January 6, 2015

ERISA-Eighth Circuit Upholds Administrator's Denial Of Claim For Long-Term Disability Benefits.

In Johnson v. United of Omaha Life Insurance Company, No. 13-2645 (8th Cir. 2014), United of Omaha Life Insurance Company ("United") is appealing the district court's grant of summary judgment to Vicki Johnson ("Johnson") in her action filed under ERISA seeking reversal of United's denial of her claim long-term disability benefits.

In this case, from May 1995 until February 2009, Johnson worked for Colorado Real Estate and Investment Company, where she was covered under the employer's disability insurance policy (the "Plan"). United was the benefits administrator for the Plan. On February 26, 2009, the day she resigned, Johnson visited Dr. Cheryl MacDonald, her primary care physician. Dr. MacDonald took Johnson's blood pressure and diagnosed Johnson with: (1) anxiety and depression and (2) fibromyalgia and chronic pain. In October 2009, Johnson filed a claim for long-term disability benefits based on the foregoing medical conditions. United denied the claim, and Johnson filed this suit.

The issue for the Eighth Circuit Court of Appeals (the "Court") is whether United's decision to deny Johnson's claim for long-term disability should be upheld. The first question is what level of review-de novo or deference-is appropriate here. Here, the official Plan document was silent on the plan administrator's discretion to determine benefit eligibility, warranting a de novo review, but the summary plan description (the "SPD") provided the plan administrator with this discretion, supporting a deferential review. The Court felt that these two documents had to be reconciled, based on what a reasonable employee would conclude is the administrator's authority. The face of the Plan in this case states, "[t]he Certificate of Insurance . . . is made a part of the Policy." The SPD was included in the Certificate of Insurance as the final part of the consecutively-paginated booklet. Also, the SPD states on its face that "[t]his Certificate is Your ERISA Summary Plan Description for the insurance benefits described herein." Thus, a reasonable participant would understand that the policy had integrated the Certificate of Insurance along with the included SPD into the policy itself. The SPD contains a clause granting to United "the discretion and the final authority to construe and interpret the Policy," including "the authority to decide all questions of eligibility." Accordingly, the Court concluded that, under the needed reconciliation of the Plan document and the SPD, discretion was granted to United to determine eligibility for benefits, thereby resulting in United having the requisite authority to receive a deferential review.

Under a deferential review, United's decision to deny the claim for long-term disability benefits will be overturned only United has committed an abuse of discretion. The Court found that this decision was based on substantial evidence, so that there was no such abuse. The substantial evidence included an absence of objective evidence of any medical condition resulting in disability. As such, the Court concluded that United's decision to deny the claim for long-term disability benefits must be upheld.

January 5, 2015

ERISA-Second Circuit Offers Next Decision On Amara, And Says That Reformation Of The Plan Is An Appropriate Remedy

In Amara v. Cigna Corporation, Nos. 13-447-cv (Lead), 13-526 (XAP) (2nd Cir. 2014), the Second Circuit Court of Appeals (the "Court") took up the long-running dispute arising out of certain misleading communications made by CIGNA Corporation ("CIGNA") and CIGNA Pension Plan (together with CIGNA, "defendants") to CIGNA's employees regarding the terms of the CIGNA Pension Plan and, in particular, the effects of the 1998 conversion of CIGNA's defined benefit plan ("Part A") to a cash balance plan ("Part B"). The case had reached the U.S. Supreme Court.

The Supreme Court instructed the district court to consider on remand whether plaintiffs are entitled to relief under ERISA § 502(a)(3), which provides for "appropriate equitable relief" to redress specified violations of ERISA or of plan terms. On remand, the district court ordered CIGNA to provide plaintiffs with A+B benefits (that is, the plaintiffs receive their accrued benefits under Part A, in the form in which those benefits were available under Part A, and in addition their accrued benefits under Part B, in whatever form those benefits are available under Part B) and new or corrected notices, ordering such relief under §502(a)(3). Thus, the district court ordered a reformation of the plan, as the equitable relief under §502(a)(3). The defendants appealed. They argue that the district court erred in ordering equitable relief pursuant to § 502(a)(3). The plaintiffs argue that the court erred in limiting relief to A+B benefits, as opposed to affording them the benefits they would have received pursuant to Part A (a more favorable result to them).

