March 4, 2015

ERISA-Seventh Circuit Holds That Defendant May Not Be Responsible For Withdrawal Liability

In Hotel 71 Mezz Lender LLC v. The National Retirement Fund, No. 14-2034 (7th Cir. 2015), the National Retirement Fund ("NRF") and its trustees sought to hold Hotel 71 Mezz Lender LLC ("Mezz Lender") and Oaktree Capital Management, L.P. ("Oaktree") responsible for multiemployer pension fund withdrawal liability pursuant to section 4201 of ERISA.

In this case, Oaktree, through Mezz Lender, provided financing for the acquisition of a hotel by Chicago H&S Hotel Property LLC ("H&S"). When H&S later defaulted on the loan, it was taken into bankruptcy and the hotel was sold. NRF is a multiemployer pension plan to which H &S had been making employer contributions for the hotel employees under a collective bargaining agreement. NRF contends that the sale of the hotel triggered withdrawal liability to NRF on the part of H&S and any other "trade or business" under common control with it--including both Oaktree and Mezz Lender (together, the "Oaktree parties"). One issue for the Seventh Circuit Court of Appeals (the "Court")-do the Oaktree parties have any responsibility for the withdrawal liability? The Oaktree parties had come under common control with H &S, so the remaining question was whether they conducted a "trade or business".

In analyzing the case, the Court concluded that there was uncertainty and an absence of evidence as to whether the Oaktree parties were engaged in a "trade or business". As such, the Court could not determine whether the Oaktree parties could have responsibility for the withdrawal liability. Consequently, the Court remanded the case back to the district court to make this determination.

March 3, 2015

ERISA-10th Circuit Rules That There Are No Vested Health or Life Insurance Benefits

In Fulghum v. Embarq Corporation, No. 13-3230 (10th Cir. 2015), the Plaintiffs represented a class of retirees formerly employed by Sprint-Nextel Corporation ("Sprint"), Embarq Corporation("Embarq"), or a predecessor and/or subsidiary company of either Embarq or Sprint (collectively "Defendants"). Plaintiffs brought this suit after Defendants altered or eliminated health and life insurance benefits for retirees. Plaintiffs asserted, among others, that Defendants violated ERISA by breaching their contractual obligation to provide vested health and life insurance benefits. The district court granted Defendants summary judgment on this claim, and Plaintiffs appeal.

In analyzing the case, the Tenth Circuit Court of Appeals (the "Court") noted that the plans at issue provide health or life insurance benefits and, thus, are welfare benefit plans under ERISA. Welfare benefit plans are not governed by ERISA's minimum vesting standards and employers are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans. If, however, an employer has contractually agreed to provide retirees with vested benefits, it may not unilaterally modify or terminate the welfare benefit plan that establishes those benefits. Further, the interpretation of an ERISA plan is governed by federal common law. The Court said that, in deciding whether an ERISA employee welfare benefit plan provides for vested benefits, it will apply general principles of contract construction. In particular, the Court will interpret an ERISA plan like any contract, by examining its language and determining the intent of the parties to the contract. A plaintiff cannot prove his employer promised vested benefits unless he identifies "clear and express language" in the plan making such a promise. Further, a promise to provide vested benefits must be incorporated into the formal written ERISA plan. Summary plan descriptions ("SPDs") are considered part of the ERISA plan documents.

Continuing, the Court said that, having reviewed the SPDs at issue in this matter, the Court concludes Plaintiffs cannot show that any plan contains clear and express language promising vested benefits. The SPDs presented either contained a reservation of rights clause, under which the employer could change or discontinue the benefits at any time, and/or had no clear and express or affirmative promise under which benefits will vest. As a result of the foregoing, the employer may change or stop the health and life insurance benefits in any manner and at

February 11, 2015

ERISA-Fifth Circuit Rules That Plaintiff Is Entitled To Long-Term Disability Benefits

In George v. Reliance Standard Life Insurance Company, No. 14-50368 (5th Cir. 2015), plaintiff Robert George ("George") appeals from the district court's final judgment affirming the decision of the ERISA plan administrator in relevant part. After reviewing the case, the Fifth Circuit Court of Appeals (the "Court") reversed and rendered judgment for George. Further, the Court remanded the case to the district court to determine the amount of benefits to award to George.

