Category Archives: Uncategorized

Congress Considering Change to ERISA 3(2) for Multiple Employer Plans

Posted on June 18, 2012 by Administrator| Comments Off

When the Dept. of Labor released Advisory Opinion 2012-04A – Multiple Employer Plans on May 25, 2012, addressing whether the Dept. of Labor would view a multiple employer plan as a single employee pension plan within the meaning of ERISA section 3(2) where multiple unrelated employers adopt the Plan to provide retirement benefits to their employees, the DOL said that “it has been the Department’s consistent view that where several unrelated employers merely execute identically worded trust agreements or similar documents as a means to fund or provide benefit, in the absence of any genuine organizational relationship between the employers, no employer group or association exists for purposes of ERISA section 3(5).” In making this determination, the DOL exercised its authority to interpret ERISA. The DOL does not have the authority to make changes to ERISA, Congress does.

Congress is considering changing ERISA section 3(2). Section 14 of the H.R. 1534, the Small Businesses Add Value for Employees Act of 2011 (SAVE Act of 2011) adds this paragraph to ERISA section 3(2):

‘‘(C) A plan, fund, or program shall not fail to be treated as an employee pension benefit plan solely by reason of the plan, fund, or program being established or maintained by two or more employers whose only relationship is participation in the same plan, fund, or program. This subparagraph shall only apply to a plan, fund, or program that provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account.’’.

The SAVE Act of 2011 also creates a new type of plan – the Multiple Small Employer Plan – effective for years after Dec. 31, 2011. Section 13 of H.R. 1534 says:

(a) In General. Paragraph (11) of section 401(k) of the Internal Revenue Code of 1986 is amended by adding the following at the end thereof:

(E) MULTIPLE SMALL EMPLOYER PLAN.

(i) IN GENERAL- In the case of a plan described in clause (ii)–

(I) the amount described in subparagraph (B)(i)(I) shall be $10,000, in lieu of the amount in effect under section 408(p)(2)(A)(ii),

(II) such $10,000 amount shall be adjusted as described in section 408(p)(2)(E)(ii) except that the base period taken into account shall be the calendar quarter beginning July 1, 2011,

(III) subclause (II) of subparagraph (B)(i) and clause (ii) of subparagraph (B) shall not apply, and

(IV) section 414(v) shall not apply.

(ii) PLAN DESCRIBED- A plan is described in this clause if the plan satisfies the following requirements:

(I) Such plan satisfies the requirements of this paragraph, as modified by clause (i).

(II) The plan is described in section 413(c).

(III) The plan includes a qualified automatic contribution arrangement, as defined in paragraph (13), except that subparagraph (D) of paragraph (13) shall not apply and the qualified percentage shall be determined by reference to subclauses (I), (II), (III), and (IV) of paragraph (13)(C)(iii).

(IV) The plan does not permit any participant or beneficiary to receive or maintain a loan from the plan.

(V) The plan does not permit hardship distributions described in paragraph (2)(B)(i)(IV) except to the extent any such distribution is deemed, under regulations prescribed by the Secretary, to be on account of an immediate and heavy financial need of the employee and necessary to satisfy an immediate and heavy financial need of the employee.

(VI) The plan is maintained pursuant to a model plan document published by the Secretary.

(b) Simplification.

(1) MODEL PLAN- Within one year of the date of the enactment of this Act, the Secretary of the Treasury shall publish a model plan that may be used to satisfy the requirement of subclause (VI) of section 401(k)(11)(E)(ii) of the Internal Revenue Code of 1986.

(2) PROTECTION AGAINST LOSS- Within 120 days of the date of the enactment of this Act, the Secretary of Labor shall amend Department of Labor Regulation section 2550.404c-5(e)(4)(iv)(B) so that, in the case of a plan described in section 401(k)(11)(E) of such Code `four years’ shall be substituted for `120 days’.

(3) CLARIFYING DUTIES AND REDUCING BURDENS- Within one year of the date of the enactment of this Act, the Secretary of Labor shall–

(A) publish rules clarifying the extent to which the fiduciary duties of a participating employer and of a named fiduciary with respect to a plan described in section 401(k)(11)(E) of such Code are limited to prudently selecting and monitoring the provider of such plan and the services, fees, and investment options available from such provider, and

(B) prescribe interim final regulations providing simplified means by which plans described in section 401(k)(11)(E) of such Code may satisfy the requirements of sections 102, 103, and 105 of the Employee Retirement Income Security Act of 1974.

