In a surprise ruling, the U.S. Supreme Court has upheld all material provisions of the Patient Protection and Affordable Care Act of 2010 (the “ACA”), including the controversial individual mandate that requires taxpayers to obtain health insurance or pay a penalty tax starting in 2014. With much of the uncertainty about the future prospects of the law now lifted, employers should prepare for compliance with upcoming ACA requirements.

The Decision

Writing for a 5-4 majority in National Federation of Independent Business et al. v. Sebelius, conservative Chief Justice John G. Roberts, Jr., found that the ACA individual mandate is a permissible exercise of Congressional taxing authority. The ruling came as a surprise to many observers as it had been widely assumed that the individual mandate would be found unconstitutional, leaving questions about whether the remaining provisions of the law would also be invalidated by the Court. The ruling instead upheld all material provisions of the ACA (other than a Medicaid-specific issue that should not be relevant to employers).

What’s Next for Employers?

Now that the ACA has been upheld, sponsors of employer group health plans must focus on the pressing tasks for compliance under the act. Barring repeal or amendment of the ACA by Congress, a number of requirements, including the following, will go into effect in the near future:

• W-2 Reporting: Starting with the 2012 taxable year, wages reported on Form W-2 must include the value of employer-provided group health insurance. Employers should determine if they are appropriately tracking group health plan valuation data in order to comply with this new reporting requirement.
• Cap on Flexible Spending Account Contributions: Beginning with plan years starting in 2013, salary deferral contributions to a health flexible spending account (“FSA”) will be capped at $2,500. This cap should be communicated to participants in open enrollment materials applicable to the 2013 plan year, and appropriate changes should be made to payroll and administrative systems.
• Medical Loss Ratio Rebates: Beginning in 2011, health insurance companies were required to devote no less than a specified percentage of premiums to the provision of health care (as opposed to overhead or profit margin). Insurers who fail to meet this requirement are required to issue rebates to insured customers. Plans may soon begin receiving rebates associated with 2011 insured health coverage and employers should accordingly determine how to properly distribute or apply the rebates, keeping in mind that these funds will likely be considered to constitute plan assets and that the fiduciary provisions of the Employee Retirement Income Security Act (“ERISA”) will accordingly apply to how the rebates are handled.
• Summary of Benefits and Coverage: Starting with the first open enrollment period beginning after September 2012, plan sponsors will be required to include a plain-language Summary of Benefits and Coverage (“SBC”) with plan enrollment materials. Employers should watch for guidance and samples to be issued by the Department of Labor and should prepare to draft a SBC for inclusion with 2013 open enrollment materials.
• Affordable Health Coverage Requirement: Beginning in 2014, employers (other than certain exempt small employers) will be required to make “affordable” health coverage available to all full-time employees or face a “shared responsibility” tax penalty. Future guidance should more precisely define the kind of coverage that must be offered to avoid the penalty. Employers should watch for this guidance, which could require the addition of a low-cost coverage option available to a larger group of employees than are eligible to participate in any current health plans.
• Cadillac Tax: Beginning in 2018, employers offering health plan coverage that exceeds a threshold value (to be determined in future guidance) will face a punitive “Cadillac Tax.” Employers should watch for guidance defining what level of coverage will trigger the Cadillac Tax and prepare to make any appropriate changes to their health coverage options in order to avoid the tax.

Implications

The Supreme Court’s decision is likely to be just the first in a string of federal discussions and actions relating to health care reform. The federal debate will now move to the November elections, where the ACA is expected to serve as a key topic for both parties. For the moment, however, it is premature to expect any quick legislative repeal of any of the ACA’s requirements. Employers should operate under the assumption that all provisions of the ACA will go into effect and should plan accordingly to ensure timely compliance.

