer would receive the benefit. “Slayer statutes” prohibit the murderer from receiving a financial benefit from his or her victim, requiring the plan to disregard the beneficiary designation.

Our prior blog post suggested three strategies that a plan administrator might employ in the face of uncertainty: interpleader, receipt and refunding agreement, and affidavit of status.  Under the interpleader approach, the plan administrator would pay the benefit into the registry of the court and join each potential claimant as a party defendant. Each claimant would then argue for receipt of the

Changes to Executive Compensation: The Tax Cuts and Jobs Act’s Impact on Section 162(m)

On December 22, 2017, President Trump signed the bill popularly referred to as the “Tax Cuts and Jobs Act” (the “Act”) into law.  The Act contains significant changes to Section 162(m) of the Internal Revenue Code that are effective for taxable years beginning after December 31, 2017. In this article, we provide a summary of the changes to Section 162(m) and suggest planning considerations for publicly held corporations.

Summary of Changes to Section 162(m)

Among other changes to Section 162(m), the Act eliminated the performance-based compensation exception to the $1 million deduction limitation under Section 162(m).  The Act amended the scope of the covered employees, corporations, and compensation for purposes of the $1 million limitation on the deduction for compensation paid to certain employees under Section 162(m). The changes to Section 162(m) include the following:

  • Eliminating the performance-based compensation and commission exceptions from compensation subject

Code Section 409A…Here Today but Possibly Gone Tomorrow and Other Proposed Changes in the Tax Cuts and Jobs Act

Last week the House unveiled its tax overhaul plan, the Tax Cuts and Jobs Act (“Act”).  The Act’s proposals related to employee benefits and compensation are as follows:

Nonqualified Deferred Compensation

Perhaps one of the most talked about aspects of the Act (at least among benefits practitioners) is the demise of Code section 409A and the creation of its replacement, Code section 409B.

Under the proposed Code section 409B regime, nonqualified deferred compensation would be defined broadly to include any compensation that could be paid later than the March 15 following the taxable year in which the compensation is no longer subject to a substantial risk of forfeiture, but with specific carve-outs for qualified retirement plans and bona fide vacation, leave, disability, or death benefit plans.  Stock options, stock appreciation rights, restricted stock units, and other phantom equity are included expressly in the definition of nonqualified deferred compensation.

All

Avoiding Beneficiary Befuddlement

Challenges AheadRetirement plans are complicated creatures to administer so it perhaps is not surprising that the process of determining the beneficiary of a deceased participant can present its own set of challenges and, if things go awry, expose a plan to paying twice for the same benefit.

These risks were recently highlighted in an 11th Circuit Court of Appeals decision decided in the aftermath of the Supreme Court case of Kennedy v. Plan Administrator for DuPont Savings and Investment Plan.  In that 2009 decision, the Supreme Court ruled that a beneficiary designation naming a spouse had to be given effect even though the spouse had subsequently waived her interest in any of her husband’s retirement benefits in a divorce agreement.

In the 11th Circuit case, Ruiz v. Publix Super Markets, the question was

Stop! Drop! …and Roll. Smothering Regulations Before They Ignite.

It has been an eventful 10 days in the courts and in Congress for halting impending regulations and setting the stage to roll-back new rules implemented by the Obama Administration. Employers can expect a repeal of recently passed regulations is on the horizon in the area of benefits regulation.

ACA — 1557 Regulations: Discrimination Based on Gender Identity or Pregnancy Termination

A nationwide injunction prohibiting the Department of Health and Human Services (HHS) from enforcing nondiscrimination rules promulgated under ACA section 1557 as they relate to discrimination on the basis of gender identity or termination of pregnancy was imposed by a federal judge on December 31, 2016. (Franciscan Alliance, Inc. v. Burwell, N.D. Tex., No. 16-cv-108, 12/31/16)  The plaintiffs argued that section 1557 regulations forced health care professionals and religious-based facilities to provide gender transition services against their medical judgment and religious beliefs.

Regulations under 1557

Clouds, With A Nearly 100% Chance of a Business Associate Agreement

HHScloud recently posted guidance on its website addressing HIPAA’s approach to cloud computing.  Basically, any time a cloud service provider has electronic protected health information (ePHI), it’s a business associate.  This is true even if the cloud provider only stores encrypted ePHI and even if the cloud provider does not have the encryption key (and therefore, in theory, could not access the data).  This means that both health plans and their business associates who use outsourced cloud computing services must have business associate agreements with those services.

At first blush, this might seem like it doesn’t directly touch the health plan, but cloud computing can take many forms. For example, if your company has an off-site data server that is managed by a third party and ePHI is stored

Good News for Safe Harbor Plan Sponsors: The IRS Will Allow Mid-Year Changes

On January 29, 2016, the Internal Revenue Service issued guidance on mid-year changes to safe harbor plans under Internal Revenue Code Sections 401(k), and 401(m). Notice 2016-16 significantly expands the permissible mid-year changes available to sponsors of safe harbor plans under prior guidance.

The Notice provides guidance on mid-year changes to a safe harbor plan or to a plan’s safe harbor notice content that do not violate the safe harbor rules on account of being mid-year changes. For purposes of this Notice, a mid-year change is one that is either effective on a day other than the first of the plan year or one that is effective on the first of the plan year but adopted after that date.

This expansion, of course, comes with a few requirements. Simply put, Notice 2016-16 requires that any changes must meet applicable notice and election opportunities and

Hurry up and Spend the Money?

Hurry up and Spend the Money?

January 28, 2016

Authored by: Jennifer Stokes

Money Money MoneyIt’s like a simple set of facts on a law school exam with an answer that defies logic. And, yet, Supreme Court precedent has brought us to this illogical conclusion. Facts: Participant agrees to reimburse the plan money it has spent on his medical care. Participant sets aside money to reimburse the plan, but then spends all of the money himself before reimbursing the plan. Question: If the money cannot be traced, can the plan recover the amount it is owed from the participant’s other assets? Answer: Last week, the Supreme Court ruled in Montanile v. Bd. of Trustees of the Nat’l Elevator Indus. Health Benefit Plan that a health plan cannot enforce an equitable lien against a participant’s general assets when the participant has already spent the fund

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