New disability benefit claims procedures regulations were issued by the DOL and became applicable to disability benefit claims filed after April 1, 2018. Employers who maintain retirement plans that provide certain disability benefits (i.e., benefits based upon a determination of disability that is made under the plan) must amend the plan’s claims procedures by no later than December 31, 2018, to reflect the required changes in disability claims administration. These regulations do not apply to retirement plans that provide disability benefits that are based upon a determination of disability made outside of the plan (e.g., disability determinations made by the Social Security Administration or by the administrator of the employer’s long-term disability plan).
As we enter the last quarter of 2018, plan sponsors should ensure that all required plan amendments will be made to their tax-qualified retirement plans by the applicable deadlines and that the plan administrator is prepared for any changes in administrative procedures that will be required as of January 1, 2019. As a practical matter, plans should be amended for any applicable changes as soon as practicable to conform the plan document (and its summary plan description) to match the plan’s administration.
A new round of U.S. tariffs on $200 billion in Chinese imports became effective on September 24, 2018. The 10 percent tax on Chinese consumer products is only the latest escalation in an ever-widening trade war between the United States and its global trading partners. While it appears that, subject to Congressional approval, trade disputes between the U.S., Mexico and Canada may have been resolved, economists and policymakers continue to debate the impact of the wider trade war on the domestic and global economy. In the near term, some imported products (including inputs for a range of items not directly subject to any tariff) will cost more. Some domestic manufacturers of products that are subject to foreign retaliatory tariffs may have less demand in export markets. In short, the more expensive it is to trade between affected nations, the less international trade is likely to happen. And if trade is… Continue Reading
The Tax Cuts and Jobs Act (the “Tax Act”), passed at the end of last year, revised Section 274 of the Internal Revenue Code to generally disallow a deduction for expenses with respect to entertainment, amusement, or recreation. However, the Tax Act does not specifically address the deductibility of expenses for business meals. The IRS intends to publish proposed regulations clarifying when business meal expenses are nondeductible entertainment expenses and when they are 50 percent deductible expenses. Until the proposed regulations are effective, a taxpayer can rely on the transitional guidance in IRS Notice 2018-76 to determine whether the taxpayer can deduct 50 percent of a business meal expense. View the IRS Notice 2018-76.
A recent case decided by a federal district court in California highlights that employer action other than a direct payment of premiums may constitute an “employer contribution” for purposes of determining whether a group insurance program is exempt from ERISA. Under the so-called “Voluntary Plan Exemption”, generally such a program will be exempt from ERISA if (i) there are no employer contributions toward coverage, (ii) participation in the program is completely voluntary, (iii) the employer does not endorse the program, and (iv) the employer receives no consideration for the program. In Bommarito v. Northwestern Mutual Life Ins. Co., the plaintiff, who was the sole owner of her company, and nine of her employees applied for individual policies of disability insurance to be issued by Northwestern Mutual Life Insurance Company (“Northwestern”). In the submission of her application to Northwestern, the plaintiff included the nine employee applications and a request for a… Continue Reading
Haynes and Boone, LLP has released its Fall 2018 Energy Roundup, a comprehensive report on the industry that reflects an improved outlook for oil and gas producers. The Energy Roundup includes the firm’s latest “Borrowing Base Redeterminations Survey,” which captures September polling of oil and gas producers, oilfield services companies, energy lenders, private equity firms, and other industry participants to get their predictions about producers’ future borrowing capacity or “borrowing bases.” Producers’ loans are assessed by their lenders twice a year to determine how much credit will be available based upon the collateral value of the producers’ property, referred to as their “borrowing bases.” The borrowing bases turn on banks’ projections about future prices for the producers’ oil and gas reserves. The survey, which the firm has conducted twice a year since April 2015, offers a clear, forward-looking view about the projected financial state of the domestic energy market. The latest… Continue Reading
Haynes and Boone Energy Roundup, a comprehensive report on the industry that reflects an improved outlook for oil and gas producers – most recent update: September 26, 2018. Borrowing Base Redeterminations Survey, a forward looking survey that reveals what lenders, borrowers and others in the industry expect regarding the borrowing base redeterminations in light of oil price uncertainty – most recent update: September 26, 2018. Oil Patch Bankruptcy Monitor, which includes details on oil and gas producers that have filed for bankruptcy since the beginning of 2015 – most recent update: August 31, 2018. Oilfield Services Bankruptcy Tracker, which includes details on oilfield services companies that have filed for bankruptcy since the beginning of 2015 – most recent update: August 31, 2018. Midstream Report, which includes details on the midstream companies that have filed for bankruptcy since 2015 – most recent update: August 31, 2018.
Church Plan Exemption Class Action Advances, Court to Determine What Constitutes a “Principal Purpose Organization”
Last year, the U.S. Supreme Court jointly heard and ruled on a series of long-running, class action lawsuits challenging the church plan status of retirement plans sponsored by certain religiously affiliated healthcare systems. In its opinion, the Supreme Court overturned the lower courts’ decisions and held that such plans could qualify as church plans, even if they were not originally established by a church, if the plans were maintained by a church-affiliated organization whose principal purpose is the administration or funding of the plan (view our prior blog post on this Supreme Court opinion). The cases were then remanded back to their original district courts for further proceedings consistent with the Supreme Court’s order. One of those federal district courts recently ruled, in partially denying a motion to dismiss, that the plaintiffs had pled enough facts to adequately allege a claim that the Dignity Health retirement plan was not a… Continue Reading
Granting “incentive stock options” qualifying under Section 422 of the Internal Revenue Code (“ISOs”) can often result in more favorable tax treatment to the recipient, provided that the recipient holds the option and the optioned shares for the required period of time. When granting ISOs, it is important to make sure that the plan document and administrative procedures only permit such options to be granted to eligible recipients. For purposes of ISOs, eligible recipients are limited to employees of a granting corporation (or its subsidiaries that are corporations). Independent contractors, non-employee directors, and employees of entities that are not corporations for tax purposes are ineligible to receive ISOs.
A recently released IRS Private Letter Ruling (the “PLR”) describes a potential approach for an employer to integrate a student loan repayment program with the employer’s defined contribution plan. As described in the PLR, the employer proposed to amend its 401(k) plan to permit employees to enroll in a voluntary student loan benefit program (the “Program”) under which the employer would make a nonelective contribution to an employee’s account under the plan for each pay period during which the employee made a student loan repayment equal to a specified amount of eligible compensation. The IRS ruled that, based on the conditions described in the PLR, the Program did not violate the Internal Revenue Code’s “contingent benefit” prohibition (i.e., an employer cannot offer a benefit, other than a matching contribution, that is contingent upon the employee making contributions to a 401(k) plan). The PLR did not address what impact such a… Continue Reading