III.       Nonqualified Deferred Compensation Plans

Executives and other highly compensated employees frequently receive a portion of their compensation in the form of tax-deferred savings under a nonqualified deferred compensation plan such as a SERP or other “top-hat” plan. As a general matter, until these amounts are paid to the recipient and taxed as ordinary income, the benefits are treated for legal purposes as simply an unfunded promise of the employer’s to pay the employee some stated amount in the future. Employers may set aside assets toward the payment of nonqualified deferred compensation benefits into a “rabbi” trust, but even so the plan is still treated as “unfunded” because assets in the rabbi trust remain available to the employer’s creditors.

Because of the unfunded nature of nonqualified deferred compensation benefits, these benefits are generally unavailable to creditors. The recipient does not have legal title to the benefits until distributed, and there is no specific pool of assets available for creditors to attach. However, depending on how the employer has chosen to design the plan, it is possible that the nonqualified deferred compensation benefits may be subject to certain kinds of creditor claims. For instance, it is common for nonqualified plans to provide for division of assets to satisfy a domestic relations order, similar to the QDRO rules applicable to ERISA plans. Additionally, many nonqualified plans also provide that benefits can be reduced to satisfy any personal indebtedness of the employee to the employer. Generally, however, third-party creditor claims other than those arising through domestic relations orders cannot be satisfied by attaching an employee’s interest in a nonqualified deferred compensation plan.

An executive with a nonqualified deferred compensation plan balance may thus prefer that benefits remain unpaid until a future date for asset protection purposes. Once the benefits are paid to the employee, they become subject to the claims of creditors and do not qualify for rollover to an IRA or other protected vehicle. Depending on the design of the plan, it may be possible for a participant in a nonqualified plan who is due to take a distribution at some specific date to postpone the distribution five years or longer into future (it is generally prohibited under section 409A of the Internal Revenue Code to postpone a scheduled distribution for a period of less than five years).

Every nonqualified plan is different, so review the applicable plan documents to determine to what extent assets are protected from claims of creditors, and also whether “redeferral” elections are permitted in order to strategically postpone a distribution for asset protection purposes.

IV.       State Government Retirement Benefits

Employees of a state government or affiliated institution such as a state college or university may be eligible to participate in plans unavailable to employees of private sector employers, such as 457 plans state retirement systems. Plans sponsored by a governmental entity are exempt from most parts of ERISA, so the protections that generally apply to ERISA plans do not apply to all governmental plans on the same terms. Under federal bankruptcy law, however, benefits provided under a qualified plan or a governmental 457 or 403(b) plan are treated as exempt to the same extent as assets under an ERISA plan.

With respect to state retirement systems, state law will dictate to what extent these assets are protected from creditors. Under Virginia law, benefits accrued under the Virginia Retirement System (VRS) or its related plans, such as the Optional Retirement Plans, are generally protected from the claims of creditors, with three exceptions:

             1.         Process to recover debt to any employer who has employed the individual;

             2.         Administrative actions or court orders to enforce child or spousal support payment obligations; and

             3.         Division of retirement assets to the extent they constitute marital property for purposes of state law.

These protections are weaker than those applicable to ERISA plans and even IRAs in two respects. First, benefits accrued under the VRS plans are subject to the claims of employers, while ERISA plans and IRAs are protected against the claims of employers to the same extent as the claims of other third-party creditors. Second, benefits accrued under the VRS plans are subject to a wider range of enforcement actions to collect child or spousal support or to divide marital property than are ERISA plans, since Virginia law allows administrative actions to collect VRS assets even without a court order as would be required with respect to an ERISA plan.

Residents of Virginia who are eligible for a distribution from the VRS or an ORP should generally prefer to roll the distribution into an IRA (to the extent that the distribution is eligible for rollover) as soon as possible rather than leaving the assets in the state plan. The asset protection rules applicable to IRAs under current Virginia law are stronger than those applicable to the VRS plans. However, as noted above, any decision to roll assets into an IRA should be considered carefully if relocation to another state is anticipated in the future. –Shad C. Fagerland

How safe are the assets in your retirement account? Imagine the following scenarios:

 1.  You are in a car accident that results in a serious injury. Your insurance coverage is insufficient, leaving you with personal liability in the amount of $250,000. You have $200,000 in a 401(k) account, $50,000 in an IRA, and $25,000 in net assets outside these accounts. Can the injured party collect the judgment by attaching the assets in your 401(k) plan? How about your IRA?