(4) ELIMINATION OF DISINCENTIVE TO POOLING- Not later than one year after the date of the enactment of this Act, the Secretary of the Treasury shall prescribe final regulations under which a plan described in section 413(c) of such Code may be treated as satisfying the qualification requirements of section 401(a) of such Code despite the violation of such requirements with respect to one or more participating employers. Such rules may require that the portion of the plan attributable to such participating employers be spun off to plans maintained by such employers.

The SAVE Act of 2011 was introduced by Rep. Ron Kind (WI) on April 14, 2011 and is currently pending before the House Subcommittee on Health, Employment, Labor, and Pensions.

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Posted in Legislation, Multiple Employer Plans, Uncategorized

Tagged Advisory Opinion 2012-04a, ERISA, HR 1534, MEP, multiple employer plan, SAVE Act of 2011

IRS Adding LinkedIn to Communicate About PTINs

Posted on June 15, 2012 by Administrator| Comments Off

News from the IRS today:

The IRS Return Preparer Office is expanding its social media presence in an effort to better communicate with and support the tax professional community. RPO is now on LinkedIn. Follow us to keep up-to-date on the latest changes in your profession. You will find the latest info on PTIN renewals, the Registered Tax Return Preparer Competency Test, the Special Enrollment Exam and continuing education requirements.

I followed the link, and it sent me to a company profile that I could follow. Not quite a LinkedIn group, so no ability to post discussions, but it is a good start and I’m looking forward to seeing what the IRS does on LinkedIn.

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Posted in Industry News, IRS, Uncategorized

Tagged IRS, LinkedIn, PTIN, Tax Return Preparer

Has the Dept. of Labor Taken a Stand on Open MEPs?

Posted on May 23, 2012 by Administrator| 5 Comments

Little did Jamila Minnicks know the firestorm she would start when she wrote a memorandum asking the U.S. District Court for the District of Idaho to remove Matthew Hutcheson from exercising authority or control over one of the plans he served as fiduciary or trustee for, and asking the court to appoint an independent fiduciary to wrap up the plan. For those of you who have not been following the Matthew Hutcheson situation, he was a fiduciary for a number of plans who has been criminally charged with wire fraud and misappropriating pension funds and is currently awaiting trial on those charges. For those of you who do not know Jamila Minnicks, she is a Trial Attorney with the Plan Benefits Security Division of the Dept. of Labor. When there are allegations of missing pension funds due to criminal activity, it is normal for the Dept. of Labor to work with federal prosecutors to secure any pension funds which may be at risk, including asking a court to removing the existing fiduciaries and trustees and replacing them with independent fiduciaries.

It is also normal for a trial attorney to file a Memorandum in Support of an application for a temporary restraining order (TRO). In most courts, an application for a temporary restraining order is a pre-formatted form which doesn’t provide adequate space to explain to the judge why the court should issue the temporary restraining order, so the trial attorney will write a separate Memorandum in Support containing the reasons why the court should issue the TRO. In Matthew Hutcheson’s case, Jamila Minnick was able to give the court 25 pages of reasons why Matthew Hutcheson should be removed as a fiduciary, including:

“For these reasons, the relief sought herein is necessary because Defendant Hutcheson, who has been separately indicted by the United States, in part, for his criminal activity in connection with his improper acts, remains to this day a fiduciary with control over the Plans. Thus, the Secretary respectfully requests that this Court immediately appoint an independent fiduciary with exclusive authority and control over RSPT, the Plans, and their assets and remove Defendants Hutcheson and HWA from all authority and control over RSPT, and Plans, and their assets.”

Notice that the government says “authority and control over RSPT, the Plans, and their assets”. Just like in plan documents, when a word is capitalized in a trial brief, it usually has a specific definition. In the Memorandum of Support, the word “Plans” is capitalized and is used to designate when the trial attorney is referring to the individual plan sponsors within RSPT who had money misappropriated from their plan assets. The first paragraph of the Memorandum in Support creates this distinction between the individual plan sponsors and the trust holding the plan assets with:

“Plaintiff Hilda L. Solis, Secretary of the United States Department of Labor (“the Secretary”), respectfully submits this Memorandum in Support of her application for a temporary restraining order (1) prohibiting Matthew D. Hutcheson and Hutcheson Walker Advisors, LLC from exercising authority or control over the Retirement Security Plan & Trust (“RSPT), the assets it holds for ERISA-covered plans (the “Plans”), and the Plans and (2) appointing an independent fiduciary with exclusive authority and control over RSPT, the assets it holds for ERISA-covered plans and the Plans. The Secretary also seeks an order to show cause why a preliminary injunction should not be granted.”

