Pension News in 2013
The following list tracks important guidance that was released during 2013. These items are summarized in detail, with appropriate commentary, in our quarterly newsletter, eRISA Update. See our Newsletters page to sign up for eRISA Update. Legislative Developments
Treasury Regulations
- Regulations permit a company to suspend or reduce the safe harbor contribution before the end of the year if the company is operating at an economic loss or provides advance notice to employees of possibility of suspension or reduction [Citation: Treas. Reg. §§1.401(k)-3(g) and 1.401(m)-3(h) (November 15, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-11-15/pdf/2013-27452.pdf
- Indian tribal fishing rights income under IRC §7873 included in section 415 compensation definition [Citation: Prop. Treas. Reg. §1.415(c)-2, 78 F.R. 68780-68782 (November 15, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-11-15/pdf/2013-27331.pdf
IRS Guidance
- The IRS posts information about QCDs made pursuant to ATRA rules [Citation: Charitable Donations from IRAs for 2012 and 2013, www.irs.gov] Text at http://www.irs.gov/Retirement-Plans/Charitable-Donations-from-IRAs-for-2012-and-2013
- Annual update of determination letter procedure for 2013 [Citation: Rev. Proc. 2013-6, 2013-1 I.R.B. (January 2, 2013)] Text available at http://www.irs.gov/irb/2013-01_IRB/ar11.html
- Annual update of user fee procedure for 2013 [Citation: Rev. Proc. 2013-8, 2013-1 I.R.B. (January 2, 2013)] Text available at http://www.irs.gov/irb/2013-01_IRB/ar13.html
- Latest revision of the EPCRS procedure adds correction options for 403(b) plans, modifies the VCP submission procedure, clarifies when a determination letter is required with a VCP submission, addresses when QNECs are required to satisfy corrective contributions, provides additional guidance on overpayments, and incorporates IRC §436 into certain corrections made under defined benefit plans methods [Citation: Rev. Proc. 2013-12, 2013-4 I.R.B. (January 21, 2013) (advance release on December 31, 2012)] Text available at http://www.irs.gov/pub/irs-drop/rp-13-12.pdf.
See http://www.irs.gov/pub/irs-tege/rp13_12_topical_index.pdf, for a topical index of Rev. Proc. 2013-12.
See http://www.irs.gov/pub/irs-tege/rp13_12_changes_chart.pdf, for a chart of significant changes made by Rev. Proc. 2013-12.
See http://www.irs.gov/pub/irs-tege/rp1312_appendix_C_part1.pdf for an interactive copy of the Model Compliance Statement for VCP submissions.
See http://www.irs.gov/pub/irs-tege/rp1312_appendix_C_sch1.pdf for an interactive copy of Schedule 1 in Part II of Appendix C of Rev. Proc. 2013-12. For the other 8 schedules substitute the number for "1" in the link. For example, Schedule 7 is at http://www.irs.gov/pub/irs-tege/rp1312_appendix_C_sch7.pdf
See http://www.irs.gov/pub/irs-tege/vcp_submission_kit_403b.pdf for a VCP submission package for use by a 403(b) plan sponsor to correct a failure to adopt a written plan on a timely basis
- IRS launches prototype and volume submitter programs for 403(b) plans; supplements remedial amendment guidance [Citation: Rev. Proc. 2013-22]
Text available at http://www.irs.gov/pub/irs-drop/rp-13-22.pdf
- ESOPs that become subject to IRC §401(a)(35) may eliminate option provided under IRC §401(a)(28) to receive distribution in lieu of diversifying employer stock investments [Citation: Notice 2013-17, 2013-20 I.R.B. (May 13, 2013)]
Text available at http://www.irs.gov/pub/irs-drop/n-13-17.pdf
- Static mortality tables released for valuation dates occurring in 2014 and 2015; applicable to IRC §417(e) determinations for annuity starting dates that occur in stability periods beginning in 2014 and 2015; comments requested [Citation: Notice 2013-49, 2013-32 I.R.B. (August 5, 2013)]
Text available at http://www.irs.gov/pub/irs-drop/n-13-49.pdf
- Mass submitters of defined benefit pre-approved plans have until January 31, 2014, rather than October 31, 2013, to submit opinion letter and advisory applications for the second 6-year cycle [Citation: Anniouncement 2013-37]
Text available at http://www.irs.gov/pub/irs-drop/a-13-37.pdf
- Effective September 16, 2013, the IRS recognizes same-sex married couples as
married for all purposes of the tax code. The legal status is based on where
the marriage is entered into, regardless of domicile [Citation: Rev. Rul. 2013-17].
