Qualified Plans

  • If your plans are filed in “Cycle C” for determinations letters (i.e., plan sponsor’s EIN ends in 3 or 8), address items needed for the IRS filing before the end of the year. The filing deadline is January 31, 2014, but notices to “interested parties” must be distributed no later than 10 days before the filing. Set that filing date and prepare the plan restatement before the ball drops.
  • If your company did not timely adopt a written 403(b) plan document, you may qualify for a reduced compliance fee under the IRS’ correction program, but only if the filing is made before the ball drops.
  • Most defined benefit plans have been amended to incorporate the benefit accrual and distribution restrictions that apply if the plan’s funding drops below certain thresholds. These Code Section 436 rules must be added to your defined benefit plan by written amendment before the ball drops if you sponsor a calendar year plan.
  • More detailed information on the above items can be found here.
  • Have your payroll and benefit administration systems been updated to reflect the new qualified plan limits for 2014? The elective deferral pre-tax/Roth limit remains unchanged at $17,500. The limit on compensation taken into account for purposes of calculating maximum contributions and benefits will go from $255,000 to $260,000. The Social Security taxable wage base will go from $113,700 to $117,000.

The Defense of Marriage Act (“DOMA”) – Repeal of Section 3

  • Qualified retirement plans, 403(b) plans and 457 plans should be administered by treating a same sex spouse as a spouse for purposes of determining rights and benefits under the plan. An individual is a same sex spouse to a participant if the individual and participant have a valid marriage under the laws of the state where the marriage occurred. While amendments to the plans are not required before the ball drops, a review of beneficiary forms and other plan administration documents and processes is recommended to ensure compliance with these new rules. We expect additional guidance from the Internal Revenue Service and the Department of Labor before 2014, but will likely have well into the new year to adopt plan amendments.
  • Welfare benefit plans should be reviewed to ensure that the definitions of spouse are consistent with the company’s intent regarding coverage of same sex spouses and, for insured plans, any state laws. Enrollment forms, summary plan descriptions and other plan administration materials should be reviewed and updated as soon as possible.
  • Same sex spouses are now dependents under federal law for purposes of determining the taxability of employer-provided health benefits and the ability to pay for health coverage on a pre-tax basis. Before the ball drops, payroll systems should be updated to reflect this change and make any required corrections for 2013. More information on this topic can be found here.

Executive Compensation

  • Under Code Section 409A rules, compensation deferral elections for amounts otherwise payable in 2014 must be documented and irrevocable before the ball drops. This deadline is not flexible!
  • Some employers utilize a rule for administrative convenience that permits income and employment tax withholding on certain items of compensation to be made at the end of the year (i.e., imputed income on after-tax long-term disability premiums). Employers should ensure that all payroll deductions for taxable compensation for the year are taken into consideration before the ball drops.

Group Health Plan Amendments Due to Health Care Reform

  • Most stand-alone Health Reimbursement Accounts (“HRAs”) are no longer permitted. You may need to amend your HRA before the ball drops to integrate it with your major medical plan and to reflect that participants will be provided an opportunity to permanently opt out of the HRA and waive future reimbursements, as described here.
  • Effective for plan years beginning on or after January 1, 2014, group health plans will become subject to several new Health Care Reform mandates. Before the ball drops, your group health plan may require amendments due to the following:
    • Plans may not establish annual dollar limits on essential health benefits for any participant or beneficiary.
    • Plans may not impose preexisting condition exclusions (but still need to send HIPAA creditable coverage notices to terminating participants through 2014).
    • Plans will be prohibited from applying a waiting period (i.e., the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective) which exceeds 90 days.
    • Non-grandfathered plans may not deny a participant who is eligible to participate in an “approved clinical trial” participation in that clinical trial, or deny or limit “routine patient costs” for items and services furnished in connection with participation in such a trial.
    • Non-grandfathered plans must limit out-of-pocket maximums to no more than $6,350 for self-only coverage and $12,700 for family coverage.
    • Click here for a complete year-end checklist for group health plans.