In this case, George served as a helicopter pilot in the United States Army. In 1985 George was injured in a helicopter crash, and doctors were forced to amputate one of his legs at the knee. George retired from military service in 1987. After retiring, George began flying helicopters for PHI, Inc. ("PHI"). PHI purchased a long-term disability insurance policy (the "Policy") for George from the defendant, Reliance Standard Life Insurance Co. ("RSL"). George flew for PHI for more than twenty years. But in 2008 he began experiencing severe pain at the site of his amputation, which prevented him from safely wearing his prosthetic limb. As a result, he was no longer able to operate the foot controls of a helicopter, and he was forced to retire from flying. At that time, he was earning $75,495 per year. George filed a claim for long-term disability benefits under the Policy with RSL.

The Policy contains a definition of "Total Disability", which a claimant must satisfy to be entitled to long-term disability benefits. The Policy also contains a relevant limitation provision (the "Exclusion Clause"). The Exclusion Clause limits benefits to 24 months when mental conditions contribute to the disability. RSL determined that George did not meet the definition of Total Disability, and therefore is not entitled to the benefits claimed. RSL further determined that, even if George was Totally Disabled, the Exclusion Clause would apply to limit George's long-term disability benefits to 24 months of payment. George brought this suit, challenging RSL's determinations, under section 502(a)(1)(B) of ERISA.

In reaching its conclusions, the Court noted that, since the Policy gave RSL the appropriate discretion, RSL's determinations are entitled to a deferential review. However, the Court held that RSL abused its discretion when it determined that George was not Totally Disabled. RSL fails to cite any evidence in the record that supports its conclusion that George's ability to perform sedentary work, and to work in the alternative occupations, would allow George to obtain substantially the same earnings that he had as a pilot, This negated RSL's determination that George was not Totally Disabled, as the Policy defines this term. Further, the Court determined that RSL abused its discretion in determining that the Exclusion Clause would apply. There is no evidence in the record that George's mental conditions impaired his ability to hold down a job. As such, the Court reversed the district court's decision and awarded the long-term disability benefits

February 9, 2015

ERISA-Ninth Circuit Remands Case Back To District Court To Consider Whether Plaintiff Is Entitled To The Remedy of Surcharge

In Gabriel v. Alaska Electrical Pension Fund, No. 12-35458 (9th Cir. 2014), plaintiff Gregory R. Gabriel appeals the district court's dismissal of his claims against the defendant Alaska Electrical Pension Fund (the "Fund") and other defendants under ERISA. In this case, the Ninth Circuit Court of Appeals (the "Court") affirmed the district court's determination that Gabriel failed to raise a genuine issue of material fact as to his entitlement to "appropriate equitable relief" under § 502(a)(3) of ERISA, in the form of equitable estoppel or reformation.

However, Court said that, because the district court made its ruling prior to the Supreme Court's decision in CIGNA Corp. v. Amara, the district court did not consider the availability of the monetary remedy against a trustee, sometimes called a surcharge, which the Court held may be "appropriate equitable relief" for purposes of § 502 (a)(3) of ERISA. Accordingly, the Court vacated the district court's ruling that Gabriel is not entitled to any form of "appropriate equitable relief" and remanded the case for the district court to reconsider the availability of surcharge in this case, and, if available, whether Gabriel has adequately alleged a remediable wrong.

February 5, 2015

ERISA-D.C. Court Of Appeals Holds That State Law Cannot Be Applied To Obtain Undistributed Plan Benefits

In Vanderkam v. Vanderkam, No. 13-5163 (D.C. Columbia 2015), the D.C. Circuit Court of Appeals (the "Court") began the case by noting that ERISA entitles certain spouses of pension plan participants to a survivor annuity unless waived pursuant to clearly defined procedures. In this case, the pension plan participant concedes that ERISA vested an annuity in his ex-wife, but nonetheless argues that Texas law, including his Texas divorce decree, requires entry now of a declaratory judgment that, after his death, she place her annuity payments into a constructive trust for his benefit. The district court rejected this claim, holding that ERISA preempts any state law or state-court decree that would otherwise defeat the spouse's vested annuity. The Court affirmed.

In so affirming, the Court said that it emphasized the narrowness of its opinion. The Court said that this case involves an effort by a plan participant to obtain an interest in undistributed plan benefits, and we hold only that absent a qualified domestic relations order and compliance with ERISA's strict waiver provisions for survivor annuities, he may not use state law for that purpose. This opinion has nothing to say about how ERISA might affect an effort by a plan participant to use state law to obtain an interest in benefits after distribution to the beneficiary. That question is not presented in this case, and the Court expresses no opinion on it.

