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IRS Takes Step Towards De-Risking Retiree Lump Sum Windows

On March 6, 2019, the IRS announced that it will not amend the minimum required distribution regulations under Code section 401(a)(9) to expressly prohibit lump-sum window elections for retirees who are already receiving annuity payments under a defined benefit pension plan.  This practice has never been clearly permissible under existing RMD regulations. Nevertheless, some plan sponsors seeking to “de-risk” their pension liability received private letter rulings in the past permitting such action.  Then the IRS issued Notice 2015-49 announcing that it would propose amendments to the RMD regulations clarifying that lump sum windows for retirees are not be permitted.  Now the IRS has altered course on this issue again with Notice 2019-18.

Thoroughly confused?  Not surprising given the shifting positions of the IRS on this issue.

Existing Regulations

Existing regulations state that once annuity payments have commenced over a period of time,

ESOPs: A Path to Bank Independence

Originally posted on BankBryanCave.com.

Employee Stock Ownership Plans offer an opportunity for banks to offer an attractive employee benefit plan, but can also do so much more.  On the latest episode of The Bank Account, Jonathan and I are joined by Bryan Cave Partner, Steve Schaffer, to discuss the advantages to banks considering implementing an ESOP.

To hear the Bank Account Podcast, please visit here.

Button up Your Business Associates Agreements or Pay the Price

480652321Last month, the Office of Civil Rights (OCR) of the U.S. Department of Health and Human Services (HHS) announced a resolution agreement with the Center for Children’s Digestive Health (CCDH) which included a $31,000 penalty.

This isn’t the first time a covered entity has paid a “resolution amount” to settle potential violations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules with respect to a business associate agreement (or lack thereof).

Fiduciary Rule Under Review – Update

On Friday, President Trump issued an order directing the Department of Labor to review the new regulation to determine whether it is inconsistent with the current administration’s policies and, as it deems appropriate, to take steps to revise or rescind it.

The long awaited Fiduciary Rule expanded protection for retirement investors and included a requirement that brokers offering investment advice in the retirement space put clients’ interests first.  Financial institutions that either implemented, or were rapidly completing, their compliance efforts to comply with the Fiduciary Rule will need to assess the impact of this order on these efforts.  Notwithstanding many earlier reports that the rule would be delayed 180 days, the date on which the rule was to take effect (April 10, 2017) has not been delayed.  However, it is anticipated that a delay will be forthcoming, making the decision whether or not to proceed with further

ACA Facelift to Disability Claims Process Could Affect All Plans

claimIt might be tempting to conclude that the recent Department of Labor regulations on disability claims procedures is limited to disability plans.  However, as those familiar with the claims procedures know, it applies to all plans that provide benefits based on a disability determination, which can include vesting or payment under pension, 401(k), and other retirement plans as well. Beyond that, however, the DOL also went a little beyond a discussion of just disability-related claims.

The New Rules

The new rules are effective for claims submitted on or after January 1, 2018. Under the new rules, the disability claims process will look a lot like the group health plan claims process.  In short:

  • Disability claims procedures must be designed

PBGC Proposed Rule May Offer DC Plans New Tool for Finding Missing Participants

where-are-youFor many years, the PBGC has been helping reunite missing participants with their benefits under single-employer defined benefit plans. Now, a new PBGC proposed rule may open up the program to missing participants under other terminated plans.

Under this proposed rule, terminated defined contributions plans may choose to transfer benefits of missing participants to the PBGC or to establish an IRA to receive the transfer and send information to the PBGC about the IRA provider.   The PBGC will attempt to locate the missing participants and add them to a searchable database. The PBGC notes that once the program is established, it may issue guidance making the reporting requirement mandatory for defined contribution plans as authorized under section 4050 of ERISA.

The PBGC will accept the transfer of accounts of

Employee Stock Ownership Plans: Another Tool for Family-Owned Banks

Today’s economy presents numerous challenges to community bank profitability—compressed net interest margins, increased regulation, and management teams fatigued by the crisis. In response to these obstacles, many boards of directors are exploring new ways to reduce expenses, retain qualified management teams, and offer opportunities for liquidity to current shareholders short of a sale or merger of the institution.

For many family-owned banks, their deep roots in the community and a desire to see their banks thrive under continued family ownership into future generations can cause these challenges to be felt even more acutely. In particular, recruiting and retaining the “next generation” of management can be difficult. Cash compensation is often not competitive with the compensatory packages offered by publicly-traded institutions, and equity awards for management officials are unattractive given the limited liquidity of the underlying stock. All the while, these institutions should ensure that their owners have reasonable assurances of

The ESOP as a Solution

The ESOP as a Solution

August 2, 2013

Authored by: Steven Schaffer and Chris Rylands

Employee Stock Ownership Plans (“ESOPs”) can be a good choice for the right company because they can generate liquidity for the owners in a tax-advantaged form, allow the owners to retain de facto, if not legal, control, and provide employee ownership and the resultant productivity and retentive benefits to the business.  Common uses of ESOPs include can have other uses as well, such as:

  • Allowing an owner to exit his or her business but provide an incentive to retain existing management (who may be unable to buy)
  • Allowing a shareholder to diversify his or her holdings through a partial (or total) sale to an ESOP;
  • Providing a vehicle to efficiently redeem unwanted shareholders;
  • Structuring management buy-outs;
  • Providing a buyer for an estate holding closely-held stock;
  • Closing out a private equity fund by selling a portfolio company to an ESOP; and
  • Selling a division to employees.

Using

Reminder: Hurry! Opportunity for Possible Refund of FICA Taxes Ends Soon!

As noted in our blog entry on October 16, 2012, under the Sixth Circuit’s discussion in U.S. v. Quality Stores, severance payments made because of an employee’s involuntary separation resulting from a reduction-in-force or discontinuance of a plant or operation are not subject to FICA taxes.  This holding is contrary to a prior decision of the Federal Circuit Court of Appeals and published IRS guidance.  The government has until May 3 to appeal the case to the Supreme Court.  Until a final decision in this case has been rendered, taxpayers that have made severance payments in 2009 should file a protective claim for a FICA tax refund no later than April 15, 2013.  This protective claim will preserve the taxpayer’s right to a refund should the IRS not appeal the decision or should the decision be upheld on appeal.

 

HIPAA v. the iPhone

HIPAA v. the iPhone

January 16, 2013

Authored by: Chris Rylands and Steven Schaffer

HHS recently included on its website some helpful information regarding security of mobile devices in video format.  While primarily directed at health care providers, the videos are still useful for health plan sponsors/administrators (and their business associates).  (The way the HIPAA rules are written suggest that the plan itself should view the videos, but we doubt the actual physical document would learn much.)  Interestingly, the videos are emblazoned with disclaimers that following the videos does not guarantee compliance with HIPAA or any other law.

It is a particularly good idea for plan sponsors/administrators to review the videos given that HHS’s Office of Civil Rights (“OCR”) recently announced a “resolution agreement” with Hospice of North Idaho (“HONI”) in which HONI agreed to pay $50,000 and made certain future compliance commitments.  The OCR investigation started due to HONI’s voluntary report