IRS Provides Helpful Answers Regarding Long-Term Part-Time Employees in 403(b) Plans
In November 2023, the IRS issued proposed regulations addressing the SECURE 2.0 long-term part-time (LTPT) employee eligibility requirements applicable to 401(k) plans knowing that further guidance would be needed to explain how those requirements would apply to 403(b) plans—you can read our summary of the proposed regulations here...
A Brief Guide to Qualified Disclaimers for Retirement Plan Administrators
A “qualified disclaimer” is a tax-effective way to refuse a transfer of property that would otherwise occur on someone’s death. From time to time, retirement plan administrators may be contacted by a beneficiary who wants a deceased participant’s benefit to go to a contingent beneficiary or the participant’s estate...
Student Loans and Code Section 127 Educational Assistance Programs: A Reminder from the IRS, FAQs, and a Sample Plan Document
On August 28, the IRS issued IR-2024-227 , reminding employers of the following key aspects of educational assistance programs under Internal Revenue Code Section 127: They can be used to help reimburse the costs of or pay for employees’ student loans through December 31, 2025; They must be established...
Prepare for Cooler Weather, Annual Enrollment, and 2025
Summer is ending and fall is rapidly approaching. For employee benefit professionals with calendar-year health and welfare benefit plans that means preparing for annual enrollment and year-end compliance requirements. This post provides a high-level overview of significant health and welfare benefits compliance issues new in 2024 that plan sponsors...
IRS Issues Guidance Addressing Matching Contributions on Student Loan Payments
Section 110 of the SECURE 2.0 Act of 2022 (“SECURE 2.0”) permits employers maintaining a 401(k), 403(b), governmental 457(b), or SIMPLE IRA plan to make matching contributions based on qualified student loan payments (“QSLPs”), effective for plan years beginning after December 31, 2023. [1] On August 19, the IRS...
HHS Issues Model Attestation Required by Final HIPAA Regulations Supporting Reproductive Health Care Privacy
On April 26, 2024, the U.S. Department of Health and Human Services (HHS) and Office for Civil Rights (OCR) published Final Regulations under HIPAA’s Privacy Rule introducing greater protections for information related to reproductive health care. One aspect of the Final Regulations requires all covered entities, including self-insured group...
A Primer on COBRA Continuation Coverage for Health Care Flexible Spending Accounts
It is a common practice for employers to offer employees a health care flexible spending account (“Health FSA”) option under a cafeteria plan. However, employers (and their COBRA administrators) may not be aware that Health FSAs are subject to COBRA continuation coverage requirements and may inadvertently fail to provide...
Proposed Rules for Maine Paid Family and Medical Leave Provide Some Helpful Information for Employers
Maine’s comprehensive paid family and medical leave (PFML) law, enacted in October 2023, establishes a state benefits program funded by employer and employee contributions (the “Program”). The PFML law provides for implementation of the Program in phases over several years: January 1, 2024–January 1, 2025 —Setting up the administrative...
Novel 401(k) Plan Lawsuits Over the Use of Forfeitures—Swinging for the Fences or Plausible Claims?
In our December 7, 2023 post , we noted five class action lawsuits, all filed by the same law firm within two months, in which 401(k) plan participants allege plan fiduciaries violated ERISA by using plan forfeitures to offset employer contributions instead of paying plan expenses. Recently, judges in...
Can a Self-Funded Group Health Plan Exclude Coverage for Gender-Affirming Care?
We are sometimes asked whether a self-funded group health plan is required to cover gender-affirming medical services. As this post explains in detail, it is generally impracticable for a self-funded ERISA-covered plan to exclude coverage for gender-affirming care as there are significant risks of litigation, penalties, or loss of...
Section 457(f) Plans and Noncompete Clauses: What the IRS Gave, the FTC May Take Away
When the IRS published proposed regulations harmonizing key provisions of Code Sections 409A and 457(f) in 2016, executive compensation lawyers and consultants rejoiced. It was not just that a long wait was over (roughly nine years from the publication of IRS Notice 2007-62, which promised guidance on these issues...
Why Is There No IRS Correction Program for Non-Governmental 457(b) Plans?
This post examines excess deferrals under non-governmental 457(b) plans, including the approved method for correcting them and the penalty for failing to correct them, to make the case for a change in IRS policy on correcting administrative errors in such plans. Non-governmental 457(b) plans are sometimes called “eligible deferred...
RxDC Reporting in Light of June 1, 2024 Deadline and Recent PBM Litigation
Under the Consolidated Appropriations Act of 2021 (“CAA”), employer-sponsored group health plans, including medical-only plans, must submit information about their prescription drugs and health care spending. [1] This submission is often referred to as the Prescription Drug Data Collection report, or the RxDC report. The deadline for RxDC reports...
Health and Welfare Benefit Plan Fiduciary Governance in the Wake of the Johnson & Johnson Lawsuit
For the past few years, we have encouraged plan sponsors to focus on matters of fiduciary governance for their health and welfare benefit plans ( see our 2021 blog post ). Yet many plan sponsors overlook the fact that the fiduciary standards of ERISA apply equally to retirement plans...
Retirement Plans: What Categories of Employees may be Excluded?
We are often asked about the permissibility of excluding certain categories of employees from participating in an employer’s tax-qualified retirement plan. [1] This post provides a high-level summary of what is and is not permitted. Excludable by Statute . Certain categories of employees, by statute, may be excluded from...