 2.  After losing your job, you find yourself over $50,000 in debt and begin to consider filing for personal bankruptcy protection. Your most significant asset is $25,000 in an IRA that originated as a rollover from your former employer’s profit sharing plan. Are you required to count the assets in your IRA when determining whether you can file bankruptcy? Will you be required to apply the IRA assets to pay off part of your debt? 

3.  You recently switched jobs and have $75,000 in an account under your former employer’s 403(b) plan. You are not thrilled with the investment options available under the 403(b) plan and would like to roll the account over into an IRA; however, you are concerned about a pending legal judgment and want to make sure that these assets will be protected against your creditors to the maximum extent possible. Should you keep the assets in the 403(b) plan or roll them into an IRA?

Asset protection is an important retirement planning consideration that is often overlooked. When considering where to place your retirement savings, keep in mind that different savings vehicles may leave your assets more exposed to the claims of creditors than others. This article outlines the basic asset protection rules applicable to ERISA plans, IRAs, nonqualified deferred compensation plans, and other common retirement savings vehicles.

I.  ERISA Plans

 Assets held in a qualified retirement plan sponsored by an employer or former employer (including 401(k) plans, profit-sharing plans, defined benefit pension plans, and ESOPs, among other types of plans) are covered by the Employee Retirement Income Security Act of 1974 (“ERISA”), a federal law that mandates a strong level of protection for retirement savings. ERISA also applies to certain 403(b) plans offered by non-profit or governmental employers. As a general rule, ERISA plans offer the most solid protection that is available under the law.

ERISA (as well as the parallel sections of the U.S. Tax Code) protects plan assets in several ways. First, ERISA requires that assets held in an employer’s retirement plan must be used for the “exclusive purpose” of providing benefits to plan participants and beneficiaries. ERISA also contains an “anti-alienation” rule prohibiting a plan from assigning plan benefits to any person other than the plan participant or beneficiary, and also from allowing any attachment, garnishment, or other forms of legal process against plan assets. What this means as a practical matter is that the plan is prohibited from paying the amount credited to a participant’s account to anyone but the participant. If a creditor contacted the plan administrator seeking to collect on a personal debt, the plan administrator would be required by law (and by the terms of the plan) to deny the claim.

As an additional layer of protection, ERISA plans are protected against claims under competing state laws. ERISA contains a broad preemption clause providing that ERISA supersedes any state law to the extent that the law “relates to” an employee benefit plan, meaning that ERISA’s protections (such as the anti-alienation rule) can be used to defend against collection actions in any U.S. jurisdiction.

The major exception to the exclusive benefit and anti-alienation rules is Qualified Domestic Relations Orders (“QDROs”), which pertain to the collection of court-ordered alimony, child support, or property division payments. If a plan participant is ordered to use assets from an ERISA plan in connection with a QDRO, the plan administrator can divert the assets in the plan account as required by the order without first obtaining the participant’s consent.

With respect to bankruptcy, assets held in an ERISA plan are treated as exempt for purposes of federal bankruptcy law (but may not be treated as exempt in all states, so make sure to do your homework to understand the bankruptcy laws applicable to the state where you reside or file for bankruptcy protection). This means that assets held in an ERISA plan are not counted as assets that must be used to pay off creditors under the federal bankruptcy rules, and the debtor is thus allowed to retain these assets after going through bankruptcy. Under Virginia law, assets held in an ERISA plan are also treated as fully exempt to the same extent as provided under Federal law. (Prior to 2007, however, Virginia law only exempted ERISA plan assets up to a certain level – a reminder that state bankruptcy laws can differ from federal laws in important ways, and can also be subject to change.)

