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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

Broadening Statements Can Save You During Claim Construction

Many experienced practitioners have come to realize that a fair amount of wordsmithing is required to ensure that an invention is not unduly limited.  The Federal Circuit has consistently taken the approach that the intrinsic evidence contained within the patent is most highly regarded during claim construction, to the point where inventor statements characterizing the invention may be irrelevant.  In Continental Circuits LLC v. Intel Corp., (Appeal Number 2018-1076, Fed. Cir. February 8, 2019) (“Continental Circuits”), the Federal Circuit looked at a limitation that was read into the claims by the District Court and found that the exacting requirements to infer a claim limitation had not been met. Continental Circuits LLC (“Continental”) owned four patents directed to a “multilayer electrical device… having a tooth structure.”  Continental Circuits at 2.  The four patents at issue, U.S. Patent No. 7,501,582 (“the ‘582 patent”), U.S. Patent No. 8,278,560 (“the ‘560 patent”), U.S. Patent… Continue Reading

Practice Tip – Missing Participants Remain a Significant Concern for Retirement Plan Sponsors

When participants in qualified retirement plans are no longer current employees of the plan sponsor, it can be challenging to ensure that the contact information in the plan’s records is up to date and accurate. However, inaccurate contact information in the plan’s records is problematic for a variety of reasons, including causing operational failures when participants do not receive distribution of benefits by the plan’s required distribution date and increasing the possibility of fraud when a participant’s information is sent to the wrong address. Plan administrators should review their procedures for locating missing participants and ensure that they are (1) consistent with available guidance from the IRS and the DOL, (2) appropriate for the plan and its participant population, and (3) being followed consistently by the plan administrator or its delegate. Plan administrators should also document any steps undertaken to locate missing participants. The plan’s procedures should also address how… Continue Reading

Are Your Voluntary Benefits Programs Subject to ERISA?

An employer should be cautious to not “endorse” a voluntary benefits program that the employer wants to be exempt from ERISA. The DOL’s safe harbor exempting certain plans from ERISA (often called “voluntary plans”) requires the sole function of the employer to be, without endorsing the program, to permit the insurer to publicize the program to employees and to collect premiums and remit them to the insurer. Federal courts have found impermissible endorsements where employers either encouraged their employees to participate in their voluntary benefits program or selected the insurer and limited eligibility criteria. For example, in October 2018, the U.S. Court of Appeals for the Third Circuit decided a case involving whether the employer’s endorsement of a volunteer disability benefits program caused it to be subject to ERISA. The Court found that (i) a reasonable employee would not view the program as being merely a third-party offering and (ii)… Continue Reading

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