Cross-Plan Offsetting in Group Health Plans—The DOL Makes its Position Clear
Under Section 404 of ERISA, plan fiduciaries must act for the exclusive benefit of plan participants and beneficiaries and use plan assets only to provide benefits and defray reasonable expenses of administering the plan. In addition, Section 406 of ERISA prohibits a plan fiduciary from engaging in self-dealing. The...
ACA Compliance When Employees Move from Full-Time to Part-Time Mid-Year
We are well into the Affordable Care Act (“ACA”) information reporting season. Forms 1095-B/1095-C must be provided to employees by March 1, 2024, and the deadline for electronic transmittal of Forms 1094-B/1094-C to the IRS is April 1, 2024. A common fact pattern that frequently results in ACA reporting...
Safe Harbor Exception for De Minimis Dollar Amount Reporting Errors
As part of the routine administration of employee benefit plans, shortly after the end of a calendar year, many transactions must be reported to the federal government (“information returns”) and participants (“payee statements”) using forms such as Forms W-2, 1099, 1094, and 1095. As benefits professionals know, errors can—and...
IRS Issues Practical Guidance for Implementing SECURE 2.0 Provisions
The Internal Revenue Service gave retirement plan sponsors end-of-the-year gifts by providing guidance under twelve sections of the SECURE 2.0 Act of 2022 (“SECURE 2.0”). Although Notice 2024-2, released December 20, 2023 (the “Notice”), expressly does not provide “comprehensive guidance,” it does address urgent, practical questions for the implementation...
SECURE 2.0 Provisions with 2024 Implementation Dates
This post summarizes provisions of SECURE 2.0 that retirement plans may need or want to implement for 2024. While no amendments are required for plans heading into 2024, plan operations may see some updates, especially if the plan sponsor wishes to implement some of the new optional features. We...
Proposed Regulations Regarding Long-Term, Part-Time Employees
Newly issued IRS Proposed Regulations regarding the special eligibility and vesting requirements for long-term, part-time employees provide guidance that 401(k) plan sponsors have been waiting for since these requirements were established under SECURE 1.0. Though it has been three years since SECURE 1.0 was enacted, the Proposed Regulations were...
Use of Retirement Plan Forfeitures: The IRS Proposed Regulations, Recent Litigation, and the DOL’s Position
In five recently filed class action lawsuits, [1] 401(k) plan participants allege that plan fiduciaries violated ERISA by using plan forfeitures to offset employer contributions instead of paying plan expenses. The use of forfeitures to offset employer contributions is a long-standing practice expressly approved by IRS proposed regulations issued...
HIPAA Privacy Rule Changes: Just in time for the New Year?
In 2021, the Department of Health and Human Services (HHS) proposed changes to the Privacy Rule under the Health Insurance Portability and Accessibility Act of 1996 (HIPAA) that would significantly alter the current regulations (Proposed Rules). The Proposed Rules are supposed to be finalized in 2023. Once the Proposed...
Maine’s Mandatory Retirement Savings Program: What Employers Need to Know
On October 18, 2023, the Maine Retirement Savings Board adopted a final rule implementing Maine’s state-run retirement savings program, the Maine Retirement Investment Trust or MERIT. MERIT is intended to help employees who do not have access to a retirement plan through their employer save for retirement by requiring...
The Department of Labor Proposes Its New Fiduciary Rule
On October 31, 2023, the Department of Labor published a new proposed regulation (the “ Proposed Rule ”) defining “investment advice” for purposes of determining when someone advising an ERISA plan or participant or an IRA owner is a fiduciary. The Department’s latest proposal is designed to avoid court...
Retiree Medical Coverage: Just Get the COBRA Waiver
The interaction between employer-provided retiree medical coverage and COBRA [1] is complex. Many employers incorrectly assume they do not have to offer COBRA at retirement if they offer a retiree medical plan or a retiree health reimbursement arrangement (HRA), but the calculus is not that simple. Whether there is...
Catch-Up Contributions: IRS Provides Relief from Roth Requirements of SECURE 2.0
On August 25, 2023, the IRS issued IRS Notice 2023-62 , providing much needed relief for employers who have been struggling to implement Section 603 of the SECURE 2.0 Act of 2022 (“SECURE 2.0”), which requires high income employees to make all catch-up contributions to 401(k), 403(b), or governmental...
DOL Continues Enforcement of Non-Quantitative Treatment Limitation Requirements
Introduction : Fifteen months ago, we wrote that the U.S. Department of Labor (“DOL”) had informed Congress that it intended to devote substantial resources to enforcing the new comparative analysis requirement for non-quantitative treatment limitations (“NQTLs”) required under the Mental Health Parity and Addiction Equity Act. (Read our blog...
How to Comply with the Health FSA Debit Card Claims Substantiation Rules
The IRS’s recent Chief Counsel Advice Memorandum 202317020 (the “Memo”) brings into focus the importance of compliance with the debit card claims substantiation requirements for medical care expenses reimbursed or paid for through a health flexible spending account (“health FSA”) offered under a cafeteria plan. [1] The risk of...
Update on the Debate over Environmental, Social, and Corporate Governance Investing
The debate over investment of retirement plan funds based on environmental, social, and corporate governance (“ESG”) factors continues to make waves. This post provides a high-level overview of the current state of play for plans that are subject to ERISA. We last wrote about this topic in October 2021...
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