In Case You Missed It: Spotlight on Benefits – 2024 Winter

Written by members of Faegre Drinker’s benefits and executive compensation team, this blog features analysis and information on matters related to retirement plans, health and welfare plans, ESOPs, fiduciary governance, and other benefits issues.

This quarterly digest provides links to our most popular posts during the past few months so that you can catch up on what you missed or re-read them.


ERISA Moments, Ep. 13: Rollover Recommendations Will Be Fiduciary Advice … And What About Withdrawals?

By Bradford Campbell and Fred Reish
We’re looking at the DOL’s fiduciary proposal and the prohibited transaction exemptions associated with it. In this episode, Fred and Brad are talking about rollovers. The proposed definition of fiduciary advice basically says that a one-time investment recommendation can result in an adviser or insurance agent becoming a fiduciary.

Five Habits of the Healthy Health Plan Fiduciary

By Kendra L. Roberson
As it is often said, “the only constant in the world is constant change.” So it is important for health plan fiduciaries to periodically review the fundamentals for consistency and compliance to avoid risk and costly mistakes. We provide a health plan fiduciary checklist — with five actions that health plan fiduciaries can take to help keep an organization safe and successful.

Roth Employer Contributions

By Doug Heffernan and Mark Rosenfeld
On December 20, 2023, the IRS issued Notice 2024-2, which provides question-and-answer guidance on various aspects of the SECURE 2.0 Act. This post focuses on the ability to make employer contributions (match or nonelective) as Roth contributions under SECURE 2.0 Act, Section 604.

DOL Finalizes Changes to the Qualified Professional Asset Manager (QPAM) Exemption: What Investment Managers Need to Know

The changes will primarily impact registered investment advisers, banks, and insurance companies who manage retirement plan or IRA assets directly, or who manage certain types of funds or other vehicles for which the underlying assets are deemed to constitute “plan assets” under the look-through rules in ERISA and DOL regulations.

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

Can ChatGPT be Your ERISA Counsel?

Is ChatGPT sufficiently reliable to provide advice on employee benefits matters? Not yet, but ChatGPT and generative Artificial Intelligence may likely be useful tools for employee benefits attorneys in the future.[1]

As it is late March, we asked ChatGPT 3.5 to solve a common issue: an individual made deferrals above the Internal Revenue Code § 402(g) limit (although typically these are referred to as “excess deferrals,” in the ChatGPT 3.5 reply it uses both “excess contribution” or “excess deferral” interchangeably. In the Faegre comments, we use the term “excess deferral.”). As background, the Internal Revenue Code limits the amount of employee deferrals that can be made within a participant’s taxable year (almost always the calendar year). In 2023, that limit was $22,500. An individual who participates in more than one 401(k)/403(b) plan is responsible for monitoring whether they exceed the limit with respect to all plans in which the individual participates.

Continue reading “Can ChatGPT be Your ERISA Counsel?”

The Retirement Income Challenge in 401(k) Plans: Overcoming Legal Obstacles

Plan sponsors have been concerned about their fiduciary responsibilities for the selection of insurance companies to provide guaranteed income in their defined contribution plans, such as 401(k) plans. The SECURE Act of 2019 created an easy-to-satisfy fiduciary safe harbor to protect plan sponsors and to facilitate insured retirement income in those plans.

Read more from the Retirement Income Institute Alliance for Lifetime Income.

 

Inclusion of Guaranteed Retirement Income Solutions in 401(k) Plans: Impact of SECURE 2.0

The SECURE 2.0 Act of 2022 expressed Congressional policy to encourage defined contribution plans, such as 401(k) plans, to offer insured retirement income to their participants. The Act included several provisions that ease compliance barriers when insured income products are offered in plans.

Read more from the Retirement Income Institute Alliance for Lifetime Income.

 

IRS Announces Phase 2 of Pre-Examination Compliance Pilot Program

Recently, the IRS announced phase two of its expansion of the Pre-Examination Compliance Pilot Program. Under the pilot program, an employer may limit or entirely avoid an impending IRS audit if they promptly correct any identified errors via the IRS’s Self Correction Program (SCP). During phase two, the IRS will notify employers by letter that their retirement plan was selected for upcoming examination. The employer then has 90 days to review their plan’s documents and operations to determine if they meet current tax code requirements.

