The IRS has revised its Employee Plans Compliance Resolution System (the “EPCRS”), under which errors in the administration of qualified retirement plans may be corrected.  Below, I reproduce a memo I prepared summarizing the EPCRS as revised.  If any errors arise in plan administration, consideration should be given to fixing them using the EPCRS.  Let me know if you have any questions.



In News Release IR-2016-171, Dec. 15, 2016, the Internal Revenue Service (the “IRS”) says that, as the tax filing season approaches, low- and moderate-income workers are reminded that they can take steps now to save for retirement and earn a special tax credit in 2016 and years ahead.  Here is the text of the News Release:

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2016 tax returns. People have until the due date for filing their 2016 return (April 18, 2017), to set up a new individual retirement arrangement or add money to an existing IRA for 2016. This includes the Treasury Department’s myRA. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees.

In Trustees Of The Upstate New York Engineers Pension Fund v. Ivy Asset Management, Docket No. 15-3124 (2nd Cir. 2016), the plaintiff Board of Trustees of a pension fund was suing the fund’s investment manager, Ivy Asset Management, alleging breach of fiduciary duty in failing to advise the fund in 1998 that it had become imprudent to continue as a customer of Bernard L. Madoff Investment Securities LLC.  The Board of Trustees were also suing Bank of New York Mellon Corporation, alleging that it knowingly participated in the fiduciary breach.  The district court dismissed the Board of Trustees’ complaint for failure to state a claim and for failure to allege an actual injury sufficient to establish Article III standing.  Upon review, the Second Circuit Court of Appeals (the “Court”) affirmed the district court’s dismissal.

As to the standing issue, the Court said that, in order to establish standing: (1) the plaintiff must have suffered an injury-in-fact; (2) there must be a causal connection between the injury and the conduct at issue; and (3) the injury must be likely to be redressed by a favorable decision.  Further, in a case arising under ERISA, the plaintiff must allege some injury or deprivation of a specific right that arose from a violation of an ERISA duty in order to meet the injury-in-fact requirement.  In this case, the Court found that there is no cognizable investment loss.  The Board of Trustees did not claim that the fund suffered a loss that exceeded profits, and an increase in pension funds, shown in this case, is not a recognizable loss.  Further, a breach of fiduciary duty under ERISA, as alleged here, in and of itself does not constitute an injury-in-fact sufficient for constitutional standing.  Accordingly, the Court found that the Board of Trustees failed to allege facts sufficient to show Article III standing.

This helps: IRS says (with a very limited exception) “No Amendments Required”!  The details follow.

The Internal Revenue Service (the “IRS”) has issued Notice 2016-80, which contains the Required Amendments List for 2016 (“2016 RA List”).  The major points:

Final Day of Remedial Amendment Period.  The Notice reminds us that, in the case of an individually designed qualified retirement plan, the remedial amendment period for a disqualifying provision arising as a result of a change in qualification requirements generally is extended to the end of the second calendar year that begins after the issuance of the Required Amendments List (RA List) in which the change in qualification requirements appears.  As such, the Notice provides that December 31, 2018 is the last day of the remedial amendment period-and is the deadline for adopting the amendment- with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on this 2016 RA List.

Employee Benefits-IRS Provides Guidance On Extension Of Time To Provide Information Forms To Individuals Receiving Health Coverage

In IRS Health Care Tax Tip 2016-78, November 30, 2016, the Internal Revenue Service (the “IRS”) reminds employers and others that it has extended the 2017 due date for employers and coverage providers to furnish information statements to individuals.  However, the due dates to file those returns with the IRS are not extended. A chart is provided to help interested persons understand the upcoming deadlines.

The Tax Tip makes reference to IRS Notice 2016-70, in which the IRS formally announced the extension.

In Foster v. Sedgwick Claims Management Services, Inc., No. 15-7150  (DC Cir. 2016), the appeal before the District of Columbia Court of Appeals (the “Court”) involved two issues under ERISA, with respect to private benefit plans. The first issue concerns the definition of “payroll practices” that are exempt from ERISA. The second addresses whether terms of the ERISA plan at issue in this case gives discretion to the plan administrator sufficient to warrant deferential review of the administrator’s benefit determinations.

In this case, in July 2014, Plaintiff  Kelly Foster sued Sedgwick Claims Management Services, Inc. (“Sedgwick”) and Sun Trust Bank Short and Long Term Disability Plans (together “Defendants”) under ERISA, to enforce her rights to benefits under short-term and long-term disability benefit plans that had been adopted by her employer, Sun Trust Bank (“SunTrust”). The district court found that the short-term plan was a “payroll practice” exempted from ERISA’s ambit by a Department of Labor regulation. Plaintiff  initially conceded this point. Because Plaintiff’s sole cause of action with respect to the short-term plan rested on ERISA, the District Court rejected Plaintiff’s claim. The District Court additionally found that the long-term plan gave Sedgwick, the plan administrator, sole discretion to “evaluate” an employee’s medical evidence and “determine” if the employee’s condition meets the plan’s definition of disability. The district court accordingly applied a deferential standard of review to Sedgwick’s denial of long-term disability benefits sought by Plaintiff and concluded that the administrator had neither abused its discretion nor acted arbitrarily or capriciously in assessing Plaintiff’s claim for benefits. The district court granted summary judgment to Defendants and dismissed Plaintiff’s complaint.

