Many retirement plan errors are inadvertent and involve small dollar amounts. However, the work involved in correcting such errors can be time consuming and burdensome. Fortunately, SECURE 2.0 provides that for certain overpayment errors a responsible plan fiduciary can now decide not to seek repayment. While plan fiduciaries are entitled to seek recoupment of overpayments, subject to some limitations, many plan sponsors will welcome this guidance since it allows them to forego seeking recoupment of overpayment errors.
For example, if a 401(k) plan incorrectly included PTO payouts upon termination in eligible compensation, and thus, applied plan contributions to such ineligible portion, the affected participants would probably not notice and in fact might not reasonably be expected to know whether or not the PTO payout should have been included in eligible compensation in their final paycheck. The dollar amounts of the overpayments would in many cases be small and also would include the participants’ own deferrals. In such a case, the plan fiduciary might reasonably choose to not seek recoupment, while correcting the payroll error going forward. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00Lyn Domenickhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngLyn Domenick2023-08-22 12:25:472023-09-26 14:30:13Simply Irresistible…To Not Seek Recoupment of Overpayments
The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury (collectively, the Departments) recently issued proposed Mental Health Parity and Addiction Equity Act (MHPAEA) regulations and their second joint report to Congress regarding their MHPAEA enforcement activities as required under the MHPAEA and the Consolidated Appropriations Act, 2021 (CAA).
In addition, the DOL issued Technical Release 2023-01P, requesting comments on potential data requirements related to non-quantitative treatment limitations (NQTLs) and network composition. The proposed regulations and Technical Release indicate that employers can expect increased compliance obligations related to NQTLs and the NQTL comparative analysis reporting and disclosure requirements established by the CAA. For additional information about the CAA’s MHPAEA NQTL comparative analysis reporting and disclosure requirements, please see our blog posts from 2022 and 2021. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00Alex Smithhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngAlex Smith2023-08-10 12:20:552023-09-26 14:30:20Better Hide the Wine … Employer Considerations as the DOL Doubles Down on Mental Health Parity Compliance in New Proposed Regulations
Many aspects of benefits and executive compensation require coordination between a company’s benefits, HR, finance and securities compliance personnel. One topic currently responsible for many such “all hands” planning sessions is the SEC’s new clawback rule. This rule has been a long time in the making, and the final compliance deadline of December 1, 2023 is now fast approaching.
In 2010, the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act required the SEC and U.S. securities exchanges to require listed companies to implement clawback policies. After delays, proposed rules and other preliminary actions, in October 2022 the SEC issued its final rule (called “Rule 10D-1”) laying out the requirements for clawback policies. The NYSE and Nasdaq followed up by developing listing standards in line with Rule 10D-1. The SEC approved those listing standards on June 9, 2023. Public companies now have their marching orders – the rules are effective October 2, 2023 and listed companies must have clawback policies in place no later than December 1, 2023. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00Beth Nedrowhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngBeth Nedrow2023-07-27 09:38:172023-09-26 14:30:30With a Little Help From My Friends … New Clawback Rule Requires Coordination of Finance, Securities, HR, and Benefits Personnel
Bruno Mars may be crooning “Count on me,” but make sure you don’t overcount your retirement plan participants! New rules may allow you to leave some employees out of the count, which could save you the expense of the annual audit.
If your retirement plan is considered “large” – generally 100 or more participants – you’re probably in the middle of the Department of Labor required annual independent audit of the financial statements that must accompany the Form 5500. There are a few exceptions to the audit requirement – plans that have less than 100 participants at the beginning of the year and those with between 80 and 120 who filed as a small plan in the prior year. If your plan is just over that 100-participant level, there may be relief on the horizon from the required audit and another reason to keep track of those separated participants. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00Becky Achtenhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngBecky Achten2023-06-28 14:55:222023-09-26 14:30:39You Can Count On Me…But Check Your Math When Counting Participants for the 5500 Audit Rule!
Secure Act 2.0 requires certain plans to automatically enroll participants once they become eligible to participate. Plans that were established prior to December 29, 2022 are exempt from this new requirement. Plans that are established after December 29, 2022 are subject to the automatic enrollment requirement but not until the 2025 plan year. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00Leslie Thomsonhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngLeslie Thomson2023-05-19 09:24:182023-09-26 14:30:49Crazy Little Thing Called . . . Automatic Enrollment
Today’s Benefits Dial post was written in part by a special guest author, ChatGPT. With all of the buzz surrounding AI chatbots, I decided to see how ChatGPT would do composing a blog post on a somewhat technical but fairly common executive compensation scenario. As discussed below, the results were not so good. Here is our guest author’s blog on the ability to make subsequent deferral elections in a nonqualified deferred compensation plan:
Making a Section 409A subsequent deferral election can be a complex process, but it is an important step for individuals who have previously deferred compensation under a nonqualified deferred compensation plan. The subsequent deferral election allows these individuals to change the timing of their future payments, providing greater flexibility and control over their income streams.
