November 2012 Employee Benefits Update - Select Compliance Deadlines And Reminders

Cycle B Determination Letter Filings Due January 31, 2013

Remedial Amendment Period Cycle B individually designed plans must be submitted for a favorable Internal Revenue Service (IRS) determination letter no later than January 31, 2013. Cycle B plans include those sponsored by employers with tax identification numbers (EINs) ending in a two or a seven, as well as any multiple employer plans.

Summary of Benefits and Coverage

Starting with plan years beginning on or after September 23, 2012, group health plans are required to issue a summary of benefits and coverage (SBC) to participants and beneficiaries covered under the plan. For plans that do not require annual enrollment, the SBC must be provided no later than 30 days prior to the first day of the new plan year. Therefore, calendar-year plans without open enrollment should issue their SBCs by Friday, November 30, 2012.

Internal Revenue Code Section 436 Amendments

Internal Revenue Code (Code) section 436 as added by the Pension Protection Act of 2006 sets limits on benefit payments and pension accruals for defined benefit plans that are "underfunded." As discussed in the December 2011 EB Update, the IRS issued Notice 2011-96 extending both the deadline to amend a plan to satisfy Code section 436 and the period during which such an amendment is eligible for relief from the anti-cutback requirements of Code section 411(d)(6). The IRS has not issued an additional extension on the amendment deadline. Accordingly, calendar-year plans subject to Code section 436 should ensure that their plan amendments have been adopted by December 31, 2012.

Internal Revenue Code Section 409A Payment Timing Correction

Code section 409A does not allow the payment timing of deferred compensation to be contingent upon the execution of a release (including execution of non-solicitation agreements and non-competes) because it gives the employee partial control over the payment timing. From the perspective of the IRS, the ability to delay signing the release during the 90-day period could allow the employee to effectively choose the year in which taxation occurs—in violation of Code section 409A. The IRS considers this a Code section 409A violation if it is supported by the written plan document, regardless of whether the situation actually occurs. The problematic language is often found in employment and severance agreements, but can also arise in traditional deferred compensation plans.

Existing arrangements that...