This distinction is important because, later within the 25 pages of reasons why Matthew Hutcheson should no longer be permitted to have authority or control over plan assets, the trial attorney uses the word “Plans”. It is this use of the word “Plans” in the Memorandum in Support which seems to be the spark that has lit a bonfire of rumors about multiple employer plans because of the way the trial attorney uses the word “Plans” in 4 sentences within the Memorandum’s 25 pages. Those 4 sentences have been latched onto and quoted as official guidance issued by the Dept. of Labor which, depending on who you hear the rumor from, either prohibits all multiple employer plans, or prohibits some multiple employer plans, or adds language to Internal Revenue Code section 413(c) requiring all sponsors of multiple employers plans to share some type of commonality. As we go through those 4 sentences, keep in mind that a Memorandum in Support of [an] Application for a Temporary Restraining Order and For an Order to Show Cause why a Preliminary Injunction Should not be Granted is just that – a memorandum supporting a request for a TRO filed with a trial court. It can not add language to the Internal Revenue Code (only Congress can do that). It cannot change Treas. Reg. 1.413-2 (only the IRS can do that). And it is not official guidance from the Dept. of Labor.

Criminal cases start with indictments, so let’s start with Matthew Hutcheson’s indictment. The indictment says:

“18. The G Fid Plan, the RSPT, and the NRSP are all Multiple Employer Plans (“MEP’s”). Unlike single-employer plans or traditional multi-employer plans, MEP’s are intended to serve as a retirement plan that can be adopted by numerous employers notwithstanding that there is no common ownership or affiliation among the adopting employers.”

For those latching onto random sentences about multiple employer plans contained within the court filing in the Matthew Hutcheson case, this sentence provides all the proof they need that no common ownership or affiliation is required among adopting employers of a multiple employer plan. This sentence in the indictment is also contrary to the first sentence in the second paragraph of the Factual Background section contained in the Memorandum in Support, which says:

“In fact, RSPT was not a single ‘multiple employer plan’ pursuant to ERISA. This is because there was no commonality of employment-based interest among the participating employer sponsors of the plans apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a “group” or “association” of employers as required to be a single plan covering multiple employers for purposes of ERISA section 3(5), 29 U.S.C. section 1002(5). Thus, RSPT failed to qualify as a single “pension plan” for purposes of ERISA section 3(2), 29 U.S.C. 1002(2), since it was not established or maintained by an “employer” for purposes of that section.”

For half of the multiple employer plan community, the indictment contains the correct statement that “no common ownership or affiliation among the adopting employers” is required of multiple employer plans.

For the other half of the multiple employer plan community, the Memorandum in Support contains the correct statement that “because there was no commonality of employment-based interest among the participating employer sponsors of the plan apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a group or “association” of employers as required to be a single plan covering multiple employers”, RSPT was not a single ‘multiple employer plan’.

Because they contradict each other, both statements cannot be simultaneously true. Or is it possible that the sentence about commonality and RSPT is being misread because of the way the first paragraph in the Memorandum in Support distinguished between RSPT and the Plans. Either way, neither one is official guidance from the Dept. of Labor, the IRS or Congress about what type of commonality is required among plan sponsors of multiple employer plans.

The reason I say what type of commonality is required is because all plan sponsors of multiple employer plans share some type of commonality. Whether it is a common plan design, a common investment strategy, a common geographical location, a common membership in a trade association, or a common business plan involving leasing of employees, all plan sponsors in multiple employer plans share some type of commonality or they would not have been motivated to join together in a multiple employer plan. Whether the Dept. of Labor decides it is more important that plan sponsors share a common membership in a chamber of commerce before they can join together in a multiple employer plan, or whether the Dept. of Labor decides it is more important that plan sponsors share a common investment strategy and plan design before they can join together in a multiple employer plan, is still to be seen and will not happen in any of the pleadings filed by the government in the criminal case involving Matthew Hutcheson.