II.        Individual Retirement Accounts (IRAs)

Assets held in an IRA or Roth IRA are not covered by ERISA, and thus do not qualify for the heightened protection of the exclusive benefit rule, anti-alienation rule, or ERISA preemption. This result applies regardless of whether the assets originated as contributions to the IRA or as a rollover from another IRA or ERISA plan. One implication of a decision to roll assets out of an ERISA plan and into an IRA is thus that the rollover may leave the assets more exposed to the claims of creditors than otherwise would have been the case.

Assets held in an IRA are generally subject to state law asset protection rules, which can vary widely from state to state. Many states, including Virginia, exempt assets held in an IRA from the claims of creditors to the same extent as assets held in an ERISA plan. (Prior to 2007, IRA assets were not treated as exempt under Virginia law if the debtor also held assets in an ERISA plan.) However, this is not universally the case. In some states, IRA assets are only partially exempt from the claims of creditors, and in others IRA assets are not exempt at all.

Federal bankruptcy law exempts assets held in an IRA to the same extent as assets held in an ERISA plan. Residents of a state that does not fully exempt IRA assets for purposes of state bankruptcy law may thus prefer to apply federal exemptions if allowed.

The major point to consider when deciding whether or not to roll assets from an ERISA plan into an IRA is that IRA assets will not be protected equally in all locations. If you currently reside in a state, like Virginia, that treats IRAs the same as ERISA plans for asset protection purposes, you may feel comfortable making the rollover. However, if you ever relocate in the future, you may move into a jurisdiction that leaves the IRA assets more exposed to creditors. General information about the bankruptcy and asset protection rules applicable in different states can be found online at sites such as Legal Consumer.com (http://www.legalconsumer.com/), but it is always best to seek the advice of counsel licensed to practice law in the state in question. 
–Shad C. Fagerland

The Department of Labor has postponed the date that 401(k) plan sponsors must comply with new fee disclosure rules from May 31, 2012 to August 30, 2012. These rules, introduced in final regulations under the Employee Retirement Income Security Act (“ERISA”) Section 408(b)(2), require sponsors of participant-directed account plans such as 401(k) plans to provide detailed information about the plan’s procedures for making investment directions as well as a breakdown of the fees charged by each available investment fund.

The postponement was granted by the Department of Labor in order to allow plan sponsors some additional time to adjust to recent revisions to the final regulations. The benefits community had been anticipating that the effective date of the regulations would be postponed, but most commentators had hoped for an extension into the 2013 calendar year. The three-month delay granted by the Department of Labor leaves little time for plan sponsors to finalize their disclosure materials to comply with the new fee disclosure requirements.

Within the next few months, plan sponsors should receive detailed fee disclosure information from the plan’s investment providers. This information must be compiled into two separate disclosure statements that are required to be provided to participants on an ongoing basis: an annual disclosure (which must be provided by August 30, 2012), and a quarterly disclosure (the first installment of which must be provided by November 14, 2012).

Stay tuned for further updates, including a more detailed discussion of the required contents of the new disclosure forms. –Shad C. Fagerland

The benefits community has been awaiting major changes to the rules governing disclosure of plan-related fees for several years, but it has taken some time for final regulations to take shape. The Department of Labor in 2010 issued provisional regulations that were originally scheduled to go into effect on July 16, 2011, but the compliance deadline was recently extended into the 2012 plan year. It is likely that additional changes to the proposed rules will be made prior to the effective date.

Sponsors of 401(k) plans, 403(b) plans, and other plans that permit individual investment direction should be aware that beginning in mid-2012, several new categories of information relating to plan investments and fees will need to be disclosed for the first time. The required disclosures will most likely be combined into two separate documents, one that is provided at enrollment then annually thereafter, and one that is provided in the form of quarterly statements.

