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Are Unpaid Employer Contributions Considered Plan Assets?

Are Unpaid Employer Contributions Considered Plan Assets?

December 8, 2011

Authored by: benefitsbclp

Department of Labor regulations provide that deductions for an employee’s wages are assets of an ERISA fund as soon as these amounts can be segregated from the employer’s general assets. While no similar regulations exist regarding unpaid employer contributions, a recent district court case concluded that case law has developed the following general rule in the context of a multiemployer plan: “unpaid employer contributions are not assets of a fund unless the agreement between the fund and the employer specifically and clearly declares otherwise.” West Virginia Laborers’ Pension Trust Fund v. Owens Pipeline Service LLC, S.D.W.Va., No. 2:10-cv-00131, Nov. 18, 2011 (citing ITPE Pension Fund v. Hall, 334 F.3d 1011, 1013 (11th Cir. 2003)).

In the Owens case, the defendant, the company president and sole shareholder of the corporation, decided to make payments on a piece of equipment instead of making contributions to four multiemployer pension

Have You Inadvertently Amended Your Benefit Plans in an Acquisition?

Have You Inadvertently Amended Your Benefit Plans in an Acquisition?

November 29, 2011

Authored by: benefitsbclp

Has your company recently acquired another company or its assets? Did the purchase agreement require continuation of any particular level of benefit for acquired employees or retirees? If so, the Fifth Circuit appears to believe that the purchase agreement may have amended your company’s employee benefit plans to provide those benefits described in the purchase agreement. What does this mean? That acquired employees and retirees can potentially sue your company for benefits described in a contract to which the employees and retirees were neither a party nor a third party beneficiary.

Evans v. Sterling, 2011 WL 4837847 (5th Cir. 2011).

In December of 1996, Sterling Chemicals acquired American Cyanamid’s (“Cytec”) acrylic fibers business in an asset purchase transaction. In connection with the acquisition, Sterling offered employment to certain Cytec employees. The asset purchase agreement included a provision requiring Sterling to provide certain levels of retiree medical coverage for

New EBSA Consumer Assistance Website

New EBSA Consumer Assistance Website

November 23, 2011

Authored by: benefitsbclp

The Department of Labor’s Employee Benefit Security Administration (EBSA) is making it easier for consumers to submit questions and complaints regarding their health and retirement plans. EBSA has created a new consumer assistance website which allows users to submit inquiries electronically.  If you hablo Espanol, it’s also available in Spanish.

The DOL claims the new website provides easy access to useful information through links for resources/tools, hot topics, and publications. It also provides links to electronic forms where a user may “Ask a Question”, “Submit a Complaint”, or “Report a Problem.” EBSA seems to be serious about wanting to hear from consumers and give them assistance by promising to respond to all inquiries within three business days.

What does this mean for employers? The increased ease in which employees can submit complaints regarding their health and retirement plans to the DOL may lead in increased government scrutiny. Employers should

Can I Deduct a Bonus for Tax Purposes if I Don’t Know Who Will Get it?

The IRS recently released Revenue Ruling 2011-29 clarifying the deductibility of bonuses. The question posed in the Ruling was:

“Can I deduct a bonus in the current tax year if I know how much I will pay in bonuses by the end of the year, even if I don’t know who will get them until next year?”

The Facts: The more detailed facts are as follows:

A company (we’ll call it “X” to protect the innocent) uses an accrual method of accounting for federal tax purposes. X pays bonuses to a group of employees pursuant to a program that defines the terms and conditions under which the bonuses are paid for a taxable year. X communicates the general terms of the bonus program to employees when they become eligible and whenever the program is changed.

Under the program, bonuses are paid to X’s employees for services performed during the taxable

If It Isn’t Written Down, It Didn’t Happen

If It Isn’t Written Down, It Didn’t Happen

November 8, 2011

Authored by: benefitsbclp

 

We’ve all heard the old adage, advising us to record our thoughts and actions, lest they become lost to obscurity. In EP Quality Assurance Bulletin 2012-1, released November 2, the IRS reminds us of the importance of documentation with regard to the qualified plans in our lives. The Bulletin, entitled “Verification of Prior Plan Documents in the Absence of a Determination Letter,” provides IRS determination letter specialists with updated guidance on verification that retirement plans have been timely amended for prior legislation.