January 29, 2015

ERISA-Supreme Court Rules That There Is No Presumption That Retiree Health Benefits Are Vested

In M & G Polymers USA, LLC v. Tackett, No. 13-1010 (U.S. Supreme Court 2015), the Supreme Court overturned the long standing "Yard-Man" inference of the Sixth Circuit Court of Appeals that retiree health benefits created under a collective bargaining agreement are vested.

In this case, when petitioner M&G Polymers USA, LLC ("M&G") purchased the Point Pleasant Polyester Plant in 2000, it entered a collective bargaining agreement and related Pension, Insurance, and Service Award Agreement (the "P & I Agreement") with the local union. The P & I Agreement provided that certain retirees, along with their surviving spouses and dependents, would "receive a full Company contribution towards the cost of [health care] benefits"; that such benefits would be provided "for the duration of [the] Agreement"; and that the agreement would be subject to renegotiation in three years. Following the expiration of those agreements, M&G announced that it would require retirees to contribute to the cost of their health care benefits. The retirees then sued M&G and related entities, alleging that the P & I Agreement created a vested right to lifetime contribution free health care benefits. The District Court dismissed the complaint for failure to state a claim, but the Sixth Circuit reversed based on the reasoning of its earlier decision in the Yard-Man case. On remand, the District Court ruled in favor of the retirees, and the Sixth Circuit affirmed.

Upon reviewing the case, the Supreme Court held that the Sixth Circuit's decision rested on principles that are incompatible with ordinary principles of contract law. ERISA governs pension and welfare benefits plans, including those established by collective-bargaining agreements. ERISA establishes minimum funding and vesting standards for pension plans, but welfare benefits plans--which provide the types of benefits at issue here--are exempt from those rules. The Supreme Court said that it interprets collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy. When a collective-bargaining agreement is unambiguous, its meaning must be ascertained in accordance with its plainly expressed intent.

Continuing, the Supreme Court found a number of deficiencies in Yard-Man and subsequent cases expanding it. These deficiencies include that the Sixth Circuit failed to consider traditional contract principles, including the rule that courts should not construe ambiguous writings to create lifetime promises and the rule that contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.The Supreme Court concluded by that that, although there is no doubt that Yard-Man and subsequent cases affected the outcome here, the Sixth Circuit should be the first to review the agreements under ordinary principles of contract law. As such, the Supreme Court vacated the Sixth Circuit's affirmation and remanded the case.

January 22, 2015

ERISA-Fifth Circuit Rules That Investment Guidelines Are Not "Other Instruments" Which Participants May Request Under ERISA Section 104(b)

The case of Murphy v. Verizon Communications, Inc., No. 13-11117 (5th Cir. 2014), arose out of the spin-off of Verizon Communication, Inc.'s information services unit into a new corporation called Idearc, Inc., which subsequently evolved into SuperMedia, Inc. Several retirees, whose pension benefits were transferred from Verizon pension plans to Idearc pension plans as part of the spin-off, brought a class action suit against defendants-Verizon and the Verizon, Idearc (and later the SuperMedia) pension plans, asserting a variety of claims under ERISA. One such claim stemmed from the defendants' alleged failure to turn over certain documents and disclose certain information to the plaintiffs.

As to these allegations, the Fifth Circuit Court of Appeals (the "Court") noted that the documents sought were investment guidelines for the plans at issue. It said that, under ERISA Section 104(b)(4), plan administrators must, "upon written request of any participant or beneficiary, furnish a copy of the latest updated summary[] plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated." 29 U.S.C. § 1024(b)(4). If a plan administrator fails to comply with this requirement, the district court has discretion to impose a penalty of up to $110 per day. 29 U.S.C. § 1132(c)(1)(B); 29 C.F.R. § 2575.502c-1.

The Court then said that it agrees with the majority of the circuit courts, which have construed Section 104(b)(4)'s catch-all "other instruments" provision narrowly so as to apply only to formal legal documents that govern a plan. Such a construction is consistent with the plain meaning of the term "instrument," i.e., "[a] written legal document that defines rights, duties, entitlements, or liabilities, such as a statute, contract, will, promissory note, or share certificate." (quoting several dictionaries). In this case, the Court concluded that the investment guidelines do not constitute "other instruments" under Section 104(b)(4), as they are not binding on the plans at issue here, and they do not define any rights, duties, entitlements, or liabilities.