In analyzing the case, the Court concluded that the district court did not abuse its discretion in determining that the elements of reformation have been satisfied and that the plan should be reformed to adhere to representations made by the plan administrator. Further, based on the particular facts of this case, the Court held that the district court did not abuse its discretion in limiting relief to A+B benefits

December 23, 2014

Employee Benefits-IRS Reminds Us That Retirement Plans Need Regular Review

In Retirement News for Employers, December 18, 2014 Edition, the Internal Revenue Service (the "IRS") reminds us that retirement plan needs regular care to keep it operating properly. What the IRS says is here.

December 22, 2014

Employee Benefits-IRS Reminds Us That It Is Not Too Late To Set Up A Retirement Plan 2014

In Retirement News for Employers, December 18, 2014 Edition, the Internal Revenue Service (the "IRS") reminds us that it is not too late to set up a retirement plan for 2014. What the IRS says is here.

December 19, 2014

ERISA-DOL Provides Guidance on Use Of Plan Assets By Apprenticeship and Training Programs

Introduction. In Field Assistance Bulletin ("FAB") 2012-01, the U.S. Department of Labor (the "DOL") provided guidance, intended for EBSA enforcement personnel, on the use of plan assets by apprenticeship and training plans to pay for graduation ceremonies and advertising. As a supplement, the DOL has now issued FAB 2012-02, which provides guidance on the expenditure of plan assets on apprenticeship skills contests or competitions. Here is what the new FAB says:

Background. Apprenticeship and training plans established by employers or labor organizations are "employee benefit plans" under ERISA, and are subject to the fiduciary standards in Part 4 of ERISA. ERISA section 404(a)(1) provides that a plan fiduciary shall discharge his duties: (1) solely in the interest of the participants; (2) prudently; and (3) for the exclusive purpose of (a) providing benefits to participants and their beneficiaries, and (b) defraying reasonable expenses of administrating the plan.

In the context of apprenticeship and training plans, the exclusive purpose rule and the duty to manage plan assets prudently require plan fiduciaries to ensure the reasonableness of plan expenses in light of the educational objectives of the training program. In every instance, a plan must be able to justify expenses as appropriate means of carrying out their mission as benefit plans. When fiduciaries expend plan assets without reasonably determining that the expenditures are likely to promote legitimate plan objectives, they breach their core fiduciary obligations under ERISA and are personally liable for the resulting loss of plan assets. Moreover, expenses should be permitted under the terms of the plan, and approved by a responsible plan fiduciary in accordance with internal accounting, recordkeeping, and administrative controls designed to prevent inappropriate, excessive, or abusive expenditures of plan assets.

Paying For Participation In A Skills Competition Or Contest. Apprenticeship plans provide training and apprenticeship opportunities to plan participants. Competitions can promote the plan's legitimate goals both by directly providing training benefits to plan participants and by helping plan fiduciaries assess the effectiveness of their plan's training programs. Where this is the case, plans may treat the necessary costs of a plan's engagement in competitions as costs of administering the plan. In accordance with ERISA section 404(a)(1)(A), the plan may defray such costs where they are permitted under the terms of the plan, in the plan's interests, and are reasonable. Such expenses also should be approved by a responsible plan fiduciary in accordance with internal accounting, recordkeeping, and administrative controls designed to prevent inappropriate, excessive, or abusive expenditures of plan assets.

Thus, for example, a plan may pay reasonable expenses properly and actually incurred on behalf of apprentices participating as contestants in the skills contest, such as transportation to and from the competition, registration fees, along with accommodations and meals, if necessitated by out-of-town travel. A plan may also pay lost wages of the apprentices due to their absence from employment while participating in a competition.