If you are filing your plan during the second remedial amendment cycle and you already have a d-letter covering the first cycle, you need to include all good-faith and interim amendments adopted after your first cycle submission.  In addition, you should include any discretionary amendments adopted since the issue date of the d-letter. However, if you are filing for a plan that does not

Compliance with ERISA Fee Disclosure Rules Considered Consistent with SEC Mutual Fund Advertising Rules

The Securities and Exchange Commission (“SEC”) issued a “no action letter” on October 26, 2011 indicating that issuing disclosures compliant with the Department of Labor (“DOL”) participant fee disclosure rules will not be considered inconsistent with the SEC Rule 482 advertising requirements that apply to mutual funds.

Participant Fee Disclosure Rule – DOL Regulation Section 2550.404a-5 requires plan administrators of participant-directed individual account plans to disclose, among other things, plan and investment-related information. Initial disclosures are not required until 2012. The performance data required to be disclosed in the regulation must be presented in a chart or other comparative format. Generally, the chart must include the average annual total return of the fund for the one-, five, and ten-calendar year periods ending on the date of the most recently completed calendar year. The DOL regulation also requires certain other disclosures, but, with respect to a money market fund,

2012 Qualified Plan Limits – YAY!

2012 Qualified Plan Limits – YAY!

October 24, 2011

Authored by: benefitsbclp

 Last week, the IRS issued a press release announcing its 2012 cost-of-living adjustments for retirement plans. The chart below reflects the qualified plan limits for calendar years 2009-2012.

 

Type of Limitation

 

2012

 

2011 

 

2010

 

2009

         

Elective Deferrals (401(k) and 403(b); not including adjustments and catch-ups)

$17,000

$16,500

$16,500

$16,500 

457(b)(2) and 457(c)(1) Limits (not including catch-ups)

$17,000

$16,500

$16,500

$16,500

Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (1)

$5,500

$5,500

$5,500 

$5,500 

SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals

$2,500

$2,500

$2,500

$2,500 

Letters From Your Friends at the IRS About Your Form 5500

Letters From Your Friends at the IRS About Your Form 5500

October 20, 2011

Authored by: benefitsbclp

The IRS Employee Plans Compliance Unit recently announced that they would be sending letters to plan sponsors whose Form 5500 filings were six to nine months late. From our experience, these letters are usually sent because there was a simple error, such as transposed numbers in the employer’s EIN or failing to mark a final return filed in a prior year as the “Final Return/Report.” Most often, a corrected copy of the Form 5500 will suffice to make the IRS go away for this purpose. A failure to respond to a compliance check letter could result in an audit referral to the IRS’s Employee Plans Examinations or the Department of Labor (“DoL”).

If an employer discovers a simple error, such as those noted above, whether via a letter from the IRS or otherwise, we generally recommend that the employer file an amended return with the DoL processing center

Special Action Items for October

Special Action Items for October

October 13, 2011

Authored by: benefitsbclp

This is a brief reminder on common time-sensitive matters. We distribute these by email every month. If you would like to be added to the list, please comment below or email one of us. If you have questions, please call one of us. Thanks very much.

DEADLINES

Only a few days left to comply with these deadlines:

  • October 15, 2011 is the last day that a calendar-year plan can be corrected by amendment and in operation to address failure of the minimum coverage requirements of Code Section 410(b) and the general nondiscrimination requirements of Code Section 401(a)(4) in 2010. Has your plan received these tests from the plan’s recordkeeper?
  • 2011 third-quarter contributions to defined benefit plans must be made by October 15, 2011.
  • Calendar-year defined benefit plans with 100 or more participants are required to submit online premium filings to the PBGC by October 17, 2011. Special rules apply

Third Circuit Update: 401(k) Plan Includes Reasonable Investment Options, Directed Trustee Not A Fiduciary

The Third Circuit recently issued a decision in Renfro v. Unisys Corporation, affirming dismissal of the claims brought against Unisys defendants in a 401(k) plan “excessive fee case.” The court specifically affirmed dismissal of the breach of fiduciary claims brought by of a putative class of participants in a 401(k) defined contribution plan on account of the fact that the Unisys 401(k) plan’s mix and range of investment options was reasonable. Since the court affirmed dismissal of the complaint, it declined to rule on whether the Unisys defendants were entitled to summary judgment on the ERISA Section 404(c) defense. One clear implication of the decision is that there is nothing wrong with offering “higher priced” retail mutual funds in a 401(k) plan. The Third Circuit also affirmed dismissal of the Fidelity defendants since Fidelity was not a fiduciary with respect to the selection and retention of investment options in Unisys’s

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