To make a subsequent deferral election under Section 409A, an individual must first meet certain eligibility requirements. Specifically, the individual must have originally deferred compensation under a nonqualified deferred compensation plan that complies with Section 409A, and the election must be made at least 12 months before the original payment date. Once eligibility is established, the individual must submit a written election to the plan administrator outlining the new deferral election terms.
It is important to note that making a subsequent deferral election is not a decision to be taken lightly. There may be significant tax consequences associated with a change in payment timing, and it is important to consult with a tax professional before making any changes to a nonqualified deferred compensation plan. In addition, the plan document may contain specific rules and procedures for making a subsequent deferral election, and failure to follow these rules could result in adverse tax consequences.
In summary, a subsequent deferral election under Section 409A can provide valuable flexibility for individuals who have previously deferred compensation under a nonqualified deferred compensation plan. However, it is important to carefully consider the tax implications and procedural requirements before making any changes to a plan. For more information on making a subsequent deferral election, consult with a benefits attorney or tax professional.
If you remember that title song then you might remember a time before RMDs. Required minimum distributions (RMDs) have been a fixture of retirement plan operations ever since passage of the Tax Reform Act of 1986. One of the provisions in that law was the implementation of the RMD age starting with age 70-1/2; this partially offset lost revenue from the tax cuts in the bill. Many years later SECURE 1.0 increased the RMD age to 72 effective January 1, 2020. SECURE 2.0 increased the RMD age yet again and enacted other RMD-related changes that impact plan operations as described below. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00Lyn Domenickhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngLyn Domenick2023-04-17 13:22:462023-09-26 14:31:13Video Killed the Radio Star… and RMDs Changed Too
Simply Irresistible…To Not Seek Recoupment of Overpayments
/in 401(k) Plans, 403(b) plans, Defined Benefit Plans, ERISA, IRS, Legislation, Retirement Plansby Lyn Domenick
Many retirement plan errors are inadvertent and involve small dollar amounts. However, the work involved in correcting such errors can be time consuming and burdensome. Fortunately, SECURE 2.0 provides that for certain overpayment errors a responsible plan fiduciary can now decide not to seek repayment. While plan fiduciaries are entitled to seek recoupment of overpayments, subject to some limitations, many plan sponsors will welcome this guidance since it allows them to forego seeking recoupment of overpayment errors.
For example, if a 401(k) plan incorrectly included PTO payouts upon termination in eligible compensation, and thus, applied plan contributions to such ineligible portion, the affected participants would probably not notice and in fact might not reasonably be expected to know whether or not the PTO payout should have been included in eligible compensation in their final paycheck. The dollar amounts of the overpayments would in many cases be small and also would include the participants’ own deferrals. In such a case, the plan fiduciary might reasonably choose to not seek recoupment, while correcting the payroll error going forward. Read more
Better Hide the Wine … Employer Considerations as the DOL Doubles Down on Mental Health Parity Compliance in New Proposed Regulations
/in Benefits Plan Creation, Corporate Governance in Benefits, DOL, ERISA, Fiduciary Duties, Health & Welfare Plans, Legislation, Litigationby Alex Smith
The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury (collectively, the Departments) recently issued proposed Mental Health Parity and Addiction Equity Act (MHPAEA) regulations and their second joint report to Congress regarding their MHPAEA enforcement activities as required under the MHPAEA and the Consolidated Appropriations Act, 2021 (CAA).
In addition, the DOL issued Technical Release 2023-01P, requesting comments on potential data requirements related to non-quantitative treatment limitations (NQTLs) and network composition. The proposed regulations and Technical Release indicate that employers can expect increased compliance obligations related to NQTLs and the NQTL comparative analysis reporting and disclosure requirements established by the CAA. For additional information about the CAA’s MHPAEA NQTL comparative analysis reporting and disclosure requirements, please see our blog posts from 2022 and 2021. Read more
With a Little Help From My Friends … New Clawback Rule Requires Coordination of Finance, Securities, HR, and Benefits Personnel
/in Executive Compensationby Elizabeth Nedrow
Many aspects of benefits and executive compensation require coordination between a company’s benefits, HR, finance and securities compliance personnel. One topic currently responsible for many such “all hands” planning sessions is the SEC’s new clawback rule. This rule has been a long time in the making, and the final compliance deadline of December 1, 2023 is now fast approaching.
