Spotlight on Benefits

IRS Issues 83(b) Election Form

Internal Revenue Code Section 83(b) elections can now be made on a standard IRS Form 15620. Previously, 83(b) elections were made on self-drafted forms. Individuals making an 83(b) election can still submit a self-drafted form, if desired.

Background on 83(b) Elections

An 83(b) election is typically made at the time a taxpayer receives a grant of unvested property, like restricted stock or profits interests. Under Code Section 83(a), property is taxed when vested and no longer subject to a substantial risk of forfeiture. Code Section 83(b) allows a taxpayer to accelerate the timing of the income tax inclusion to be as of the date of grant (prior to the property right vesting and becoming nonforfeitable). Taxpayers will make an 83(b) election in the hopes that the property’s value is lower as of the grant date than the vesting date, and to ease the administrative burden of determining the value of property at various vesting dates.

Continue reading “IRS Issues 83(b) Election Form”

Correcting Automatic Enrollment Errors

The SECURE 2.0 Act made it easier for retirement plan sponsors to correct automatic enrollment errors. As a policy matter, Congress strongly supports automatic enrollment provisions in retirement plans, and making it easier to correct errors should (hopefully) encourage retirement plan sponsors to add such features to their plans. This post focuses on the automatic enrollment correction provisions of the SECURE 2.0 Act. (For an overview of the SECURE 2.0 Act for defined contribution plan sponsors, click here.)

Correcting Automatic Enrollment Errors

Section 350 of the SECURE 2.0 Act codified a safe harbor correction for automatic enrollment errors into the Internal Revenue Code. Prior to the SECURE 2.0 Act, automatic enrollment errors were eligible for correction under EPCRS (Employee Plans Compliance Resolution System) but were often subject to a sunset provision by the IRS (although that sunset provision had been extended previously).

Continue reading “Correcting Automatic Enrollment Errors”

ERISA Moments Ep. 27: The SEC Staff Speaks Out on Standards for Rollover Recommendations

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the newest episode, The SEC Staff Speaks Out on Standards for Rollover Recommendations, below.

Continue reading “ERISA Moments Ep. 27: The SEC Staff Speaks Out on Standards for Rollover Recommendations”

IRS Announces 2025 Retirement Plan Limits

The Internal Revenue Service (IRS) recently announced the 2025 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS modestly increased the applicable limits for 2025. The following limits apply to retirement plans in 2025:

The limit on elective deferrals under 401(k), 403(b) and eligible 457(b) plans increased to $23,500.
The limit on catch-up contributions by participants aged 50 or older did not change and remains at $7,500. This means that the maximum amount of elective deferral contributions for those participants in 2025 is $31,000.
The enhanced catch-up contribution limit for those ages 60-63 in 2025 is $11,250. This means that the maximum amount of elective deferral contributions for these participants in 2025 is $34,750.
The Internal Revenue Code (Code) Section 415 annual addition limit is increased to $70,000 for 401(k) and other defined contribution plans, and the annual benefit limit is increased to $280,000 for defined benefit plans.
The limit on the annual compensation that can be taken into account by qualified plans under Code Section 417 is increased to $350,000.
The dollar level threshold for becoming a highly compensated employee under Code Section 414(q) increased to $160,000 (which, under the look-back rule, applies to HCE determinations in 2026 based on compensation paid in 2025).
The dollar level threshold for becoming a “key employee” in a top-heavy plan under Code Section 416(i)(1) is increased to $230,000.

Continue reading “IRS Announces 2025 Retirement Plan Limits”

Trends in Optional Features Available Under Secure Act 2.0

During our October 30, 2024 webinar, “It’s 2024 and … It’s Decision Time in the Retirement Plan World!” we polled our audience on their interest in adding optional features available under Secure Act 2.0 (discussed in our prior blog post). The results are in!

Based on the responses to our polls:

There is very little interest in adding Pension-Linked Emergency Savings Accounts with 60 percent of respondents selecting “Strong No” and an additional 13 percent responding “Lean No,” for a total negative response rate of 73 percent.
Similarly, a strong response against adding Emergency Personal Expense Distribution with a collective 65 percent of respondents selecting “Strong No” or “Lean No.”
Student Loan Matching Contributions were not given a passing grade with a collective 56 percent of respondents selecting “Strong No” or “Lean No.”
In contract, there was more interest in adding Qualified Birth or Adoption Distribution (a collective 40 percent “Strong Yes” or “Lean Yes”) and Domestic Abuse Victim Distribution (a collective 39 percent “Strong Yes” or “Lean Yes”).
The Disaster Recovery Distribution was in the middle, with 43 percent responding “Maybe,” 29 percent not interested in adding these to their plan and 15 percent planning to add this option to their plan.