For the text of Rev. Rul. 2013-17, see http://www.irs.gov/pub/irs-drop/rr-13-17.pdf.
FAQs were also issued. See http://benefitslink.com/src/irs/faqs_same_sex_spouses_8_29_2013.pdf (FAQs for married couples) and http://benefitslink.com/src/irs/faqs_reg_dom_partners_8_29_2013.pdf (FAQs for domestic partners).
- Plan administrators and employers that file more than 250 returns of any type in a calendar year would be required under proposed regulations to file Form 5500, Form 8955-SSA and Schedule SB/MB electronically or on other magnetic media [Citation: Prop. Treas. Reg. §§301.6057-3, 301.6058-2 and 301.6059-2, 78 F.R. 53704-53709 (August 30, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-08-30/pdf/2013-21159.pdf
- Adjusted dollar limits for 2014 [Citation: IR-2013-86 (October 31, 2013)]
Text available at http://content.govdelivery.com/accounts/USIRS/bulletins/926401?reqfrom=share
- Additional extension for certain FBAR filings [Citation: FinCEN Notice 2013-1 (December 17, 2013)]
Text available at http://www.fincen.gov/forms/files/FBAR%20Notice%20re%20Extended%20Filing%20Date%20(532-2013)_editSig.pdf
- IRS provides guidance on Internal Roth Conversions of nondistributable non-Roth funds held inside a 401(k), 403(b) plan or governmental 457(b) plan; supplements guidance under Notice 2010-84 regarding Internal Roth Conversions [Citation: Notice 2013-74, 2013-52 I.R.B. (December 19, 2013)]
Text available at http://www.irs.gov/pub/irs-drop/n-13-74.pdf
- 2013 list issued for review of Cycle D plans in the 2nd cycle under Rev. Proc. 2007-44 [Citation: Notice 2013-84, 2013-52 I.R.B. (December 19, 2013)]
Text available at http://www.irs.gov/pub/irs-drop/n-13-84.pdf
DOL Regulations
DOL Formal Guidance/Prohibited Transaction Exemptions
- DOL proposes to grant temporary exemption for certain indemnification/cross-collateralization agreements involving certain investment arrangements [Citation: Notice of Proposed Amendments to PTE 80-26, 78 F.R. 31584 (May 24, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-05-24/pdf/2013-12362.pdf
- DOL proposes amendments to six class exemptions to eliminate reference to credit ratings, as required by the Dodd-Frank financial reform legislation [Citation: Proposed Amendments to Class Prohibited Transaction Exemptions to Remove Credit Ratings Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 78 F.R. 37572-37583 (June 21, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-06-21/pdf/2013-14790.pdf
PBGC regulations and other guidance
- Extension of interim guidance on reportable events for the 2013 plan year and subsequent years [Citation: PBGC Technical Update 13-1 (January 30, 2013)]
Text available at http://www.pbgc.gov/res/other-guidance/tu/tu13-1.html
- Reproposed regulations to revise reportable event rules would create new safe harbors based on the financial status of the contributing sponsor, simplify small plan waivers and other waivers, and eliminate certain automatic waivers and extensions under current regulations [Citation: Prop. PBGC Reg. §§4043.1-4043.9, 4043.20-4043.35, 4043.61-4043.68, 4043.81, 78 F.R. 20039 (April 3, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-04-03/pdf/2013-07664.pdf
- PBGC issues request for information regarding implementation of missing participant program to DC plans [Citation: Missing Participants in Individual Account Plans - Request for Information, 78 F.R. 37598 (June 21, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-06-21/pdf/2013-14834.pdf
- PBGC proposes to simplify premium payment due dates, add variable rate premium exemptions for new plans and standard termination plans, codify 7-day grace period for premium penalty waivers [Citation: Prop. PBGC Reg. §§4006.2-4006.6 and 4007.2, 4007.3, 4007.8, 4007.11, 4007.12, 4007.13, Appendix to Part 4007, 78 F.R. 44056-44069 (July 23, 2013)]
Text available at http://www.gpo.gov/fdsys/pkg/FR-2013-07-23/pdf/2013-17561.pdf
EBSA Advisory Opinions, Field Assistance Bulletins and other informal guidance
- DOL clarifies application of ERISA fiduciary and prohibited transaction rules to “cleared swap” transactions conducted pursuant to the Dodd-Frank Act [Citation: Advisory Opinion 2013-01A]