Prizes for apprentices competing in the skills contest would be a permissible plan expense. The prizes should be consistent with the training purposes of the plan, which may include, for example, credits to cover plan-related tuition expenses or tools and equipment used in the trade. The amounts spent on such prizes would not be subject to the modest amount limitation applicable to gifts to recognize people who assist in organizing or conducting competitions (see discussion below), but should be reasonable in light of the financial situation of the plan and other relevant circumstances (such as the size and level (e.g., local, regional, national, international) of the competition), or could be donated in whole or in part by industry employers or trade associations.

A plan also may pay reasonable travel expenses of individuals other than apprentices (e.g., instructors) if they play a necessary role in the conduct of a competition (e.g., setting up the contest site or serving as judges). It may also be permissible in certain circumstances to pay for plan trustees or other plan officials to attend and observe the competition in order to assess possible improvements in the plan's training program. The approving plan fiduciary should ensure that any such observers have adequate experience to make an informed evaluation.

Use of plan assets to pay travel expenses for others, or to pay for hotel accommodations and meals for days outside of the competition itself, would not be permissible.

Payment For Expenses Of Organizing And Conducting The Competition. Expenses for organizing or conducting competitions are payable from plan assets where: (1) they are reasonable in light of the role played by the competition in supporting the training program; (2) they are approved in accordance with the terms of the plan and internal accounting, recordkeeping, and administrative controls designed to prevent inappropriate, excessive, or abusive expenditures of plan assets; and (3) the amount of the expense is reasonable in proportion to the amount of funds expended on the delivery of the primary apprenticeship and training benefits and is for costs of the competition.

Conducting and organizing a competition may require the expenditure of plan assets on the venue for the competition, travel, transport of necessary equipment, and communications to plan participants about the event. Gifts to those who assist in organizing or conducting competitions of modest value (e.g., $25 gift cards) would be permissible.

Similarly, modest expenses for T-shirts and similar apparel that bear the logo of the plan could serve a legitimate plan purpose of promoting and marketing the apprenticeship program. Further, promotional advertisement of a competition in order to encourage the participation of apprentices and the support of employers also would be consistent with this purpose.

The prohibited transaction provisions of ERISA section 406(b) prohibit a fiduciary of a plan from dealing with the assets of a plan in his own interest or own account. Thus, fiduciaries involved in the decision for the plan to conduct or participate in a contest may not benefit themselves through the expenditure of plan assets related to that contest beyond the reimbursement of direct expenses related to organizing or participating in the conduct of the contest.

Permissible Travel Expenses. Assuming compliance with the above general principles, permissible plan expenses would include the reasonable costs of meals, travel (e.g., airfare), and accommodations. Costs attendant to such travel, such as reasonable expenses for transportation from the airport to the hotel or competition site and return, baggage fees, airport parking or shuttle fees, and shipping costs for tools, equipment, and supplies necessary to conduct or compete in the contest generally would be permissible plan expenses. Alternatively, a plan could reimburse some travel expenses by using a reasonable "per diem" amount.

Competitions may sometime include a celebratory meal to recognize participants, judges, volunteers, and organizers, and to present awards to the contest winners. In general, if a plan was paying authorized attendees per diem expense in connection with their travel to participate in the competition, a plan could use those funds to cover the costs for those individuals to attend such dinners. Plans would have to deduct that amount from the meal or per diem reimbursement that they would otherwise pay to the apprentice or other authorized attendee. In other cases, for example, where the skills competition is local and attendees, therefore, are not receiving per diem expense, the standards articulated in FAB 2012-01 for use of plan assets to pay for graduation ceremony expenses would apply to the use of plan assets to pay for such an awards dinner.

