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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

Patent Term Adjustment deductions for applicant delay are only appropriate when the Applicant could have taken steps to advance prosecution but failed to do so

In Supernus Pharmaceuticals, Inc. v. Iancu, No. 2017-1357 (Fed. Cir. Jan. 23, 2019), the Federal Circuit rejected the U.S. Patent and Trademark Office’s practice of deducting time from the patent term adjustment (PTA) for applicant delays during periods of time when the applicants had no reasonable steps to take to advance prosecution.  Slip op. at 19. The PTA statute provides that PTA will be reduced by the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.  35 U.S.C. § 154(b).  The U.S. Patent and Trademark Office (USPTO) promulgated regulations relating to PTA, including 37 C.F.R. § 1.704(c)(8), which states Submission of a supplemental reply or other paper, other than a supplemental reply or other paper expressly requested by the examiner, after a reply has been filed, in which case the period of adjustment set forth in § 1.703 [that extends the… Continue Reading

Practice Tip – Service Provider Contracts in M&A Due Diligence

In conducting due diligence in connection with a corporate transaction, it is common for buyers to request copies of the target’s current contracts with its benefit plan service providers like the recordkeeper and third party administrator. Buyers should also consider obtaining information regarding how long the target has been using their current service provider. If there has been a change in service providers in the prior several years, buyers should also consider requesting copies of contracts with the target’s previous service providers. This is true especially if there is a concern that there might be operational errors that would require correction, since information will likely have to be obtained from the plan’s prior service providers.

Puerto Rico Treasury Announces Qualified Retirement Plan Limits for 2019

The Puerto Rico Department of the Treasury recently issued Circular Letter Internal Revenue No. 18-21 (the “Circular”), which announced applicable qualified retirement plan limits for 2019, as required by the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”). For plans qualified only in Puerto Rico, the limits on elective deferrals, catch-up contributions, and after-tax contributions all remain unchanged for 2019, while the limits on annual benefits, annual contributions, plan compensation, and the highly compensated employee threshold all increased for 2019. For plans qualified in both Puerto Rico and the U.S. (including the Federal Government Thrift Plan), the limits on catch-up and after-tax contributions remain unchanged for 2019, while the limits on elective deferrals, annual benefits, annual contributions, plan compensation, and the highly-compensated employee threshold, all increased for 2019. The applicable plan limits are as follows: Annual Benefit Limit (All Defined Benefit Plans): $225,000 (increased from $220,000)… Continue Reading

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