Text available at http://www.dol.gov/ebsa/regs/AOs/ao2013-01a.html
- DOL updates its interim guidance on the annual funding notice requirements to reflect MAP-21 [Citation: Field Assistance Bulletin 2013-01]
Text available at http://www.dol.gov/ebsa/regs/fab2013-1.html
- Revenue sharing payments not plan assets until used to pay expenses or credited to the plan [Citation: DOL Advisory Opinion 2013-03A (July 3, 2013)]
Text available at http://www.dol.gov/ebsa/regs/AOs/ao2013-03a.html
- DOL issues nonenforcement policy that will permit plans to “reset” the annual fee disclosure deadline in 2013 or 2014 [Citation: Field Assistance Bulletin 2013-02 (July 22, 2013)]
Text available at http://www.dol.gov/ebsa/regs/fab2013-2.html
ERISA Litigation
- A district court in the District of Columbia (Loving v. Internal Revenue Service) has ruled that the IRS does not have the authority to license tax preparers, essentially throwing out the regulatory system in Circular 230 with respect to the licensing of RTRPs, and placed an injunction on enforcement of the RTRP program. In response to this opinion, the IRS has suspended the mandatory CE requirements for RTRPs, and is not scheduling RTRP exams. The online PTIN system was suspended for a short time but is now up and running after the court clarified that its opinion did not challenge the legitimacy of the PTIN requirements. The IRS also is seeking to have the court lift its temporary injunction on the RTRP program and is planning an appeal of the decision. The text of the court opinion is at http://ij.org/images/pdf_folder/economic_liberty/irs_tax_preparers/irs-opinion-1-18-13.pdf.
- Case lacked constitutional standing where alleged breach occurred in an overfunded defined benefit plan [Citation: David v. Alphin, 704 F.3d 327 (4th Cir. January 14, 2013)]
Text available at http://www.ca4.uscourts.gov/opinions/Published/112181.p.pdf
- Plan contributions taken into account to determine if compensation is reasonable under IRC §162; unreasonable compensation results in disallowance of qualified plan deduction and excise tax under IRC §4972 [Citation: Thousand Oaks Residential Care Home I, Inc. v. Commissioner, T.C. Memo 2013-10 (January 14, 2013)]
Text available at http://www.ustaxcourt.gov/InOpHistoric/thousandoaksresidentialcarehome.TCM.WPD.pdf
- Beneficiary designation procedures in SPD are enforceable by plan and not in conflict with Amara opinion [Citation: Liss v. Fidelity Employer Services Company, LLC, 2013 WL 677280 (6th Cir. February 26, 2013) (not selected for publication in the Federal Register)]
Text available at http://scholar.google.com/scholar_case?case=14781359847990108425&q=Liss+v.+Fidelity+Employer+Services+Company,+LLC&hl=en&as_sdt=2,41&as_vis=1
- ERISA does not preempt a state court order requiring former spouse to turn over benefits received under ERISA plan [Citation: Andochick, M.D. v. Byrd, 709 F.3d 296 (4th Cir. March 4, 2013)]
Text available at http://www.ca4.uscourts.gov/Opinions/Published/121728.P.pdf
- Administrator abused its discretion in denying participant’s claim for retroactive benefits resulting from a failure of the plan to timely inform her of her right to elect full benefits under an early retirement provision [Citation: Helton v. AT&T, Inc., 709 F.3d 343 (4th Cir. March 6, 2013)]
Text available at http://www.ca4.uscourts.gov/Opinions/Published/112153.P.pdf
- 6-year statute of limitations on fiduciary breach claims involving investment menu selection generally runs from time menu option is added; 404(c) relief doesn’t apply to fiduciary decisions regarding selection of investment menu options [Citation: Tibble v. Edison International, 711 F.3d 1061 (9th Cir. March 21, 2013); amended 729 F.3d 1110 (9th Cir. August 1, 2013)]
Text available at http://cdn.ca9.uscourts.gov/datastore/opinions/2013/03/21/10-56406.pdf