Permissible plan expenses would not include, for example, the costs associated with the personal itinerary of such participants such as hotel, meals or travel accommodations for days not associated with necessary travel to or from the competition or during the competition itself, or costs to upgrade travel tickets or hotel rooms (e.g., from coach to business class).

Reimbursements For Wages Lost. In some cases, rather than paying the apprentice directly for lost wages due to participation in a skills contest, the plan may instead reimburse employers who agree to pay plan participants their wages and make related benefit plan contributions for time away from work to take part in a contest. See the FAB for details.

December 16, 2014

Employee Benefits-IRS Provides Guidance On Maintaining Retirement Plan Records

In Employee Plans News, Issue 2014-22, December 9, 2014, the Internal Revenue Service (the "IRS") provides guidance on maintaining retirement plan records. Here is what the IRS said.
As an employer sponsoring a retirement plan, you are required by law to keep your books and records available for review by the IRS. Having these records will also facilitate answering questions when determining participants' benefits. Employee plans covers the qualification of pension, annuity, profit sharing and stock bonus plans, IRAs, SEPs, SIMPLEs, tax sheltered annuities, and 457 plans.

Which plan records should you keep in case of an IRS audit?

As a plan sponsor you should keep the plan and trust document, recent amendments, determination and approval letters, related annuity contracts and collective bargaining agreements. The records you keep are based on the type of plan you sponsor.
For example:

SEP Plans - Keep Form 5305-SEP or 5305A-SEP as your plan document
SIMPLE IRA plans - Keep Form 5304-SIMPLE or 5305-SIMPLE as your plan document
Profit sharing, 401(k) or defined benefit plans - Keep your plan document, adoption agreement (if you have one) and all plan amendments

Also keep:

• trust records such as investment statements, balance sheets, and income statements
• participant records such as census data, account balances, contributions and earnings, loan documents and information, compensation data and participant statements and notices

How long should you keep plan records?

You should keep retirement plan records until the trust or IRA has paid all benefits and enough time has passed that the plan won't be audited. Retirement plans are designed to be long-term programs for participants to accumulate and receive benefits at retirement. As a result, plan records may cover many years of transactions. The Internal Revenue Code and Income Tax Regulations as well as the Employee Retirement Income Security Act of 1974, as amended (ERISA) require plan sponsors to keep records of these transactions because they may become material in administering pension law.

If you're audited

You are required to provide complete, accurate records in either paper or electronic format if the IRS requests them during an audit.

Additional resources

Revenue Procedure 98-25 - lists the basic requirements for recordkeeping when a taxpayer maintains their records in an automatic data processing system.

December 15, 2014

Employee Benefits-IRS Provides Reminder On Required Distributions From Retirement Plans and IRAs

In Employee Plans News, Issue 2014-22, December 9, 2014, the Internal Revenue Service ("IRS") reminded taxpayers born before July 1, 1944, that they generally must receive payments from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31. Here is what the IRS said.

Known as required minimum distributions (RMDs), these payments normally must be made by the end of 2014. But a special rule allows first-year recipients of these payments, those who reached age 70½ during 2014, to wait until as late as April 1, 2015 to receive their first RMDs. This means that those born after June 30, 1943 and before July 1, 1944 are eligible for this special rule. Though payments made to these taxpayers in early 2015 can be counted toward their 2014 RMD, they are still taxable in 2015.

The required distribution rules apply to owners of traditional IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2014 RMD, this amount was on the 2013 Form 5498 normally issued to the owner during January 2014.

The special April 1 deadline only applies to the RMD for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, for example, a taxpayer who turned 70½ in 2013 (born after June 30, 1942 and before July 1, 1943) and received the first required payment on April 1, 2014 must still receive the second RMD by Dec. 31, 2014.

The RMD for 2014 is based on the taxpayer's life expectancy on Dec. 31, 2014, and their account balance on Dec. 31, 2013. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Use the online worksheets on IRS.gov or find worksheets and life expectancy tables to make this computation in the Appendices to Publication 590.