General Plan Information
This disclosure must be provided to participants before they enroll in the plan and at least annually thereafter. This notice:

• describes the method of giving investment directions;
• discloses the investment alternatives and any brokerage windows or similar arrangements;
• describes all applicable administrative expenses and the manner of allocation among participant accounts;
• includes various other pieces of required language; and
• contains a table disclosing detailed fee and performance information related to each available investment alternative.

Quarterly Fee Disclosure
This disclosure must be provided on a quarterly basis (with an annual summary once each plan year) to each participant, disclosing all fees actually charged to the plan in general (e.g., administrative record-keeping fees) or to the participant’s account in particular (e.g., fees to process loans or QDROs), including fees charged indirectly through funds by means such as 12b-1 fees or revenue sharing arrangements.

At present, compliance with these rules would be difficult if not impossible since some of the information required to be included in the notice (such as 12b-1 or revenue sharing fees) is currently hard to come by. Before the participant disclosure rules go into effect, however, the new regulations will require investment companies and other service providers to provide detailed disclosure to plan sponsors containing all required information. This will make the task of drafting these new disclosures much less daunting.

The general compliance deadline for these new disclosure rules has been postponed until April 1, 2012. The initial participant disclosure must be made no later than May 31, 2012, and quarterly statements must commence no later than August 14, 2012. Plan sponsors should plan accordingly as a good deal of effort may be required to produce the first round of disclosures. Specifically, plan sponsors should soon begin the process of inventorying all plan-level fees and expenses; communicating with service providers to ensure receipt of necessary fee information; and drafting form disclosures that comply with the final regulations, with specific data for each fund to be provided as it becomes available.

The members of our Employee Benefits Practice Group stand by to assist with the drafting of these new disclosures and to answer any questions you may have. –Shad C. Fagerland

On May 16, 2011, the U.S. Supreme Court issued an important decision with implications for sponsors of employee benefit plans: CIGNA Corp. v. Amara. The opinion in this case clarifies the consequences that occur when a plan’s Summary Plan Description (“SPD”) conflicts with the terms of the underlying plan document by promising more generous benefits than are available under the plan.

This case arose out of the 1998 conversion of CIGNA’s pension plan to a “cash balance” formula.  Various features of the new plan meant that some employees received fewer benefits than they would have received under the pre-1998 defined-benefit system.   CIGNA did not adequately describe these features in its revised SPD, which instead indicated that the revised formula provided “an overall improvement in retirement benefits” and guaranteed that retiring employees would receive at least as much as benefits to which they were entitled prior to the date of amendment.  

When CIGNA employees discovered that the plan benefits were in some cases less than the amount indicated by the SPD, they filed suit under ERISA § 502(a)(1)(B), which allows participants to recover benefits owed under the terms of a plan. The district court granted their claim and, as a remedy, order CIGNA to reform its plan to provide the benefits promised in the SPD. The district court did not require the plan beneficiaries to show that they had each suffered individual injuries as a result of the changes in the plan; rather the evidence created a presumption of “likely harm” to the plan beneficiaries, which CIGNA had failed to rebut.  The Court of Appeals for the Second Circuit summarily affirmed the district court’s decision.

On appeal, the Supreme Court vacated the decisions below and remanded the case to the district court on the ground that the ERISA § 502(a)(1)(B) did not authorize the court to reform the plan.  The Court explained that § 502(a)(1)(B) only authorizes relief to enforce the terms of an existing plan; it does not permit a court to rewrite a plan to conform to the representations made in an SPD.  The Court rejected the argument that the terms of the SPD are themselves part of the plan which the SPD is intended to summarize.  Therefore, the Court concluded that statements in a SPD are merely communications “about the plan” and do not “constitute the terms of the plan for purposes of § 502(a)(1)(B).”

The Court continued on to explain that relief would be authorized by § 502(a)(3), which allows a plan beneficiary “to obtain other appropriate equitable relief” for violations of ERISA.  The Court also rejected CIGNA’s argument that plan beneficiaries must always show detrimental reliance to obtain relief based on statements contained in an SPD, but it also emphasized that the plan beneficiaries were required to make some showing of actual harm.

