The IRS and Treasury recently issued proposed regulations under Internal Revenue Code Section 162(m) to reflect changes enacted by the Tax Cuts and Jobs Act (“TCJA”) to the tax deductibility of compensation paid by publicly held corporations to certain executive officers. Code Section 162(m) disallows the deduction by any publicly held corporation for compensation paid in any taxable year to a covered employee that exceeds $1 million. The proposed regulations implement the changes from the TCJA by (i) updating the definitions of covered employee, publicly held corporation, and applicable employee compensation; (ii) implementing the elimination of the performance-based compensation exception; and (iii) clarifying the application of the “grandfather” rule for outstanding compensatory arrangements that were in effect on November 2, 2017 and not modified on or after that date. The proposed regulations also provide guidance on (a) the elimination of the transition period following a corporation’s IPO, (b) the impact… Continue Reading
The HHS Office for Civil Rights (“OCR”), which is the agency responsible for enforcement of the HIPAA privacy, security, and breach notification rules (“HIPAA Rules”), announced a recent $2.175 million settlement with a covered entity under HIPAA (the “Covered Entity”) for the Covered Entity’s failure to properly notify HHS of a breach of unsecured protected health information (“PHI”) as required by the HIPAA Rules, and other potential violations. Background OCR had investigated the Covered Entity in response to an individual complaint it received that alleged the Covered Entity had sent correspondence to the individual containing another person’s PHI. OCR’s investigation determined that the Covered Entity had mailed correspondence containing the PHI of 577 individuals to the wrong addresses. In some of the correspondence, the PHI consisted of the names and account numbers of the individuals and their dates of medical service. The Covered Entity had reported this incident to HHS… Continue Reading
In Notice 2019-64, the IRS published the Required Amendments List for 2019, which lists statutory and administrative changes in plan qualification requirements that (i) are first effective in the plan year in which the list is published and (ii) may require a plan amendment. This year’s list contains two items related to the final regulations for (x) hardship distributions, which implement legislative changes enacted in the Bipartisan Budget Act of 2018, and (y) certain collectively bargained cash balance/hybrid defined benefit plans maintained pursuant to one or more collective bargaining agreements ratified on or before November 13, 2015. The deadline for adopting any required amendments described in this year’s list is December 31, 2021. In addition, any required amendments that were listed in the 2017 Required Amendments List must be adopted (if applicable to an employer’s plan) by December 31, 2019. The 2017 list included three items that relate to (i)… Continue Reading
In Notice 2019-63, the IRS extended the due date, from January 31, 2020 to March 2, 2020, for furnishing to individuals the 2019 Form 1095-B and Form 1095-C. This notice does not, however, extend the due date to file Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS, which are due by February 28, 2020 (paper filing) or March 31, 2020 (filing electronically), although certain other extensions may be available. This notice also extends the IRS’s good faith transition relief from penalties that could apply for incorrect or incomplete information reported on such forms furnished to individuals or filed with the IRS. This relief does not apply if the forms were not filed or furnished by the applicable due date. Notice 2019-63 is available here.
First Circuit Reverses Lower Court Ruling that Private Equity Funds are Liable for a Portfolio Company’s Pension Liability
On November 22, 2019, the U.S. First Circuit Court of Appeals reversed a district court’s finding that Sun Capital Partners III and Sun Capital Partners IV (collectively, the “Funds”) formed a “partnership-in-fact” in connection with the Funds’ investment in a bankrupt portfolio company (Scott Brass) that incurred pension plan withdrawal liability. Our prior review of the district court’s ruling is available on our blog here. ERISA imposes joint and several liability on each member of a controlled group for certain liabilities, including pension plan withdrawal liabilities. A “controlled group” includes trades or businesses that are under common control, which typically means 80% common ownership. Notwithstanding the fact that Sun Capital Partners III and Sun Capital Partners IV owned 30% and 70% of Scott Brass, respectively, the district court previously determined that by the Funds’ co-investment in the portfolio company, the two formed a “partnership-in-fact” that owned 100% of Scott Brass… Continue Reading
In Notice 2019-60, the IRS granted additional nondiscrimination relief for certain “closed” defined benefit plans (i.e., plans frozen as to new participants before December 13, 2013, but that provide ongoing benefit accruals for existing participants). This relief is in addition to the relief originally provided in Notice 2014-5, which permits employers who sponsor both a “closed” defined benefit plan and a defined contribution plan to demonstrate that the aggregated plans comply with the nondiscrimination requirements of Code Section 401(a)(4) on the basis of equivalent benefits, even if the aggregated plans do not satisfy the current conditions for testing on that basis. The new nondiscrimination relief provides that these closed defined benefit plans will also be deemed to satisfy the nondiscrimination requirements that relate to plan benefits, rights, and features (such as optional forms of benefits and certain ancillary benefits) that were provided under the plan at the time it was… Continue Reading
The U.S. Departments of the Treasury, Labor, and Health and Human Services (the “Departments”) recently issued proposed rules requiring fully-insured and self-funded employer-sponsored group health plans and health insurance issuers to provide participants with an Internet-based tool that shows estimated cost-sharing information for specific covered services and providers (based on network rates and allowable amounts for out-of-network providers) prior to receiving services, similar to the information currently provided to participants via an Explanation of Benefits (or EOB) after services are rendered. The participant would also be able to request a hard copy of this information. In addition, the proposed rules would require the group health plan to publish its network negotiated rates and historical allowed amounts for out-of-network providers. Grandfathered plans and excepted benefits would not be subject to the proposed rules. The proposed rules have a 60-day comment period, and the Departments have proposed that the rules would be… Continue Reading
HHS recently issued a final rule (the “HHS Rule”) that sets out the inflation-adjusted civil monetary penalty (“CMP”) amounts that HHS is authorized to assess or enforce, including for violations of the HIPAA privacy and security rules. The adjusted CMP amounts are applicable to HIPAA violations by a HIPAA covered entity or business associate that occur after November 2, 2015, for which a CMP is assessed on or after November 5, 2019 The HHS Rule is available here.
In Revenue Procedure 2013-22, as modified by Revenue Procedure 2017-18, the IRS previously established an initial remedial amendment period for correcting form defects in a 403(b) plan that ends on March 31, 2020. In Revenue Procedure 2019-39, the IRS has now established a system of ongoing remedial amendment periods for correcting form defects in 403(b) plans that occur after March 31, 2020, as well as extending the deadline for certain defects that occur before March 31, 2020. In addition, to assist plan sponsors, the IRS will begin including changes to 403(b) plan requirements on its Required Amendments List and Operational Compliance List. The IRS also introduced a cycle program for pre-approved plans during which Section 403(b) prototype plans and volume submitter plans can request to receive a pre-approved plan letter from the IRS. Under this new guidance, the remedial amendment period for non-governmental Section 403(b) individually-designed plans will end on… Continue Reading
The IRS recently announced the inflation-adjusted limits for 2020 for tax qualified retirement plans. Below is a list of some of the key annual limits that will apply in 2020: • Compensation limit used in calculating a participant’s benefit accruals: increased to $285,000. • Elective deferrals to 401(k) and 403(b) plans: increased to $19,500. • Annual additions to a defined contribution plan: increased to $57,000. • Catch-up contributions for employees aged 50 and over to 401(k) and 403(b) plans: increased to $6,500. • Annual benefit limit for a defined benefit plan: increased to $230,000. • Compensation dollar limit for defining a “key employee” in a top heavy plan: increased to $185,000. • Compensation dollar limit for defining a “highly compensated employee”: increased to $130,000. The complete list of 2020 plan limits is available in Notice 2019-59 here.