ML BeneBits

After a recent slower period of activity in the initial public offering (IPO) markets, there has been speculation in accounting and finance markets that there might be an increase in activity over the course of the 2025 calendar year. Private companies considering a near- or mid-term IPO need to take a number of steps in their preparation for that undertaking, including review and development of an executive compensation program, which will help ensure that their IPO is successful and that their management team remains engaged prior to, in connection with, and after an IPO.

Companies required to use “box 11” of Form W-2 in 2023 to report either payments of nonqualified deferred compensation (deferred compensation) or FICA taxation of unpaid deferred compensation may soon be challenged by employees angry about potential double taxation of deferred compensation. This double tax is created because the Form 1040 filing instructions for 2023 require deferred compensation payments reported in box 11 of Form W-2 to be reported on an employee’s Form 1040 as “wage” income subject to income tax and again as “additional income,” also subject to income tax.

Recently, we have become aware of what appears to be a new approach in the US Department of Labor’s (DOL’s) Form 5500 Annual Report (Form 5500) penalty program, including increased penalties and faster enforcement actions. This development could impact the sponsors and administrators of any Employee Retirement Income Security Act (ERISA) plan that is required to make a Form 5500 filing, particularly when a filing is late or deficient, or has the potential to be late or deficient.

The Inflation Reduction Act (IRA) made several changes to Medicare Part D that may impact whether employer-sponsored coverage will be creditable for the 2025 plan year. With open enrollment season about to begin, plan sponsors that provide prescription drug coverage to Medicare-eligible individuals should double check their plan’s creditable coverage status for 2025.

The US Department of Labor (DOL) issued a press release on September 6, 2024 reminding ERISA plan fiduciaries that it considers cybersecurity to be an area of “great concern” and emphasizing that it continues to investigate potential cybersecurity-related ERISA violations. The press release accompanied guidance updating the DOL’s 2021 cybersecurity subregulatory guidance and, most significantly, clarifying that the 2024 updates apply to all types of ERISA plans, including health and welfare plans. In our view, this clarification now aligns the DOL’s cybersecurity guidance with the position it has taken in investigations and public statements.

The amendments to the QPAM Exemption include a September 15, 2024 notification deadline that will apply to many asset managers. This blog post includes a brief summary of the US Department of Labor’s (DOL’s) recent technical amendments to the exemption.

In Loper Bright Enterprises v. Raimondo and Relentless Inc. v Department of Commerce, the Supreme Court held that both the United States’ constitutional structure and the Administrative Procedure Act preclude a court from deferring to administrative agencies when they interpret ambiguous statutory text. Instead, the court must assess the “best meaning” of the statute using traditional tools of statutory construction.

A recent ruling by the US Court of Appeals for the Third Circuit provides a valuable reminder for multiemployer pension funds and contributing employers regarding ERISA’s withdrawal liability notice and demand requirements. Specifically, the case presents a recap of what it means for a notice and demand to be provided “as soon as practicable” under ERISA Section 4219(b)(1) and the interplay of that timing requirement with common defenses raised for withdrawal liability demands that are allegedly less than timely.

Employers utilizing class-based criteria to exclude employees from retirement plan participation face new issues and considerations following the adoption of the long-term part-time employee (LTPTE) rules in SECURE 1.0 and SECURE 2.0. Employers who have not done so already may want to evaluate their plan's eligibility rules to determine whether any updates or clarifications may be desirable.

In connection with a merger, acquisition, or other corporate (M&A) transaction, buyers often face the dilemma of how to handle the seller’s existing retirement plans covering the continuing employees. Terminating a seller’s existing retirement plan can be complicated if the seller maintains a Savings Incentive Match Plan for Employees (SIMPLE) IRA plan because the “exclusive plan rule” under Section 408(p)(2)(D) of the Internal Revenue Code (Code) provides that a SIMPLE IRA plan may not be maintained for a calendar year if the employer maintains a qualified plan for that calendar year.