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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

Revised VCP Fees – Simple Isn’t Always Better

Revised VCP Fees – Simple Isn’t Always Better

January 18, 2018

Authored by: benefitsbclp

The Internal Revenue Service (“IRS”) has described its recent changes to its Voluntary Correction Program (“VCP”) user fees as “simplification.”  This simplification is achieved by significantly changing the way user fees are determined and by eliminating alternative and reduced fees that were previously available.   At first blush, this simplification appears to result in a general reduction in user fees, however, in certain circumstances, the changes will actually result in significantly higher fees.   If you are the person responsible for issuing or requesting checks for your plan’s VCP application(s), it is important to note the differences from the past fee structure so that you will know what your plan is in for (good or bad) the next time a VCP application is necessary.

In case you are not familiar with the VCP, the IRS created the program under its Employee Plans Compliance Resolution System, to allow tax-favored retirement plans not

4 Steps for Compliance with the New Disability Claims Procedures

Did you read our post “Work Now, Party Later,” advising you to do just that in response to the new Department of Labor rule governing disability claims procedures? If so—party on! If not, we hope you enjoyed your holiday celebrations, because it is now time to work.

On January 5, the Department of Labor announced its decision that the new disability claims procedure rules will take effect on April 1 of this year. Here is our suggested plan of attack for employers:

Step 1: Review our previous blog post to familiarize yourself with the new rules.

Step 2: Identify which of your plans offer disability benefits.

Remember to check both your ERISA qualified and nonqualified plans.

Step 3. Determine whether you need to amend your plan and/or SPD.

Under the new rules, participants who file a disability claim must receive an expanded explanation of their adverse

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

2018 Qualified Plan Limits Released

The Internal Revenue Service today released the 2018 dollar limits for retirement plans, as adjusted under Code Section 415(d). We have summarized the new limits (along with the limits from the last few years) in the chart below.

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*For taxable years beginning after 12/31/12, an employer must withhold Additional Medicare Tax on wages or compensation paid to an employee in excess of $200,000 in a calendar year for single/head of household filing status ($250,000 for married filing jointly).

Help for Hurricane Harvey…and Irma and Maria, Too

September 14, 2017

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Help for Hurricane Harvey…and Irma and Maria, Too

September 14, 2017

Authored by: benefitsbclp

Employers seeking ways to help employees and their family members affected by Hurricanes Harvey, Irma, or Maria should consider the various relief made available by the Internal Revenue Service under Announcements 2017-11 and 2017-13 and Notice 2017-48.

Under Notice 2017-48, employers who maintain a leave-based donation program (there is still time to adopt one) can afford employees the opportunity to forgo their vacation, sick or personal leave in exchange for cash contributions made by the employer, before Jan. 1, 2019, to charitable organizations assisting those impacted by Hurricane Harvey.  The donated leave will be excluded from the donor employees’ income and wages and the employer will be able to deduct such contributions to a qualifying charitable organization as a business expense.  As always, the Notice includes specific guidelines that must be followed in order for employers and employees to take advantage of this relief.  Note

Work Now, Party Later: The Case for Tackling the New Disability Claims Procedures Before Year-End

Update: On November 24, 2017, the Department of Labor filed a final rule to delay the applicability date of new disability claims procedures regulation by 90 days, through April 1, 2018.

Plan sponsors are typically forced to wait for last minute guidance to satisfy year-end compliance obligations. As a result, those of us who work with these plans spend the last days of the year frantically ensuring plans are in compliance mode while friends and family ring in the new year with frivolity and festivities. While we can’t guarantee that won’t happen again this year, if it happens to you because you are evaluating the impact of the new disability claim procedures on plans, then shame on you. As discussed below, the information necessary to comply with the new rules is already available. So address these obligations now – then dig out your little-black-dress or tux, and join the year-end

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.

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

IRS Views on Self-Certification of Financial Hardship

IRS Views on Self-Certification of Financial Hardship

March 15, 2017

Authored by: Richard Arenburg and Denise Erwin

DesolationIn today’s virtual world, we suspect most plan sponsors rely upon the self-certification process to document and process 401(k) distributions made on account of financial hardship. The IRS has recently issued examination guidelines for its field agents for their use in determining whether a self-certification process has an adequate documentation procedure.  While these examination guidelines do not establish a rule that plan sponsors must follow, we believe most plan sponsors will want to ensure that their self-certification processes are consistent with these guidelines to minimize the potential for any dispute over the acceptability of its practices in the event of an IRS audit.

The examination guidelines describe three required components for the self-certification process:

(1)        the plan sponsor or TPA must provide a notice to participants containing certain required

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