January 21, 2015

Employee Benefits-IRS Discusses The Retirement Savings Contributions Credit

In Retirement News for Employers, December 18, 2014 Edition, the Internal Revenue Service (the "IRS") discusses the Retirement Savings Contributions Credit ( sometimes called the Saver's Credit). What the IRS says is here.

January 20, 2015

ERISA-Eighth Circuit Holds That Plaintiff Was Not Entitled To Statutory Damages For Her Employer's Failure To Provide Her With Notification Of COBRA Entitlement

In Cole v. Trinity Health Corporation, No. 14-1408 (8th Cir. 2014), the following obtained. When plaintiff Bonnie Cole stopped working for defendant Trinity Health Corporation ("Trinity Health"), the company failed to timely notify Cole of their right to COBRA continuing health care coverage, as it was required to do. Cole filed this suit, seeking statutory damages, which may be awarded in the court's discretion after a violation of this notification requirement. However, the district court declined to award damages and granted summary judgment to Trinity Health.

The Eighth Circuit Court of Appeals (the "Court") was asked to decide whether the district court's decision was in error. The Court found no abuse of discretion in the district court's denial of statutory damages and therefore it affirmed the grant of summary judgment. The Court noted that, in this case, there is no dispute that Trinity Health violated the COBRA notification requirement. The question before the Court, then, is whether the district court erred in declining to assess statutory damages. Since the decision to assess these damages is left to the discretion of the district court, the Court will review that decision for abuse of discretion.

The district court had reasoned that Cole was not entitled to actual damages because the amount of her unreimbursed medical bills from May 2012 was less than the COBRA premiums she would have had to pay to maintain medical insurance. The district court also reasoned that Cole was not entitled to statutory penalties because "Trinity Health acted in good faith," "[Cole was] not harmed or prejudiced by Trinity Health's tardy notice of ...COBRA rights," and "[Cole was] provided continued medical coverage for approximately eleven months after [her] termination.". The Court found that the district court's denial of statutory damages on the foregoing grounds did not involve any clearly erroneous findings and was not otherwise an abuse of discretion.

January 15, 2015

Employee Benefits-IRS Talks About The Various Types Of Retirement Plan Contributions

In Retirement News for Employers, December 18, 2014 Edition, the Internal Revenue Service (the "IRS") discusses the various types of retirement plan contributions which may be made. Here is what the IRS says:

Types of Retirement Plan Contributions

If you participate in an employer-sponsored retirement plan, you may be able to make different types of plan contributions from your wages:
• Pre-tax elective deferrals aren't included in your gross income in the year that you make them. For example, if you asked your employer to contribute $2,000 from your $30,000 salary to the plan, you'd only include $28,000 in income. You must include these contributions, plus any earnings, in your income when you later withdraw them.
• Designated Roth contributions are elective deferrals that are included in your gross income in the year you make them, but not when you withdraw them from the plan. If you meet certain conditions, you don't have to include any earnings on these contributions in your income when you withdraw them.
• After-tax employee contributions are also included in your gross income in the year you make them. You don't include these contributions in income when you withdraw them, but you must include any earnings. Unlike elective deferrals, there isn't an annual dollar limit on the amount of these contributions you can make, but if you're a highly compensated employee, your after-tax employee contributions may be limited by what other employees contribute.
• Catch-up contributions are additional elective deferrals you may be able to contribute to the plan if you're age 50 or older by the end of the calendar year. You can make these contributions as pre-tax elective deferrals or designated Roth contributions (if your plan allows them) or any combination of the two.

Elective deferral limits:

For 2014:
• $17,500 to 401(k) (other than a SIMPLE 401(k)), 403(b) and 457(b) plans (plus
$5,500 catch-up contributions)
• $12,000 to SIMPLE plans (plus $2,500 catch-up contributions)
For 2015:
• $18,000 to 401(k) (other than a SIMPLE 401(k)), 403(b) and 457(b) plans (plus $6,000 catch-up contributions)
• $12,500 to SIMPLE plans (plus $3,000 catch-up contributions)

Ask your employer or check your summary plan description to find out which types of contributions you can make to your workplace retirement plan.

January 14, 2015

ERISA-Fourth Circuit Overturns District Court's Denial Of Claim For Short Term Disability Benefits, And Sends The Case Back To Plan Administrator For Further Review

In Harrison v. Wells Fargo Bank, N.A., No. 13-2379 (4th Cir. 2014), plaintiff Nancy Harrison brought suit against her employer Wells Fargo, arguing that the company improperly terminated her short-term disability benefits while she was undergoing a series of treatments for thyroid disease. The district court upheld Wells Fargo's decision, finding that it, as the plan administrator, did not abuse its discretion in denying Harrison's claim.