- Reliance on decline of market price of mortgage-backed securities not enough to sustain claim for fiduciary breach regarding the continued investment in such securities by an ERISA plan [Citation: PBGC on behalf of Saint Vincent Catholic Medical Centers Retirement Plan v. Morgan Stanley Investment Management, Inc., 712 F.3d 705 (2nd Cir. N.Y. April 2, 2013)]
Text available at: http://articles.law360.s3.amazonaws.com/0429000/429437/Morgan%20Stanley.pdf
- ERISA plan terms, not just equitable principles, govern administrator’s action to enforce equitable lien; common-fund rule provides appropriate default where plan is silent on allocation of attorney’s fees [Citation: US Airways, Inc. v. McCutchen, 133 S.Ct. 1537 (April 16, 2013)]
Text available at http://www.supremecourt.gov/opinions/12pdf/11-1285_i4dk.pdf
- Neither actions taken by recordkeeper nor authority reserved by recordkeeper to substitute or delete funds made it a functional fiduciary; actions or exercise of authority must involve the basis of the claims that allege the fiduciary breach [Citation: Leimkuehler v. American United Life Insurance Co.,713 F.3d 905 (7th Cir. (Ind.) April 16, 2013)]
Text available at:
http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2013/D04-16/C:12-1081:J:Wood:aut:T:fnOp:N:1119071:S:0
- Plan administrator acted reasonably in determining that participant had elected cash balance formula instead of continuing on plan’s traditional benefit formula [Citation: Durbin v. Columbia Energy Group Pension Plan, 2013 WL 1663110 (6th Cir. Ohio April 17, 2013) (not for publication in the Federal Reporter)]
Text available at http://scholar.google.com/scholar_case?case=10942475090123751386&hl=en&as_sdt=2&as_vis=1&oi=scholarr
- Allegations did not overcome Moench presumption, resulting in dismissal of stock drop case in Seventh Circuit where employer stock dropped by 54%; document contained strong language about maintaining an employer stock investment option [Citation: White v. Marshall & Ilsley Corporation, 714 F.3d 980 (7th Cir. Wisc. April19, 2013)]
Text available at http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2013/D04-19/C:11-2660:J:Hamilton:aut:T:fnOp:N:1121403:S:0
- Inherited IRAs not entitled to bankruptcy protection under Bankruptcy Code §522(d)(12) [Citation: In the Matter of Clark, 714 F.3d 559 (7th Cir. (Wisc.) April 23, 2013)] Text available at http://volo.abi.org/in-re-clark/opinion
- Guarantee provided by IRA owner on financing needed for IRA to purchase start-up company with rollover assets resulted in prohibited transaction and disqualification of IRA [Citation: Peek and Fleck v. Commissioner, 140 T.C. No. 12 (May 9, 2013)]
Text available at http://www.ustaxcourt.gov/InOpHistoric/peekandfleck.TC.WPD.pdf
- ERISA does not preempt a state-law claim for tortious interference with contractual obligations relating to employer’s declaration that SERP was invalid in order to close acquisition [Citation: Gardner v. Heartland Industrial Partners, LP, 715 F.3d 609 (6th Cir. (Mich.) May 10, 2013)]
Text available at http://www.ca6.uscourts.gov/opinions.pdf/13a0133p-06.pdf
- Anti-alienation provision under ERISA doesn't preclude waiver of contested ERISA pension claims; plaintiff was sufficiently apprised of claim at time he signed the release [Citation: Hakim v. Accenture United States Pension Plan, 718 F.3d 675 (7th Cir. (Ill.) May 23, 2013)]
Text available at http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2013/D05-23/C:11-3438:J:Manion:aut:T:fnOp:N:1140434:S:0
- Moench presumption of prudence doesn’t apply where plan neither requires nor encourages investment in employer securities; fraud-on-the-market theory applies to establish presumption of detrimental reliance by ERISA participants on misrepresentations [Citation: Harris v. Amgen, Inc., 2013 WL 5737307 (9th Cir. (Cal.) October 23, 2013) (replacing original opinion published at 717 F.3d 1042 on June 4, 2013)]
Text available at: http://cdn.ca9.uscourts.gov/datastore/opinions/2013/10/23/10-56014.pdf
- Supreme Court strikes down section 3 of DOMA as unconstitutional; effect on ERISA plans and tax code spousal rights not clear without guidance [Citation: U.S. v. Windsor, ___ S.Ct. ___ (June 26, 2013)]
