The 2013-2014 term of the Supreme Court of the United States produced opinions that will have substantial effects on the design and administration of most employee benefits plans. This summary highlights three key decisions, one significant procedural ruling, and an emerging issue likely headed for Supreme Court review, all of which deserve the attention of employee benefits professionals.
While 2014 has been a relatively quiet year in terms of new rules affecting retirement plans, the January 1, 2015 effective date for the Affordable Care Act employer shared responsibility mandate is now in sight. This summary discusses a few key developments regarding employee benefit plans – especially group health plans – for employers to consider as they move into the second half of 2014.
In Part 1 of this two-part series we suggested that the key to compliance with the fiduciary requirements of ERISA can be boiled down to a simple proposition: follow a prudent process and document it. We used that proposition as a basis for offering five foundational steps that a fiduciary committee charged with overseeing the administration of an ERISA retirement plan should take, especially when the committee has responsibility for the investment of plan assets. One of those foundational steps involves the preparation of minutes of committee meetings. In this second part of the series we focus entirely on the preparation of meeting minutes. The goal is make sure your fiduciary committee gets the most mileage out of meeting minutes from a compliance standpoint and avoids stubbing its toe in the event that the minutes find their way into the hands of someone seeking to hang the committee by its own documentation.
Even in areas of law where the landscape of rules, regulations, and risks seems constantly to be changing, certain core concepts and basic principles hold fast. In the case of fiduciary responsibility under ERISA, the core concepts and basic principles can be boiled down to three key elements: (1) establish a prudent process; (2) adhere to the process; and (3) document the process. These principles apply no matter what kind of benefit plan is involved (if it is governed by ERISA) and no matter what role the fiduciary plays in the operation of the plan. And courts have affirmed the strength and validity of these principles time and time again even when the decisions made by fiduciaries look really bad in hindsight. In this first part of a two-part series we will highlight five best practices that we recommend to any employer who maintains a retirement plan is subject to ERISA. These practices apply to both defined contribution plans where participants typically control the investment of their individual accounts (such as 401(k) plans and 403(b) plans that include employer contributions) and defined benefit pensions plans (where the investment risk is essentially on the employer). The key fiduciary responsibility requirements of ERISA do not vary based on the size or sophistication of the employer. Therefore, while the implementation of these best practices may vary to some extent based on the size and sophistication of the employer, the efficacy of the practices will not.
Within the past five months, two federal District Court judges have cast doubt on the validity of IRS letter rulings (and similar DOL opinion letters) issued to church-affiliated employers dating back to 1983. These federal judges – one in California and one in New Jersey – concluded that the IRS and the DOL have fundamentally misinterpreted the statutory definitions of “church plan” in the Internal Revenue Code and ERISA by finding that a plan “established” by a tax exempt church-affiliated entity could qualify as a church plan. In the views of the two judges, such entities may be allowed to “maintain” a plan established by a church but only a church can “establish” a church plan. Is it possible that two large federal agencies employing hundreds of lawyers got something so essential wrong, time and time again, over a period of 30 years? These judges certainly think so.