The primary implication of this decision for plan sponsors is that conflicts between the terms of the plan and the SPD can form a valid basis for recovery by plan participants, forcing the employer to honor promises made in the SPD even if those benefits are not authorized under the terms of the plan. Further, the court’s determination that the participants were not required to show that they detrimentally relied on the SPD in order to recover under ERISA § 502(a)(3) make it that much easier for plaintiffs to recover, removing a defense that employers had previously relied upon.

The lesson? Always double check the SPD to make sure it matches the terms of the plan. –Shad C. Fagerland

The Department of Labor (“DOL”) recently proposed a new regulation that could negatively impact sponsors of Employee Stock Ownership Plans (“ESOPs”). Under this proposed rule, valuation firms that provide appraisals of ESOP companies would be deemed to constitute “fiduciaries” for purposes of ERISA, a change which would increase the potential liability faced by valuation firm and would accordingly make it more difficult and costly for ESOP companies to obtain their required annual appraisal.

Senators Ayotte, Snowe, Collins, Brown, and Landrieu are sponsoring a free standing legislative proposal that will provide protection for ESOP valuators from the proposed DOL regulation. S. 1232 will modify the definition of “fiduciary” under ERISA to exclude valuators of ESOPs.  We believe that S. 1232 will protect ESOPs by preventing the unnecessary increase in administrative that would result if the proposed DOL regulation becomes finalized.

Please consider asking Senators Warner and Webb to co-Sponsor S. 1232.  We ask that all ESOPs in the Commonwealth of Virginia draft letters urging Senators Warner and Webb to co-Sponsor and support S. 1232, as well as employee ownership in general.  Click here for a suggested form letter, the text of which can be copied and printed under your company’s letterhead.  –Christopher L. McLean

A recent survey found that nearly 1 in 5 retirement plan participants has taken an early withdrawal from a retirement plan account within the past year in order to cover emergencies.  Click here for the story. 

Early retirement withdrawals, whether via hardship distributions, loans, in-service distributions for employees over age 59-1/2, or voluntary withdrawals from an IRA, are clearly not a wise move from a retirement savings perspective. Early withdrawal not only hamstrings the long-term growth of the retirement account, it also leads to premature tax liability, including in many cases an additional 10% penalty tax (for individuals below age 59-1/2).

Do employers owe a duty to employees to make it difficult to access the funds in their accounts, or perhaps to counsel employees to think twice about taking an early distribution?  From a legal perspective, the answer is a clear and resounding “no.” The law governing retirement plans permits early withdrawals in many circumstances, and offers no incentive for employers to design their plans to prohibit or restrict early distribution. Employers are free to offer these options (or not offer them), and if offered, employees must be allowed to use them on a nondiscriminatory basis. In fact, one of the only ways employers can get into trouble in this arena is by administering their early withdrawal provisions in a way that places additional burdens on employees for exercising their rights under the plan – for instance, by requiring employees to attend a financial counseling session prior to requesting a hardship distribution. An employee who is unwilling to attend a counseling session but otherwise satisfies the plan’s criteria for a hardship withdrawal could have a legitimate claim of prohibited discrimination against the plan administrator.

One thing employers can do is to opt out of the early withdrawal business altogether by amending plans to remove these options. Plans might be amended to permit loans but not hardship withdrawals, for instance, or to provide that certain categories of contributions (like profit sharing contributions) are not eligible for early withdrawal. The tax law provides neither an incentive nor a disincentive to include such provisions, so it is a matter of choice for each individual employer.

One thing to keep in mind, however: any early withdrawal provisions that are offered under the plan must be administered on a nondiscriminatory basis. An option available to one employee must be available under the same terms to all. –Shad C. Fagerland

Employers are required to establish written documents setting forth certain terms relating to their employee benefit plans. Failure to maintain the proper documents in updated form can lead to penalties or other enforcement actions by the IRS, Department of Labor, or other regulatory agencies.

