United States: Employee Benefits October 2016

Retirement Plan Developments

Internal Revenue Service ("IRS") Extends Temporary Nondiscrimination Relief for Closed Defined Benefit Plans

The IRS extended temporary nondiscrimination relief for closed defined benefit plans through the end of 2017.  The IRS will not publish final regulations with enough time for plan sponsors to comply before the temporary nondiscrimination relief would have expired.

IRS Issues Final Regulations for Bifurcated Defined Benefit Plan Distributions

The IRS finalized regulations that allow participants to receive optional forms of benefits that are paid partly as annuities and partly as single sums.  The final regulations provide for two methods to bifurcate the accrued benefit.  Under the first method, a plan may bifurcate the accrued benefit so that the plan provides that the minimum present value requirements in Treasury Regulation § 1.417(e)-1(d) apply to a specified part of the accrued benefit as though the part were the whole accrued benefit.  Under the second, alternative method, a plan that distributes a specified single sum to a participant will satisfy the requirements in Treasury Regulation § 1.417(e)-1(d) if the remaining portion of the participant's benefit satisfies the minimum requirement set forth in the regulations.

The final regulations apply to distributions with annuity starting dates in plan years that begin on or after January 1, 2017.

Pension Benefit Guaranty Corporation ("PBGC") Issues Proposed Rule for Missing Participants Program for Terminating Plans

On September 20, 2016, the PBGC issued proposed regulations to redesign its existing missing participants program for terminating single-employer defined benefit plans and to adopt three new missing participants programs.  The new programs would cover (1) multiemployer defined benefit plans covered by the PBGC's insurance program for plans covered by Title IV of ERISA, (2) professional service employer defined benefit plans that are not covered under the Title IV insurance program and (3) most defined contribution plans.  The new programs would allow terminating plans to transfer accounts of missing participants to the PBGC or send the PBGC information about where the accounts were transferred after the plans conducted a diligent search.  As with the existing defined benefit plan program, the PBGC will try to find all reported participants.  Participants who cannot be located will be added to the PBGC's searchable database of missing participants.

There are some noteworthy changes in the proposed regulations.  For example, the PBGC will charge a fee to participate in the program.  In addition, plans would have to treat participants with de minimis benefits as missing if they are subject to mandatory cash-out and are non-responsive.  The new program also has more robust requirements for searching for missing participants before the PBGC will accept a transfer from a terminating Plan.  The PBGC also proposes reducing the number of benefit categories and actuarial assumptions for determining the amount of the transfer to the PBGC, and proposes changes to the rules for paying benefits to missing participants and their beneficiaries.

The new missing participants program is voluntary for terminating defined contribution plans and defined benefit plans that are not covered by PBGC insurance.

PBGC Lowers Penalties for Late Payments of Premiums

The PBGC lowered the penalty rates for late payments of premiums by all plans and provided a waiver of most of the penalty for plans that have demonstrated a commitment to premium compliance.  Under the final regulation, the lower self-correction penalty rate will be 1/2 percent with a 25 percent cap, and the higher penalty rate will be 2.5 percent with a 50 percent cap.  The PBGC also eliminated the minimum penalty assessment.

The PBGC will waive 80 percent of penalties assessed at the 2.5 percent rate if (1) the plan has a five-year record of timely payment of all premiums and (2) payment of the late premium no later than 30 days after the PBGC informs the plan in writing that there is or might be a problem.

This final regulation is applicable to late premium payments for plan years beginning after 2015.

Court Rejects Application of Dudenhoeffer for Privately Held Stock

In Allen v. GreatBanc Trust Co., No. 15-3569 (7th Cir. 2016), employees sued the trustee of their employer's employee stock ownership plan ("ESOP") in connection with a seller-financed transaction.  In the transaction, the ESOP bought non‑public stock from the employer's shareholders for $60 million.  Within a year of the sale, the stock price had dropped by almost 50 percent.  The employees' lawsuit alleged that the trustee breached its fiduciary duty by failing to obtain an appropriate valuation and engaged in prohibited transactions.  The district court dismissed the complaint after finding that the plaintiffs had not met the "special circumstances" pleading requirement of Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014).

In Dudenhoeffer, the United States Supreme Court stated that in certain cases involving the decline of the share price of publicly traded stock held by a retirement plan, the plaintiffs must plead special circumstances that show that the trustee knew the shares were overvalued. However, the Seventh Circuit rejected Dudenhoeffer's "special circumstances" pleading requirement in the context of private stock.  The Seventh Circuit noted that the "special circumstances" pleading requirement is unnecessary because there is no market whose valuation must be explained away.  Accordingly, the Seventh Circuit reversed the district court's decision and allowed the case to proceed past the pleading stage.

