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Court Upholds Revocation of Frozen Profit Sharing Plan’s Tax Exempt Status for Failure to Amend

On March 15, 2011, the U.S. Tax Court upheld a frozen profit-sharing plan’s loss of tax exempt status as a qualified plan because the plan sponsor failed to amend the plan as required for several tax law changes. Despite arguments that the plan had been terminated and therefore did not need to be amended for such changes, the court held that (i) the discontinuance of contributions and barring of new participants was not sufficient to demonstrate that the plan had been terminated; and (ii) without a formal termination of the plan, the plan’s trust was not a “wasting trust” (a trust remaining for the purpose of distributing plan assets) and must comply with statutory requirements for continued favorable tax treatment. The case is a reminder that until there is a formal termination of the qualified plan and liquidation of the trust funding the plan, required amendments still must be made.… Continue Reading

FDIC Proposes Rule for Compensation Clawback from Officials Responsible for Financial Institution Failure

The FDIC has proposed a rule implementing its authority under the Dodd-Frank Act to serve as a receiver for a financial company whose failure would pose a significant risk to the financial stability of the U.S. The proposed rule, in part, identifies the circumstances in which the FDIC as receiver will seek to recoup compensation from senior executives and directors who are “substantially responsible” for the failed condition of a covered financial company. In determining whether to recoup, the FDIC will consider whether (1) the senior executive or director performed his or her responsibilities with the requisite degree of skill and care for his or her position and (2) as a result of his or her performance the senior executive or director individually or collectively caused a loss that materially contributed to the failure of the covered financial company. The FDIC will presume “substantial responsibility” if the senior executive or… Continue Reading

Compliance with Certain Claims and External Review Requirements Delayed

The Departments of Labor, Health and Human Services, and Treasury have extended the deadline for non-grandfathered health plans to comply with certain requirements of health reform?ÇÖs claims and external review provisions. Specifically, compliance with the following requirements has been extended until the first day of the plan year beginning on or after January 1, 2012 (i.e. January 1, 2012 for calendar year plans): Notification of determinations of urgent care claims must be provided within 24 hours;?á Notices of benefit determinations must be culturally and linguistically appropriate; and Notices of benefit determinations must include the specific diagnostic code and treatment code and the meaning of the codes. Further, the effective date of the provision allowing a participant to immediately bring a lawsuit or request external review if the plan does not strictly adhere to the requirements of the claims procedures has also been delayed until the first day of the plan… Continue Reading

March 2011