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PBGC Issues Proposed Rule Amending Waivers to Annual Financial and Actuarial Information Reporting

The PBGC issued a proposed rule that codifies existing PBGC guidance on when MAP-21 stabilized rates are and are not taken into account for purposes of PBGC’s regulation on Annual Financial and Actuarial Information Reporting. The proposed rule also limits the reporting waiver that is applicable if the aggregate underfunding of pension plans in a controlled group does not exceed $15 million to controlled groups with fewer than 500 participants. The proposed rule also waives reporting solely due to either a statutory lien resulting from missed contributions of more than $1 million or outstanding minimum funding waivers exceeding the same amount, provided the missed contributions or minimum funding waivers were reported to the PBGC under the PBGC’s reportable event regulations under ERISA Section 4043 by the applicable due date. The proposed rule can be found here.

DOL Clarifies Safe Harbor for Selection of Annuity Providers for Defined Contribution Plans

A regulation issued by the DOL in 2008 regarding the selection of annuity providers under defined contribution plans provided plan fiduciaries with safe harbor conditions for the selection and monitoring of annuity providers and annuity contracts for benefit distributions. The DOL recently issued Field Assistance Bulletin 2015-2 (the “FAB”) to help provide guidance and clarify the scope of fiduciary obligations with respect to annuity selections under such safe harbor. The FAB clarifies that the fiduciary’s selection and monitoring of an annuity provider is judged based on the information available at the time of selection and at each periodic review, and not in light of subsequent events. With respect to the periodic review, the FAB provides that the regularity of such review is based on the facts and circumstances and provides examples. The FAB also makes it clear that a fiduciary’s obligation to monitor an annuity provider ends when the fiduciary… Continue Reading

Anti-Assignment Provision Must Specifically Apply to Healthcare Service Providers

A surgery center in Houston sued a self-funded, employer-sponsored group health plan under an “Assignment of Benefits and Designation of Authorized Representative.” The U.S. District Court for the Southern District of Texas denied the plan’s motion to dismiss, stating that the plan’s anti-assignment clause did not prohibit assignments of benefits claims to healthcare service providers. These types of demands by out-of-network providers are increasingly common and becoming more burdensome than just a nuisance for employers that sponsor self-funded plans subject to ERISA. Such employers are encouraged to review their plans’ anti-assignment clauses to ensure they specifically apply to certain types of healthcare service providers. In this case, the court’s order did not discuss whether the parties had raised the issue concerning the right of the provider to continue litigation as the participant’s authorized representative, even if the anti-assignment clause was found to be applicable to such provider. The court order… Continue Reading

IRS Issues Proposed Regulations Targeting Management Fee Waivers by Private Equity Funds

The Internal Revenue Service (the “IRS”) recently released proposed regulations providing that certain arrangements in which a service provider receives allocations of a partnership’s underlying income may be treated as compensatory payments for services under the Internal Revenue Code (the “Code”).  In releasing such regulations, the IRS is attempting to crack down on certain “management fee waiver” practices by private equity firms which try to convert management fees into profits interests in order to get capital gains treatment on such income as opposed to ordinary income treatment.  The proposed regulations provide a facts and circumstances test and factors to evaluate whether an arrangement should be treated as a disguised payment for services.  An arrangement that is recharacterized as a disguised payment for services under the proposed regulations will be treated as such for all purposes of the Code.  Such payment will be subject to tax at ordinary income tax rates,… Continue Reading

HHS Settlement Reminds Covered Entities of Obligations and Potential Penalties under HIPAA

The U.S. Department of Health and Human Services (“HHS”) recently entered into a Resolution Agreement with St. Elizabeth’s Medical Center (“SEMC”) to settle charges that SEMC violated HIPAA by failing to implement sufficient security measures to safeguard protected health information (“PHI”) when using certain Internet-based document sharing applications. In addition, SEMC allegedly failed to timely respond to, and mitigate damages caused by, the breach of unsecured PHI on an employee’s personal laptop and thumb drive. As part of the settlement, SEMC agreed to pay HHS nearly $220,000 and to a corrective action plan under which SEMC must, among other things, review and revise its HIPAA policies, procedures, and training; retrain its workforce who have access to PHI; and submit to certain other reporting and record retention requirements. Employers that sponsor group health plans, in consultation with legal counsel, should undertake a review to ensure full compliance with HIPAA’s privacy and… Continue Reading

New Australian Employee Share Scheme Tax Rules Effective July 1, 2015

Several changes to the Australian employee share scheme tax rules became effective July 1, 2015. As enacted, the new rules reverse certain rule changes made in 2009 and provide for (i) deferring taxation of options until the time of exercise, rather than upon vesting; (ii) extending the maximum tax deferral period from seven years to 15 years from the acquisition date of a share right; and (iii) increasing the maximum share ownership limit used to determine eligibility for tax deferrals on share rights from five percent to 10 percent. In addition, the new rules provide certain tax concessions for employees of small start-up companies. Additional information on the new tax rules is available on the Australian Taxation Office’s website here.

IRS Proposes to Eliminate Lump Sum Cashout Windows for Defined Benefit Plan Retirees in Pay Status

In Notice 2015-49, the IRS announced that it proposes to amend the Treasury Regulations under Section 401(a)(9) of the Internal Revenue Code, effective as of July 9, 2015, to prohibit defined benefit plan sponsors from amending their plans to offer a lump sum cashout window to participants already in pay status. The announcement does not affect lump sum cashout windows for participants who are not already in pay status. Notice 2015-49 contains limited exceptions for cashout windows (i) that received a favorable private letter ruling before July 9, 2015; (ii) that were adopted or authorized by an entity with authority to amend the plan before July 9, 2015; (iii) that were adopted pursuant to a collective bargaining agreement in place before July 9, 2015; or (iv) for which participants received a written notice before July 9, 2015, communicating a definite intent to offer a cashout window. IRS Notice 2015-49 can… Continue Reading

Proposed Rules Requiring Companies to Adopt Clawback Policies on Incentive Compensation

As required by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission (the “SEC”) recently proposed rules directing national securities exchanges and associations to establish listing standards requiring companies to adopt clawback policies. Under the proposed rules, companies would be required to develop policies that, in the event of an accounting restatement, recoup from certain current and former executive officers incentive-based compensation they would not have received based on the restatement, regardless of fault (i.e., no misconduct required). Such clawbacks would apply to excess incentive-based compensation that is tied to accounting-related metrics, stock price, or total shareholder return (with such excess determined based on an estimate of the effects on stock price or shareholder return if correct financial statements had been issued) and would apply to excess compensation received within a three-year look-back period. Companies would have discretion, however, not to… Continue Reading

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