Making correct classifications between independent contractors and employees is not getting simpler with flexible, geographically-distributed workforces. For those with long memories, a key case in the area of worker classification was issued by the Ninth Circuit in Vizcaino v. Microsoft Corporation, 97F.3d 1187 (CA-9, 1996). Vizcaino v. Microsoft held that certain workers, originally hired as independent contractors, were actually employees who were entitled to benefits under Microsoft’s 401(k) plan and Microsoft’s Employee Stock Purchase Plan. Determinations like this can lead to substantial corrections costs to fix tax-qualified benefit plans as well as to make the contributions required under plan terms to the improperly excluded employees.
The controlled group rules under the IRC are possibly one of the driest and most technical areas in benefits practice, but mistakes in controlled group status can be very expensive and complicated to correct. The problem we are seeing is that in too many cases, it is not clear whether the plan sponsor or the plan’s service providers have responsibility for monitoring which entities are in the plan sponsor’s controlled group.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2019-09-12 16:42:452019-09-12 16:42:47Sunshine … on my controlled group makes me happy
Employee Stock Purchase Plans (ESPPs) are a program offered by many companies (particularly those with publicly traded stock) as a way for all of their employees to buy company stock. In their most robust format, employees can buy stock at a discount. You’d think employees would jump at the chance to capitalize on this immediate value opportunity. Not so! Employee participation rates are typically fairly low (often below 50%). Employers who offer ESPPs strive for ways to engage employees to appreciate and participate in this valuable benefit. Those employers may be interested to hear that a startup company is making headlines for its product aimed at boosting ESPP participation.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2019-09-05 09:22:122019-09-05 09:22:14She works hard for the money, so you’d better … help her afford to buy company stock
The
Ninth Circuit handed Charles Schwab & Co., Inc. a victory this week that could
impact plan sponsors by ordering individual arbitration of ERISA claims. A
three-judge panel unanimously reversed a California federal judge’s decision
denying Schwab’s Motion to Compel individual arbitration of its workers ERISA
breach of fiduciary duty claims. The Court overturned Amaro v Continental
Can Co. 724 F.2d 747 (9th Cir. 1984), in light of more recent precedent,
including the U.S. Supreme Court’s 2013 opinion in American Express v.
Italian Colorado Restaurant, 570 U.S. 228, 233 (2013).
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2019-08-26 15:39:332019-08-26 15:39:35You gotta fight for your right … to arbitrate
You may be hearing from the IRS soon on penalties related to the Affordable Care Act (“ACA”).
We
have seen increased ACA-related enforcement activity from the IRS,
particularly with respect to taxes owed under the employer mandate (which
requires large employers to provide group health coverage meeting certain
requirements to full-time employees). In our experience, the employer mandate
assessments often contain errors in calculating the penalty and/or originate
from inadvertent mistakes made by the taxpayer on the Form 1094-C or Form
1095-C and can often be eliminated or reduced.
The
IRS is also assessing penalties on large employers that fail to file
ACA-related tax forms. We recently
helped a large employer obtain full abatement of a proposed penalty exceeding
$200,000 for failure to file and transmit Forms 1094-C and 1095-C. In this
case, we were able to show that the failure was due to reasonable cause and
persuade the IRS to abate the entire penalty. If you receive proposed
ACA-related taxes or penalties, please reach out to a member of the Holland
& Hart Benefits Law Group.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2019-08-16 09:16:162019-08-16 10:05:44Somebody get me a (juris) doctor . . . increased IRS activity on healthcare reform
The IRS issued a ruling earlier this summer that serves as
a reminder of how important it is to maintain the distinction between an
election for health plan coverage and an election on how to pay for such
coverage.
In practice, virtually all employees (and frankly, many
employers) forget there is a distinction between electing coverage and electing
how to pay for it. It is usually automatically assumed that when an employee
elects medical coverage, they will pay for that coverage pre-tax under a
Section 125 cafeteria plan. Indeed, IRS guidance and proposed regulations
permit the employer to default an employee into paying for medical coverage
pre-tax under a cafeteria plan. But if an employee makes this election (either
affirmatively or by default), they may come to regret it, as demonstrated in
the IRS Chief Counsel letter issued May 8, 2019.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2019-08-13 09:48:032019-08-16 10:06:09Ch-ch-ch-changes . . . cafeteria plan change in status rules are sometimes surprisingly restrictive
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.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2019-08-08 09:15:072019-08-16 10:06:18Come together, right now . . . and join a MEP?
