Category: Benefits

You might want to try a search with Viewzi. PCMagazine has this to say about it:

Viewzi aggregates search results from Google, Yahoo!, YouTube, and more, and lets you pick how you want them presented. Do you want just the text from the Web pages? Just the photos? Video previews (shown here)? Searching with Viewzi is fun and, depending on your search term, can actually be more convenient than a simple Google search.

(Try searching “benefits blogs” with the term here.)

According to a federal district court in Iowa, an employer mischaracterized its sales team as “independent contractors.” The Tax Update Blog discusses the case here. The IRS held against the employer in spite of the following:

. . . The salesmen testified they were provided with no health benefits or other typical employee benefits.

I have updated my Section 409A links section in the side-bar to include all of the IRS Notices which have been issued since 2005. (If I missed one, please let me know.)

The Treasury Department today issued Revenue Ruling 2008-45, which answers this question: Is the exclusive benefit rule of § 401(a) of the Internal Revenue Code violated if the sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer of the sponsorship of the plan is not in connection with a transfer of business assets, operations, or employees from the employer to the unrelated taxpayer? The IRS answers “yes” in the ruling. However, in conjunction with the ruling, they have announced that, with the help of the PBGC, the DOL, and the Commerce Department, they have put together “a legislative framework of principles” that are intended to guide the development of legislation that would permit such transactions for “frozen” plans. See the Announcement here for the legislative framework they are recommending. (Apparently, this effort is intended to address situations such as those described in this article here.)

JCEB has posted its 2008 Agency Q & As:

• IRS Q & As
• DOL Q & As
• PBGC Q & As
• CMS Q & As

Many readers will be interested in DOL Q & A 19 in which the DOL appears to take issue with what many practitioners had thought might be a viable structure for insulating corporate boards of directors from the ongoing fiduciary duty to monitor:

Question 19: A corporation and its directors and officers are aware of the view that a person who or that has a discretionary power to appoint a fiduciary is, to the extent of that power, a fiduciary – with some responsibility to monitor his, her, or its appointee’s performance to the extent needed in evaluating whether to remove the appointee. In establishing a new pension plan, the corporation, by its governing board, adopts a plan document that specifies that a particular named person is the plan’s administrator, trustee, and named fiduciary. Although the plan document includes an amendment provision, that provision states that an amendment that purports to change or remove the administrator, trustee, or named fiduciary is void. The plan document also provides that no person other than a court can remove the plan’s administrator, trustee, or named fiduciary, and that any such purported removal is void. Is it clear that the corporation and its directors and officers need not monitor the fiduciary’s performance?

Proposed Answer 19: Yes. A person can’t have a duty to consider whether to perform an act that would be void.

DOL Answer 19: The DOL staff disagrees with the proposed answer. The selection of plan fiduciaries, such as a plan’s administrator, trustee, or named fiduciary, is a fiduciary function and those who appoint the fiduciaries remain responsible for monitoring those whom they have selected, regardless of any plan language to the contrary. Any amendment that would purport to eliminate a plan fiduciary’s responsibility to monitor, and, if need be, change or remove the plan’s administrator, trustee, or named fiduciary would be contrary to ERISA. See also ERISA section 404(a)(1)(D) – A plan fiduciary shall discharge his duties with respect to a plan in accordance with the documents and instruments governing the plan insofar as such documents are consistent with the provisions of Title I and title IV. See also 29 C.F.R. § 2509.75-8, Q D-4, Amicus Brief of DOL in Tittle v. Enron, In the United States District Court for the Southern District of Texas, Houston Division, Civil Action No. H-01-3913 and Consolidated Cases, Aug. 30, 2002.

The traditional disclaimer stated on the JCEB website applies:

The questions are submitted by ABA members and the responses are given at a meeting of JCEB and government representatives. The responses reflect the unofficial, individual views of the government participants as of the time of the discussion, and do not necessarily represent agency policy. Reports on each of the discussions are prepared by a designated JCEB representative, based on the notes and recollections of the JCEB representatives at the meeting, and may be reviewed by agency personnel. The questions are submitted in advance to the agency, and it is understood that these reports will be made available to the public.

If you read my previous post here discussing a recent Tax Court case illustrating the perils of borrowing from a 401(k) plan, you will also want to read this Advisory Alert just posted on the SEC’s website regarding 401(k) plan debit cards: “401(k) Debit Cards: What You Might Not Know.” See also this FINRA Alert as well: “401(k) Debit Cards—Think Before You Swipe.”

More links:

• Read about recent attempts by legislators to ban 401(k) debit cards here: “Schumer, Kohl Offer Legislation to Ban Debit Cards That Raid Retirement Accounts.” The lawmakers are arguing that the average American should not be allowed such easy access to funds in their 401(k) when they are saving too little already.
• Read an article about the 401(k) debit card generally: “Retirement debit cards sound like a nightmare, but have some benefits.”

