ML BeneBits

The US Department of Labor (DOL) final amendment to Prohibited Transaction Class Exemption 84-14, the so-called QPAM Exemption that is commonly relied upon by investment managers for ERISA-governed employee benefit plans and individual retirement accounts to avoid potential prohibited transaction issues, was published in the Federal Register on April 3, with the changes becoming effective on June 17, 2024.

When private equity investment transactions close, management and private equity investors are off to the races—generally aligned on strategic and financial objectives. However, as market conditions and the economic climate shift, key parties may become misaligned and management incentive plans (MIPs) could become underwater or ineffective.

Besides being Valentine’s Day, February 14, 2024 is an important day for employers with any California employees: It is the last day for employers to notify California employees (including former employees who were employed after January 1, 2022) that any unlawful noncompetes applicable to them are void. These notices need to be specific to each employee and individually addressed, and so will likely involve some investment in time and effort by employers to ensure compliance with the law.

US state and federal laws have increasingly sought to regulate environmental, social, and governance (ESG) investing—a trend that continued in 2023. This increased regulatory focus has impacted benefit plans, including ERISA plans and, especially, public retirement plans.

To the great relief of many plan sponsors, administrators, recordkeepers, and payroll vendors, the IRS issued highly anticipated relief regarding the mandatory "Rothification" of catch-up contributions.

Recent action taken by the Pension Benefit Guaranty Corporation (PBGC) and the US Department of Labor (DOL) will affect plans that are eligible for, or have received, special financial assistance (SFA). SFA-eligible plans should note the new guidance when applying for SFA.

A recent news release indicates that the US Department of Labor (DOL) has an investigatory initiative focused on the issue of “insurability” under life insurance benefits. This issue arises when insurance premiums are collected for ERISA insurance benefits but there is a failure to complete the necessary process of confirming evidence of insurability. The result is that the employee believes they have insurance coverage, but coverage is not available when sought because the evidence of insurability was never completed. The DOL views such failures as a potential breach of ERISA’s fiduciary duties by either the insurer, the employer, or both.

Single-employer defined benefit pension plans that have elected to use the “alternative method” for determining Pension Benefit Guaranty Corporation (PBGC) premiums have a window to take action that may significantly reduce their PBGC premiums for 2023. Action must be taken prior to the due date for PBGC premiums for the year, which for calendar year plans is October 16, 2023.

The Internal Revenue Service (IRS) expanded its individually designed determination letter program to include 403(b) retirement plans in November 2022, before which time 403(b) plan sponsors did not have the ability to file for a determination letter, and thus could not receive assurance from the IRS that the plan’s written terms complied with Internal Revenue Code (Code) Section 403(b).

Recipients of periodic or annuity retirement plan distributions provide a Form W-4P to payors of pension or annuity payments for the correct amount of federal income tax to be withheld from these distributions. (While retirement plan administrators are primarily liable for withholding (and remittance of withholding), under Treasury Regulation § 3405-1T, Q&A 13, this responsibility can be, and commonly is, shifted to the payor.) In response to changes to the withholding rules in the Tax Cut and Jobs Act of 2017 (TCJA), the Internal Revenue Service (IRS) updated Form W-4P in 2022 and mandated the use of the new 2023 Form W-4P as of January 1, 2023.