On the other hand, if the government keeps flip-flopping on this point in the Matthew Hutcheson criminal case, the criminal case against Matthew Hutcheson may go away. If the government can’t agree on whether RSPT was a multiple employer plan or not, how can they explain to a jury of non-retirement plan professionals how RSPT, or the Plans, operated in a way that allowed Matthew Hutcheson to misappropriate their pension funds.

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Posted in DOL, Multiple Employer Plans, Uncategorized

Tagged Matthew Hutcheson, MEP, multiple employer plan

IRS Selects Kinsail Corp. for Approving ERPA Continuing Education Providers

Posted on September 20, 2011 by Administrator| Comments Off

On Sept. 19, 2011, the IRS announced that it has selected Kinsail Corporation as the vendor to administer application and renewal services for Continuing Education Providers that serve Registered Tax Return Preparers, Enrolled Agents, and Enrolled Retirement Plan Agents. According to their website, Kinsail Corporation is located in the U.S. Virgin Islands.

The IRS says the Continuing Education vendor will be responsible for administrative processing of applications and renewals from education providers, maintaining a public listing of all approved providers, and collecting course completion information from providers by PTIN to provide to the IRS through a single source. The IRS will maintain full oversight of approving and reviewing providers.

The IRS has not clarified how this will impact the ERPA CPE requirement going forward, or when Kinsail Corporation will take over processing applications and renewals from firms providing ERPA CPE. On the Request For Proposal (RFP) notice issued by the IRS on June 30, 2011 announcing the position of Continuing Education vendor, the IRS said that it anticipates the Continuing Education vendor taking over effective Jan. 1, 2012.

It was just six weeks ago, on Aug. 1, 2011, that the IRS issued Notice 2011-61 requesting comments by Aug. 17, 2011 on the process for individuals and companies to be approved by the IRS as continuing education providers. A number of vendors providing seminars approved by the IRS for ERPA CPE credit submitted comments in response to Notice 2011-61, including ASPPA.

Note: My company is one of the vendors currently approved by the IRS to offer seminars for ERPA CPE credit. We look forward to working with Kinsail Corporation to maintain our ability to offer seminars approved by the IRS for ERPA CPE credit.

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Posted in Uncategorized

Differences Between Plan Sponsor and Plan Administrator

Posted on September 19, 2011 by Administrator| Comments Off

On May 16, 2011, the U.S. Supreme Court issued an opinion in Cigna Corp. v. Amara, No. 09-804. It involved a dispute between Cigna Corp., the plan sponsor, and approximately 25,000 participants in Cigna’s defined benefit plan over Cigna’s decision to convert the defined benefit plan into a cash balance plan in 1998. As part of converting the defined benefit plan into a cash balance plan, Cigna transferred participants’ defined benefit account balances into the cash balance plan to create an opening account balances in the cash balance plan for each participant. The issue framed before the U.S. Supreme Court was whether a showing of “likely harm” is sufficient to entitle plan participants to recover benefits based on faulty disclosures. For anyone involved with cash balance plans, this case is a must read.

It is also a must read for anyone who administers plans, even if they do not administer cash balance plans, because, as part of the opinion, the Court also discusses what makes a 204(h) notice defective, what the differences are between a summary plan description and a plan document, and what the differences are between a plan administrator and plan sponsor.

According to the Supreme Court, the differences between a plan sponsor and a plan administrator are:

“the plan’s sponsor (e.g. the employer), like a trust’s settlor,

1. creates the basic terms and conditions of the plan

2. executes a written instrument containing those terms and conditions, and

3. provides in that instrument ‘a procedure’ for making amendments.”

“The plan’s administrator, a trustee-like fiduciary,

1. manages the plan,

2. follows its terms in doing so, and

3. provides participants with the summary documents that describe the plan (and modifications) in readily understandable form.”

The Court says that, while the same entity can fulfill both roles, ERISA does not mix the responsibilities by giving the administrator the power to set plan terms indirectly by including them in the summary plan description.

With so much debate taking place lately over the roles of plan sponsors, fiduciaries, and service providers, it should be interesting to see how this opinion shapes that discussion.

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Posted in Uncategorized

Free ERPA CE on April 28, 2011 Hosted by the IRS

Posted on April 18, 2011 by Administrator| Comments Off

On April 28, 2011, the IRS is holding a free webinar on issues relating to funding standards applicable to single and multiemployer pension plans. The IRS notes that the presentation will focus on the rules under the Pension Protection Act, funding relief and relevant agency guidance.

To attend, register through the IRS’ website here.

