--An employee who is eligible to make salary deferrals under a 401(k) plan, SIMPLE IRA, 403(b), SARSEP or governmental 457(b) plan may make catch-up contributions under that plan for any calendar year, up to the catch-up contribution limit for that year, if (1) the plan allows catch-up contributions, (2) the employee is age 50 or older at any time during the calendar year and (3) the employee makes a valid salary deferral election that includes the amount of the catch-up contributions before the end of the calendar year.

--Notwithstanding condition (1) above, if an employee can make salary deferrals under plans of unrelated employers, he or she can contribute up to the annual salary deferral limit plus the amount of the catch-up contribution limit even if none of the plans allow catch-up contributions. However, the employee can not exceed the annual salary deferral limit in any one plan. For example, an employee (aged 50) participates in both a 401(k) plan and a 403(b) plan of unrelated employers. Both plans allow employees to contribute the annual maximum salary deferral limit ($16,500 for both 2009 and 2010) but neither plan allows catch-up contributions ($5,500 limit for 2009 and 2010). The employee could elect to contribute a combined total of $22,000 ($16,500 plus $5,500 catch-up contributions) via salary deferrals to both plans. However, because neither plan allows catch-up contributions, the employee can not contribute more than $16,500 to either plan.

--An employee can make a catch-up contribution for a calendar year only from income that, but for the deferral election, he or she would have received during that year. Therefore, an employee cannot make catch-up contributions with 2010 wages for 2009.

--A plan may not treat salary deferrals as catch-up contributions until they exceed the least of the following: (1) any statutory limit, such as the annual limit on salary deferrals ($16,500 for non-SIMPLE plans, $11,500 for SIMPLE 401(k) and SIMPLE IRA plans), (2) the plan's actual deferral percentage test limit, if applicable, or (3) the plan-imposed limit, if any.

--The maximum amount of catch-up contributions an employee can make for 2010 are: (1) $5,500 for 401(k) (not SIMPLE), 403(b), governmental 457(b) and SARSEP plans and (2) $2,500 for SIMPLE 401(k) and SIMPLE IRA plans.

TIA-CREFF offers the Traditional Annuity as an investment option for participants in funding vehicles it makes available for 403(b) plans and 401(k) plans. Prior to payout, for each contribution or "premium" received, the Traditional Annuity provides a guarantee of principal, a guaranteed minimum interest rate (generally 3 percent but in some recent contracts between 1 percent and 3 percent), and the potential for additional interest which may be declared by TIAA-CREF in its discretion.

Section 29 C.F.R. § 2520.104-44(b)(2) provides a limited exemption for a plan from certain reporting requirements, including the need to have an accountant examine the plan's financial statements, when the plan's benefits are, generally, paid exclusively through allocated insurance contracts issued by an insurance company which guarantees the benefit payments. The 2008 Form 5500 Instructions further provide that this plan need not report the value of the allocated contracts on Part I of the Schedule H or I (i.e., as being plan assets). Those Instructions reiterate the DOL's longstanding view that "allocated" contracts include only those contracts under which an insurance company immediately assumes "fixed dollar obligations", and that the reporting exemption is premised on the fact that under these contracts the plan has effectively transferred the risk for the payment of benefits accrued to that date to the insurer.

After examining the Traditional Annuity, the ERISA regulations and Form 5500 Instructions, the Advisory Opinion concluded that the Traditional Annuity is not a fully allocated contract within the meaning of 29 C.F.R. § 2520.104-44(b)(2). This obtains because upon payment of each contribution or "premium" to the Traditional Annuity, TIAA-CREF does not unconditionally guarantee to provide a retirement benefit of a certain amount, or a "specific dollar benefit". Rather, the Traditional Annuity guarantees only a minimum rate of return, based on the contributions or premiums received and a minimum rate of interest. The value attributable to each contribution or premium payment can increase when additional interest is declared. Since the Traditional Annuity is not a fully allocated contract, any accumulations with respect to the contributions or premiums it receives must be reported as plan assets on Form 5500.

However, there is a new wrinkle. Prior to the Act, the employee's COBRA qualifying event had to be an involuntary termination of employment, in order for the employee to be eligible for the COBRA subsidy. Under the Act, an employee may be eligible for the COBRA subsidy if:
--his or her qualifying event is a reduction in work hours, which occurs on or prior to March 31, 2010 (but on or after September 1, 2008); and
--he or she is involuntarily terminated on or after March 2, 2010, and after the reduction in work hours.

