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John G. Ferreira, Amy Pocino Kelly, Patrick Rehfield
ML BeneBits

What Employee Benefits Professionals Will Be Watching in 2020

November 07, 2019

As we look forward to 2020, we bring you a few key takeaways on the hot topics and trends that individuals operating in the employee benefits space are watching in health and welfare, plan sponsor considerations, executive compensation, fiduciary, and fringe benefits.

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Tags: Employee Benefits, ERISA/Employee Benefits Litigation, Events, Health and Welfare Plan Design and Administration, Multiemployer Plans, Retirement Plan Design and Administration, Tax

Check Out Our November 2019 Events!

November 06, 2019

Join Morgan Lewis this month for these programs on employee benefits and executive compensation:

  • TEI & Morgan Lewis Present: Taxation of Compensation & Benefits | November 12 | Chicago | Seminar sponsored by Morgan Lewis and TEI | Live presentations featuring Morgan Lewis lawyers Handy Hevener, Steve Johnson, Dan Salemi, Erin Randolph-Williams, David Zelikoff, Cosimo Zavaglia, Matthew Mock, Andy Anderson, Sage Fattahian, and Jonathan Zimmerman
  • Looking Ahead to the 2020 Proxy Season | November 21 | Pittsburgh | Seminar | Live presentation by and roundtable with Morgan Lewis Lawyers Celia Soehner, Randy McGeorge, and Erin Randolph-Williams

We’d also encourage you to attend the firm’s Global Public Company Academy series:

  • Morgan Lewis Shareholder Activism Defense Webinar: What You Need to Know to Avoid Being an Easy Target for an Activist Investor| November 6 | Webinar presented by Keith Gottfried and Sean Donahue
  • Securities Litigation Update | November 20 | Webinar presented by Michael Blanchard, Marc Sonnenfeld, and Laura Hughes McNally

Visit the Morgan Lewis events page for more of our latest programs.

Tags: Employee Benefits, ERISA/Employee Benefits Litigation, Events, Executive Compensation, Labor, Employment & Benefits

IRS Announces Cost-of-Living Adjustments for 2020: Dollar Limitations for Retirement Plans

By R. Randall Tracht
// November 06, 2019

The Internal Revenue Service (IRS) announced today cost-of-living adjustments affecting dollar limitations for retirement plans that will take effect for 2020. (Read the IRS Notice.) Highlights from the announcement include the following:

  • The contribution limit for elective deferrals to 401(k), 403(b), and 457(b) plans increases from $19,000 to $19,500
  • The catch-up contribution limit for elective deferrals to such plans for employees age 50 and older increases from $6,000 to $6,500
  • The annual compensation limit for amounts taken into account under a tax-qualified retirement plan increases from $280,000 to $285,000
  • The overall annual limitations on benefits set forth in Section 415 of the Internal Revenue Code increases from $56,000 to $57,000 for defined contribution retirement plans and $225,000 to $230,000 for defined benefit retirement plans
  • The compensation threshold used to define highly compensated employees increases from $125,000 to $130,000 

If you have questions about this announcement, please reach out to Randy Tracht or your Morgan Lewis contact.

Tags: Employee Benefits, ERISA/Employee Benefits Litigation, Retirement Plan Design and Administration

DOL’s Proposed Website-Based Electronic Disclosure Option Is a Welcome Change

By Elizabeth S. Goldberg and R. Randall Tracht
// October 24, 2019

The US Department of Labor (the Department) on October 22 announced the publication of a proposed rule intended to serve as a supplement to the Department’s existing electronic disclosure regulations. The proposed rule leaves the existing electronic disclosure regulations (and options) in place but adds a new “notice and access” rule (29 CFR § 2520.104b-31) that would permit retirement plans (but not welfare plans) to satisfy certain ERISA disclosure requirements by posting those documents to a website established for that purpose and providing notice to participants that the documents are available on the website.   

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Tags: Retirement Plan Design and Administration

Warning: Your 2020 PBGC Premiums Could Be Much Higher than You Expect

By Robert L. Abramowitz
// October 21, 2019

Pension plans that are not fully funded for PBGC purposes have two parts to their PBGC premium. One part is a flat rate premium of $83 per participant in 2020 ($80 for 2019). The other is a variable rate premium that looks to the value of the plan’s “unfunded vested benefits,” which is the excess, if any, of the plan’s Premium Funding Target over the fair market value of plan assets. The Premium Funding Target is generally determined the same way as the plan’s funding target for ERISA Section 303 minimum funding requirements, with one important exception. The interest rate used to measure the Premium Funding Target is a “spot” rate, rather than an interest rate averaged over 24 months. In lieu of using the special premium discount rates, a plan sponsor may make an election (irrevocable for five years) to use smoothed discount rates, similar to, and in some cases identical to, the rates used to determine the minimum required contribution (the Alternative Premium Funding Target). The PBGC variable rate premium for 2020 is 4.5% of the plan’s unfunded vested benefits, subject to a headcount cap of $561 per participant.

