Monday, February 2, 2009
Obama signs Lilly Ledbetter Fair Pay Act
Obama signed the Fair Pay Act, which overrules the Supreme Court case of Ledbetter v. Goodyear Tire & Rubber Company, Inc., which limited the time for which pay discrimination claims could be brought. This new law is not just limited to salary, it also applies to payment under benefit plans. The full Bill can be found at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h2831ih.txt.pdf
Friday, January 16, 2009
Is a Same Sex Former Married Partner Entitled to Pension Benefits in a Dissolution?
The Owens v. Automotive Machinists Pension Trust case below raises of question of whether the Ninth Circuit would recognize same sex married partners for purposes of dividing a qualified retirment plan in a divorce. If a same sex married partner, or former married partner, may be considered a "dependent" for purposes of meeting the definition of an Alternate Payee, perhaps a same sex married (or former married partner) would also be entitled to benefits pursuant to a QDRO in a partnership dissolution.
Owens v. Automotive Machinists Pension Trust, 551 F.3d 1138 (9th Cir. 2009). http://www.ca9.uscourts.gov/datastore/opinions/2009/01/12/0735253.pdf
Owens v. Automotive Machinists Pension Trust, 551 F.3d 1138 (9th Cir. 2009). http://www.ca9.uscourts.gov/datastore/opinions/2009/01/12/0735253.pdf
Quasi-Marital Spouse Entitled to 50 percent of pension benefits
On January 12, 2009, in the case of Owens v. Automotive Machinists Pension Trust, the Ninth Circuit court of appeals affirmed the lower court's ruling that a quasi-marital partner is entitled to pension benefits pursuant to a Qualified Domestic Relations Order ("QDRO"). Norma and Phillip Owens lived together for 30 years but never married. The couple separate in 2004, and Norma sought half of Phillip's pension. Under ERISA, a person must meet the definition of an Alternate Payee in order to receive a portion of benefits from a qualified retirement pursuant to a QDRO. A person is an Alternate Payee if he or she is a spouse, former spouse, child or other dependent of the participant. Although ERISA does not recognize Norma as a spouse or former spouse, under the definition of Alternate Payee, the Ninth Circuit agreed with the lower court that Norma was a "dependent" who lived in the household with the taxpayer, and, therefore, met the definition of an Alternate Payee.
See full opinion at: http://www.ca9.uscourts.gov/datastore/opinions/2009/01/12/0735253.pdf
See full opinion at: http://www.ca9.uscourts.gov/datastore/opinions/2009/01/12/0735253.pdf
Thursday, January 15, 2009
Is your retirement plan protected from creditors?
KRAVITZ Retirement Plan News had a great article in the January/February 2009 issue regarding when qualified retirement plan assets are not protected from creditors. These reasons include federal tax levy, qualified domestic relations orders, and participant loans. Interestingly enough, even though the feds can get to your 401(k) or other qualified plan assets, the assets cannot be touched by a third party for restitution of a criminal act. Read more at: http://www.lkravitz.com/pubsarticles/documents/Jan-Feb.pdf
Monday, December 22, 2008
Hartford Employee Class Actions
This may be just the tip of the iceberg for class actions alleging breach of fiduciary duty under ERISA in stock drop cases. Two more employees have filed lawsuits alleging breach of fiduciary duty against Hartford for keeping the retirement plan invested in company stock despite its subprime mortgage exposure. Hartford is not the only company hit by employee suits for stock drop. Other defendants include: AIG, Bear Sterns, Washington Mutual, IndyMac, Lehman Brothers, Merrill Lynch, Morgan Stanley, Countrywide, Fifth Third Bank, Wells Fargo, and UBS.
Read more on the Hartford case at: http://www.planadviser.com/compliance/article.php/3319
Read more on the Hartford case at: http://www.planadviser.com/compliance/article.php/3319
Thursday, December 11, 2008
2009 COLA Limits
IRS Announces the 2009 Cost of Living Increases for retirement plan limitations. IR-2008-118.
Maximum Elective Deferral Limit (402(g)) -- $16,500
Maximum Catch Up Limit (414(v)(2)(B)(ii)) -- $5,500
Defined Contribution 415 Annual Additions Limit (415(c)(1)(A) -- $49,000
Annual Compensation Limit (401(a)(17)) -- $245,000
Defined benefit 415 Annual Benefit Limit (415(b)(1)(A)) -- $195,000
Highly Compensated Employee Definition (414(q)(1)(B) -- $110,000
Key Employee/Officer(416(i)(1)(A)(i) -- $160,000
Social Security Taxable Wage Base -- $106,800
October 2008 - Supreme Court Hears Issue of Ex-Spouse Waiver of Benefits in a Divorce
Family Law attorneys, have you ever drafted a Marital Settlement Agreement and included a provision allowing the nonemployee spouse of a retirement plan participant to waive his or her rights to their interest in the plan? Did you ever wonder whether that provision was in compliance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA")? The Supreme Court heard arguments on this question in October.