For most taxpayers, the RMD is based on Table III (Uniform Lifetime) in the IRS publication on IRAs. So for a taxpayer who turned 72 in 2014, the required distribution would be based on a life expectancy of 25.6 years. A separate table, Table II, applies to a taxpayer whose spouse is more than 10 years younger and is the taxpayer's only beneficiary.

Though the RMD rules are mandatory for all owners of traditional IRAs and participants in workplace retirement plans, some people in workplace plans can wait longer to receive their RMDs. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulations in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.Find more information on RMDs, including answers to frequently asked questions, on IRS.gov.

December 11, 2014

Employment-Eighth Circuit Finds That Plaintiff Has Made Out A Case Of An ADEA Violation

In Tramp v. Associated Underwriters, Inc., No. 13-2546 (8th Cir. 2014), Marjorie Tramp appeals from the district court's grant of summary judgment in favor of her former employer Associated Underwriters, Inc., on Tramp's claims of, among other things, wrongful termination on the basis of age in violation of the Age Discrimination in Employment Act (the "ADEA"). Upon reviewing the case, the Eighth Circuit Court of Appeals (the "Court"), overturned the district court's judgment, ruled that Tramp has presented a submissible case of age discrimination for determination by a fact-finder, and remanded the case back to the district court on that basis.

Why did the Court so rule on the ADEA issue? The Court noted that Tramp claims that Associated Underwriters terminated her because her age affected its employee health insurance costs. The Court said that, to prevail on a claim under the ADEA, Tramp must prove by a preponderance of the evidence (which may be direct or circumstantial) that age was the `but-for' cause of the challenged employer decision. To so prove this point, Tramp must first establish a four-part prima facie case of age discrimination by showing that: (1) she is over 40 years old, (2) she met the applicable job qualifications, (3) she suffered an adverse employment action, and (4) there is some additional evidence that age was a factor in the employer's termination decision. Once Tramp establishes a prima facie case, the burden of production shifts to the employer to articulate a legitimate, nondiscriminatory reason for its adverse employment action. If the employer does so, Tramp must show that the employer's proffered reason was pretext for discrimination. At all times, Tramp retains the burden of persuasion to prove that age was the `but-for' cause of the termination.

As to the prima facie case, the Court said that Tramp has established elements (1) to (3) and that only element (4) is in question. Here, Associated Underwriters' may have terminated Tramp to reduce health care costs. In turn, termination to effect such reduction may have been a proxy for termination due to age. That is for the finder of fact to determine. Thus, the Court concluded that Tramp made out her prima facie case, and remanding the case back to the district court is appropriate.

December 10, 2014

ERISA-Eighth Circuit Holds That Insurer Did Not Abuse Its Discretion In Denying Claim For Disability Benefits

In Hampton v. Reliance Standard Life Insurance Company, No. 13-2782 (8th Cir. 2014), after being diagnosed with insulin-dependent diabetes mellitus, Christopher Hampton ceased work as an over-the-road truck driver for Ozark Motor Lines, Inc. Pursuant to the company's employee benefit plan--Ozark Motor Lines Inc. Benefit Plan (the "Plan")--which is governed by ERISA, Hampton submitted a claim for long-term disability benefits to Reliance Standard Life Insurance Company, the Plan's insurer and claims-review fiduciary. Reliance Standard concluded that Hampton was not disabled under the terms of the Plan and denied the claim on that basis. Hampton sued Reliance Standard and the Plan, arguing that Reliance Standard abused its discretion. The district court granted judgment on the record for Hampton. Reliance Standard and the Plan appeal.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") said that where, as here, an ERISA-governed employee benefit plan grants discretion to the plan administrator or another fiduciary, such as the claims-review fiduciary, to interpret the plan and to determine eligibility for benefits, we review the fiduciary's decision for abuse of discretion. Under this standard of review, we must uphold Reliance Standard's decision so long as it is based on a reasonable interpretation of the Plan and is supported by substantial evidence. Where a fiduciary both evaluates claims for benefits and pays benefits claims, the court still applies the deferential abuse-of-discretion standard, but the fiduciary's conflict of interest is one factor to be considered in the review.