To comply with the Act, an individual described above, who did not previously elect to receive COBRA coverage (or who let his or her coverage lapse), must be notified (during the 60-day period starting on the date of the termination) and given the opportunity to make the election. Similarly, an individual described above, who did elect to receive COBRA coverage upon the reduction in work hours, must be notified (during that 60-day period) of his or her eligibility for the COBRA subsidy. I understand that a bill has been introduced in Congress to further extend the COBRA subsidy, so stay tuned.

Specifically, the case presented two issues concerning damages under the FMLA. The first issue is whether the court, rather than the jury, should determine the amount of the front pay awarded for a termination of employment in violation of the FMLA. Front pay is the amount awarded for lost compensation during the period between the Court's judgment and reinstatement at work (or in lieu of reinstatement). The Court noted that the FMLA does not explicitly grant plaintiffs the right to front pay, so that any award of front pay would be provided only under the section of the FMLA which grants prospective equitable relief (29 U.S.C. §2617(a)(1)(B), providing "for such equitable relief as may be appropriate, including employment, reinstatement and promotion"). The Court concluded that front pay is an equitable remedy to be determined by the court, both as to the availability of the remedy and the amount of the award.

The second issue is whether liquidated damages are available. The Court noted that 29 U.S.C. section 2617(a)(1)(A)(iii) subjects an employer, who violates the FMLA, to double damages, unless the employer can prove that the action in question was taken in good faith, and that the employer had reasonable grounds for believing that this action did not violate the FMLA. Here, the district court had denied the plaintiff's request for liquidated damages, without any explanation. The Court decided to remand the case back to the district court to reconsider the issue of whether liquidated damages are available and set forth the reasons for its decision.

The Court said that when, as here, the alleged harasser is in a supervisory position over the plaintiff, the objectionable conduct giving rise to the Claim is automatically imputed to the employer. But, subject to proof by a preponderance of the evidence, the employer may raise the Faragher/Ellerth affirmative defense to liability or damages from the Claim . This defense will protect the employer if two elements are present: (1) the employer exercised reasonable care to prevent and promptly correct any discriminatory or harassing behavior, and (2) the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. In this case, element (1) was satisfied, since the employer maintained a formal, written sexual harassment policy that was contained in an employee handbook.

As to element (2), the employer was required to demonstrate that the plaintiff unreasonably failed to take advantage of the policy described in the handbook, when the plaintiff complained only to the harassing manager-who failed to address her complaints-while the policy allowed the plaintiff to file a complaint with some one other than the harassing supervisor. Here, the Court ruled that there is no requirement that a plaintiff must exhaust all possible avenues made available, so that an employer is not, as a matter of law, entitled to the Faragher/Ellerth affirmative defense merely because an employer's sexual harassment policy offers such avenues. Rather, the facts and circumstances of each case must be examined to determine whether, by not pursuing other avenues provided in the policy, the plaintiff unreasonably failed to take advantage of the employer's preventative measures, so that element (2) is met. According to the Court, this examination is for a jury, and the Court remanded the case back to the District Court for further proceedings.

• The proposed rules are limited to the implementation of the PPA statutory exemption relating to investment advice.
• The proposed regulation allows investment advice to be given under the statutory exemption in two ways. One is through the use of a computer model certified as unbiased. The other way is through an adviser compensated on a "level-fee" basis (i.e., fees do not vary based on investments selected by the participant).
• Several other requirements must also be satisfied, including disclosure of fees the adviser is to receive. The regulation contains some key safeguards and conditions, including:
o Requiring that a plan fiduciary (independent of the adviser or its affiliates) select the computer model or fee leveling investment advice arrangement.
o Imposing recordkeeping requirements for advisers relying on the exemption for computer model or fee leveling advice arrangements.
o Requiring that computer models must be certified in advance as unbiased and meeting the exemption's requirements by an independent expert.
o Establishing qualifications and a selection process for the expert who must perform the above certification.
o Clarifying that the fee-leveling requirements do not permit advisers (including its employees) to receive compensation from affiliates on the basis of their recommendations.
o Establishing an annual audit of investment advice arrangements, including the requirement that the auditor be independent from the adviser.
o Requiring disclosures by advisers to plan participants.

The proposed regulation may be found here, and is scheduled to be published in the Federal Register on March 2, 2010.

In an application for Social Security disability benefits, the plaintiff had said "I became unable to work because of my disabling condition on October 13, 2004" and "I am still disabled." In a subsequent portion of this application, the plaintiff answered the question, "[h]ow do your illnesses, injuries or conditions limit your ability to work?" He replied "[c]an't write, type, sit, stand, walk & lift, reach, grab, bend." On a different form, issued by New York State, in a part dealing with social activities, the plaintiff indicated that he was "no longer able to speak on phone or work with computer [due] to pain."

