Attention Plan Sponsors: The Cost of Non-Compliance Just Went Up

Penalty

Ensuring that your employee benefits plans comply with the Employee Retirement Income Security Act of 1974 (“ERISA”) just became more important. That is because the cost of noncompliance just increased (and in some instances, the increases are significant). On June 30, 2016, the U.S. Department of Labor (the “DOL”) issued an interim final rule increasing the penalties for certain violations of ERISA. The interim final rule is effective for penalties assessed after August 1, 2016 if the corresponding violation occurred after November 2, 2015. Continue reading

IRS Simplifies Section 83(b) Election Process

Form 1040

On July 25, 2016, the IRS issued final regulations under Section 83 of the Internal Revenue Code (the “Code”) simplifying the process by which taxpayers may make elections under Code Section 83(b) by eliminating one of the filing requirements. These final regulations adopt without change proposed regulations that were issued in July 2015.

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IRS Issues Long-Awaited Guidance on Deferred Compensation Arrangements

On June 21, 2016, the Internal Revenue Service issued long-awaited guidance on deferred compensation arrangements under Sections 409A and 457 of the Internal Revenue Code. The proposed regulations under Section 409A clarify and/or modify certain provisions of the final regulations issued under that Section in 2007, and also withdraw a specific provision of earlier proposed regulations under Section 409A issued in 2008 that addressed the calculation of amounts includible in income under Section 409A(a)(1), replacing it with revised proposed regulations. The proposed regulations under Code Section 457 prescribe rules for the taxation of deferred compensation arrangements established and maintained by state or local governments or other tax exempt organizations. In each case, the proposed regulations would affect participants, beneficiaries, plan sponsors, and administrators.

A link to the proposed regulations under Section 409A may be found here, and the proposed regulations under Section 457 may be found here.

Stay tuned for our in-depth analysis on these proposed regulations.

The IRS Asserts (Again) That Partners Are Not Employees

In light of the new final and temporary regulations issued by the IRS and the U.S. Department of Treasury (Reg. 301.7701-2T), partnerships that have been using wholly-owned disregarded entities to “employ” partners (in order to provide access to various tax benefits, including cafeteria plans, parking and transit benefits, and other employee benefit plans) will need to reevaluate their structure and treatment of partner/employee classification. In the new rules, which were published on May 4th, 2016, the IRS moved to halt this practice, providing that where partners of a partnership are separately working for a second (disregarded) subsidiary legal entity, such individuals may not be treated as employees of the subsidiary. Instead, they are considered self-employed individuals for both self-employment and employment benefit plan purposes. Continue reading

Starting December 1, 2016, $913 Per Week to be New Standard for Exempt Workers

On December 1, 2016, the most significant changes to federal overtime law in more than a decade will go into effect. The federal Department of Labor instituted these changes by amending the Fair Labor Standards Act regulations. The primary change is that the minimum amount employers will be required to pay exempt salaried employees will increase substantially. Employers will be required to pay exempt workers at least $913 per week ($47,476 per year), up from the current requirement of $455 per week ($23,600 per year). Continue reading

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