The Court concluded that Reliance Standard's interpretation and application of the Plan is reasonable. Reliance Standard interpreted the Plan to require, when claiming long-term disability benefits, "evidence that one is physically or mentally incapable of performing the material duties of his occupation," independent of his loss of a license. Mere loss of license due to a medical condition-as happened to Hampton -does not mean that Hampton is disabled for purposes of the Plan. The Court further concluded that Reliance Standard's determination that Hampton was not totally disabled, within the meaning of the Plan, was supported by substantial evidence. As such, the Court held that Reliance Standard did not abuse its discretion in denying the long-term disability benefits, and the Court reversed the district court's judgment.

December 9, 2014

Employee Benefits-IRS Issues 2014 Cumulative List of Changes in Plan Qualification Requirements/Extends Deadlines For Upcoming Filings

The IRS has issued Notice 2014-77. The Notice contains the 2014 Cumulative List of Changes in Plan Qualification Requirements (2014 Cumulative List) described in section 4 of Rev. Proc. 2007-44. The 2014 Cumulative List is to be used by plan sponsors and practitioners submitting determination letter applications for plans during the period beginning February 1, 2015 and ending January 31, 2016.

The Notices says that plans using this Cumulative List will primarily be single employer individually designed defined contribution plans and single employer individually designed defined benefit plans that are in Cycle E. Generally an individually designed plan is in Cycle E if the last digit of the employer identification number of the plan sponsor is 5 or 0, or if the plan is a § 414(d) governmental plan (including governmental multiemployer or governmental multiple employer plans) for which an election has been made by the plan sponsor to treat Cycle E as the second remedial amendment cycle for the plan.

To help filers for the current filing cycles, in Announcement 2014-41, the IRS extends from February 2, 2015 to June 30, 2015, the deadline for submitting on-cycle applications for opinion and advisory letters for pre-approved defined benefit plans for the plans' second six-year remedial amendment cycle. This announcement also provides a two day extension, from Saturday, January 31, 2015, to Monday, February 2, 2015, for Cycle D on-cycle submissions (primarily individually designed plans including multiemployer plans).

December 8, 2014

Employee Benefits-IRS Updates Its Rollover Chart

Anyone up for a rollover? In Employee Plans News, Issue 2014-19, November 24, 2014, the IRS make available a one-page chart which, as of November 17, 2014, shows which rollovers from and to retirement plans and IRAs are permitted. Take a look.

December 4, 2014

ERISA-Eleventh Circuit Rules That Action By The Defendant To Stop Benefit Payments Causes The Statute Of Limitations On Filing Suit To Start Running

In Witt v. Metropolitan Life Insurance Co., No. 14-11349 (11th Cir. 2014), the Eleventh Circuit Court of Appeals (the "Court") was asked to determine whether the plaintiff Don Witt's lawsuit, seeking to recover disability benefits allegedly due from May 1997 to the present, is barred by the applicable statute of limitations and, if so, whether the defendants waived that statute-of-limitations defense.

In this case, from May 18, 1972, until December 29, 1994, Witt worked as a senior operations specialist with Shell Oil Company. In connection with his employment, Witt gained access to short-term and long-term disability insurance through the Shell Oil Long Term Disability Plan (the "Plan"), whose long-term disability claims are administered by Metropolitan Life ("MetLife"). In January, 1997, Witt filed a claim for disability benefits based on a number of medical problems. MetLife approved this claim. However, on May 22, 1997, MetLife terminated Witt's claim, effective May 1, 1997, for failure to provide adequate supporting medical records. After filing an unsuccessful appeal with MetLife in 2011, which MetLife entertained as a "courtesy review" but denied, Witt brought this suit for reinstatement of the benefits in 2012.

