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Overpayments to Participants

July 8, 2015

Authors

Richard Arenburg

Overpayments to Participants

July 8, 2015

by: Richard Arenburg

Hand Over the MoneyThe IRS has clarified its correction guidance recently to say that errors made in overpaying participants for their benefits can be cured by employer make-up contributions, rather than by pursuing participants and beneficiaries for the overpayments they have received. In issuing this clarification, the IRS has aligned itself with the views of the Department of Labor, which has issued advisory opinions that date back to the 1970s that essentially take the same position.

This avenue of correction is particularly welcome given the apparent reluctance of at least some courts to require repayments by overpaid participants. A federal district court recently allowed a participant to use equitable estoppel as a basis to prevent a pension plan from

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The Yard-Man Inference is No Longer an Inference

February 3, 2015

Authors

benefitsbclp

The Yard-Man Inference is No Longer an Inference

February 3, 2015

by: benefitsbclp

SCOTUS

The death knell for the so-called “Yard-Man Inference” has sounded. If you think we’re being a little dramatic – OK, maybe you’re right – we have a tendency to get a little too worked up about employee benefits cases that make it to the Supreme Court. But, in any event, last week the Supreme Court resolved a circuit split and overturned the Yard-Man Inference with its decision in M&G Polymers USA, LLC v. Tackett.

 

The Yard-Man Inference is named for the important retiree benefits decision handed down in 1983 in International Union et. al. v. Yard-Man, Inc., 716 F.2d 1476. In that case, the Sixth Circuit applied a presumption of vesting of retiree medical benefits in the absence of a termination provision in a collective bargaining agreement. You can read more about the

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Do you know the Yard-Man (inference, that is)?

June 27, 2014

Authors

Chris Rylands

Do you know the Yard-Man (inference, that is)?

June 27, 2014

by: Chris Rylands

As a child, you may have sung “do you know the Muffin Man?,” but as an employer you should make sure you know the Yard-Man inference.

Read the Small PrintThe “Yard-Man inference” comes from the Sixth Circuit’s decision in Auto Workers v. Yard-Man, Inc.  In that opinion, the Sixth Circuit created a presumption that retiree welfare benefits vest on retirement, unless a collective bargaining agreement clearly states otherwise.

However, the inference that these types of benefits vest has not been well received in all courts. For example, the Third Circuit has held the exact opposite: that retiree welfare benefits granted under a CBA expire with the CBA unless the agreement explicitly states otherwise.  Auto Workers v. Skinner Engine Co..

The split between the Circuits has likely contributed to the

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The Sound of Silence: SCOTUS To Review Rules Governing Vesting of Retiree Health Benefits under CBAs

May 20, 2014

Authors

benefitsbclp

The Sound of Silence: SCOTUS To Review Rules Governing Vesting of Retiree Health Benefits under CBAs

May 20, 2014

by: benefitsbclp

Old Woman ShhhhThe Supreme Court has granted review in a case that will resolve a long-standing circuit split concerning the vesting of retiree health care benefits.  On May 5th, the Supreme Court granted certiorari in the case of M&G Polymers USA, LLC v. Tackett. In reviewing Tackett, the Supreme Court will have the opportunity to decide whether silence concerning the duration of retiree health-care benefits in collective bargaining agreements means the parties intended those benefit to vest and therefore continue indefinitely or whether such benefits are vested only where there is a clear statement that health care benefit are intended to survive the expiration of the collective bargaining agreement.

There has long been a split among the circuit courts regarding the requirement for vesting of retiree health care benefits providing

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Don’t Miss the April 15th Deadline to File a Protective Refund Claim for 2010 FICA Tax!

January 30, 2014

Authors

Denise Erwin and Serena Yee

Don’t Miss the April 15th Deadline to File a Protective Refund Claim for 2010 FICA Tax!

January 30, 2014

by: Denise Erwin and Serena Yee

As you may recall from our earlier post, the 6th Circuit held in U.S. v. Quality Stores, that severance payments made to employees in connection with an involuntary reduction in force were not “wages” subject to FICA taxes. This decision was contrary to published IRS guidance and created a split in the courts. In October of last year, the United States Supreme Court agreed to review the case and on January 14th, it heard oral arguments. The Supreme Court is expected to issue a ruling by the end of June.

