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IRS Opens Determination Letter Program to Merged Plans and Hybrid Plans

In Revenue Procedure 2019-20, the IRS extended the determination letter program, effective as of September 1, 2019, to include merged plans resulting from a corporate merger or similar transaction. For a merged plan to be eligible for a favorable determination letter, (i) the date of the plan merger must occur no later than the last day of the first plan year beginning after the plan year that includes the closing date of the corporate transaction, and (ii) the determination letter application must be submitted between the date of the plan merger and the last day of the first plan year beginning after the date of the plan merger. In addition, the IRS will accept determination letter applications for individually designed statutory hybrid plans during a 12-month window beginning on September 1, 2019. As always, the IRS will continue to process determination letter applications for initial plan qualification and for qualification… Continue Reading

IRS Expands Self-Correction Program Under EPCRS

The IRS recently published Rev. Proc. 2019-19, which sets forth the most current consolidated statement of the correction programs under the IRS’s Employee Plans Compliance Resolution System (“EPCRS”). Pursuant to the new guidance, which became effective April 19, 2019, eligible plan sponsors may use the self-correction program (“SCP”) component of EPCRS to correct certain failures that were previously only correctable under the voluntary correction program (“VCP”) or Audit CAP components of EPCRS. Unlike VCP and Audit CAP, SCP does not require any filings or payments to the IRS. The amended SCP now includes procedures for correcting certain plan document failures and for correcting certain participant loan failures (including defaulted plan loans). Rev. Proc. 2019-19 also expands the circumstances under which certain operational failures may be corrected by plan amendment under SCP. View Rev. Proc. 2019-19. View a summary of the key changes to the SCP component of EPCRS.

Patent Eligibility Used as the Federal Circuit’s Shuttlecock in Weekly Badminton Match

In the months following the release by the USPTO of The 2019 Revised Patent Subject Matter Eligibility Guidance (“2019 Revised Guidance”), anecdotal evidence shows a noticeable uptick in the number of patent ineligibility rejections that have been withdrawn by Examiners at the USPTO, which is promising for applicants and inventors filing patents in technology areas that have been gridlocked since the Supreme Court decision in  Alice Corp. v. CLS Bank International, 573 U.S. 208, 134 S. Ct. 2347 (2014).  While the trend at the USPTO appears to be improving in favor of applicants, a division continues to exist in the Court of Appeals for the Federal Circuit (“CAFC”).  Recently, two different panels of the CAFC made apparently contradictory decisions on patent eligibility within a week of each other that.  Sample claims from each case are reproduced below: Case #1: 1.  A computer-automated method of hierarchical event monitoring and analysis within… Continue Reading

Court Vacates Key Provisions of the DOL’s Association Health Plan Regulations

In its recent decision in State of New York v. U.S. Department of Labor, the federal district court for the District of Columbia vacated key provisions of the final regulations issued in 2018 by the DOL under ERISA regarding the establishment of “association health plans” (the “Final Regulations”). The Final Regulations broadened the criteria under ERISA for determining when a group of employers may join together as a “single employer” to sponsor a single group health plan in the form of an association health plan (“AHP”). The Final Regulations were applicable to fully-insured AHPs as of September 1, 2018, to existing self-funded AHPs as of January 1, 2019, and to newly created self-funded AHPs as of April 1, 2019. See our prior blog post for additional information regarding the Final Regulations. In response to the Final Regulations, 11 states and the District of Columbia sued the DOL alleging that (i) key… Continue Reading

IRS Publishes Updated Operational Compliance Checklist

The IRS recently published an updated Operational Compliance Checklist (the “Checklist”), which lists changes in qualification requirements that became effective during the 2016 through 2019 calendar years. Examples of items added to the Checklist for 2019 include, among other things: Changes to the hardship distribution rules enacted by the Bipartisan Budget Act of 2018, such as eliminating the requirement to first take out all available plan loans and expanding the types of contributions eligible for distribution Proposed regulations enacting certain other changes to the hardship distribution rules, such as eliminating the six-month contribution suspension requirement and expanding the safe harbor list of expenses deemed to constitute an immediate and heavy financial need The extension of temporary nondiscrimination relief for closed defined benefit plans The Checklist is only available online and is updated periodically to reflect new legislation and IRS guidance. The Checklist does not, however, include routine, periodic changes, such… Continue Reading