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Posted in Uncategorized

Blogging About ERISA Carnival #10

Posted on August 19, 2007 by Suzanne Wynn| Comments Off

This week in the Employee Benefits world:

Mark Cussen of the Nesteggr blog provides a short overview of nonqualified plans in Nonqualified Plan Can Meet Special Business Needs.

Roy F. Harmon of the Health Plan Law blog discusses a subrogation court decision involving a minor injured in a car accident in Wal-Mart Takes All in ERISA Reimbursement Dispute with Minor Child Plan Beneficiary.

Bill Griffith Jr. of the Securing Retirement Income for Life blog takes a look at 403(b) transfers, including the impending Sept. 24, 2007, deadline for 90-24 transfers, in 403(b) Plan Transfers.

The law firm of Morris James Delaware of the Delaware Business Litigation Report blogs about the U.S. District Court’s decision in Roarty v. Tyco International Group Ltd., in District Court Allows Breach of Fiduciary Duty Claim Under ERISA, Dismisses State Contract Claim.

D. Todd Smith of the Texas Appellate Law Blog discusses the recent 5th Circuit Court of Appeals decision in Ex-Spouse Retains ERISA Retirement Benefits.

Barry Barnett of the Blawgletter blogs about Sixth Circuit Agrees With Third and Seventh on Post-”Cash Out” ERISA Standing.

Stephen Rosenberg of the Boston ERISA & Insurance Litigation Blog mentions the 20th Annual ERISA Litigation Conference, taking place in October of 2007 and also in February of 2008. The February session is here in Orlando.

Submit your blog article to the next edition of Carnival of Employee Benefits using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

[tags]Pension Protection Act, ppa, pension, retirement, blog carnival, employee benefits, fiduciary, ERISA, 401(k)[/tags]

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Posted in Carnival of Employee Benefits, Uncategorized

IRS Releases Summary of Final 403(b) Regs

Posted on July 24, 2007 by Suzanne Wynn| Comments Off

In a special edition of Retirement News for Employers, the IRS provides a summary of the Final 403(b) Regs.

One highlight of the summary is the statement that the Final 403(b) Regs also contain a provision not related to 403(b) plans. In the language of the IRS summary:

Finally, the 414(c) regulation addresses aggregation to determine the employer for control group benefit purposes for all exempt organizations (not governments), except churches, based upon an 80% director or trustee common control test.

[tags]403(b), controlled group, 414(c), regulations, IRS, plan document, pension, retirement, ERISA[/tags]

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Posted in 403(b), IRS, Uncategorized

Blogging about ERISA

Posted on July 16, 2007 by Suzanne Wynn| Comments Off

Over the weekend, the Wall Street Journal marked the 10th anniversary of blogging with an article by Tunku Varadarajan. The article includes several people listing their favorite blogs. In the spirit of marking this anniversary, here are some of my favorite ERISA blogs:

Taxprof – written by Prof. Paul Caron and Ron Jones of the University of Cincinnati Law School. Yes, Cincinnati is where I graduated from law school. And no, I did not have the honor and privilege of actually attending any of Prof. Caron’s classes. I regularly check Taxprof to see what new scholarly works have been published about ERISA.

Stephen Rosenberg’s Boston ERISA & Insurance Litigation Blog – updated daily, this blog does a good job of covering current ERISA issues. When I am looking for a well-reasoned opinion about a recent court opinion, I check out this blog first.

Brian King’s ERISA Blog – Brian’s blog also contains well-reasoned opinions about recent ERISA court cases as well as ERISA health plan issues. Brian also seems to find more ERISA humor than just about any other blogger.

Susan Mangiero’s Pension Risk Matters – this blog is one of the few ERISA blogs which focuses on pension risk and discusses fiduciary issues. For example, today’s post is about hedge fund returns.

Roy F. Harmon’s Health Plan Law – Roy writes the best blog about health plan issues.

Jerry Kalish’s Retirement Plan Blog – I think Jerry simply writes better than the rest of us. Just check out one of his recent posts about 403(b) plans.

Workplace Prof Blog – written by Paul Secunda and Richard Bales, it provides daily commentary on ERISA as well as other workplace issues – plus it has a book club.

And on days I am truly just surfing the web, I go to Technorati.com and search on “ERISA”. Every day, ERISA is mentioned in a variety of blogs. Today, I am surfing about my new bright shiny thing – pension equity plans.