DOL – Page 5 – Benefits Law Group Blog

Wait a Minute Mr. Postman . . . COBRA Litigation Update

July 23, 2020/in DOL, ERISA, Health & Welfare Plans, Litigation

We have been monitoring an increase in litigation relating to COBRA election notices in recent months. The plaintiffs in these cases allege that COBRA election notices are deficient, and as a result, the plaintiffs, on a class basis, should be awarded a $110/per day per participant penalty (among other relief). Many of these cases allege deficiencies on notices that are substantially similar to the Department of Labor’s model notice.

While none of these cases have fully worked through the courts, a number have settled for significant sums. The settlement success has predictably spurred more complaints and suits.

Into the Mystic . . . Employee Benefit Considerations for Returning Workers

June 30, 2020/in 401(k) Plans, Cafeteria Plans, Defined Benefit Plans, DOL, ERISA, Health & Welfare Plans, IRS, Legislation, Retirement Plans

by Kevin Selzer

Many employers are venturing into uncharted waters as significant numbers of employees are being rehired or returning from extended leaves of absence (e.g., furloughed employees). In this environment, it can be easy to overlook the employee benefit plan implications of this workforce shift. Below are some best practices for employers faced with employees returning to work.

Ensure that retirement plans are crediting service for returning employees correctly. In most cases, employers will not be able to treat a rehired employee as a new employee for retirement plan purposes. This means that the employer will have to consider the employee’s prior service for purposes of determining proper eligibility and vesting credit. This is a good time for employers to check and confirm that any systems that track service (e.g., payroll systems and the retirement plan administrator’s systems) are configured correctly to credit prior service.

Might as Well Face It… Your Annual Retirement Plan Audit is Not a Clean Bill of Health

May 19, 2020/in 401(k) Plans, Defined Benefit Plans, DOL, ERISA, Fiduciary Duties, IRS, Retirement Plans

by Ben Gibbons

With calendar year-end Form 5500s due on July 31, or October 15 with an extension (and still no COVID-19 filing relief as of the date this blog was published), it’s that time of year where plan sponsors begin thinking about their annual retirement plan independent audits. However, these are not the only audits companies should be thinking about.

Both the Internal Revenue Service (IRS) and the Department of Labor (DOL) routinely select qualified retirement plans for examination. In the event of an audit by either agency, a plan’s records, procedures and processes will be examined. If errors or deficiencies are found, at a minimum, corrections will be required, and in some instances, fines or sanctions will be levied.

Relief . . . Just a Little Bit – IRS Notice 2020-23: Limited Extensions of Form 5500

April 20, 2020/in 401(k) Plans, 403(b) plans, Defined Benefit Plans, DOL, Equity Compensation, Executive Compensation, Health & Welfare Plans, IRS, Retirement Plans

By Kevin Selzer and Lyn Domenick

In the midst of everything going on, we wanted to point out a few “under the radar” implications of IRS Notice 2020-23. The Notice, issued on April 9th, provides that tax-related deadlines that fall between April 1, 2020 and July 14, 2020 (the “delay period”) are automatically extended to July 15, 2020.

Delayed 5500s. Most plan sponsors hoping for Form 5500 relief will have to wait for additional guidance since only a small group of plans have Form 5500 deadlines fall during the delay period. For example, the regular Form 5500 due date for calendar year plans (July 31st) falls just outside of the delay period. We note that the DOL has authority under the CARES Act to provide additional Form 5500 relief.

We Interrupt This Program – Is a Multiple Employer Plan In Your Future?

January 9, 2020/in 401(k) Plans, Benefits Plan Creation, DOL, ERISA, Fees, Fiduciary Duties, Investments, IRS, Legislation, Retirement Plans, SECURE Act

by Kevin Selzer

We interrupt our usual Benefits Dial programming – to take a closer look at developments affecting multiple employer plans (MEPs) as part of our series of posts on the recently enacted benefit plan legislation, including the SECURE Act (background here). The reform to MEPs is seen by many as the biggest disruptor to the retirement plan industry. Why? It facilitates the banding together of retirement plan assets from unrelated employers, helping employers punch above their weight. By combining together to form a larger plan, smaller employers can leverage assets with regard to plan services, and maybe most importantly, investment fees paid by participants.

MEPs have long been permitted but many employers have been unwilling to participate in those plans. The biggest deterrent has been the “one bad apple rule.” That rule provides that a defect in any participating employer’s portion of the MEP can impact the tax qualification of the entire MEP for other participating employers. In other words, if one participating employer in the MEP is unwilling (or maybe unable) to correct an error, the whole plan can be disqualified by the IRS. The SECURE Act helps solve this issue with a special kind of MEP called a pooled employer plan (PEP). PEPs have a specific procedure for dealing with tax qualification defects. In short, a participating employer in a PEP who refuses to correct the error, can be discharged (spun off) from the PEP to isolate the disqualification impact. The SECURE Act grants relief under ERISA to boot. Historically, MEPs were treated as a collection of separate plans unless the underlying employers met a commonality standard. A PEP (called a “Group of Plans” under ERISA) is also treated as a single plan for ERISA purposes under the SECURE Act. This means, for example, that such plans would be allowed to file a single Form 5500.

Friends in Low Places . . . IRS focusing on late contributions too

November 11, 2019/in 401(k) Plans, 403(b) plans, 457(b) plans, DOL, ERISA, Fiduciary Duties, Governmental Plans, IRS, Retirement Plans

by Kevin Selzer

“I was the last one you’d thought you’d see there…”

We tend to think of untimely remittances to retirement plans as primarily an ERISA issue, and certainly, the cause of many DOL audits. Lately, however, it seems the IRS also sees late contributions as an invitation to examine the plan.

Come together, right now . . . and join a MEP?

August 8, 2019/in 401(k) Plans, Benefits Plan Creation, DOL, ERISA, IRS, Legislation, Retirement Plans

by Beth Nedrow

In late July, the Department of Labor released a rule allowing small businesses to more easily band together in a joint retirement plan. The idea is that a larger plan will have more leverage to obtain better pricing and better service from vendors. Equally important is the ability of employers to offload some or all of the responsibility for maintaining retirement plans.

The final rule alters the definition of “employer” in ERISA for purposes of who may establish and maintain an individual account defined contribution retirement plan. Under the new rule, a group or association, or a PEO (professional employer organization) can sponsor what the DOL refers to as a “MEP” – a “multiple employer plan.” The regulation is limited to “bona fide” groups, associations and PEOs – which means they must have a business purpose or other common connection, and not merely have the purpose of providing the retirement plan. In this way, the new rule mirrors the DOL’s regulations intended to expand the availability of association health plans (“AHPs”), which is currently stalled due to litigation.