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Benefit News of Note For Human Resources and Finance Departments

It’s April.  For those of you in a planning mode, here’s what you may  want to think about...

Your Pension Plan and Retiree Medical Costs May Be Rising.  The culprit behind the cost increase, better than expected mortality improvement after the age of 55.   The Society of Actuaries exposure draft of a new mortality improvement scale, if adopted, is expected to  result in increases in traditional pension plan liabilities of 2% to 4% and in retiree health care liabilities of 6% to 9%.  The new mortality scale may be applied by the IRS as soon as 2014, and it is possible that auditors will push for its implementation even earlier.
 

401(k) Safe Harbor Plans IRS Compliance Check Employers with 401(k) plans that utilize safe harbor designs to pass nondiscrimination testing may soon be receiving a compliance check in the mail from the IRS.    The IRS will look to see whether the safe harbor requirements are being met, in addition to plan form qualification.   Accordingly, if you have never had your safe harbor notice reviewed by counsel, now is a great time to make sure it is compliant.  Also, note that if you  receive an IRS compliance check you should not just ignore it.  The IRS will refer for audit plans that do not respond to compliance checks.  Remember that plan errors can be corrected through the IRS voluntary correction program even after receipt of a compliance check, but the less expensive  voluntary correction programs are not available once the IRS commences a plan audit.
 

Identifying Executive Employment Contracts and Severance Arrangements with Release Language.   It is not unusual for employment agreements and severance arrangements to contain claims release language that the IRS believes violates Section 409A.   The IRS guidance on releases was issued after 2008, meaning this issue may not have been addressed through the Section 409A review process that companies completed in 2008.  The IRS has given employers an opportunity to correct deficiencies in release language without any penalties or reporting requirements, but to be entitled to relief, agreements must be amended no later than December 31, 2012.

Utilizing  a Private Health Insurance Exchange.  Some of the nation’s largest consulting firms (Aon Hewitt and Mercer), as well as other companies in the insurance business, are rolling out private health insurance exchanges for employers.  With a private health insurance exchange, a company provides its employees with a lump sum and then lets the employees choose from an array of insurance products that can be offered by more than one insurance company.  This type of arrangement may appeal to companies that wish to provide their employees with more flexibility to choose the type of coverage they wish while fixing the company’s share of the health insurance costs in a more predictable manner.  The exchanges are expected to result in cost savings and to better contain health insurance cost increases. 

© 2019 Poyner Spruill LLP. All rights reserved.

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About this Author

Nancy C. Brower, Employee benefits lawyer, ERISA Attorney, Poyner Spruill Law Firm
Partner

Nancy practices in the area of employee benefits and ERISA. She has significant experience designing and documenting retirement plans and executive compensation plans as well as providing administrative advice on these plans. Nancy has represented clients before the Internal Revenue Service and Department of Labor, and she has represented clients in matters involving employee benefit due diligence, negotiation and planning in the context of mergers and acquisitions.

Representative Experience...

704-342-5275
Kelsey H. Mayo, Employee Benefits Attorney, Poyner Spruill Law Firm
Associate

Kelsey's practice is focused in the areas of Employee Benefits and Executive Compensation.  She has extensive experience working with governmental, non-profit, and for-profit employers on all aspects of qualified and non-qualified plans, welfare benefit plans, fringe benefit plans, and executive compensation plans.  She routinely represents clients before the Internal Revenue Service and Department of Labor in matters involving employee benefits.

Representative Experience

  • Assisting employers establish and maintain defined benefit and defined contribution retirement plans in compliance with ERISA and the Internal Revenue Code.

  • Designing and redesigning retirement plans to take advantage of new rules and strategies, including safe harbor 401(k) plans, automatic contribution arrangement features, and cash balance plan conversions.

  • Providing guidance to plan fiduciaries regarding meeting fiduciary duties and responsibilities under retirement plans.

  • Counseling companies considering a retirement plan termination regarding compliance, required filings, and taxation issues.

  • Aiding employers in the design, modification, and termination of executive employment agreements and executive compensation arrangements.

  • Negotiating and reviewing executive compensation arrangements, including compliance with Internal Revenue Code Section 409A.

  • Advising employers on administration of benefit plans in accordance with applicable rules and regulations.

  • Working with employers to identify and correct plan errors through the DOL and IRS compliance programs.

  • Advising employers on welfare and fringe benefit plans, including HIPAA, COBRA, domestic partner, and non-discrimination issues. 

704-342-5307