There has been a great deal written about why borrowing from your 401(k) plan is a bad idea. If you want to read a good case in point that illustrates how things can go awry when it comes to a 401(k) plan loan, read the recent Tax Court case of Tilley v. Commissioner. The participant in that case had borrowed from her 401(k) account to purchase a home, but when she was terminated, couldn’t pay the loan off. Even though the participant received a Form 1099R indicating that the unpaid loan balance was taxable, the participant failed to pay any additional tax on the distribution. The IRS ended up assessing tax on the loan balance, a 10% early distribution penalty as well as a 20% negligence penalty. After trying to allege that a call center representative for the provider had indicated that the distribution was not taxable, the Tax Court stated that it was not reasonable for the taxpayer “to rely on a. . . call-center representative for tax advice.” The participant was also hoping to obtain a waiver of the 60-day rollover requirement from the Tax Court, offering to put the money in an IRA, but the Tax Court declined:

Four years later, petitioners urge the Court to grant them a waiver of the 60-day requirement. See sec. 408(d)(3)(I). They argue that [the provider] made a mistake sending them the check and that they would now be willing to put the money into [the participant’s] IRA. On these facts we decline to grant the waiver, and we do so without offense to equity or good conscience.

(The case was brought before the Tax Court under Internal Revenue Code section 7463 pertaining to amounts in controversy of $50,000 or less. That is why the opinion states that the case is not precedential.)

From the TaxGuru here.

How much is the benefit of health insurance worth to employees? According to a study at the Center for Retirement Research at Boston College, forty-seven percent (47%) of individuals with health insurance said they would not be willing to forego health insurance, even if offered a 30-percent raise.

The DOL has issued its new fiduciary disclosure requirements for participant-directed individual account plans. You can access the following regarding the regulations:

News Release
Fact Sheet
Preamble and Prop. DOL Reg. Secs. 2550.404a-5 and 2550.404c-1
Model Comparative Chart

Some brief observations:

(1) The regulations have a proposed effective date of January 1, 2009 and would apply to all participant-directed plans, regardless of whether or not they have sought to comply with ERISA section 404(c).

(2) The DOL states its legal basis for issuing the regulations in the preamble:

The Department believes, as an interpretive matter, that ERISA section 404(a)(1)(A) and (B) impose on fiduciaries of all participant-directed individual account plans a duty to furnish participants and beneficiaries information necessary to carry out their account management and investment responsibilities in an informed manner. In the case of plans that elected to comply with section 404(c) before finalization of this proposal, the requirements of section 404(a)(1)(A) and (B) typically would have been satisfied by compliance with the disclosure requirements set forth at 29 CFR § 2550.404c–1(b)(2)(i)(B). However, the Department expresses no view with respect to plans that did not comply with section 404(c) and the regulations thereunder as to the specific information that should have been furnished to participants and beneficiaries in any time period before this regulation is finalized.

(Query regarding that last statement and how it might impact current fee litigation.)

(3) The proposed regulation would amend the regulation under ERISA section 404(c), 29 CFR 2550.404c–1, to make the disclosure requirements for section 404(c) compliant plans consistent with those that would apply to all participant-directed individual account plans generally.

(4) The Department estimates that approximately 437,000 participant directed individual account plans covering 65,269,000 participants would be affected by the proposed regulation. Of these plans, 275,000 plans, covering 49,212,000 participants and beneficiaries are reported to comply with ERISA section 404(c), and the remaining 162,000 plans covering 16,057,000 participants and beneficiaries are not.

(5) The Department assumes that in the year of implementation, all 437,000 affected plans will conduct a legal review to verify their compliance with the proposed regulation and prepare the required disclosures. The Department estimates that the review would, on average, take one-half hour of a legal professional’s time at an (in-house) hourly rate of $113 resulting in a total aggregate estimate of approximately 218,000 legal hours at an equivalent cost of approximately $24,628,000.

(Doubtful that it will only take one-half hour.)

(6) Regarding the required investment-related information, it is interesting what the DOL has to say about risk:

. . . [T]he Department attempted to define the most essential information about available investment options that should be automatically furnished in a comparative format to participants and beneficiaries, and included that information in the proposal. That information includes historical and benchmark performance, and fees and expenses. In addition, the Department considered including information on risk, but believes that risk information is not easily translated into a simple uniform comparative format that can be described in a regulatory standard. The Department notes that in most cases more detailed information, including information on risk is readily available to participants and beneficiaries through Internet Web sites, should they decide to review such information in assessing the various investment options available under their plan.

(7) Written comments on the proposed regulation should be received by the Department of Labor on or before September 8, 2008. You can make your comments here. (Click on “Add Comments.”)