Please join us in welcoming Michelle McCarthy, our new employee benefits and executive compensation partner in Los Angeles. Read more about Michelle.

The Tax Cuts and Jobs Act (TCJA) amended Section 217 of the Internal Revenue Code (Code) to suspend the deduction for moving expenses from 2018 through 2025. This change has a subtle yet meaningful impact on many tax-qualified retirement plans.

When testing qualified plans for compliance with the Code’s coverage and nondiscrimination requirements, plans are required to use a definition of “compensation” that complies with Code Section 414(s). The default definition of compensation in Section 414(s) is “compensation” as it is defined in Code Section 415(c)(3), which includes nondeductible moving expenses, but excludes deductible moving expenses. The TCJA makes all moving expenses “nondeductible,” which means that all moving expenses should be included in compensation for plans that use the default Section 415 definition for testing purposes.

There are two distinct types of insurance products that ERISA plan fiduciaries should be aware of. We get a lot of questions about these, so we thought a refresher may be in order.

First, there is the insurance product ERISA actually requires. This is the bond required by Section 412 that is intended to protect employee benefit plans from risk of loss due to fraud or dishonesty. This requirement applies to every person who “handles funds or other property” of an employee benefit plan, with certain exceptions. “Handles” is construed broadly and includes not just physical contact with plan funds or property, but also the power to transfer funds or property from a plan to a third party, or the authority to direct disbursements of such funds or property. The US Department of Labor (DOL) has said that a plan investment committee “handles” plan assets if the committee’s investment decisions are final (including, for example, the decision of which investment manager to hire), so each member of such committee should be bonded. On the other hand, fiduciaries who make recommendations that are subject to approval by other fiduciaries do not “handle” plan funds or property, and so on that basis, they would not need to be bonded.

Contributions to individual retirement accounts (IRAs) for a given year are due by the tax return filing deadline for that year, excluding extensions. For most IRA owners, the deadline for making their 2018 IRA contributions is Monday, April 15, 2019. However, for IRA owners who live in Maine or Massachusetts, the deadline is Wednesday, April 17, 2019.

Internal Revenue Service Notice 2019-09 gives tax-exempt organizations interim guidance on how to identify covered employees, calculate remuneration, and allocate excise tax under Section 4960. Please see our recent LawFlash on this interim guidance, and reach out to the LawFlash authors or your Morgan Lewis contacts if you have additional questions.

In the wake of the JSC’s demise, Rep. Richard Neal (D-Massachusetts) and Rep. Bobby Scott (D-Virginia) have reintroduced the so-called “Butch Lewis” Act. Titled “The Rehabilitation for Multiemployer Pensions Act,” the legislation would establish a federal loan program for critical and declining (“red zone”) multiemployer pension plans administered through a newly-created federal agency, the Pension Rehabilitation Administration (PRA).

Join Morgan Lewis this month for this program on employee benefits and executive compensation:

Many in the multiemployer pension plan community expected significant developments in 2018 in the ongoing effort to address the multiemployer pension plan solvency crisis. There were higher than usual expectations when the Joint Select Committee on Solvency of Multiemployer Pension Plans (JSC) was formed in early 2018 and tasked with developing legislative solutions to improve the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation (PBGC). Unfortunately, after a year-long effort during which several ideas were discussed, the JSC failed to agree on any formal proposal. In the wake of the JSC’s demise, the so-called “Butch Lewis” Act has been reintroduced, which is addressed in Part 2 of this series.

The New York City Council has approved an amendment to the Administrative Code of the City of New York (Int. 0863-2018) that prohibits employment discrimination and harassment based on an individual’s reproductive health choices, which goes into effect on May 20, 2019. Please see our recent LawFlash about this amendment, and reach out to the LawFlash authors or your Morgan Lewis contacts if you have additional questions.

A recent case provides a reminder for plan administrators of the importance of complying with Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) notice obligations and a good excuse to review health plan COBRA procedures.

In Morehouse v. Steak N Shake, Inc., a former employee brought a suit against her former employer after a workplace injury ultimately led to her losing her employer group health plan coverage. Before her injury, the plaintiff paid for her plan coverage by biweekly payroll deductions. Once injured, the plaintiff went on Family and Medical Leave Act (FMLA) leave and started workers’ compensation benefits. She was not provided a COBRA notice when she began leave. Instead, she continued to be covered under the plan and premiums were deducted from her workers’ compensation benefits. Once her workers’ compensation benefits ended, she was unable to pay her premiums and her plan health coverage was cancelled. She was then terminated from employment following the expiration of the FMLA period. After her plan coverage ended, she purchased health insurance to help pay for surgery to address her injury, but still had more than $30,000 in out-of-pocket costs.