In 2010, the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act required the SEC and U.S. securities exchanges to require listed companies to implement clawback policies. After delays, proposed rules and other preliminary actions, in October 2022 the SEC issued its final rule (called “Rule 10D-1”) laying out the requirements for clawback policies. The NYSE and Nasdaq followed up by developing listing standards in line with Rule 10D-1. The SEC approved those listing standards on June 9, 2023. Public companies now have their marching orders – the rules are effective October 2, 2023 and listed companies must have clawback policies in place no later than December 1, 2023. Read more
You Can Count On Me…But Check Your Math When Counting Participants for the 5500 Audit Rule!
/in 401(k) Plans, DOL, ERISA, IRS, Retirement Plansby Becky Achten
Bruno Mars may be crooning “Count on me,” but make sure you don’t overcount your retirement plan participants! New rules may allow you to leave some employees out of the count, which could save you the expense of the annual audit.
If your retirement plan is considered “large” – generally 100 or more participants – you’re probably in the middle of the Department of Labor required annual independent audit of the financial statements that must accompany the Form 5500. There are a few exceptions to the audit requirement – plans that have less than 100 participants at the beginning of the year and those with between 80 and 120 who filed as a small plan in the prior year. If your plan is just over that 100-participant level, there may be relief on the horizon from the required audit and another reason to keep track of those separated participants. Read more
Crazy Little Thing Called . . . Automatic Enrollment
/in Executive Compensation, IRSby Leslie Thomson
Secure Act 2.0 requires certain plans to automatically enroll participants once they become eligible to participate. Plans that were established prior to December 29, 2022 are exempt from this new requirement. Plans that are established after December 29, 2022 are subject to the automatic enrollment requirement but not until the 2025 plan year. Read more
Can’t Stop the AI*
/in Executive Compensation, IRSby Benjamin Gibbons
Today’s Benefits Dial post was written in part by a special guest author, ChatGPT. With all of the buzz surrounding AI chatbots, I decided to see how ChatGPT would do composing a blog post on a somewhat technical but fairly common executive compensation scenario. As discussed below, the results were not so good. Here is our guest author’s blog on the ability to make subsequent deferral elections in a nonqualified deferred compensation plan:
Making a Section 409A subsequent deferral election can be a complex process, but it is an important step for individuals who have previously deferred compensation under a nonqualified deferred compensation plan. The subsequent deferral election allows these individuals to change the timing of their future payments, providing greater flexibility and control over their income streams.
To make a subsequent deferral election under Section 409A, an individual must first meet certain eligibility requirements. Specifically, the individual must have originally deferred compensation under a nonqualified deferred compensation plan that complies with Section 409A, and the election must be made at least 12 months before the original payment date. Once eligibility is established, the individual must submit a written election to the plan administrator outlining the new deferral election terms.
It is important to note that making a subsequent deferral election is not a decision to be taken lightly. There may be significant tax consequences associated with a change in payment timing, and it is important to consult with a tax professional before making any changes to a nonqualified deferred compensation plan. In addition, the plan document may contain specific rules and procedures for making a subsequent deferral election, and failure to follow these rules could result in adverse tax consequences.
In summary, a subsequent deferral election under Section 409A can provide valuable flexibility for individuals who have previously deferred compensation under a nonqualified deferred compensation plan. However, it is important to carefully consider the tax implications and procedural requirements before making any changes to a plan. For more information on making a subsequent deferral election, consult with a benefits attorney or tax professional.
Read more
Video Killed the Radio Star… and RMDs Changed Too
/in 401(k) Plans, 403(b) plans, 457(b) plans, Defined Benefit Plans, ERISA, Governmental Plans, IRS, Legislation, Retirement Plansby Lyn Domenick
If you remember that title song then you might remember a time before RMDs. Required minimum distributions (RMDs) have been a fixture of retirement plan operations ever since passage of the Tax Reform Act of 1986. One of the provisions in that law was the implementation of the RMD age starting with age 70-1/2; this partially offset lost revenue from the tax cuts in the bill. Many years later SECURE 1.0 increased the RMD age to 72 effective January 1, 2020. SECURE 2.0 increased the RMD age yet again and enacted other RMD-related changes that impact plan operations as described below. Read more