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Courts Continue To Expand ERISA Church Plan Exemption

Most employers know that there is a federal law – the Employee Retirement Income Security Act, or ERISA – that governs employer-sponsored employee benefit plans. There are a few notable exceptions that could apply to healthcare employers, however. One, in particular, has received a fair amount of attention by courts in recent years: the church plan exemption. This exemption excuses certain church-related plans both from ERISA obligations and also from certain requirements of the Internal Revenue Code.

IRS Proposes Permanent Nondiscrimination/Coverage Relief for Closed Pension Plans

The Internal Revenue Service (IRS) has issued proposed regulations that would provide permanent relief from certain coverage and nondiscrimination testing requirements to defined benefit plans that are closed to new participants, but that provide ongoing accruals to “grandfathered” employees, i.e. some or all employees who were participants in the plan as of a specified date. In recent years, many employers have closed their defined benefit plans to new participants except to groups of grandfathered employees, who continue accruing benefits in the closed plan (this is often referred to as a “soft freeze”). Over time, a soft-frozen plan may become more concentrated with highly-compensated employees (since longer-service employees tend to be higher paid on average). This often makes it difficult for closed plans to pass the Internal Revenue Code’s nondiscrimination/coverage testing requirements.

U.S. Supreme Court Clarifies the Scope of ERISA Fiduciary Obligations in Recent Stock Drop Decision February 2, 2016

In recent years, plaintiffs’ lawyers have brought numerous ERISA breach of fiduciary duty lawsuits against employers that offer employer stock funds in their 401(k) plans. These lawsuits are typically brought on behalf of plan participants who have lost money because the value of the company’s stock has dropped. For many years, plaintiffs faced uphill battles in these so-called “stock drop” suits as most federal appellate courts adopted a “presumption of prudence” that favored plan fiduciaries’ decisions with respect to the continued inclusion of company stock in 401(k) plans. In 2014, in Fifth Third Bancorp v. Dudenhoeffer, the U.S. Supreme Court weighed in on this issue and eliminated this presumption of prudence.

(VIDEOS) You need an employee benefits lawyer when...

Nexsen Pruet tax and benefits attorney Sue Odom produced two quick videos. The first is about when an employee benefits attorney might be needed and the second about Employee Stock Ownership Plans.

Supreme Court Rebukes Ninth Circuit’s Disregard of Prudence Precedent for Employee Stock Ownership Plans

Providing a specific, stringent pleading standard for claims alleging breach of the duty of prudence against fiduciaries who manage employee stock ownership plans (ESOPs), the U.S. Supreme Court again has reversed the Ninth Circuit Court of Appeals, in Amgen Inc. v. Harris, No. 15-278 (Jan. 25, 2016), because of its failure to apply the proper pleading standard for such claims.

IRS Issues Proposed Rules on Normal Retirement Age for Governmental Plans

The Internal Revenue Service (IRS) has issued proposed regulations relating to the definition of normal retirement age for governmental retirement plans. In 2007, the IRS issued regulations regarding normal retirement age for all qualified retirement plans. The 2007 regulations generally mandated that pension plans define normal retirement age as no younger than the earliest age that is reasonably representative of the typical retirement age for the industry in which participants are employed. The 2007 regulations further provided that a normal retirement age of age 62 or later is automatically deemed to satisfy the “reasonably representative” requirement. Through a series of notices, the IRS delayed the application of the 2007 regulations to governmental plans because of special concerns that applied to governmental plans. The IRS then announced in 2012 that it intended to modify the regulations as they applied to governmental plans. In the newly-issued proposed regulations, the IRS announces modifications to the 2007 normal retirement age regulations for purposes of their application to governmental plans.

Navigating the Rollover as Business Start-ups (ROBS) Strategy

A former executive starts a new chapter in her life and wants to buy a franchise operation and work there. A long-time consultant tires of working for others and wants to start and manage a new stand-alone business for himself. Where can they access money to fund these new operations? From their credit cards? Off their home equity lines? From a new kick-start campaign online?

DOL Announces Expansion of Defined Benefit Pension Plan Audit Program

The U.S. Department of Labor (DOL) recently announced that it is expanding an audit program directed at large defined benefit pension plans. The program, which originated in the DOL’s Philadelphia region and is expanding, is looking at pension plans that the DOL suspects have failed to attempt to locate terminated vested participants who have reached their required beginning dates (which is generally April 1 following the date a participant reaches age 70 ½), and are entitled to receive required distributions.

SUPREME COURT REBUKES NINTH CIRCUIT’S DISREGARD OF PRUDENCE PRECEDENT FOR EMPLOYEE STOCK OWNERSHIP PLANS

For the second time in Amgen Inc. v. Harris, the Supreme Court reversed the Ninth Circuit because of its failure to apply the proper pleading standard for claims alleging breach of the duty of prudence against fiduciaries who manage employee stock ownership plans (ESOPs). The Supreme Court’s opinion sets forth a specific, stringent pleading standard for such claims – though questions remain as to how strictly lower courts will interpret that standard. The opinion also shows that it will be strategically advantageous for defendants to attack claims against ESOP fiduciaries at the pleading stage.

IRS Notice 2016-03 Modifies the IRS Determination Letter Program

The IRS recently issued Notice 2016-03 (the “Notice”), addressing several items with respect to changes made to the IRS’s determination letter program. The Notice also extends the deadline for sponsors to adopt a pre-approved defined contribution plan in certain instances.

Jackson Lewis P.C. | Massachusetts | Massachusetts Law To Prohibit Inquiries Regarding Prior Salary at Interview (February 01, 2016)

Jackson Lewis P.C. | California | California Court of Appeal Holds Employee’s Agreement to Reimburse Training Costs in Event of Resignation Does Not Offend Public Policy (February 02, 2016)

Littler Mendelson, P.C. | New York | Don't Get Lost in the Weeds: Medical Marijuana is Now Legal in New York (February 01, 2016)

Ogletree Deakins | Massachusetts | Can a Massachusetts Religious School Refuse to Employ a Worker in a Same Sex Marriage (February 01, 2016)

Franczek Radelet P.C | Illinois | Definition of “Deliberate and Willful” Misconduct Under the Illinois Unemployment Insurance Act Revised and Expanded (February 04, 2016)

Littler Mendelson, P.C. | New York | New York City Expands Human Rights Law to Prohibit Employment Discrimination Against Caregivers (February 01, 2016)

FordHarrison LLP | New York | HOME CARE PROFESSIONALS SERIES Part 1 – NYS Domestic Workers' Bill of Rights (February 02, 2016)

Franczek Radelet P.C | Illinois | Illinois Supreme Court Rules Educational Employers Are Not Required to Arbitrate “Do Not Hire” Designation (February 01, 2016)

Jackson Lewis P.C. | California | What California Retail Employers Need to Know About Accommodating Pregnancy (January 29, 2016)

Schulte Roth & Zabel LLP | New York | New York City Commission on Human Rights Issues Enforcement Guidance on Fair Chance Act and Clarifies Credit Check Law Exemption (February 04, 2016)