Plaintiff then filed a motion for reconsideration. She admitted she had conceded that the short-term disability plan was exempt from ERISA during summary judgment, but argued that the district court’s embrace of this position constituted an error of law. The district court rejected Plaintiff’s attempt to raise a new legal theory in a motion for reconsideration when the same claim could have been asserted during summary judgment. The district court denied the motion for reconsideration.

In Notice 2016-70, the Internal Revenue Service (“IRS”) extended the due date for providing information returns required under the Affordable Care Act (the “ACA”).  More specifically, the Notice extends the due date, from January 31, 2017, to March 2, 2017, for furnishing to individuals:

–the 2016 Form 1095-B, Health Coverage, required to be furnished by providers of “minimum essential coverage” (such as employers and insurers) under section 6055 of the Internal Revenue Code (the “Code”), and

–the 2016 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, required to be furnished by “applicable large employers” under section 6056 of the Code.

In Central States, Southeast and Southwest Areas Health and Welfare Fund v. American International Group, Inc., No. 15-2237 (7th Cir. 2016), a self-funded ERISA plan had sued several independent health insurers seeking reimbursement for medical expenses it paid on behalf of beneficiaries who were covered under both the plan and the insurers’ policies. The Seventh Circuit Court of Appeals (the “Court”) was asked to decide whether a lawsuit like this one—a “coordination of benefits” dispute—seeks “appropriate equitable relief” under section 502(a)(3) of ERISA. Six circuits have held that section 502(a)(3) does not authorize suits of this type because the relief sought is legal, not equitable. The Court decided to join this consensus and affirm the dismissal of the ERISA plan’s suit.

In Armani v. Northwestern Mutual Life Insurance Company, No. 14-56866 (9th Cir. 2016), the Court’s panel vacated in part the district court’s judgment in favor of the defendant in part in plaintiff’s action under ERISA, challenging a denial of benefits under a long term disability insurance policy.

In this case, the administrative record showed that the plaintiff could not sit for more than four hours a day. The district court, reviewing de novo, nonetheless upheld the insurer’s determination that the plaintiff could perform sedentary work. The Court’s panel held that the district court erred by rejecting the plaintiff’s proposed definition of “sedentary” work on the basis that it was drawn from the Social Security context. Agreeing with other circuits, the panel held that an employee who cannot sit for more than four hours in an eight-hour workday cannot perform “sedentary” work that requires “sitting most of the time.”

The Court’s panel vacated the part of the district court’s judgment denying the plaintiff his long term disability benefits and remanded for further proceedings.

In Deschamps v. Bridgestone Americas, Inc. Salaried Employees Retirement Plan, No. 15-6112 (6th Cir. 2016) (Unpublished), the following occurred. After working for ten years at a Bridgestone plant in Canada, Andre Deschamps (“Deschamps”) transferred to a Bridgestone facility in the United States. Prior to accepting this position he expressed concern about losing pension credit for his ten years of employment in Canada. But upon receiving assurances from members of Bridgestone’s management team that he would keep his ten years of pension credit, Deschamps accepted the position. For over a decade, Deschamps received various written materials confirming that his first date of service for pension purposes would be August 8, 1983. He even turned down employment opportunities from a competitor at a higher salary because of the purportedly higher pension benefits he would receive at Bridgestone.

However, in 2010, Deschamps discovered that Bridgestone had changed his first service date to August 1, 1993, the date he began working at the American plant. After failed attempts to appeal this change through Bridgestone’s internal procedures, Deschamps brought a suit against Bridgestone to restore August 8, 1983 as his first service date for pension purposes, alleging claims of equitable estoppel, breach of fiduciary duty, and an anti-cutback violation of ERISA.  The district court granted summary judgment for Deschamps on these three claims.

Upon review, the Sixth Circuit Court of Appeals (the “Court”) affirmed the district court’s grant of summary judgement in Deschamps’s favor on his equitable estoppel, breach of fiduciary duty, and anti-cutback claims, and remanded the case for further proceedings as may be appropriate. In particular, the Court concluded that the text of the Bridgestone plan (the Plan”) is at worst ambiguous, but at best, favors Deschamps’s argument that he was a covered employee in 1983 under the classification of “supervisor.” It is not untenable that Deschamps, in his capacity as a maintenance manager, was a supervisor under the language of the Plan. Further, it is undisputed that as a result of the change in the interpretation of this provision that excluded foreign employees from being classified as covered employees, Deschamps’s benefits were decreased. Therefore, Deschamps has established an anti-cutback violation and the district court did not err in granting summary judgment in his favor on this claim.