U.S. Department of Labor Finalizes Regulations Authorizing States to Establish Retirement Savings Programs

Blog post by Lawrence I. Davidson

On August 25, 2016, the U.S. Department of Labor (DOL) released its Final Rule that will facilitate state legislatures in establishing employee retirement savings programs that are ERISA compliant.  Currently, roughly one-third of all workers do not have an opportunity to save for retirement through retirement savings accounts offered by their employers.  To date, eight states, including Illinois and California, have already passed legislation which creates retirement savings account programs for employees.  While the specific rules of these employee retirement savings programs vary for each state, all of them have the purpose of encouraging residents of their State to save for retirement.  Often this is accomplished through a state “auto-IRA” law which requires employers that do not offer workplace retirement savings programs to automatically enroll their employees in payroll deduction IRAs administered by the state.  Continue reading U.S. Department of Labor Finalizes Regulations Authorizing States to Establish Retirement Savings Programs

IRS Extends Governmental Plan Filing Deadline

The Internal Revenue Service (IRS) has released Rev. Proc. 2012-50, which will delay the IRS determination letter filing deadline for governmental plans to January 31, 2016.

As background, governmental plans are required to file for IRS determination letters in “Cycle C” of the IRS’s five-year-cycle determination letter program. The initial Cycle C ended on January 31, 2009, but the IRS effectively extended the filing deadline by allowing governmental plans to submit in “Cycle E,” which ended on January 31, 2011. The extension did not, however, change the requirement that governmental plans file in Cycle C. Therefore, even though many governmental plans filed only last year, absent an accommodation, those plans would be required to file again at the start of the next Cycle C, beginning on February 1, 2013.

Continue reading IRS Extends Governmental Plan Filing Deadline

IRS Publishes Additional Guidance for Employees Impacted by Hurricane Sandy

As a follow-up to our prior entry regarding Employee-Assistance Programs Available to Employers in the Wake of Hurricane Sandy, there have been two recent developments from the Internal Revenue Service of note:

(1) Notice 2012-69 addressed the treatment of certain amounts paid to Section 170(c) organizations under employer leave-based donation programs to aid victims of Hurricane Sandy. The IRS has stated that it will not assert that cash payments an employer makes to Section 170(c) organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are made to the Section 170(c) organizations for the relief of victims of Hurricane Sandy and are paid before January 1, 2014. Similarly, the Service will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages for employees. Employers who have adopted leave-sharing plans (or are considering their adoption) should take note of this development.

Continue reading IRS Publishes Additional Guidance for Employees Impacted by Hurricane Sandy

Employee-Assistance Programs Available to Employers in the Wake of Hurricane Sandy

In coping with the aftermath of Hurricane Sandy, which affected millions of individuals across the eastern United States, there are a number of potential programs that employers can implement in order to assist employees. We examine two such programs – the establishment of a major disaster leave sharing plan and tax-free qualified disaster relief payments – in our Client Alert, entitled Employee-Assistance Programs Available to Employers in the Wake of Hurricane Sandy.

“What Are Other Funds Doing About. . .”

“What Are Other Funds Doing?”

I often hear this question at trustee board meetings. More often than not, it arises from a decision on funding or investment policy. When asked, it is expected that “the professionals” (i.e. attorney, actuary or consultant) will pull from a trove of information and divine “the answer.” The fact is, funding policy (dictated by the fund’s sponsor) and investment policy (as determined by the fund’s board) can be as varied as fingerprints.

Continue reading “What Are Other Funds Doing About. . .”

The Private Equity Conundrum

A recent article in the Wall Street Journal notes the apparent conflict of public pension fund investments in private equity. The article points to the fact that certain labor unions, including the Service Employees International Union (SEIU), have criticized private equity funds while their members sit on boards which authorize investments in such funds. A specific example citied is the Ohio Public Employees Retirement System, which includes a representative of SEIU among its Board members, having increased its targeted private equity holdings. The article goes on to point out TV spots funded by the American Federation of State, County and Municipal Employees (AFSCME) which criticize Republican presidential candidate Mitt Romney regarding his tenure at Bain Consulting.

Continue reading The Private Equity Conundrum

The Pension Disclosure Battleground

Public fund boards are increasingly under media pressure to disclose the identity and pension benefits of retirees. Historically, disclosure requests were confined to elected officials or other government employees with public profiles (e.g. university presidents, Division I-A football and basketball coaches.) Now, disclosure efforts are focused on “high end” pensioners – typically those with annual pensions above $100,000 per year – regardless of position or notoriety.

Continue reading The Pension Disclosure Battleground

IRS Proposes “Governmental Plan” Definition

For years, governmental entities have struggled with the criteria for identification of a “governmental plan” for purposes of the tax-qualification rules of the Internal Revenue Code (“IRC”). On November 8, 2011, the IRS issued an advance notice of proposed rulemaking (ANPRM) defining “governmental plan” under Section 414(d) of the IRC. The ANPRM sets forth an extensive discussion of the IRS’s view on the characteristics of a governmental plan. It can be anticipated that through the initial comment period — ending on February 6, 2012 — and as proposed regulations work their way into final regulations, input from governmental sponsors and advisors may significantly impact the criteria for determining governmental plan status.

Link to full text of Duane Morris Alert:

http://www.duanemorris.com/alerts/IRS_advanced_notice_of_rulemaking_for_governmental_plans_4303.html.

Link to full text of ANPRM:

http://www.gpo.gov/fdsys/pkg/FR-2011-11-08/pdf/2011-28853.pdf

IRS Announces Pension Plan Limitations for 2012

On October 20, 2011, the Internal Revenue Service published news release IR-2011-103, which details the cost-of-living adjustments for dollar limitations for pension plans and other retirement-related benefits for the 2012 tax year.

Of particular note for plan sponsors is the fact that the elective deferral limit has been increased from $16,500 to $17,000 and the annual limitation for contributions to defined contribution plans increased from $49,000 to $50,000. In addition, the annual compensation limit increased from $245,000 to $250,000. This is the first increase in those areas since the current limits went into effect for 2009.

Continue reading IRS Announces Pension Plan Limitations for 2012