President Obama’s health care reform law (aka: the “The Affordable Care Act” or “ACA”) is designed to broadly change the field of health care insurance. While the law’s main focus may be to help Americans without health insurance coverage, it also has the potential to bring a variety of positive effects to the world of… [Read more…]
December 8, 2010
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) was passed to “promote the financial stability of the United States” and to protect consumers from “abusive financial services practices.”[1] It will bring unprecedented change to the securities and derivative investments markets. It will also negatively impact participants of employee benefit plans subject… [Read more…]
May 31, 2010
The basic parts of the Patient Protection and Affordable Care Act (aka: “PPACA”) are identifiable by the actors affected (ie: the Individual, the Employer, and the Insurance Carrier), as well as the reforms that define their interconnection (ie: State exchanges, and benefit plan designs). PPACA directs states to create exchanges that will offer qualified benefit… [Read more…]
April 21, 2010
Entities subject to the executive compensation and governance requirements of Section 111 of the Emergency Economic Stabilization Act of 2008 (“EESA”), as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”), may also be subject to the oversight of the Special Master for Executive Compensation. The Special Master has authority to interpret section… [Read more…]
February 2, 2010
Everyone in the business of employee benefit plan servicing shares a common interest; they make money doing it. Many service providers continue to benefit from the very flow of that money as a result of various “revenue sharing” agreements. Take, for example, the case of an investment advisor who charges a plan a set annual… [Read more…]
January 15, 2010
The business of pension plan servicing, being a mere graft of the already complex financial services industry, has naturally adapted to multi-faceted fee-sharing arrangements (aka: revenue sharing). Troubles arise, however, where these arrangements are not disclosed to participants, beneficiaries, – and plan sponsors, because the Employee Retirement Income Security Act of 1974, as amended, generally… [Read more…]
December 21, 2009
The court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (“Firestone”) held that where a plan vests discretion in the plan administrator, courts will not review decisions under a de novo standard but rather will afford broad deference to the administrative record. The court also opined, however, that where an administrator… [Read more…]
December 19, 2009
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (“Firestone”) provided employee benefit plan administrators with a powerful cloak of protective deference, so long as they have been granted discretion.[1] Twenty years later, the court in MetLife Insurance Co. v. Glenn, 128 S. Ct. 2343 (2008) (“Glenn”) instructed courts to nevertheless remain cognizant of… [Read more…]
December 12, 2009
The Supreme Court decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (“Firestone”) allows decisions made by employee benefit plan administrators who have been granted discretion to to determine eligibility, interpret plan terms, or both, to enjoy great deference by a reviewing court.[1] MetLife Ins. Co. v. Glenn, 128 S. Ct.… [Read more…]
November 14, 2009
MetLife Ins. Co. v. Glenn, 128 S. Ct. 2343 (2008) (“Glenn”), the landmark Supreme Court decision giving explanation on Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (“Firestone”), warned providers who act both as decider of entitlement and payor of benefits that their conflict will be weighed to identify abuses. Recall that… [Read more…]
October 22, 2009
There are only six permissible distributable events under IRC § 409A. They are: 1) A fixed time or pursuant to some fixed schedule specified under the plan; 2) Separation of service; 3) Change in control; 4) Severe financial hardship; 5) Disability; or, 6) Death. The specific date requirement may be met by way of an… [Read more…]
October 11, 2009
Which plans can be exempt from 409A? Of course, certain types of arrangements are specifically exempted from Section 409A coverage, such as IRC 401(a) qualified retirement plans, bona fide vacation leave, sick leave, disability and death benefits, etc. Nevertheless, the key to avoiding 409A coverage lies in whether receipt of compensation can be deferred, as… [Read more…]
October 5, 2009
IRC § 409A provides strict rules, and harsh penalties, governing nearly all situations where compensation is to be paid under a deferred compensation arrangement. Compensation is deferred and subject to IRC § 409A if the service provider (ie: employee, executive, or independent contractor) has a legally binding right during a taxable year to compensation that… [Read more…]
September 28, 2009
IRC § 409A applies broadly to any deferred compensation arrangement in which a service provider (ie: employee, executive, or independent contractor) has a legally binding right during a taxable year to payment that is or may be payable in a later taxable year.[i] Though no legally binding right will be found where a service recipient… [Read more…]
September 5, 2009
The most favorable tax treatment of deferred compensation is generally found by way of qualified plans. However, an employer’s ability to reward its employees in proportion to their particular value to the company is all but impossible under a qualified scheme due to the demands for uniformity under the Employee Retirement Income Security Act of… [Read more…]
August 23, 2009
If a public corporation has a Sec. 422 stock option plan (Incentive Stock Option plan, or “ISO”), a Non-Qualified Stock Option plan (or “NSO”), and a Non-Qualified Deferred Compensation plan (or “NQDC”) plan, and all benefits and options immediately vest and become exercisable upon the sale of the company, how will the sale of all… [Read more…]
April 25, 2009
This Note is a critique of a paper entitled “Illinois State Pension Plans: Do Participants Have Standing to Demand a Minimum Funding Ratio,” presented by authors Barry Kozak and Jeremy Brunner at Chicago’s John Marshall Law School’s 2009 Employee Benefits Symposium. Of course, it is offered collegially, and is designed as collateral commentary on the… [Read more…]
October 22, 2008
The laws governing employment-based retirement security plans include the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (the Code). Under these laws, employers who sponsor plans are held to a high legal standard of trust, as well as held liable for account losses where the employer directs the investments. 401(k)… [Read more…]
August 7, 2008
Three quarters of a century ago, President Roosevelt noted: “There is no tragedy in growing old, but there is tragedy in growing old without means of support.”[1] The Social Security program was born soon after, as was an analogy long attributed to the Roosevelt Administration – that of the three-legged stool. The stool concept advanced… [Read more…]
August 2, 2008
Pensions of old came with a promise that, upon retirement, employees would receive a set level of income – a pre-defined benefit – throughout his or her remaining life. Those defined benefit pensions of our grandparents’ era, however, are losing popularity and being replaced by more portable retirement savings vehicles like the 401k. Twenty years… [Read more…]
June 14, 2008
A fiduciary, for purposes of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is any person identified as such in the written instrument establishing the employee benefit plan[i], or anyone who has the functional authority to control and manage the operation and administration of a plan.[ii] “Functional fiduciaries” are often unaware of… [Read more…]
M. R. F.
January 11, 2012
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