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DISCLAIMER: This blog is published for general information only - it is not intended to constitute legal advice and cannot be relied upon by any person as legal advice.  U.S. Treasury Regulations require us to notify you that any tax-related material in this blog (including links and attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties, and may not be referred to in any marketing or promotional materials.  While we welcome you to contact our authors, the submission of a comment or question does not create an attorney-client relationship between the Firm and you. 

Entries in Plan Administration (51)


Fiduciary Committee Best Practices – Part 2: Preparing Meeting Minutes

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.

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Fiduciary Committee Best Practices – Part I: The Basics

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. 

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IRS Guidance Confirms Treatment of Same Sex Spouses under Cafeteria Plans

IRS Notice 2014-01, issued yesterday, provides helpful guidance for the administration of cafeteria plans after the U.S. Supreme Court’s decision in the Windsor case.  The guidance provides answers to a number of questions that employers and plan administrators have been asking, including the following:

May a participant who was married to a same-sex spouse as of the date of the Windsor decision (June 26, 2013) be treated as if he or she experienced a change in legal marital status?  Yes.  The decision to recognize same sex marriages for federal law purposes for the first time amounts to change in legal marital status.  Accordingly, a cafeteria plan may permit such a participant to revoke an existing election and make a new election in a manner consistent with the change in legal marital status.

Would a change in the tax treatment of a benefit offered under a cafeteria plan be considered a significant change in the cost of coverage?  No.  The fact that same sex married couples can be covered without the imputation of income (and pre-tax dollars can be used to purchase benefits) does not constitute a significant cost change for purposes of permitting a status change.  For periods between June 26 and December 31, 2013, however, a cafeteria plan will not be treated as having failed to meet the cafeteria plan requirements if the plan permitted a participant with a same-sex spouse to make a mid-year election change based on a significant change in the cost of coverage.

At what point must an employer begin to allow pre-tax salary reductions for same sex married couples?  If an employer receives notice before the end of the cafeteria plan year including December 16, 2013 (the publication date of the IRS Notice) that a participant is legally married, then the employer must begin treating the amount that the employee pays for the spousal coverage as a pre-tax salary reduction under the plan no later than the later of (a) the date that a change in legal marital status would be required to be reflected for income tax withholding purposes under Code Section 3402, or (b) a reasonable period of time after December 16, 2013.

At what point may a cafeteria plan permit a participant's flexible spending account to reimburse covered expenses for a same sex spouse?  A cafeteria plan may permit FSA reimbursements for the covered expenses of a same-sex spouse, or of a same-sex spouse's dependent, that were incurred during a period beginning on a date that is no earlier than (a) the beginning of the cafeteria plan year that includes the date of the Windsor decision or (b) the date of marriage, if later.  This would include a health, dependent care, or adoption assistance FSA to reimburse covered expenses of the participant's same-sex spouse.

Much more post-Windsor guidance is expected early next year to deal with a variety of issues under retirement plans as well as, in general, the possible retroactive effect of the invalidation of Section 3 of the Defense of Marriage Act. 


2013 Year End Benefit Plan Compliance Update and Reminders for Employers

As 2013 draws to a close and we look ahead to 2014, there is no shortage of benefit plan administrative challenges with which employers must contend.  While the Patient Protection and Affordable Care Act of 2010 (“ACA”) remains very much at the forefront of these challenges, retirement plan and deferred compensation plan administration continue to require attention.  With that in mind, we offer the following non-exhaustive summary of key legal compliance matters to keep in mind while closing out this year and planning for next year.

Health Care Reform Update

Despite the waves of political and judicial attacks that are not expected to let up – and the missteps that marred the roll out of – the ACA continues to be the law of the land.  The implementation of some important components of the ACA has been delayed, however, and some elements of the law have been modified.  Beyond well-publicized notice and other requirements that took effect earlier this year, employers should take note of the following:

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Fort Halifax Redux: Identifying an ERISA Plan Made Simple Again

We are frequently asked by clients whether a severance policy or program is an “ERISA plan” and, thus, subject to ERISA’s  documentary, administrative, reporting, and disclosure requirements.  A recent decision from the United States District Court for the District of Puerto Rico provides a helpful analysis of this re-occurring question in a concise, six-page opinion, and provides an opportunity for us to review the issues. 

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