Taxpayers may be entitled to a FICA tax refund if the decision is upheld by the Supreme Court on appeal. In order to preserve the right to a refund, taxpayers must file a protective claim before the applicable statute of limitations runs. As we previously reported in a post last year, the deadline to

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DOMA – Round 2 (The First Decisions After Windsor)

July 31, 2013

Authors

benefitsbclp

DOMA – Round 2 (The First Decisions After Windsor)

July 31, 2013

by: benefitsbclp

Windsor was decided just over a month ago and we’re already starting to see how courts are interpreting the ruling. Windsor left unanswered the question of whether Part 2 of DOMA, which allows states to bypass the Full Faith and Credit Clause of the Constitution for same-sex marriages validly performed out-of-state, can stand now that Section 3 of DOMA has been deemed unconstitutional.  [Click here or here for additional information.]

Last week, a federal district court in Ohio ignored an Ohio law that refuses to recognize same-sex marriages, even if validly performed in another state (sometimes referred to as a mini-DOMA). In Obergefell v. Kasich, the plaintiffs, both Ohio residents, briefly traveled to Maryland earlier this month to get married, not even getting off the plane before returning home to Ohio. One spouse was dying of ALS and the other wanted to be recorded as the surviving spouse on

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Collective Bargaining Agreements: Creating Vested Retiree Medical Benefits

May 8, 2013

Authors

Serena Yee and Jeffrey Russell

Collective Bargaining Agreements: Creating Vested Retiree Medical Benefits

May 8, 2013

by: Serena Yee and Jeffrey Russell

Following its December 22, 2011, ruling we discussed previously that retired Kelsey-Hayes (“Company”) union members must arbitrate their claims for fully-paid lifetime retiree medical benefits, the Eastern District of Michigan handed a victory to different class of union retirees facing similar changes to their healthcare coverages.  United Steelworkers of America v. Kelsey-Hayes Co.

Plaintiffs worked at the now closed automobile parts manufacturing plant in Jackson, Michigan. Under the collective bargaining agreements (“CBAs”) with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, the Company was required to establish healthcare coverage for retirees and their dependents and surviving spouses and to contribute the full premium for such coverages.  Before and after the plant closing in 2006, the Company paid all retirees’ healthcare coverage costs.  In September 2011, the Company announced plans to replace the retiree medical plan with individual health

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

April 10, 2013

Authors

Brian Berglund and Steven Schaffer

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

April 10, 2013

by: Brian Berglund and Steven Schaffer

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.

 

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Potential Refund Claim for FICA Taxes on Severance Payments Made in a Reduction in Force

October 16, 2012

Authors

Denise Erwin

Potential Refund Claim for FICA Taxes on Severance Payments Made in a Reduction in Force

October 16, 2012

by: Denise Erwin

On September 7th, 2012, the 6th Circuit upheld the District Court’s decision in U.S. v. Quality Stores, holding that severance payments made to employees in connection with an involuntary reduction in force were not “wages” subject to FICA taxes.  United States v. Quality Stores, Inc. (In re Quality Stores, Inc.), 424 B.R. 237 (W.D. Mich. 2010), aff’d, 10-1563, 2012 U.S. App. LEXIS 18820 (6th Cir. September 7, 2012).   In so holding, the 6th Circuit reasoned that such severance payments were supplemental unemployment compensation benefits (“SUB Pay”) within the meaning of § 3402(o)(2) of the Internal Revenue Code (the “Code”) exempt from FICA taxes.

This holding is directly at odds with the position of the Internal Revenue Service (“IRS”), set forth in Revenue Ruling 90-72, that such severance payments are wages for FICA purposes and not SUB Pay.  According to the IRS, the definition of SUB Pay

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Sixth Circuit Allows Reasonable Modifications of Retiree Health Benefits

October 12, 2012

Authors

Chris Rylands and Steven Schaffer

Sixth Circuit Allows Reasonable Modifications of Retiree Health Benefits

October 12, 2012

by: Chris Rylands and Steven Schaffer

On September 13, 2012, the Sixth Circuit in Reese v. CNH Am. LLC, 11-1359, 2012 WL 4009695 (6th Cir. Sept. 13, 2012) reiterated its 2009 ruling in the same case that an employer could unilaterally modify a retiree health plan, as long as the modifications were reasonable. The September 13th ruling was the Court’s second review of the case on appeal; the sequel to an unfolding drama.

In this case, the employer and labor union entered a collective bargaining agreement which stated the employer would provide healthcare benefits for retirees and their eligible surviving spouses. The issue was whether the lifetime healthcare benefits had vested and, if so, whether, and to what extent, the employer could modify the benefits. In 2009, the Court found that the lifetime health care benefits had vested pursuant to the collective bargaining agreement, but that the employer could modify the benefits as long

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