The Supreme Court heard the Fifth Circuit case Kennedy v. Plan Administrator for Dupont Savings and Investment Plan, regarding an ex-spouse’s waiver of retirement benefits in divorce. Limiting the grant of certiorari to the third question presented, whether the Fifth Circuit was correct in concluding that ERISA’s Qualified Domestic Relations Order provision, 29 U.S.C. §1056(d)(3)(B)(i), is the only valid way a divorced spouse can waive her right to receive her ex-husband’s pension benefits under ERISA. Petitioner, the estate of the ex-husband, argues that the divorce decree validly waived the ex-wife’s right.
Although the Court was originally expected to hear the issue of whether a QDRO was the sole means for waiving benefits in a pension plan, the Court focused on the issue of the plan document rule, for which the federal appeals courts are divided. Under the plan document rule, fiduciaries to the plan are only required to look at the plan document, which includes the beneficiary designations, when determining how benefits are paid upon death. The issue then became whether the Court could decide the plan document issue, because they hadn’t granted certiorari on that issue. The Court decided that it could hear the issue if the parties were given an opportunity to provide supplemental briefing.
On October 28, 2008, the Court issued an order requesting supplemental briefing on the plan document issue. If the Court rules in favor of the plan document rule, pension plan administrators will only need to look as far as the beneficiary designation to determine who the beneficiary is.
During oral arguments, in addressing the issue of whether the waiver under the judgment of dissolution was a valid waiver of benefits, Justice Scalia pointed out that a QDRO is a form for the assignment or alienation of benefits and since this was a waiver of benefits and not an assignment or alienation, the QDRO exception does not apply and the waiver is valid. The parties in support of QDRO’s as the only form to waive benefits, or the plan document rule, argue that a decision to allow waivers in judgements or marital settlement agreements (i.e. non-qualified orders) would increase the burden on the plans. It has additionally been argued that these are private plans and the Court needs to make the administration easy so that company’s will provide these benefits to employees. If plan administrators have to interpret the language of judgments from different states, the administrative burden will be overwhelming and could lead to wrong interpretations and increased cost of legal counsel to determine validity of waivers for each state specific document and state laws.
The Supreme Court heard the Fifth Circuit case Kennedy v. Plan Administrator for Dupont Savings and Investment Plan, regarding an ex-spouse’s waiver of retirement benefits in divorce. Limiting the grant of certiorari to the third question presented, whether the Fifth Circuit was correct in concluding that ERISA’s Qualified Domestic Relations Order provision, 29 U.S.C. §1056(d)(3)(B)(i), is the only valid way a divorced spouse can waive her right to receive her ex-husband’s pension benefits under ERISA. Petitioner, the estate of the ex-husband, argues that the divorce decree validly waived the ex-wife’s right.
Although the Court was originally expected to hear the issue of whether a QDRO was the sole means for waiving benefits in a pension plan, the Court focused on the issue of the plan document rule, for which the federal appeals courts are divided. Under the plan document rule, fiduciaries to the plan are only required to look at the plan document, which includes the beneficiary designations, when determining how benefits are paid upon death. The issue then became whether the Court could decide the plan document issue, because they hadn’t granted certiorari on that issue. The Court decided that it could hear the issue if the parties were given an opportunity to provide supplemental briefing.
On October 28, 2008, the Court issued an order requesting supplemental briefing on the plan document issue. If the Court rules in favor of the plan document rule, pension plan administrators will only need to look as far as the beneficiary designation to determine who the beneficiary is.
During oral arguments, in addressing the issue of whether the waiver under the judgment of dissolution was a valid waiver of benefits, Justice Scalia pointed out that a QDRO is a form for the assignment or alienation of benefits and since this was a waiver of benefits and not an assignment or alienation, the QDRO exception does not apply and the waiver is valid. The parties in support of QDRO’s as the only form to waive benefits, or the plan document rule, argue that a decision to allow waivers in judgements or marital settlement agreements (i.e. non-qualified orders) would increase the burden on the plans. It has additionally been argued that these are private plans and the Court needs to make the administration easy so that company’s will provide these benefits to employees. If plan administrators have to interpret the language of judgments from different states, the administrative burden will be overwhelming and could lead to wrong interpretations and increased cost of legal counsel to determine validity of waivers for each state specific document and state laws.
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