Continue reading “Trends in Optional Features Available Under Secure Act 2.0”

Retirement Philosophy

As qualified retirement plan sponsors evaluate the various new distribution options available under SECURE 2.0 (read our overview here), it is worth asking: What is your company’s retirement philosophy? The answer to this question will help guide plan sponsors (including, where applicable, the benefits committee) in determining what changes, if any, they’d like to make to their plans.

As we’ve been advising and discussing the new SECURE 2.0 distribution options with our clients, there are three different philosophies we’ve seen:

Continue reading “Retirement Philosophy”

ERISA Moments Ep. 26: DOL’s Rules Are Stayed: What Remains in Their Place?

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the newest episode, DOL’s Rules Are Stayed: What Remains in Their Place?, below.

Continue reading “ERISA Moments Ep. 26: DOL’s Rules Are Stayed: What Remains in Their Place?”

Reproductive Health Information Protections Afforded by New HIPAA Privacy Guidance

On April 26, 2024, the U.S. Department of Health and Human Services (HHS) issued a Final Rule updating certain Health Insurance Portability and Accountability Act (HIPAA) privacy rules with respect to the disclosure of protected health information (PHI) related to reproductive health care. Essentially, the Final Rule prohibits a covered entity from using or disclosing PHI to conduct criminal, civil or administrative investigations, or to impose corresponding liability on a person seeking or providing lawful reproductive health care.

Reproductive health care is broadly defined as “health care that affects the health of the individual in all matters relating to the reproductive system and to its functions and processes.” The preamble provides a non-exhaustive list of examples, including contraception, fertility and infertility treatments, and pregnancy-related care.

Continue reading “Reproductive Health Information Protections Afforded by New HIPAA Privacy Guidance”

Eleventh Circuit Holds That Burden of Proof of Loss Causation is on Plaintiffs in ERISA Actions

In an August 2, 2024, decision in Pizarro v. The Home Depot, Inc., No. 22-13643 (11th Cir. Aug. 2, 2024), the Eleventh Circuit reaffirmed its position — and the position of the majority of federal circuit courts to address the issue — on the burden of proving loss causation for purposes of an ERISA claim for fiduciary breach. Loss causation is an element of a plaintiff’s claim for damages because of a breach of fiduciary duty, and the plaintiff bears the burden of proving causation of loss.

Pizarro involves claims by a putative class of Home Depot employees (Plaintiffs) who participated in Home Depot’s 401(k) plan. Plaintiffs alleged that the plan had excessive fees and imprudent investment options, but the United States District Court for the Northern District of Georgia granted summary judgment in Home Depot’s favor because Plaintiffs could not prove that they suffered any losses caused by a fiduciary’s alleged breach. To make such a showing, Plaintiffs would have to prove that a hypothetical “prudent” fiduciary would have not made the same choices that the defendants made. The District Court held that Home Depot’s investment decisions were “objectively prudent,” whether or not those decisions resulted from the right process, and thus Plaintiffs could not prove damages.

Continue reading “Eleventh Circuit Holds That Burden of Proof of Loss Causation is on Plaintiffs in ERISA Actions”

New DOL Fiduciary Rule Stayed: What Advisors and Insurance Agents Recommending Rollovers Should Do Now

The stay of the new DOL fiduciary rule will remain in effect until the lawsuits challenging the rule are decided and appeals are resolved. This litigation process is likely to take several years. In the meantime, the fiduciary status of advisors and agents will be measured under the current regulation’s five-part test. However, in some cases the application of that test could result, as this article explains, in apparent one-time recommendations being deemed to satisfy the five-part test. As a result, advisors, agents and their firms should carefully consider where fiduciary status for retirement accounts may apply and, in those cases, should consider complying with the conditions of an applicable prohibited transaction exemption.

To view the full alert, visit the Faegre Drinker website.