The question faced by the Court was whether these statements, which indicated that the plaintiff was disabled, prevent the plaintiff from establishing one essential element of his ADA claim, namely, whether the plaintiff could perform the essential functions of the job with reasonable accommodation (here, such prevention from establishing this element would occur under the theory of "judicial estoppel"). In dealing with this question, the Court said that the mere fact that a plaintiff files for Social Security disability benefits-thereby representing that he is disabled-does not create a presumption that the plaintiff is not able to perform the essential functions of his job, and thus, is not able to prove an ADA claim. However, the statement made in the filing may require an explanation as to why the plaintiff can nevertheless perform his job. In this case, the Court concluded that the particular statements made were not necessarily inconsistent with the plaintiff still being able to do his job, for example, the Court felt that the statement the he was "no longer able to speak on phone or work with computer [due] to pain." related to his social interactions, not his capability to perform the essential functions of his job. The Court ruled that the statements on the applications did not bar the plaintiff's ADA claim, at least at the summary judgment stage (under the theory of "judicial estoppel" or otherwise). It overturned the district court's summary judgment and remanded the case for further proceedings.

According to the Press Release, the EBSA will be sending a letter to administrators of the approximately 16,000 403(b) plans subject to ERISA, to remind them that their 2009 Form 5500 annual reporting requirements have changed and to direct them to various EBSA resources for help in understanding and complying with the new requirements. The Press Relase reminds us that 403(b) plan administrators now must file basic financial and other compliance information annually with the government on a Form 5500 or Form 5500-SF. Large plans (generally those with 100 or more participants) must include a report of an independent qualified public accountant with their Form 5500. All Form 5500s beginning with the 2009 plan year must be filed electronically using the EBSA's new EFAST2 system.

The ESBA's outreach letter points out that the EBSA has also issued specific legal guidance and has several publications that are designed to explain the new annual reporting and electronic filing rules, such as Field Assistance Bulletin (FAB) 2010-01(see yesterday's blog) and a brochure entitled Getting Ready for Changes in Filing Your Plan's Annual Return/Report Form 5500. These materials are available on a newly created EBSA web site at www.dol.gov/ebsa/403b.html.

By way of background, in July of 2009, the EBSA issued FAB 2009-02, which addressed the application of certain Form 5500 and Form 5500-SF annual reporting and auditing requirements for 403(b) plans. Specifically, FAB 2009-02, provided transitional relief from those requirements for annuity contracts and custodial accounts entered into or established prior to 2009. The FAB stated that, for purposes of the 403(b) plan's annual reporting and related audit requirements, an annuity contract or custodial account does not need to be treated as part of the plan, or as plan assets, if it meets the following conditions: (1) the contract or account was issued to a current or former employee before 2009; (2) the employer ceased to have any obligation to make contributions (including employee salary reduction contributions), and in fact ceased making contributions, to the contract or account before 2009; (3) all of the rights and benefits under the contract or account are legally enforceable against the issuer or custodian by the individual owner of the contract or account without any involvement of the employer; and (4) the individual owner of the contract or account is fully vested (the "Transitional Relief").

The EBSA issued FAB 2010-01 to answer some of the questions it received on FAB 2009-02, and on the "safe harbor rule" at 29 CFR 2510.3-2(f), which excludes qualifying 403(b) plans from ERISA (the "safe harbor"). Here are some of the more interesting points made in the FAB:

--An annuity contract or custodial account may qualify for the Transitional Relief even if it is known to the plan administrator, and even if the employer provides information to the issuer or custodian about the employee who ownes the contract or account, e.g., his or her employment status;

--The Transitional Relief is not available if the employer forwards, through salary reduction, an employee's loan repayments for deposit in the annuity contract or custodial account, but the relief would be available if the employee made the repayments directly to the issuer or custodian;

--The Transitional Relief does not apply to any annuity contract or custodial account of a new issuer or custodian receive in an exchange after 2009 for an existing contract or account.

--A final contribution made in 2009 to an annuity contract or custodial account for the year 2008 would not cause the contact or account to be ineligible for the Transitional Rule.

--The Transitional Relief applies for purposes of ascertaining the number of a 403(b) plan's participants for reporting purposes, including the determination of whether or not the 403(b) plan is a large plan, and is therefore required to have its financial statements audited. An employee whose only assets in the 403(b) plan are contracts or accounts that meet the Transitional Rule, and who is not otherwise eligible to make salary reduction contributions under the 403(b) plan, need not be counted as a participant for purposes of this determination .

--It is the responsibility of the plan administrator to determine whether any annuity contract or custodial account qualifies for the Transitional Relief.

