Revised IRS Correction Procedures (EPCRS) Include Helpful Changes

On July 16, 2021, the Internal Revenue Service (“IRS”) published an updated version of its correction procedures for qualified retirement plans, Revenue Procedure 2021-30, the Employee Plans Compliance Resolution System (“EPCRS”).

The revisions to EPCRS include a number of changes that are intended to help simplify and provide additional flexibility for correcting certain retirement plan failures. Below is a summary of the major changes:

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ERISA Litigation Roundup: Northern District of Illinois Dismisses ERISA Stock-Drop Suit

On August 23, 2021, the U.S. District Court for the Northern District of Illinois dismissed an ERISA stock-drop lawsuit brought against fiduciaries of Kraft Heinz Food Company’s employee stock ownership plan (ESOP), holding that the plaintiffs failed to meet the “more harm than good” pleading standard set forth in Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 428 (2014). Osborne v. Emp. Benefits Admin. Bd. of Kraft Heinz, No. 20-cv-2256, 2021 WL 3725613 (N.D. Ill. Aug. 23, 2021).

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Forced Rollovers of Small Retirement Account Balances: What to Do with Missing Participants

When a participant experiences a distribution event (e.g., terminating service with the employer), and when the participant does not affirmatively elect to take the distribution, a plan document may require that an account balance of $5,000 or less be distributed immediately, and without the participant’s consent, by rolling the account over to an IRA. This is sometimes called a “forced rollover.” When making a forced rollover, a plan must comply with the applicable plan provisions and related Internal Revenue Service (“IRS”) and Department of Labor (“DOL”) guidance.

A forced rollover can only be made if a participant’s vested account balance is $5,000 or less. If a participant’s vested account balance is greater than $5,000, the account cannot be distributed without participant consent. The only exception to that limit is for terminating defined contribution plans. Additionally, although the Code does not require a forced rollover for distributions of $1,000 or less (where a “forced” distribution can be used in lieu of a rollover), the plan document can require that mandatory distributions of $1,000 or less be rolled over to an IRA.

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New DOL FAQs Provide Guidance Regarding Lifetime Income Illustrations for Defined Contribution Plans

On July 26, 2021, the Department of Labor (Department) issued frequently asked questions (FAQs) regarding the interim final rule (IFR) on lifetime income illustrations (LIIs) that must be included in participants’ pension benefit statements for defined contribution plans on an annual basis. The IFR on LIIs, which we previously discussed in a client alert, will become effective on September 18, 2021. The FAQs respond to comments received in response to the IFR regarding the applicability date of the rules and method for furnishing benefit statements.

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ERISA Litigation Roundup: Fifth Circuit Affirms Decision in Favor of American Airlines in Suit Over Plan Investment Alternative Selection

Following the Fifth Circuit’s decision in Ortiz v. American Airlines, plan fiduciaries should be aware that the application of the Thole decision may be deemed inapposite to claims for a defined-contribution plan, where participants’ benefits are tied directly to fiduciary investment decisions.

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Thinking ESOPs: Enforceability of Arbitration Provisions — There Might Be More to the Analysis

Recently, the Sixth Circuit Court of Appeals held that a plaintiff was required to request attorneys’ fees during an arbitration of an ERISA claims dispute. Having failed to do so, the plaintiff could not subsequently seek a fee award from the district court. The Sixth Circuit held that because the parties were obligated to arbitrate their ERISA disputes, the court’s jurisdiction was limited, and the parties were obligated to raise any remedy issues during the arbitration.

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ERISA Litigation Roundup: A Ninth Circuit Ruling Reminds ERISA Plans of the Importance of Administrative Accuracy

The Ninth Circuit’s recent decision in Bafford v. Northrop Grumman (April 15, 2021) affirmed the district court’s dismissal of the plaintiffs’ breach of fiduciary duty claims under ERISA but vacated the district court’s holding that state-law professional and negligent misrepresentation claims were preempted.

Northrop Grumman (Northrup), sponsor of the ERISA-governed retirement plan at issue, delegated administration of the plan to an administrative committee (the Committee). The Committee, in turn, contracted with a record keeper to provide outside administrative services. One of the services offered by the record keeper was an online benefits portal to assist plan participants in estimating pension benefits.

For the full alert, visit the Faegre Drinker website.

Part One of Surprise Medical Billing Regulatory Guidance Outlines Specific Required Changes to Group Health Plan Payment Calculations

The No Surprises Act (the “NSA”), which was signed into law at the end of 2020 as part of the Consolidated Appropriations Act, is designed to protect consumers from unexpected medical bills.  The NSA generally applies to group health plans, healthcare providers, and health insurance issuers.  The NSA is expected to have significant and far-reaching impacts on the health industry, so it is imperative that group health plan sponsors take steps to implement regulatory guidance on the NSA as it is issued.

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PBGC Issues Interim Regulations on Special Financial Assistance for Multiemployer Pension Plans

Multiemployer pension plans are collectively bargained defined-benefit employee benefit plans that are funded by several unrelated employers for the benefit of unionized employees. In recent years, the crisis of significantly underfunded multiemployer plans has continued to grow. In response, Congress enacted the American Rescue Plan Act of 2021 (ARPA), which was signed into law on March 11, 2021. ARPA amended ERISA to establish a new program within the Pension Benefit Guarantee Corporation (PBGC) to offer “special financial assistance” (SFA) to multiemployer plans in danger of becoming insolvent; in contrast to other assistance offered by the PBGC, plans are not required to repay the SFA.

ARPA directed the PBGC to issue regulations or other guidance to prescribe the application requirements for SFA payments and for how funds are to be invested and to impose conditions on plans that receive SFA payments. On July 9, 2021, the PBGC issued this guidance in the form of interim regulations.

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