If the employer identifies any errors, they may self-correct the errors under the SCP. Errors that aren’t eligible for correction under the SCP can be corrected by requesting a closing agreement, and the IRS will use the favorable Voluntary Correction Program fee structure to determine the sanction amount payable.

Continue reading “IRS Announces Phase 2 of Pre-Examination Compliance Pilot Program”

Roth Employer Contributions

On December 20, 2023, the IRS issued Notice 2024-2, which provides question-and-answer guidance on various aspects of the SECURE 2.0 Act. This post focuses on the ability to make employer contributions (match or nonelective) as Roth contributions under SECURE 2.0 Act Section 604.  (For an overview of SECURE 2.0 for defined contribution plan sponsors, click here.)

Overview of SECURE 2.0 Language on Employer Roth Contributions

Section 604 SECURE 2.0 Act permits employers to make employer contributions, both matching and nonelective contributions, as Roth contributions to a 401(k), 403(b), or 457(b) plan. To be designated as a Roth contribution, the employer contribution must be fully vested (nonforfeitable) when made. The Roth contribution is not excluded from gross income. The ability to make Roth employer contributions was effective with respect to employer contributions made after December 29, 2022, the date of enactment of the SECURE 2.0 Act.

Continue reading “Roth Employer Contributions”

In Case You Missed It: Spotlight on Benefits – Winter 2024

Written by members of Faegre Drinker’s benefits and executive compensation team, this blog features analysis and information on matters related to retirement plans, health and welfare plans, ESOPs, ERISA litigation, fiduciary governance, and other benefits issues.

This quarterly digest provides links to our most popular posts during the past few months so that you can catch up on what you missed or re-read them.


IRS Announces 2024 Retirement Plan Limits

By Sarah Bassler Millar, Mark Rosenfeld, Dawn Sellstrom and Inés Sosa
The IRS recently announced the 2024 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS modestly increased the applicable limits for 2024.

Introducing ERISA Moments: Bite-Size Vodcasts on the Latest ERISA Developments

By Fred Reish and Bradford Campbell
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.

When One Door Closes, Another Opens…Maybe Fourth Circuit Holds that Surcharge Is Not Equitable Relief Available Under ERISA but Paves the way for Unjust Enrichment Claims

By Rick Pearl
In an ERISA case for wrongful denial of health insurance benefits, the U.S. Court of Appeals for the Fourth Circuit addressed when a plaintiff may recover monetary relief under §§ 502(a)(1)(B) and (a)(3). The Fourth Circuit unsurprisingly held that ERISA § 502(a)(1)(B) limits recovery to benefits due under the terms of a plan, and a plaintiff cannot recover the cost of a denied surgery because the cost is not a “benefit” due; coverage for the cost, and payment to the provider, is the benefit. Unless a plaintiff pays the bill first, the plaintiff cannot recover the cost from an insurer.

De Minimis Financial Incentives to Participate in a 401(k) or 403(b) Plan

On December 20, 2023, the IRS issued Notice 2024-2, which provides question-and-answer guidance on various aspects of the SECURE 2.0 Act. This post focuses on the “de minimis financial incentives” under SECURE 2.0 Act Section 113.  (For an overview of SECURE 2.0 for defined contribution plan sponsors, click here.)

Continue reading “De Minimis Financial Incentives to Participate in a 401(k) or 403(b) Plan”

IRS Announces 2024 Retirement Plan Limits

The IRS recently announced the 2024 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS modestly increased the applicable limits for 2024. The following limits apply to retirement plans in 2024:

  • The limit on elective deferrals under 401(k), 403(b), and eligible 457(b) plans increased to $23,000.
  • The limit on additional catch-up contributions by participants aged 50 or older remains at $7,500. This means that the maximum amount of elective deferral contributions for those participants in 2024 is $30,500.
  • The Internal Revenue Code (“Code”) Section 415 annual addition limit is increased to $69,000 for 401(k) and other defined contribution plans, and the annual benefit limit is increased to $275,000 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 $345,000.
  • The dollar level threshold for becoming a highly compensated employee under Code Section 414(q) increased to $155,000 (which, under the look-back rule, applies to HCE determinations in 2025 based on compensation paid in 2024).
  • The dollar level threshold for becoming a “key employee” in a top-heavy plan under Code Section 416(i)(1) is increased to $220,000.

Continue reading “IRS Announces 2024 Retirement Plan Limits”

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