However, the Eleventh Circuit Court of Appeals (the "Court") analyzed the case and said that Wells Fargo failed to consider readily available material evidence of which it was put on notice (i.e., evidence that Harrision was seeking treatment for mental health conditions and certain properly signed release forms from Harrison evidencing the disability), and to inform Harrison in clear terms that her own doctor's records could establish her claim. Therefore, the Wells Fargo review process failed to conform to the directives of ERISA (requiring, among other things, a full and fair review and a deliberate, principled reasoning process which supports its decision with substantial evidence) and the Plan's own terms. As such, the Court reversed the district court's decision, and remanded the case back to the district court, with directions to return the case to Wells Fargo, as plan administrator, for a full and fair review of Harrison's claims.

January 13, 2015

Employee Benefits-Seventh Circuit Finds That The Plan Did Not Have A Partial Termination

In Matz v. Household International Tax Reduction Investment Plan, Nos. 14‐1683, 14‐2507 (7th Cir. 2014), the Seventh Circuit Court of Appeals (the "Court") reviewed a claim that a defined‐contribution ERISA pension plan, in which the employer matched contributions that its employees made, was partially terminated.

In analyzing the case, the Court said that, when a pension plan is terminated, the rights of the participants in the plan vest in full, and so none of the money contributed by the employer to the individual employees' retirement accounts is returned to the employer. Full vesting is required in the case of partial as well as total terminations. 26 U.S.C. § 411(d)(3)(A); 26 C.F.R. § 1.401‐6(b)(2). But did a partial termination occur here? The Court had previously adopted a rebuttable presumption that a 20 percent or greater reduction in plan participants is a partial termination, and that a smaller reduction is not. The Court assumes that there is a band around 20 percent. A generous band would run from 10 percent to 40 percent. Below 10 percent, the reduction in coverage should be conclusively presumed not to be a partial termination; above 40 percent, it should be conclusively presumed to be a partial termination.

The Court concluded that there was no partial termination in this case. The Court said that, even if all the participant plan terminations were deemed to constitute a single event and therefore needed to be aggregated, the percentage of participants terminated would be only 17 percent, still below the 20 percent cutoff and with no justification shown for waiving this threshold and finding that a partial termination had occurred.

January 12, 2015

Employee Benefits-IRS Provides Guidance On Correcting A Roth Contribution Failure

In Retirement News for Employers, December 18, 2014 Edition, the Internal Revenue Service (the "IRS") provides guidance on correcting a Roth contribution failure. The IRS says the following:

The issue

Many employers have added a Roth feature to their 401(k), 403(b) or governmental 457(b) plans. This feature allows employees to choose to designate some or all of their elective contributions as Roth contributions. Employees must make this designation before the deferral is withheld from their salary. A Roth contribution differs from a pre-tax elective contribution in that the Roth contribution amount is included in gross income.

The problem

A common mistake we've encountered in the operation of a Roth feature is that the employer doesn't follow the employee's election as to the type of elective deferral. The employee elects a Roth contribution, but the employer treats it as a pre-tax deferral.

Fixing the mistake

To fix the mistake of not following an employee's election to designate the contribution as a Roth contribution you must transfer the deferrals, adjusted for earnings, from the pre-tax account to the Roth account. There are two options on how to report this transfer:
1. The employer issues a corrected Form W-2 and the employee must file an amended Form 1040 for the year of the failure.
2. The employer includes the amount transferred from the pre-tax to the Roth account in the employee's compensation in the year it's transferred. If the employer elects, it may compensate the employee for the additional amount he or she owes in income tax for that year . This must likewise be included in the employee's income for that year.

Next problem

The employee elects pre-tax deferral, but the employer treats it as a Roth contribution.

Fixing the mistake

The employer can transfer the erroneously deposited deferrals, adjusted for earnings, from the Roth account to the pre-tax account. The employer would file a corrected W-2 and the employee would file an amended 1040 for the year of the failure.

Correction programs available

The plan sponsor can use the Voluntary Correction Program (VCP) (if the error issignificant and it meets the other conditions of VC). The error can be self-corrected, without IRS approval, if the mistake is insignificant or, if significant, if the plan sponsor corrects the mistake within two years. A plan sponsor can use self-correction only if the plan has practices and procedures in place designed to promote overall tax law compliance. If the plan is under IRS examination, then mistakes are generally corrected under a closing agreement using the Audit Closing Agreement Program.