--The Transitional Relief does not apply to any annuity contract or custodial account exchanged , in accordance with Treasury regulations and IRS requirements, for another contract or account with a new issuer or custodian after 2009.

--The safe harbor under DOL regulation 29 CFR 2510.3-2(f) can be available, even if the 403(b) plan has-optional features- such as participant loans- so long as the 403(b) plan's provider (i.e., contract issuer or custodian), as opposed to the employer or a third party administrator, makes the discretionary determinations about those features.

--The safe harbor would not be available if the employer may change 403(b) providers and unilaterally move employee funds from one provider to contracts or accounts of another provider.

By way of background, the American Recovery and Reinvestment Act of 2009 ("ARRA") provides for a reduction in the premiums that must be paid for COBRA health care coverage. Under ARRA, eligible individuals pay only 35 percent of their COBRA premiums, and the remaining 65 percent is reimbursed to the employer or insurer through a tax credit (the "Subsidy"). This Subsidy was available for 9 months, and to qualify for the Subsidy, an individual had to experience an involuntary termination of employment during the period of September 1, 2008 through December 31, 2009. DODA 2010 amended ARRA and COBRA to make the Subsidy available for 15 months, and to extend the period during which the involuntary termination of employment must occur until February 28, 2010.

Under ARRA, as amended by DODA 2010, individuals who are denied the Subsidy may request an expedited review of the denial by the U.S. Department of Labor. The Department must make a determination within 15 business days of receipt of a completed request for review. The request for review is made on the Application for Expedited Review of Denial of COBRA Premium Reduction, which the EBSA has now updated to reflect DODA 2010. The updated Application is here.

In answering this question, the Court revisited its earlier decision in General Mills, Inc. v. United States, 554 F.3d 727 (8th Cir. 2009), in which it had concluded that section 162(k)(1) of the Internal Revenue Code (the "Code")-which says that no deduction is allowed for any amount paid by a corporation in connection with the redemption of its stock - bars the deduction otherwise allowed by section 404(k)(1) of the Code for amounts paid by an employer to an ESOP's trust in order to redeem shares of the employer's stock. Ralston had argued that the exception in section 162(k)(2)(A)(iii) applies. Under that exception, section 162(k)(1) does not apply to-and will not bar a deduction for-dividends paid within the meaning of section 561 of the Code. However, the Court said that the exception in section 162(k)(2)(A)(iii) applies only when the Code has authorized the taxpayer to take a "deduction for dividends paid" within the meaning of section 561. Section 404(k) does not authorize such a deduction. Therefore, the exception in section 162(k)(2)(A)(iii) is not available here. The Court therefore concluded that Ralston may not deduct the cash distribution redemptive dividends, and affirmed the Tax Court's decision.

In Hall v. Liberty Life Assurance Company, No.s 08-4738/4739 (6th Cir. 2010), the plaintiff, . Sonya Hall, had received long-term disability benefits (the "LTD Benefits) for nearly five years through the National City Corporation Welfare Benefits Plan (the "Plan"). Liberty Life Assurance Company of Boston ("Liberty Life"), the third-party claims administrator, terminated the LTD Benefits when it determined that Hall was no longer totally disabled. The Plan then sought reimbursement for overpayment of the LTD Benefits, caused by retroactive Social Security benefits being awarded to Hall. Hall responded by filing suit against the Plan.

Concluding that the termination of her LTD Benefits was not arbitrary and capricious, the district court denied Hall's claim for reinstatement of the benefits. The district court further found that the Plan was entitled to partial reimbursement, and imposed an equitable lien on Hall's Social Security benefits to allow the Plan to recover the overpayments. Hall then appealed those decisions.

In dealing with the case, the Sixth Circuit affirmed both the district court's denial of the reinstatement of the LTD Benefits, and the district court's ruling that the Plan was entitled to reimbursement for the overpayments. It then turned its attention to the imposition of the equitable lien. The Court noted that a plan fiduciary is permitted to bring a claim for equitable relief to enforce the terms of the plan, under Section 502(a)(3) of ERISA. For reimbursement of plan overpayments to be considered equitable relief, the reimbursement must involve the imposition of a constructive trust or equitable lien on particular funds or property in the insured's possession. However, under 42 U.S.C. § 407(a) (generally prohibiting alienation or attachment of future Social Security payments), courts are not permitted to place a lien directly on Social Security benefits themselves. The equitable lien in this case must therefore be limited to a specifically identifiable fund (the overpayments themselves) within Hall's general assets. The Plan cannot have a claim to Hall's Social Security benefits prior to the point at which they are in her possession. Thus, the Court concluded that the lien in question, imposed directly on Hall's Social Security benefits, is not permitted.