IRS Issues Same-Sex Guidance: Many Qualified Plans Must Amend By Year-End

Filed under: 401(k) Plans, 403(b) Plans, Pension Plans, Qualified Retirement Plans

The IRS has issued additional guidance regarding how the Supreme Court’s 2013 decision in Windsor v. United States (regarding same-sex marriage) applies to qualified plans and Section 403(b) arrangements. Notice 2014-19 provides that plans must operationally comply with the Windsor decision as of June 26, 2013, although certain same-sex marriages are not required to be recognized until September 16, 2013. Plans with language that is inconsistent with the Windsor decision must generally be amended by December 31, 2014 (although certain plans may have additional time to amend). The related FAQs provide that Section 403(b) plans are also subject to the same operational effective dates, but are not required to be amended at this time. Plan sponsors should consult with counsel to determine whether their qualified plans must be amended to comply with Windsor and to discuss correction of any operational failures that may have occurred since June 26, 2013.

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Final Regulations Streamline ACA Reporting Rules

Filed under: Health Care Reform, Health Plans, Reporting and Disclosure

Final regulations under the Affordable Care Act’s information reporting provisions streamline and simplify the compliance burdens imposed on employers. Some of these requirements apply to employers of any size, while other requirements apply only to large employers (i.e., those with 50 or more full-time employees, including full-time equivalents). These information reporting provisions are effective for calendar year 2015, with the first returns and employee statements due in early 2016.

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“Play-or-Pay” Road Map Updated to Reflect 2015 Transition Rules

Filed under: Health Care Reform, Health Plans

As reported in our February 19, 2014, article, final regulations under the Affordable Care Act’s employer “play-or-pay” mandate include a number of special provisions that will apply only for 2015. We have now updated our Play-or-Pay Road Map to reflect many of those transition rules. For help in deciphering this Road Map, please contact any member of Spencer Fane’s Employee Benefits Group

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Wait a Minute (or 90 Days): Final and Proposed ACA Waiting Period Rules Issued

Filed under: Health Care Reform, Health Plans

The three agencies charged with implementing the ACA’s 90-day cap on eligibility waiting periods have simultaneously issued final and new proposed regulations on that topic.  All plans – both grandfathered and non-grandfathered – are already subject to the 90-day cap on waiting periods as of the 2014 plan year.  However, the recently finalized regulations confirm earlier guidance regarding waiting periods, and also answer a number of questions that had remained unresolved until now. 

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IRS Guidance Answers Key Questions About In-Plan Roth Conversions

Filed under: 401(k) Plans, 403(b) Plans, Qualified Retirement Plans

The IRS has resolved key questions about in-plan Roth conversions.  Notice 2013-74 addresses both old concerns (raised when Congress first authorized in-plan Roth conversions in 2010) and new ones (raised when Congress expanded the scope of Roth conversions in 2013).  With the added certainty this guidance offers to employers, administrators, and recordkeepers, plan sponsors who decided against adding an in-plan conversion feature may wish to reconsider.  Sponsors who already offer in-plan conversions may now wish to take advantage of the new options.

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Final Play-Or-Pay Regulations Include Significant Transition Rules

Filed under: Health Care Reform, Health Plans

The recent finalized regulations under the Affordable Care Act’s employer “play-or-pay” provision give larger employers (those with 50 or more full-time employees) a reason to turn their attention back to compliance with these rules.  These regulations answer a number of questions that had been left unresolved by the regulations proposed in December of 2012.

Employers with 50 to 99 full-time employees may be pleasantly surprised to learn of a transition rule that may allow them yet another year (until 2016) to come into compliance.  But even employers with 100 or more employees may take advantage of transition rules making compliance easier – or penalties for noncompliance smaller – during 2015.

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IRS Now Accepting “Cycle D” Determination Letter Applications

Filed under: 401(k) Plans, Determination Letters, Pension Plans, Qualified Retirement Plans

The IRS is now accepting applications for updated determination letters on behalf of individually designed retirement plans falling within “Cycle D” of the determination letter program.  These include plans sponsored by employers having either a “4” or “9” as the last digit of their employer identification number, as well as all multiemployer plans.

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Davidson v. Henkel: A Painful Reminder of the Special Rules for FICA Taxation of Nonqualified Deferred Compensation

Filed under: ERISA Litigation, Nonqualified Plans, Deferred Compensation, Executive Compensation, Plan Administration

Although the compensation that an employer pays to an employee is generally subject to FICA taxation at the time the compensation is paid, there are special rules for the FICA tax treatment of amounts payable under nonqualified deferred compensation plans (such as long-term incentive plans or supplemental retirement programs). These rules affect both the timing, and the amount, of the FICA tax that is payable with respect to such compensation (which tax is typically shared 50/50 by the employer and employee). In the recent case of Davidson v. Henkel, an employer that failed to heed those special rules found itself facing the prospect of bearing substantial additional tax liability – for both the employer’s and the employee’s share of the FICA tax. This case serves as a reminder that employers should pay special attention to when amounts deferred under a nonqualified plan are properly taken into account as “wages” for purposes of FICA taxes.

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IRS Grants Temporary Nondiscrimination Relief to Closed DB Plans

Filed under: Discrimination, Pension Plans, Qualified Retirement Plans, Plan Administration

In Notice 2014-5, the IRS has granted temporary relief to sponsors of “closed” defined benefit plans. This will allow such a plan (which has been “soft frozen” to new entrants) to be aggregated with a defined contribution plan sponsored by the same employer when testing the plans for compliance with the Tax Code’s minimum coverage and nondiscrimination requirements.  This relief only modestly expands the circumstances under which such aggregation is already allowed, and it applies only for plan years beginning before January 1, 2016.

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IRS Loosens Health FSA Carryover Rules

Filed under: Fringe Benefits, Health Plans, Cafeteria Plans

Thanks to recent IRS guidance, sponsors of health FSAs may now allow employees to carry over up to $500 of their account balance from one plan year to the next. Notice 2013-71 creates a new exception to the “use-it-or-lose-it rule” that has long discouraged employees from contributing to a health flexible spending account (“health FSA”). This new carryover option is immediately available, but FSA sponsors who wish to implement this option in either 2013 or 2014 will need to act quickly.

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Employee Benefits Group

Spencer Fane’s Employee Benefits Group has earned a national reputation developing innovative benefits solutions to meet client needs. From left to right: Melissa Hinkle, Rob Browning, Chadron Patton, Ken Mason, Larry Jenab, Julia Vander Weele and Greg Ash.

Benefits in Brief Volume 2012 Issue IV


Benefits in Brief Volume 2012 Issue III


Benefits in Brief Volume 2012 Issue II


Benefits in Brief Volume 2012 Issue I