I can’t drive 55 – or classify my workers
/in 401(k) Plans, 403(b) plans, 457(b) plans, 457(f) plans, Benefits Plan Creation, Cafeteria Plans, Defined Benefit Plans, DOL, Employee Stock Purchase Plans (ESPPs), ERISA, ESOPs, Fringe Benefits, Governmental Plans, Health & Welfare Plans, IRS, Litigation, PBGC, Retirement Plans, Severance Plans, State Benefits Lawsby John Ludlum
Making correct classifications between independent contractors and employees is not getting simpler with flexible, geographically-distributed workforces. For those with long memories, a key case in the area of worker classification was issued by the Ninth Circuit in Vizcaino v. Microsoft Corporation, 97F.3d 1187 (CA-9, 1996). Vizcaino v. Microsoft held that certain workers, originally hired as independent contractors, were actually employees who were entitled to benefits under Microsoft’s 401(k) plan and Microsoft’s Employee Stock Purchase Plan. Determinations like this can lead to substantial corrections costs to fix tax-qualified benefit plans as well as to make the contributions required under plan terms to the improperly excluded employees.
Read moreSunshine … on my controlled group makes me happy
/in 401(k) Plans, 403(b) plans, 457(b) plans, 457(f) plans, Benefits Plan Creation, Cafeteria Plans, Defined Benefit Plans, Employee Stock Purchase Plans (ESPPs), ERISA, ESOPs, Fringe Benefits, Governmental Plans, Health & Welfare Plans, Retirement Plansby John Ludlum
The controlled group rules under the IRC are possibly one of the driest and most technical areas in benefits practice, but mistakes in controlled group status can be very expensive and complicated to correct. The problem we are seeing is that in too many cases, it is not clear whether the plan sponsor or the plan’s service providers have responsibility for monitoring which entities are in the plan sponsor’s controlled group.
Read moreShe works hard for the money, so you’d better … help her afford to buy company stock
/in Employee Stock Purchase Plans (ESPPs), Equity Compensation, Executive Compensation, Fringe Benefits, IRSby Beth Nedrow and Kevin Selzer
Employee Stock Purchase Plans (ESPPs) are a program offered by many companies (particularly those with publicly traded stock) as a way for all of their employees to buy company stock. In their most robust format, employees can buy stock at a discount. You’d think employees would jump at the chance to capitalize on this immediate value opportunity. Not so! Employee participation rates are typically fairly low (often below 50%). Employers who offer ESPPs strive for ways to engage employees to appreciate and participate in this valuable benefit. Those employers may be interested to hear that a startup company is making headlines for its product aimed at boosting ESPP participation.
Read moreYou gotta fight for your right … to arbitrate
/in 401(k) Plans, ERISAby Holly Stein Sollod
The Ninth Circuit handed Charles Schwab & Co., Inc. a victory this week that could impact plan sponsors by ordering individual arbitration of ERISA claims. A three-judge panel unanimously reversed a California federal judge’s decision denying Schwab’s Motion to Compel individual arbitration of its workers ERISA breach of fiduciary duty claims. The Court overturned Amaro v Continental Can Co. 724 F.2d 747 (9th Cir. 1984), in light of more recent precedent, including the U.S. Supreme Court’s 2013 opinion in American Express v. Italian Colorado Restaurant, 570 U.S. 228, 233 (2013).
Read moreSomebody get me a (juris) doctor . . . increased IRS activity on healthcare reform
/in Health & Welfare Plans, IRSby Kevin Selzer
You may be hearing from the IRS soon on penalties related to the Affordable Care Act (“ACA”).
We have seen increased ACA-related enforcement activity from the IRS, particularly with respect to taxes owed under the employer mandate (which requires large employers to provide group health coverage meeting certain requirements to full-time employees). In our experience, the employer mandate assessments often contain errors in calculating the penalty and/or originate from inadvertent mistakes made by the taxpayer on the Form 1094-C or Form 1095-C and can often be eliminated or reduced.
The IRS is also assessing penalties on large employers that fail to file ACA-related tax forms. We recently helped a large employer obtain full abatement of a proposed penalty exceeding $200,000 for failure to file and transmit Forms 1094-C and 1095-C. In this case, we were able to show that the failure was due to reasonable cause and persuade the IRS to abate the entire penalty. If you receive proposed ACA-related taxes or penalties, please reach out to a member of the Holland & Hart Benefits Law Group.
Ch-ch-ch-changes . . . cafeteria plan change in status rules are sometimes surprisingly restrictive
/in Cafeteria Plans, ERISA, Health & Welfare Plans, IRSby Beth Nedrow
The IRS issued a ruling earlier this summer that serves as a reminder of how important it is to maintain the distinction between an election for health plan coverage and an election on how to pay for such coverage.
In practice, virtually all employees (and frankly, many employers) forget there is a distinction between electing coverage and electing how to pay for it. It is usually automatically assumed that when an employee elects medical coverage, they will pay for that coverage pre-tax under a Section 125 cafeteria plan. Indeed, IRS guidance and proposed regulations permit the employer to default an employee into paying for medical coverage pre-tax under a cafeteria plan. But if an employee makes this election (either affirmatively or by default), they may come to regret it, as demonstrated in the IRS Chief Counsel letter issued May 8, 2019.
Read moreCome together, right now . . . and join a MEP?
/in 401(k) Plans, Benefits Plan Creation, DOL, ERISA, IRS, Legislation, Retirement Plansby 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.
Read more