2016 Inflation Adjustments

Filed under: Dollar Limits

Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2016. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of this card. 

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Certain Mid-Sized Employers May Have Even MORE Time to Comply with the ACA’s Play-or-Pay Rules

Filed under: Health Care Reform, Health Plans

Thanks to a special transition rule, employers with 50 to 99 full-time employees (including full-time equivalents) are generally shielded from the Affordable Care Act’s “play-or-pay” penalties until January 1, 2016. Moreover, in a wrinkle that is easily overlooked, any such “mid-sized” employer that already sponsors a health plan operating on a non-calendar-year basis has even more time to comply with these rules.

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Same-Sex Marriage Ruling Impacts Benefit Plans (Again)

Filed under: 401(k) Plans, 403(b) Plans, Health Plans, Beneficiaries, Cafeteria Plans, Qualified Retirement Plans, Plan Administration

On Friday, June 26, 2015, the Supreme Court published its ruling in Obergefell v. Hodges, holding (by a 5 to 4 margin) that the Fourteenth Amendment requires a state to license marriages between two people of the same sex, and to recognize any such marriage that is lawfully licensed and performed out-of-state. As a result, all (remaining) state laws or constitutional amendments banning same-sex marriage are now invalid.

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Supreme Court Upholds Affordable Care Act Subsidies

Filed under: Health Care Reform, Health Plans

The Supreme Court announced today that it has upheld Affordable Care Act (“ACA”) subsidies for insurance purchased on federally-facilitated exchanges. By a 6 to 3 vote, the Court concluded that the statute allows for subsidies on any exchange created under the ACA. The decision in King v. Burwell may come as a disappointment to some who hoped that the subsidies would be struck down and that the entire ACA would unravel in the aftermath.

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It’s Unanimous: The Fiduciary Duty to Monitor Has Teeth

Filed under: 401(k) Plans, 403(b) Plans, ERISA Litigation, Fiduciary Duties, Plan Investments, Mutual Funds

The United States Supreme Court gave considerable comfort to defined contribution plan participants – and their lawyers – who sue plan fiduciaries for failing to keep track of plan investment options. In a unanimous decision handed down on May 18, 2015, the Court held in Tibble v. Edison International that ERISA fiduciaries have a “continuing duty” to monitor investment options, and that plan participants have six years from the date of an alleged violation of that duty to file a lawsuit against the plan’s fiduciaries. This ruling significantly undercuts the utility of a statute of limitations defense that had been successfully deployed by plan fiduciaries in previous cases, and creates fertile ground for more litigation.

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EEOC Proposes ADA Rules on Wellness Program Incentives

Filed under: Health Plans, Wellness Programs

The EEOC has issued proposed regulations providing guidance on the extent to which the ADA permits employers to offer incentives to employees to promote participation in wellness programs that are employee health programs.  The new guidance is similar, but not identical, to the rules governing incentives for health-contingent wellness programs under HIPAA. Employers should review their wellness programs to ensure compliance with both laws.

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IRS Eases Correction Rules for Missed Elective Deferrals

Filed under: 401(k) Plans, 403(b) Plans, Voluntary Correction Programs

The IRS has just given sponsors of 401(k) and 403(b) plans a number of additional options for correcting a failure to honor an employee’s election to defer a portion of his or her pay. These new options, as announced in Revenue Procedure 2015-28, will be particularly helpful to sponsors of plans that provide for automatic enrollment (including those with an automatic escalation feature).

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IRS to Plan Sponsors: You Must Retain Documentation for Loans and Hardship Withdrawals

Filed under: 401(k) Plans, Plan Administration

Most sponsors of defined contribution plans rely on a third-party administrator (a “TPA”) to handle participant loans and hardship withdrawals—typically through the TPA’s website. However, in guidance issued last week, the IRS cautions that the sponsor—not the TPA or the participant—is responsible for maintaining documents proving that those transactions comply with the law.

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Another Court Enforces DOL's Electronic SPD Rules

Filed under: Participant Communications, Reporting and Disclosure, Plan Administration

A recent decision in Thomas v. CIGNA Group Insurance serves as an important reminder that simply posting summary plan descriptions on an employer’s intranet will not satisfy Department of Labor regulations under ERISA.  As a result, this approach may expose an employer to unanticipated liabilities.

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Davidson v. Henkel: A Rather Taxing Decision

Filed under: Nonqualified Plans, Deferred Compensation, Plan Administration

A recent decision by a Michigan federal trial court serves as a warning to employers that their failure to shield participants in nonqualified deferred compensation plans from adverse tax consequences may subject the employers to legal liability.  Although this decision (in Davidson v. Henkel Corporation) involved FICA taxation, the court’s reasoning would seem to apply equally to the 20% penalty tax and interest assessments triggered by a violation of Code Section 409A.

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Spencer Fane’s Employee Benefits Group has earned a national reputation developing innovative benefits solutions to meet client needs. From left to right: Greg Ash, Ken Mason, Julia Vander Weele, Larry Jenab, Rob Browning and Melissa Hinkle.

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