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As concerns continue regarding the possibility of an economic downturn, plan sponsors should be aware of the effects that two potential downturn events could have on their qualified plans.

Substantial Cessation of Operations (Section 4062(e) Event)

Where there is a substantial cessation of operations at a facility, an employer maintaining a qualified defined benefit plan may be subject to certain notice requirements and termination liability rules. A substantial cessation of operations occurs when a permanent cessation of operations at a facility results in the loss of employment by employees at the facility who constitute more than 15% of all employees who are eligible under the plan.

The outsourcing of retirement plan recordkeeping and other administrative responsibilities has increased in recent years for both defined contribution and defined benefit plans. Although there is no overarching privacy law governing retirement plans, fiduciaries must adhere to the “prudent expert” standard of care in fulfilling their duties, and be continuously diligent and attentive to the privacy and security of participant data.

This diligence extends to the structuring of outsourcing agreements for administrative responsibilities. Read this post from our Tech & Sourcing @ Morgan Lewis blog for more data security considerations in plan administration outsourcing agreements.

Closed defined benefit plans—i.e., defined benefit plans that are frozen to new participants but that allow existing “grandfathered” participants to continue to accrue benefits—are nearly certain to face challenges in passing nondiscrimination testing. This is because, over time, the grandfathered group that continues to accrue benefits is likely to become disproportionately highly compensated as a result of their longer service and the absence of shorter-service employees participating when they are first hired.

Congratulations to employee benefits partner Daniel Salemi, who was recently named to the 2019 40 Under Forty List in the Chicago Daily Law Bulletin. The Chicago Daily Law Bulletin and Chicago Lawyer selection committee chooses the honorees from a pool of recommendations submitted by peers to recognize those attorneys who have demonstrated intelligence, passion, success in the office, and a desire to help the community through civic or pro bono efforts. Honorees were recognized at a September 19 ceremony celebrating the 20th anniversary of the 40 Under Forty list in Chicago.

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.

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

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

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

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.

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

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

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

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.

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.