The last few years have seen dozens of lawsuits filed alleging failures associated with COBRA election notices. Generally, these complaints allege that (i) any deviations from the DOL model COBRA election notice (a) were done to save money for the employer and deter employees from electing coverage, and (b) resulted in a notice that would not be understood by the average participant, and (ii) the election notices did not include the required content prescribed by applicable COBRA regulations. Recent cases highlight another area of potential litigation–whether proper mailing procedures for the election notices have been followed and can be proven by the employer. In one such case, a former employee was provided a COBRA election notice for medical coverage that was sent to her former mailing address because an updated address had not been provided to the employer’s third-party COBRA administrator. The court noted that the employer’s delegation of COBRA… Continue Reading
The SEC adopted final rules on October 26, 2022, implementing a provision of the Dodd-Frank Act that will require publicly listed companies to establish clawback policies of incentive-based compensation received by current or former executive officers if that compensation is based on erroneously reported financial information (the “Final Rules”). The Final Rules apply to all listed issuers, including smaller reporting companies, foreign private issuers, and emerging growth companies. The clawback policy must apply to any incentive-based compensation that is granted, earned, or vested based wholly or in part upon the attainment of any financial reporting measure. Under the Final Rules, an issuer would be subject to delisting if it does not adopt a written compensation recovery policy and comply with such policy. This policy is triggered in the event the issuer is required to prepare an accounting restatement that corrects an error in a previously issued financial statement that is… Continue Reading
The IRS recently announced cost-of-living adjustments for 2023. Below is a list of some of the key annual limits that will apply to qualified retirement plans in 2023: Compensation limit used in calculating a participant’s benefit accruals: increased to $330,000. Elective deferrals to Code Section 401(k) and 403(b) plans: increased to $22,500. Annual additions to a defined contribution plan: increased to $66,000. Catch-up contributions for employees aged 50 and over to Code Section 401(k) and 403(b) plans: increased to $7,500. Annual benefit limit for a defined benefit plan: increased to $265,000. Compensation dollar limit for defining a “key employee” in a top heavy plan: increased to $215,000. Compensation dollar limit for defining a “highly compensated employee:” increased to $150,000. The full list of 2023 plan limits included in Notice 2022-55 is available here.
Employers generally understand that “employee benefit plans” should only be provided to “employees” and that “independent contractors” should be excluded from benefit plan participation. While this concept is simple in principle, it is not as simple in application, since the determination of whether an individual is an independent contractor or an employee is not based on a bright-line test; rather, it is based on a facts and circumstances analysis. With the increase in the “gig” economy, the continued use of temporary or leased employees, and the periodic need to have an employee provide transition services on a limited basis following a termination of employment, minds can easily differ on an individual’s proper classification. To further complicate the matter, there are two different sets of rules that govern the determination of whether an individual is an independent contractor or an employee. As we noted in our Labor and Employment Group’s alert… Continue Reading
The IRS recently announced the following inflation-adjusted limits for 2023 for certain health and welfare plans: Health flexible spending account limit: increased to $3,050. Qualified transportation fringe benefit monthly limits for parking and transit: each increased to $300. Adoption assistance program limit: increased to $15,950. Qualified Small Employer Health Reimbursement Arrangement limit: increased to $5,850 for individual coverage and $11,800 for family coverage. The above and other 2023 plan limits are available in Rev. Proc. 2022-38 here.
In its recent Notice 2022-41 (the “Notice”), the IRS has provided for a new, optional election change event, which may be adopted by Code Section 125 cafeteria plans that operate on a non-calendar year plan year. The Notice was issued in conjunction with final regulations recently promulgated by the Treasury Department under Code Section 36B (“Final Regulations”). Final Regulations Pursuant to Code Section 36B, which was originally enacted under the Affordable Care Act, applicable taxpayers who enroll in a qualified health plan through a Health Insurance Exchange (“Exchange Plan”) and are not otherwise eligible for coverage under an employer-sponsored group health plan (“ER Plan”) that provides “minimum value” and is “affordable” are generally entitled to a premium tax credit (“PTC”). Under the prior regulations regarding the PTC, the “affordability” of coverage under the ER Plan for an employee, as well as for each of the employee’s family members, was based… Continue Reading
The IRS released Announcement 2022-161 on September 20, 2022 (available here), providing relief to victims of Hurricane Fiona in any area designated by FEMA. Those individuals and businesses that reside in the Commonwealth of Puerto Rico qualify for tax relief, postponing various tax filing and payment deadlines that occurred starting on September 17, 2022. Those individuals and businesses will now have until February 15, 2023 to file various federal individual and business tax returns and make tax payments that were originally due during that period. The February 15, 2023 extended deadline also applies to quarterly estimated income tax payments otherwise due on January 17, 2023 and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Additionally, the Puerto Rico Treasury Department issued Internal Revenue Circular No. 22-13 (available here) allowing for special disaster distributions from Puerto Rico qualified plans and Puerto Rico… Continue Reading
IRS Extends Deadline for Amending Eligible Retirement Plans Under the CARES Act and Taxpayer Certainty and Disaster Relief Act
As we previously reported here, in August 2022, the IRS issued Notice 2022-33 (available here), which provided for an extension to the deadline for amendments for certain provisions of the CARES Act; however, that extension did not apply to coronavirus-related distributions and loan relief. The IRS recently issued Notice 2022-45 (available here) providing for an extension to the deadline to amend an eligible retirement plan to reflect the coronavirus-related distributions and loan relief provisions of Section 2202 of the CARES Act and Section 302 of Title III of the Taxpayer Certainty and Disaster Relief Act of 2020 (the “Relief Act”). Pursuant to Notice 2022-45, non-governmental qualified retirement plans and Section 403(b) plans will now have until December 31, 2025 to be amended to reflect the provisions of Section 2202 of the CARES Act and Section 302 of Title III of the Relief Act. Despite the fact that the amendment deadline… Continue Reading
The electronic National Medical Support Notice (“e-NMSN”) process is a free, voluntary electronic exchange of National Medical Support Notices (“NMSNs”) between state child support agencies and employers, third-party providers, plan administrators, and unions. The HHS Office of Child Support Enforcement (“OCSE”) has issued FAQs about e-NMSN, which went live in February 2022, that highlight its potential benefits and how it operates. The FAQs state that OCSE places NMSN files from child support agencies on the employer’s designated secure server. After the employer completes the NMSN forms, OCSE picks up the NMSN files from the employer’s server and transmits them to the child support agency’s secure server. Along with the benefits associated with being able to administer NMSNs virtually, the FAQs state e-NMSN allows child support agencies to notify employers that health coverage is no longer ordered or is no longer enforced by the child support agency. An employer or plan administrator can register to use… Continue Reading
The IRS recently issued Notice 2022-33 (the “Notice”) providing extensions to the amendment deadlines for certain provisions of the SECURE Act, the CARES Act, and the Bipartisan American Miners Act of 2019 (the “Miners Act”). Pursuant to the Notice, non-governmental qualified plans and 403(b) plans now have until December 31, 2025, to be amended for: The SECURE Act; The waiver of 2020 required minimum distributions under the CARES Act; and The Miners Act (which allowed pension plans to permit in-service distributions at age 59½). Notably, the extensions under the Notice do not apply to other provisions of the CARES Act, including coronavirus-related distributions and loan relief. Accordingly, pending further guidance, amendments for all other CARES Act provisions remain due by the end of first plan year beginning on or after January 1, 2022. In all cases, plans must be operated as if the amendment applied as of its original effective… Continue Reading