With the recent decline in interest rates (and the possibility of further decline before yearend), plans may face an unexpected increase in their variable rate PBGC premium for 2020 because the value of the “unfunded vested benefits” may be quite a bit higher in 2020 compared to 2019. In this regard, each of the spot segment rates in December 2018, used for determining variable rate premiums for 2019 for calendar year plans, is at least 100 basis points higher than the comparable spot segment rates in October 2019. The spot segment rates in December 2019 will be used to determine variable rate premiums in 2020 for calendar year plans unless the Alternative Premium Funding Target has been elected. We recommend that plan sponsors check with their actuaries to determine estimated total PBGC premiums for 2020, and to evaluate whether it is advisable to undertake action to reduce the estimated premiums (e.g., by making additional contributions to the plan or electing the Alternative Premium Funding Target).

Tags: Multiemployer Plans, Retirement Plan Design and Administration

Multiple Changes for Multiple Employer Plans

By Michael B. Richman and Michael Gorman
// October 10, 2019

While the Setting Every Community Up for Retirement Enhancement Act (the SECURE Act) and its promise of truly open multiple employer plans (MEPs) sat with the Senate this summer, the US Department of Labor (DOL) and Internal Revenue Service (IRS) both issued guidance addressing MEPs.

DOL Final Regulations – MEPs Open Up for Bona Fide Groups or Associations

Under ERISA, only an “employer” may sponsor a pension plan. ERISA defines the term “employer” to include certain groups or associations of employers. The DOL has interpreted this to mean that only a bona fide group or association of employers may sponsor an MEP, thereby limiting the ability of employers to group together to achieve economies of scale aimed at reducing the administrative costs of establishing and maintaining a retirement plan.

On July 31, 2019, the DOL published final regulations addressing the definition of “employer” under ERISA for purposes of its rules on who may sponsor MEPs. These final regulations supersede proposed regulations issued on October 23, 2018, and prior subregulatory guidance.

The final regulations provide a safe harbor definition of “bona fide group or association of employers.” If a group of employers satisfies this definition, the DOL will deem the group an “employer” for purposes of being able to sponsor an ERISA pension plan. This safe harbor definition requires the group to satisfy a seven-factor test.

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Tags: Retirement Plan Design and Administration

Check Out Our October 2019 Events!

October 04, 2019

Join Morgan Lewis this month for these programs on employee benefits and executive compensation:

  • Hot Topics in Employee Benefits: What We’re Seeing | October 3 | Webinar presented by Sage Fattahian, Michelle McCarthy, Anna Pomykala, Elizabeth Goldberg, and Mark Simons
  • Executive Compensation Challenges | October 8 | Philadelphia | Seminar sponsored by NASPP and presented by Morgan Lewis and Korn Ferry | Morgan Lewis panelists are Mims Maynard Zabriskie and Erin Randolph-Williams
  • 65th Annual Employee Benefits Conference | October 21–23 | San Diego | Conference sponsored by the International Foundation of Employee Benefits Plans | Live panels at several sessions featuring Morgan Lewis lawyers Craig Bitman, Daniel Salemi, Sage Fattahian, and Lindsay Goodman

We’d also encourage you to attend the firm’s Global Public Company Academy series.

  • 2019 Annual Meeting Hot Topics and What They Mean for 2020 | October 16 | Webinar presented by Patrick Rehfield

Visit the Morgan Lewis events page for more of our latest programs.

Tags: Employee Benefits, ERISA/Employee Benefits Litigation, Events, Executive Compensation, Labor, Employment & Benefits

IRS Finalizes 401(k) Hardship Distribution Regulations

By Brian J. Dougherty and Elizabeth G. Kennedy
// October 04, 2019

The Internal Revenue Service on September 23 finalized proposed regulations relating to hardship distributions under an IRC 401(k) plan. The final regulations differ little from the proposed regulations published on November 14, 2018, and, like the proposed regulations, reflect changes made under the Bipartisan Budget Act of 2018 (BBA 2018), and provide updates reflecting changes (already in practice) made under the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act) and the Pension Protection Act of 2006 (PAP 2006). They also modify the existing “non-safe harbor” determination of whether a distribution is necessary to satisfy an immediate and heavy financial need. To learn about these changes, please read our LawFlash.

Tags: Retirement Plan Design and Administration, Tax

Join Us at the 65th Annual Employee Benefits Conference!

September 27, 2019

Please join Morgan Lewis in San Diego next month for these featured sessions at the 65th Annual Employee Benefits Conference:

Managing Risks | Dan Salemi, panelist
Monday, October 21 | 9:15–10:30 am
Tuesday, October 22 |  7:30–8:45 am

Legal and Legislative Updates for Health Plans | Sage Fattahian and Lindsay Goodman, panelists
Monday, October 21 | 1:15–2:30 pm
Tuesday, October 22 | 9:15–10:30 am

Environmental, Social, and Governance (ESG) Investment Initiatives | Craig Bitman, panelist
Monday, October 21 | 10:45–12:00 pm
Tuesday, October 22 | 10:45–12:00 pm

See our events page for more information on this can’t-miss “event of the year” for the employee benefits sector.

Tags: Employee Benefits, ERISA/Employee Benefits Litigation, Events

Partner Mims Maynard Zabriskie Named ‘Best of the Bar’ by Philadelphia Business Journal

September 27, 2019

Morgan Lewis partner Mims Maynard Zabriskie has been recognized in the Philadelphia Business Journal’s third annual Best of the Bar awards.

The awards identify Philadelphia’s top lawyers—those who have distinguished themselves in their practice specialties—across eight categories. Mims was chosen for this year’s class because of her significant, impactful work in the tax and employee benefits arena in the last year.

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Tags: Employee Benefits, ERISA/Employee Benefits Litigation
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