Making sure it doesn't happen again

Establish procedures that ensure that the participants' elections are correctly implemented. This could include educating those responsible for processing the deferral elections on how to interpret and implement the information on the election forms. In addition, periodically check the process of withholding, classifying and depositing salary deferrals so that you can timely fix errors and adjust internal controls, as needed.

January 8, 2015

Employee Benefits-IRS Discusses IRA One-Rollover- Per-Year Rule

In Retirement News for Employers, December 18, 2014 Edition, the Internal Revenue Service ("IRS") discuss the one-rollover-per year rule that applies to IRAs. Here is what the IRS says:

Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (IRS Announcements 2014-15 and 2014-32). The limit will apply by aggregating all of an individual's IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit.

• Trustee-to-trustee transfers between IRAs are not limited
• Rollovers from traditional to Roth IRAs ("conversions") are not limited

Transition rule ignores some 2014 distributions
IRA distributions rolled over to another (or the same) IRA in 2014 will not prevent a 2015 distribution from being rolled over provided the 2015 distribution is from a different IRA involved in the 2014 rollover.

Example: If you have three traditional IRAs, IRA-1, IRA-2 and IRA-3, and in 2014 you took a distribution from IRA-1 and rolled it into IRA-2, you could not roll over a distribution from IRA-1 or IRA-2 within a year of the 2014 distribution but you could roll over a distribution from IRA-3. This transition rule applies only to 2014 distributions and only if different IRAs are involved. So if you took a distribution from IRA-1 on January 1, 2015, and rolled it over into IRA-2 the same day, you could not roll over any other 2015 IRA distribution (unless it's a conversion).

Background of the one-per-year rule
Under the basic rollover rule, you don't have to include in your gross income any amount distributed to you from an IRA if you deposit the amount into another eligible plan (including an IRA) within 60 days (Internal Revenue Code Section 408(d)(3)). Internal Revenue Code Section 408(d)(3)(B) limits taxpayers to one IRA-to-IRA rollover in any 12-month period. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii), published in 1981, and IRS Publication, Individual Retirement Arrangements (IRAs) interpreted this limitation as applying on an IRA-by-IRA basis, meaning a rollover from one IRA to another would not affect a rollover involving other IRAs of the same individual. However, the Tax Court held in 2014 that you can't make a non-taxable rollover from one IRA to another if you have already made a rollover from any of your IRAs in the preceding 1-year period (Bobrow v. Commissioner, T.C. Memo. 2014-21).

Tax consequences of the one-rollover-per-year limit
Beginning in 2015, if you receive a distribution from an IRA of previously untaxed amounts:
• you must include the amounts in gross income if you made an IRA-to-IRA rollover in the preceding 12 months (unless the transition rule above applies), and
• you may be subject to the 10% early withdrawal tax on the amounts you include in gross income.

Additionally, if you pay the distributed amounts into another (or the same) IRA, the amounts may be:
• treated as an excess contribution, and
• taxed at 6% per year as long as they remain in the IRA.

Direct transfers of IRA money are not limited
This change won't affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn't a rollover (Revenue Ruling 78-406). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers.

January 7, 2015

Employee Benefits-IRS Provides Year End Reminders For IRAs

In Retirement News for Employers, December 18, 2014 Edition, the Internal Revenue Service ("IRS") provides some year-end reminders. Here is what the IRS said:

IRA Year- End Reminders
Whether you are still working or retired, you should periodically review your IRAs. Here are few things to remember.

Contribution limits
If you're still working, review the 2014 IRA contribution and deduction limits to make sure you are taking full advantage of the opportunity to save for your retirement. You can make 2014 IRA contributions until April 15, 2015.

Excess contributions
If you exceed the 2014 IRA contribution limit, you may withdraw excess contributions from your account by the due date of your tax return (including extensions). Otherwise, you must pay a 6% tax each year on the excess amounts left in your account.

Required minimum distributions
If you are age 70½ or older this year, you must take a 2014 required minimum distribution by December 31, 2014 (by April 1, 2015, if you turned 70½ in 2014). You can calculate the amount of your IRA required minimum distribution by using IRS Worksheets. You must calculate the required minimum distribution separately for each IRA that you own other than any Roth IRAs, but you can withdraw the total amount from one or more of your non-Roth IRAs. Remember that you face a 50% excise tax on any required minimum distribution that you fail to take on time.