Text available at: http://www.supremecourt.gov/opinions/12pdf/12-307_6j37.pdf
- Moench presumption applicable at motion to dismiss stage; non-public information may be the basis for discontinuing investments in employer securities but not for divesting such investments [Citation: Kopp v. Klein, 722 F.3d 327 (5th Cir. (Tex.) July 9, 2013)]
Text available at http://www.ca5.uscourts.gov/opinions/pub/12/12-10416-CV0.wpd.pdf
- Prenuptial agreement not effective in waiving spousal benefit because it failed to satisfy the acknowledgment requirement in the statutory waiver provision [Citation: Midamerican Pension and Employee Benefits Plans Administrative Committee v. Cox, 720 F.3d 715 (8th Cir. (Iowa) July 12, 2013)]
Text available at http://caselaw.findlaw.com/us-8th-circuit/1638522.html
- Moench presumption not overcome by factual allegations mostly involving public information; fiduciaries not obligated to seek out or act on non-public information in carrying out their ERISA duties [Citation: Rinehart v. Akers, 722 F.3d 137 (2nd Cir. (N.Y.) July 12, 2013)]
Text available at http://caselaw.findlaw.com/us-2nd-circuit/1638627.html
- Defendant not liable for fiduciary breach or prohibited transaction sanction with respect to alleged excessive fees because it was not a fiduciary or service provider at time fees were negotiated and had no discretion over fee structure at time fees were collected [Citation: Danza v. Fidelity Management Trust Company, 56 EBC 1230 (3rd Cir. (N.J.) July 29, 2013) (not for publication in the Federal Register)]
Text available at
http://scholar.google.com/scholar_case?case=10343734431036491856&hl=en&as_sdt=2&as_vis=1&oi=scholarr
- A district court in Pennsylvania has rejected a plan's choice of law provision that was being applied by the plan administrator to deny a same-sex surviving spouse the spousal benefits provided by the plan. See Cozen O’Connor, P.C. v. Tobits, ___ F.Supp.2d ___ (56 EBC 1213) (E.D.Pa. July 29, 2013)] Text available at http://www.washingtonblade.com/content/files/2013/07/156786178-2-11-cv-00045-144.pdf
- Seventh Circuit clarifies parameters for class actions relating to fiduciary breach actions under ERISA §502(a)(2) [Citation: Abbott v. Lockheed Martin Corporation, 2013 WL 4010226 (7th Cir. (Ill.) August 7, 2013)]
Text available at:
http://blog.fraplantools.com/wp-content/uploads/2013/08/Abbott-v-Lockheed-Martin-Doc.-51-Order-Reversing-Class-Cert-Denial.pdf
- Dismissal of claims (including voluntary dismissal of claims against person seeking attorney’s fees) can be basis for “success on the merits” to determine whether an award of attorney’s fees is appropriate [Citation: Scarangella and Scarangella & Sons, Inc. v. Group Health, Inc., 731 F.3d 146 (2nd Cir. (NY) September 10, 2013)]
Text available at:
http://scholar.google.com/scholar_case?case=10786638369737473234&hl=en&as_sdt=2&as_vis=1&oi=scholarr
- Enhanced accruals for “banked hours” were protected under IRC §411(d)(6) [Citation: Bonneau v. Plumbers and Pipefitters Local Union 51 Pension Trust Fund, 736 F.3d 33 (1st Cir. (R.I.) November 15, 2013)]
Text available at http://media.ca1.uscourts.gov/pdf.opinions/13-1515P-01A.pdf
- Court allows consideration of plan’s operation to conclude that one-person plan was not qualified and, thus, not exempt from bankruptcy estate [Citation: Daniels v. Agin, 736 F.3d 70 (1st Cir. (Mass.) November 25, 2013)]
Text available at http://caselaw.findlaw.com/us-1st-circuit/1650698.html
- Plan may establish a contractual statute of limitations period with respect to benefit claims under ERISA §502(a)(1)(B) [Citation: Heimeshoff v. Hartford Life & Accident Insurance, Co., 134 S.Ct. 604 (December 16, 2013)]
Text available at http://www.supremecourt.gov/opinions/13pdf/12-729_q8l1.pdf
- Plan administrator’s second interpretation of document also ruled to be unreasonable in Frommert case [Citation: Frommert v. Conkright, 738 F.3d 522 (2nd Cir. (NY) December 23, 2013)]
Text available at http://www.ustaxlawyer.com/pdf/2nd%20Circuit%20decision%20Dec%202013.pdf
Miscellaneous Guidance
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