It is almost here – the Annual ‘Spring Seminar!! Our Co-Chairs have and their committee have working very hard to put together an interesting and diverse program of topics. There is something for everyone, no matter what part of the industry you participate in. Be sure to sign up, either on-line, or send in your registration form.
Also, don’t forget - The Seattle Chapter will be hosting this year’s Annual Meeting, July 13-16, 2008. Information has been sent out via e-mail, as well as brochures in the mail. A representative from the Seattle Chapter will be on hand to talk about the program.
I will see you at the Annual Spring Seminar:
Wednesday, May 7th
Oregon Convention Center
777 NE MLK Blvd
Portland, OR 97232
Registration & more details:
http://www.westernpension.org/1851.html
Thomas Kramer
President, Portland Chapter
TWO MINUTE DRILL: Legal and Compliance Developments
April 9, 2008
IRS sets adoption deadline for preapproved plans:
In IRS Announcement 2008-23, the IRS set out the following adoption and filing deadlines for master-and-prototype and volume-submitter defined contribution plans:
- March 31, 2008 (or soon after): IRS issues opinion and advisory letters to 401(k) and defined contribution plan sponsors who filed confirming documentary compliance with EGTRRA and the 2004 cumulative list qualification requirements.
- April 2008 to April 30, 2010: adopting employers must sign preapproved EGTRRA restatement documents.
- May 1, 2008: IRS opens determination letter application period from adopting employers of preapproved plans. Generally, these applications would be filed using the short Form 5307, although a full Form 5300 will be needed in some circumstances.
Previously, the IRS indicated that it expects to complete its review of pre-approved defined benefit plans by 2010.
To facilitate this process, the IRS released a new version of Form 5307, Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans, and related instructions. Adopting employers may file Form 5307 for assurance that their plans meet nondiscrimination rules, Code § 415 limits and other requirements. The IRS will continue to accept the old version of the form through September 30, 2008.
A copy of Announcement 2008-23 is available at: http://www.irs.gov/pub/irs-drop/a-08-23.pdf and the revised Form 5307 instructions are at: http://www.irs.gov/pub/irs-pdf/i5307.pdf
DOL active in the courts:
On March 19, 2008, the Department of Labor (“DOL”) filed an amicus brief in a pending case on 401(k) fee issues. The DOL states its position on 401(k) fee issues and fiduciary duties in a brief filed with the US Court of Appeals for the Seventh Circuit in the case involving workers at Deere & Co. (Heckler v. Deere & Company, ___F. Supp.2d ___, 2007 WL 1874367 (W.D. Wisc. 2007)).
That suit, which alleged 401(k) participants at Deere were being charged unreasonable and undisclosed fees and expenses, was dismissed by the district court in June. In response to the dismissal, the DOL filed a brief with the Seventh Circuit supporting the Deere workers’ claims and requested that district court’s earlier ruling be reversed on appeal, where the case has been since the end of last year. As the primary enforcer of ERISA, the DOL has the opportunity to influence courts reviewing these 401(k) suits. The appeals court will likely await responses to the brief from both Deere and Fidelity. These responses are expected to be filed sometime in the next two months.
A copy of the DOL brief filed in the case is available at: http://www.plansponsor.com/uploadfiles/deerehecker7thcirc.pdf
On March 29, 2008, the DOL filed a brief with the US Court of Appeals for the Ninth Circuit in the case considering whether ERISA preempts San Francisco’s employer health spending mandate (Golden Gate Restaurant v. San Francisco, ___F.Supp. 2d___, 2007 U.S. Dist. Lexis 94112 (N.D. Cal. Dec. 26, 2007)). The district court concluded that although the goal of this legislation was “laudable,” the ordinance was preempted under ERISA. The court determined that the ordinance failed both parts of the Shaw test, in that this legislation was connected with and made a reference to an ERISA-covered plan.
San Francisco then asked the Ninth Circuit to reverse the district court’s ruling, and obtained the court’s permission to enforce the spending mandate in the meantime. A hearing is scheduled before the Ninth Circuit on April 17, 2008.
In anticipation of the hearing, employer groups and the DOL weighed in with amicus briefs arguing that the court should block the San Francisco law. This time, the DOL and employer groups share a common position.
Whether the Ninth Circuit will be persuaded and the timing for rendering a decision are unknown. If the court finds that ERISA preempts the spending mandate, employers with San Francisco employees have a reprieve pending further appeal. If the court decides to allow the spending mandate, affected employers will need to continue to assess necessary compliance efforts while keeping an eye on further judicial developments.
A copy of the DOL brief is available at: http://www.dol.gov/sol/media/briefs/GoldenGate(A)-3-27-08.pdf
New DOD TRICARE Rules:
On March 28, 2008, the Department of Defense (“DOD”) proposed rules banning employer incentives to drop employer group health plan coverage in favor of TRICARE as the primary payer. The incentive prohibitions, enacted by Congress in 2006 as part of a FY 2007 defense authorization measure, took effect on January 1, 2008. The Congressional Budget Office (“CBO”), citing DOD survey results, estimated that 50,000 people a year were “being diverted from employer-sponsored plan to TRICARE.” Outlawing employer-paid supplements, CBO predicted, will save taxpayers $119 million in 2008 and $700 million through 2011.
The ban on employer incentives applies to all active employee group health plans—both insured and self funded—and to plans sponsored by state and local government entities. There is a small employer exclusion for group health plans sponsored by employers with fewer than 20 employees, and employer-sponsored retiree group health plans are not covered by the rules.
The rules confirm that employers are not permitted to sponsor or otherwise offer their active employees TRICARE supplemental insurance policies. However, a general coverage waiver for a cash payment offered through a cafeteria plan to all employees is permissible (it cannot be limited to TRICARE-eligible employees). Employees can still purchase TRICARE supplemental insurance policies from third-party vendors, such as insurers or associations.
The cost is steep for violating the DoD rules: employers can be assessed a $5,000 penalty per violation. Comments on the proposed rule must be submitted by May 27, 2008. A copy is available in the Federal Register at: http://edocket.access.gpo.gov/2008/pdf/E8-6419.pdf
IRS issues draft Form 990 instructions and schedules:
On April 7, 2008, the IRS posted draft instructions for the revised Form 990 and schedules, as well as related tools for completing the form. The IRS published the final form and related schedules in December 2007, effective for tax years beginning in 2008. The revised Form 990 requires tax-exempt organizations to disclose a significant amount of information on compensation, governance and other matters.
Public comment is requested until June 1. The IRS web page with draft instructions and highlights is available at: http://www.irs.gov/charities/article/0,,id=181091,00.html
Author information:
Bethany A. Bacci
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, OR 97204-1268
(503) 294-9837 - direct dial
(503) 220-2480 - fax
babacci@stoel.com
www.stoel.com