IRS Modifies Employee Plans Compliance Resolution System ("EPCRS") for Changes in the Determination Letter Program

On September 29, 2016, the IRS issued Rev. Proc. 2016-51, which modifies EPCRS in light of the changes to the determination letter program and supersedes Rev. Proc. 2013-12.  Rev. Proc. 2016-51 also incorporates the provisions of several other revenue procedures.

Health and Welfare Plan Developments

Wisconsin Federal District Court Issues Ruling in Wellness Program Case

In EEOC v. Orion Energy Sys., Inc., No. 14-CV-1019 (E.D. Wis. Sept. 19, 2016), the District Court for the Eastern District of Wisconsin determined that the employer's wellness program did not violate the Americans with Disabilities Act ("ADA") by requiring participants to pay 100% of their premiums for self-insured health coverage if they failed to complete a health risk assessment.  The EEOC brought a lawsuit alleging that the employer's wellness program violated the ADA.  The employer argued that the wellness program fell under the ADA's safe harbor for bona fide benefit plans.  The bona fide benefit plan exception allows insurers to establish a bona fide benefit plan that is "based on underwriting risks, classifying risks, or administering such risks."  The district court concluded that the ADA's safe harbor did not apply because the wellness program was not used to underwrite, classify, or administer risks and was independent of the health plan.  However, the court ruled in favor of the employer on the wellness program issue because the wellness program was voluntary.

It is important to note that this case originated before the EEOC issued its final wellness program regulations, and therefore, portions of the final regulations do not apply.

DOL Issues Final Paid Sick Leave Rule for Federal Contractors

The DOL issued a final rule requiring federal contractors to provide paid sick leave to employees who work in connection with federal contracts.  The rule would cover employees who are sick, need to take care of a sick family member or must see a doctor or take a family member to a doctor.  The final rule provides for up to 56 hours of paid sick leave per year.

Department of Health & Human Services ("HHS") Releases FAQs on 1557 Regulations

HHS has published guidance to help plans comply with the final regulations that implement the nondiscrimination rules under Section 1557 of the Affordable Care Act ("ACA").  HHS issued FAQs relating to the requirement that covered entities post taglines in at least the top 15 languages spoken by individuals with limited English Proficiency.  In addition, HHS provided a table identifying the top 15 languages spoken by limited English proficiency individuals in each state.  The published list is meant to help covered entities comply with the regulations, but covered entities may refer to sources other than the list.

Upcoming Compliance Deadlines and Reminders

  1. Reinsurance Fee for Group Health Plans. Contributing entities (the third‑party administrator for self-funded plans or the insurer for fully insured plans) must report to HHS their annual enrollment counts by November 15, 2016 using the electronic “2016 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form.”  The Form will then calculate the contribution amount owed.  The contribution rate for 2016 is $27 per reinsurance covered life.  As in 2015, self-insured, self-administered plans exempt from the reinsurance fee requirement may wish to send an e-mail to CMS indicating their self-insured, self-administered status.  This is the last year that the reinsurance fee is payable.
  2. Health Plan Open Enrollment Requirements.
    1. Plan sponsors of group health plans must issue a new summary of benefits and coverage (“SBC”) to participants and beneficiaries covered under the plan in conjunction with open enrollment. Group health plans without open enrollment must issue the SBC no later than 30 days in advance of the plan year (December 1, 2016 for calendar year plans).
    2. Plan sponsors of health reimbursement arrangements (“HRA”) must offer participants an annual opportunity to opt-out of and waive all future reimbursements from their HRA. This notice of opt-out can be provided with the open enrollment materials.
  3. Defined Contribution Plan Annual Notices. Plan sponsors of defined contribution plans must provide the following notices, if applicable, at least 30 but not more than 90 days before the beginning of the Plan Year. Plan sponsors of calendar year plans must send the notices between October 3 and December 1, 2016.
    1. Plan sponsors of defined contribution plans that invest participant contributions in a qualified default investment alternative (“QDIA”) because the participant failed to make an investment election must provide an annual notice to all participants.
    2. Plan sponsors of defined contribution plans with an eligible automatic contribution arrangement or a qualified automatic contribution arrangement must provide an annual notice to all participants on whose behalf contributions may be automatically contributed to the plan. Plan sponsors can combine the automatic enrollment notice with the QDIA notice.
    3. Plan sponsors of safe harbor 401(k) plans must provide participants an annual safe harbor notice that describes the safe harbor contribution and other material plan features. Plan sponsors can combine the safe harbor notice with other required notices, such as the QDIA notice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Reinhart Boerner Van Deuren s.c.
Reinhart Boerner Van Deuren s.c.
Reinhart Boerner Van Deuren s.c.
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Reinhart Boerner Van Deuren s.c.
Reinhart Boerner Van Deuren s.c.
Reinhart Boerner Van Deuren s.c.
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions