The President’s recent budget proposal would impose a new cap on tax-favored retirement benefits. Annual contributions and accruals under tax-favored plans are already limited, but this would be a complex new limit determined by how much of a pension could be provided by your IRA and your 401(k) accounts and qualified pension plans of ALL… Continue Reading
Category Archives: U.S. Pensions & Benefits Law
Subscribe to U.S. Pensions & Benefits Law RSS FeedAre Your 401(k) Plan’s Target Date Funds On Target?
Posted in Investments, U.S. Pensions & Benefits LawMost 401(k) plans that have qualified default investment funds (QDIA’s) have chosen target date funds as their default investments. Target date funds change their mix of investments to become more conservative over time in relation to a projected retirement age. Despite their popularity, target date funds are not well understood by either the fiduciaries who… Continue Reading
De-Risking On Trial? U.S. Verizon Litigation Still Active
Posted in Innovation & Plan Design, U.S. Pensions & Benefits LawIn our March 13 webinar on de-risking defined benefit pension plans, I stated that the U.S. litigation launched by a group of Verizon retirees challenging the annuitization of their pensions was not dead, even though a federal district court refused to stop the purchase of annuities from Prudential, and the annuities were purchased in 2012…. Continue Reading
De-Risking U.S. Pensions Through Lump Sum Offers – What’s on the Front Burner for 2013?
Posted in Innovation & Plan Design, U.S. Pensions & Benefits LawDoes your defined benefit plan have a lump sum option? Nearly forty percent of U.S. employers who sponsor defined benefit pension plans are at least “somewhat likely” to offer lump sums to retirees and vested terminated participants in 2013, according to an Aon Hewitt survey released earlier this month. It is safe to say that… Continue Reading
De-Risking Your U.S. Pension: Choices and Challenges
Posted in U.S. Pensions & Benefits LawDefined benefit plan sponsors have become very focused on ways to control their asset volatility and to remove pension liabilities from their balance sheets. In fact, it would be fair to call “de-risking” a hot global issue which is in the spotlight in Europe, Canada and the United States. De-risking may take different forms, including:… Continue Reading
U.S. Pension ruling offers relief to private equity funds
Posted in U.S. Pensions & Benefits LawIn a recent blog post, Carol Buckmann wrote about a decision from a federal district court judge in Massachusetts calling into question a 2007 advisory opinion from the U.S. Pension Benefit Guaranty Corporation (PBGC). Tim Kiladze quoted Carol in a recent Globe & Mail article -“Pension ruling offers relief to private equity funds” – noting… Continue Reading
Do Investment Funds Share Their Portfolio Companies’ ERISA Liability? A U.S. District Court Says No
Posted in U.S. Pensions & Benefits LawIn 2007, the U.S. Pension Benefit Guaranty Corporation (PBGC) created a furor in the investment and employee benefits worlds when it issued an appeals opinion finding that a private equity fund that owned at least 80% of a portfolio company could be liable for the portfolio company’s plan termination underfunding under Title IV of the… Continue Reading
How Will You and Your Benefits Department Respond When Participants Ask About Their 401(k) Fees?
Posted in U.S. Pensions & Benefits LawAfter new required disclosures shed light on the murky area of 401(k) plan fees, participants eyes should be opened. In August 2012, initial fee disclosures with general information were required to be distributed to participants and starting this November, quarterly statements must be sent showing the actual amounts directly deducted from their accounts in the… Continue Reading
Providers Showed You Their 401(k) Fees: Now, What Should You Do About It?
Posted in U.S. Pensions & Benefits LawThe U.S. Department of Labor (DOL) required service providers to 401(k) and other pension and profit sharing plans that allow participants to direct investment of their accounts to provide new fee disclosures by July 1. The new requirement applies to all mutual fund families that provide record-keeping or brokerage services together with investment platforms for… Continue Reading
Does Your 401(k) Plan Have an Investment Policy Statement? That’s Great, But Do Your Fiduciaries Follow It?
Posted in U.S. Pensions & Benefits LawAlthough investment policy statements are not required by the U.S. Employee Retirement Income Security Act (ERISA), it is highly recommended that every 401(k) plan have one. An investment policy statement (IPS) can protect the plan committee or other fiduciary responsible for investments by setting out procedures for fulfilling fiduciary responsibilities. Although a good IPS can… Continue Reading
Have You Assumed Pension Termination Liability? Long Arm of the U.S. PBGC Reaches Non-U.S. Parent
Posted in U.S. Pensions & Benefits LawOne of the most difficult rules for our non-U.S. based clients to accept is controlled group liability for plan termination under Title IV of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Under these rules, all members of the controlled group may be jointly and severally liable for underfunding when a plan… Continue Reading
Canadian Equity Compensation 101
Posted in Executive Compensation, U.S. Pensions & Benefits LawAs US multinational companies (and their related cross-border activities) continue to grow and expand, US lawyers and human resources professionals may be asked to consider issues related to equity compensation for their Canadian-based employees more and more. US employers operating in Canada must consider a different set of rules for share-based compensation, including different taxation… Continue Reading
Are You Ready for a DOL Audit? 401(k) and Pensions Plans are in the Crosshairs
Posted in U.S. Pensions & Benefits LawA recent report of U.S. Department of Labor (DOL) audit results contained some surprising statistics: almost 3 out of 4 audits find violations of the Employee Retirement Income Security Act of 1974 (ERISA) and the average cost for a plan to correct them, including fines and penalties, is $450,000. The DOL’s ERISA audit force will… Continue Reading
U.S. 401(k) Disclosure Is Coming-What To Do In January
Posted in U.S. Pensions & Benefits LawIn prior blog posts, (see posts from October 26, 2010 and July 15, 2011) I have described new participant fee and investment disclosure requirements that will apply to 401(k) plans and other participant-directed defined contribution plans beginning May 31, 2012. Many participants will learn for the first time the fees they are paying for services… Continue Reading
Granting Restricted Stock in the U.S.? 83(b) Election News
Posted in U.S. Pensions & Benefits LawWhen restricted stock is transferred to a U.S. taxpayer in connection with the performance of services, Internal Revenue Code Section 83(b) allows the recipient to accelerate the taxable event to the time of transfer, rather than the time that restrictions lapse (vesting). If the taxpayer makes a Section 83(b) election, which is required to be… Continue Reading
How Do You Handle U.S. Plan Document Requests? Fifth Circuit Finds Broad Fiduciary Responsibility
Posted in U.S. Pensions & Benefits LawIf you are like most 401(k) or pension plan administrators, you have procedures for participants to request plan documents and forms. They may be as simple as requiring document requests to be sent in writing to a designated employee. Section 104(b)(4) of ERISA requires that certain plan documents, including summary plan descriptions and 5500’s, be… Continue Reading
Are You Amending Your 401(k) or Pension Plan? A Court Reminds Us to “Do It Right” or Else
Posted in U.S. Pensions & Benefits LawA recent decision provided a wake up call for plan sponsors and plan committees: the court set aside a plan amendment in an ongoing challenge to the elimination of Nabisco stock as an investment choice in the RJR Tobacco plan. We have previously written about the importance of following plan procedures when implementing changes, but this… Continue Reading
Short Term Reprieve Delays Fee Disclosure, But Don’t Put Compliance On The Back Burner
Posted in U.S. Pensions & Benefits LawNew Regulations The issue of whether plan fees are too high, which I write about regularly, will not go away. Courts are still considering some of the excessive fee cases filed in the last few years, but as part of its fee transparency project, the U.S. Department of Labor has already moved to require detailed… Continue Reading
Do Your Plan Communications Mislead Participants? The United States Supreme Court Explains Their Remedies
Posted in Plan Administration, U.S. Pensions & Benefits LawPlan fiduciaries and ERISA litigators got a few surprises in a recent United States Supreme Court decision on whether participants can be awarded benefits promised to them in plan communications, but not in the plan document. The decision, CIGNA v. Amara, has been described as a victory for plan sponsors by defense counsel and as… Continue Reading
IRS to Host Webinar on International Retirement Plan Issues
Posted in U.S. Pensions & Benefits Law“We’re the IRS and we’re here to help.” International issues in employee retirement plans have presented many vexing issues that need to be addressed. And the U.S. Internal Revenue Service (IRS) has been increasing its focus on international tax issues for some time now. So naturally, the Employee Plans division of the IRS is tackling… Continue Reading
Can 401(k) and Pension Plans Still be Disqualified? IRS and the Tax Court Remind Us That They Can
Posted in U.S. Pensions & Benefits LawThere have been some well known cases in which qualified plans were disqualified retroactively by the IRS for less than major violations of the rules. In one of the most well known, Tionesta Sand and Gravel 73 T.C. 758 (1980), affd without opinion 642 F. 2d 444 (3d Cir. 1981), a plan was disqualified for… Continue Reading
Restoring Your 401(K) Plan’s Match? – Employer Contributions are Rebounding, But Move With Caution
Posted in U.S. Pensions & Benefits LawIn August of 2010, Investment News ran the headline: “Employers Slow to Restore 401(k) Matching Contributions.” What a difference a few months can make! On February 23, 2011, Reuters reported that according to Fidelity Investments, 55% of plan sponsors who reduced or eliminated their matching contributions in the recession had either restored them or plan to… Continue Reading
Shareholders Have Their Say: Say on Pay Developments in U.S. and Canada
Posted in Executive Compensation, U.S. Pensions & Benefits LawRecent U.S. rules requiring shareholder votes on executive compensation are being watched carefully by Canadian issuers. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) calls for mandatory say-on-pay votes at all annual meetings of U.S. issuers and certain foreign issuers that are subject to the Securities and Exchange Commission’s proxy rules. Shareholders… Continue Reading
Court Holds that Purchasers of U.S. Assets May Step into ERISA Liability: Some Negotiation Tips for Buyers
Posted in U.S. Pensions & Benefits LawIn many asset sales, buyers expressly state that they are not assuming any liability for pre-closing benefit plan operations. Parties to these transactions have assumed that courts will respect these disclaimers, but the reality is that there is some troubling authority on successor liability under ERISA where a seller fails to provide benefits or make… Continue Reading