Reminders About Required Minimum Distributions

Under Section 401(a)(9)(A) of the Internal Revenue Code, qualified employer-sponsored retirement plans must commence payment of required minimum distributions to a participant by no later than the participant’s “required beginning date” (“RBD”). A participant’s RBD is defined as April 1 of the calendar year following the later of (i) the calendar year in which the participant attains age 70.5 or (ii) the calendar year in which the participant retires from the employer-plan sponsor. However, the “still-working” exception in the second clause of the previous sentence does not apply to a “five-percent owner” of the employer. Additionally, special rules apply for making required minimum distributions to beneficiaries of deceased participants. With April 1, 2019 around the corner, the following list contains a few reminders for employers regarding required minimum distributions: Once a participant has commenced required minimum distributions from the plan, the participant must continue to receive them even if the… Continue Reading

IRS Highlights Circumstances Permitting Recoupment of Erroneous HSA Contributions

Section 223 of the Internal Revenue Code provides that an individual’s interest in the balance of her health savings account (“HSA”) is not subject to forfeiture. Consequently, contributions made by an employer to an employee’s HSA may be recouped only in very limited circumstances. In IRS Notice 2008-59 (the “Notice”), the IRS described several specific circumstances in which an employer may recoup contributed amounts from the HSA trustee. However, in its recently released Information Letter 2018-0033 (the “Letter”), the IRS confirmed that the circumstances discussed in the Notice were not intended to be exclusive and clarified that if there is clear documentary evidence demonstrating an administrative or process error on the part of the employer or the HSA trustee (an “HSA Process Error”), an employer may request that the HSA trustee return the amounts to the employer, with any correction needed to put the parties in the same position they… Continue Reading

IRS Permits Lump Sum Window Programs for Retirees in Pay Status

Section 401(a)(9) of the Internal Revenue Code provides that, by the required beginning date, an employee’s accrued benefit in a tax-qualified retirement plan must either be paid in full or commence to be distributed as a nonincreasing annuity. The Treasury Regulations issued under Code Section 401(a)(9) contain an exception to the nonincreasing annuity requirement which permits increases due to a plan amendment that increases plan benefits. Some practitioners have interpreted the exception to permit sponsors to amend a plan to offer a lump sum window program to retirees already in pay status (i.e., the option for a retiree to convert the unpaid portion of her existing annuity into a one-time, lump-sum payment during a specified window period). In Notice 2015-49, the IRS announced its intent to amend the Treasury Regulations to expressly prohibit defined benefit plans from offering such lump sum window programs to retirees in pay status. In Notice… Continue Reading

Invention by Another – How the Prior Art Status of a Reference Can Be Affected by the Significance of a Joint Inventor’s Contribution to that Reference

At times, a patent owner’s previous patent can be used as a prior art reference against their later filed patents. A reference is prior art under pre-AIA 35 U.S.C. 102(e) if it was “described in … an application for patent … by another.” A patent is “by another” if it lists a different set of inventors than the patent at issue. In other words, if a patent owner’s previously filed patent lists one inventor that is not listed on their later filed patent, the previously filed patent is “by another” and may qualify as prior art for the later filed patent. This issue was explored further in Duncan Parking Technologies, Inc., v. IPS Group Inc., (Appeal No. 2018-1205, Fed. Cir. Jan. 31., 2019), where the Federal Circuit overturned the PTAB’s finding that portions of the anticipatory reference used in an Inter Partes Review (IPR) proceeding were not by another and… Continue Reading

Does Our Compensation Committee Still Need to Certify Performance Goals for Code Section 162(m)?

Under the Tax Cuts and Jobs Act of 2017 (the “Act”), Congress broadened the $1 million deduction limitation under Code Section 162(m) for a public company’s top executives by, among other things, broadening the scope of who are “covered employees” and by eliminating the performance-based compensation exception. Prior to the changes made by the Act, in order for compensation payable to a covered employee in excess of $1 million to be deductible under Code Section 162(m), the company’s compensation committee had to certify that the performance goals were met following the end of the performance period and before any payouts were made. Any misstep would disqualify the compensation awards. Beginning in 2018, there is no particular tax benefit for companies to follow the certification procedures, as any compensation over $1 million will not be deductible if paid to a covered employee. Notwithstanding the foregoing, the Act grandfathered some incentive compensation… Continue Reading

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