In analyzing the case, the Court said that, because Congress did not specify a limitations period for a claim-of-benefits ERISA action, district courts must apply the forum state's statute of limitations for the most closely analogous action. The applicable statute here is Alabama's six-year statute of limitations. Federal law determines when the statute begins to run. Witt contends the limitations period did not begin to run until May 4, 2012, when MetLife issued a final, conclusive, and written decision denying him benefits following the courtesy review. In response, MetLife contends that the limitations period began to run when MetLife stopped making monthly payments to Witt because, at that point, Witt knew or should have known that his claim had been denied.

The Court said that, as in this case, in the absence of a final or formal denial, an ERISA cause of action accrues--and the limitations period begins to run--when the claimant has reason to know that the claim administrator has clearly repudiated the claim or amount sought. MetLife's conduct-failing to provide benefits on or after May 1, 1997- demonstrated a clear and continuing repudiation of Witt's rights, and therefore caused the six year statute of limitations to start running (and expire well before 2012). Witt's claim is thus time-barred. Further, MetLife's subsequent courtesy review in 2011 did not restart the statutory clock. Additionally, MetLife did not waive any defense based on the statute of limitations by failing to specify untimeliness as a basis for denying the claim after its courtesy review.

December 3, 2014

Employee Benefits-IRS Provides Guidance On Qualified Transportation Fringe Benefits

In Revenue Ruling 2014-32, the Internal Revenue Service (the "IRS") provides guidance on:

(1) whether certain employer-provided transportation benefits, provided through electronic media, are excluded from gross income under Code sections 132(a)(5) and 132(f) (and from wages for employment tax purposes) (concluding that in some cases "yes", in other cases "no");

(2) whether, under certain facts, qualified transportation fringe benefits include delivery charges incurred by an employee in acquiring transit passes (concluding "yes" under those facts); and

(3) whether, under certain facts, qualified transportation fringe benefits can be provided through a bona fide reimbursement arrangement (concluding "no", beginning after 2015).
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December 2, 2014

Employee Benefits-New 402(f) Notices Available!

In Notice 2014-74 (the "Notice"), the Internal Revenue Service (the "IRS") amends the two safe harbor explanations in Notice 2009-68. Those explanations can be used to satisfy the requirement under Code section 402(f) that certain information be provided to recipients of eligible rollover distributions. These amendments relate to the allocation of pre-tax and after-tax amounts, distributions in the form of in-plan Roth rollovers, and certain other clarifications to the two safe harbor explanations. The Notice also includes two new, complete model notices which can be used to satisfy section 402(f), and which incorporate the amendments. The Notice indicates that the amendments to the safe harbor explanations, and the included model notices, may be used for plans that apply the guidance in section III of Notice 2014-54, with respect to the allocation of pretax and after-tax amounts.

November 25, 2014

Employment-US Labor Department Signs Agreement With New Hampshire Department Of Labor To Reduce Misclassification Of Employees

According to a News Release (11/12/2014), officials from the U.S. Department of Labor and the New Hampshire Department of Labor have signed amemorandum of understanding, with the goal of protecting the rights of employees by preventing their misclassification as something other than employees, such as independent contractors or other nonemployee statuses. The News Release states the following:

Under this agreement, both agencies will share information and coordinate law enforcement. The memorandum of understanding represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The New Hampshire Department of Labor is the latest state agency to partner with the Labor Department.

Business models that attempt to change or obscure the employment relationship through the use of independent contractors may not be used to evade compliance with federal labor law. Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem, as these employees often are denied access to critical benefits and protections -- such as family and medical leave, overtime compensation, minimum wage pay, Unemployment Insurance, personal protective equipment and retirement benefits -- to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.

Memoranda of understanding with state government agencies arose as part of the department's Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. Alabama, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington state agencies have signed similar agreements. More information is available on the Department of Labor's misclassification website athttp://www.dol.gov/misclassification/.