While some of these documents are obvious, others have a tendency to slip through the cracks. We recommend that employers periodically review this list to make sure they can locate updated versions of the following:

Qualified Retirement Plans (including 401(k) plans)

•  Plan Document: Either a prototype plan (adoption agreement plus basic plan document) or an individually designed plan. The document will need to be amended approximately every five years in order to reflect changes made by recent legislation.
• Summary Plan Description: Summary of the terms of the plan, written in language that is easy to understand. Must be distributed to participants and must be updated to reflect material changes whenever the plan is amended.
• IRS Determination Letter / Opinion Letter: Every plan should be submitted to the IRS for approval, and an updated determination letter should be kept on file. (Note that prototype plans are covered by an IRS opinion letter that accompanies the plan document; employers who adopt a prototype plan do not need to request a separate IRS determination letter but should make sure to keep the plan’s opinion letter on file.) 
• Investment Policy (optional but recommended): This document outlines the procedures to be followed by plan fiduciaries when managing plan assets or when evaluating investment options made available under the plans.
• Fiduciary Delegations (optional but recommended): In order to protect officers and directors against liability under ERISA, we recommend that employers adopt board resolutions delegating fiduciary duties concerning oversight of the plans to one or more committees. Committee charters setting forth the specific responsibilities of each committee should also be established and approved by the Board.

 Health and Welfare Plans

•  Plan Document / Summary Plan Description: Most employers satisfy the plan document requirement by issuing a summary plan description outlining the terms of the company’s health and welfare benefit offerings.
• Cafeteria Plan: Employers who offer benefits on a pre-tax basis must maintain a written cafeteria plan document that satisfies the requirements of section 125 of the tax code. This document will also contain the terms applicable to flexible spending accounts or health savings accounts (if offered).
• HIPAA Manual: The Health Insurance Portability and Accountability Act (HIPAA) requires employers who sponsor health plans to maintain a written set of policies and procedures governing the handling of protected health information. This document should include procedures relating to HIPAA’s privacy regulations as well as the more recent set of HIPAA regulations governing security of electronic health records.

Nonqualified Deferred Compensation Plans (SERPs, deferred bonus plans, etc.)

• Plan Document: Every executive compensation arrangement that provides for deferral of compensation must be described in a written document that satisfies the requirements of section 409A of the tax code. The document may take the form of an employment agreement or a separate plan document. –Shad C. Fagerland

Welcome to the Kaufman & Canoles Benefits Blog! The members of the Employee Benefits Practice Group plan to use this space to share items of interest to employer sponsors of benefit plans of all types, including retirement plans, health and welfare plans, and nonqualified deferred compensation arrangements.

 Topics to be covered include cutting edge issues and developments in the following areas:

 Qualified Plans (including 401(k) plans).

•  Document requirements, including reminders of required amendment deadlines.
• Reporting and disclosure issues.
• Voluntary correction programs offered by the IRS and Department of Labor.

ESOPs.

•  Discussion of ESOP transactions, including situations where an ESOP might be of particular benefit.
• Compliance and administration issues for new and mature ESOP companies.
• Restrictions on executive compensation imposed under section 409(p) of the Internal Revenue Code for S Corporation ESOPs.

 Health and Welfare Plans.

• Impact of health reform on employer plans, with particular emphasis on key provisions that impact employers.
• COBRA and HIPAA tips and reminders.
• HSAs, HRAs, FSAs, and the various other “consumer driven” health plan design options.

Executive Compensation.

•  Plan design tips and recommendations.
• Compliance issues under section 409A of the Internal Revenue Code.

 Ongoing Developments.

• Review of important decisions in the case law governing issues such as 401(k) investment fees, fiduciary requirements, beneficiary disputes, and the like.
• Summaries of key benefit-related statutes and regulations.
• Review of important administrative guidance issued by the IRS, Department of Labor, or Treasury Department.  -Shad C. Fagerland