The American Recovery and Reinvestment Act of 2009 (ARRA) provides involuntarily terminated individuals (and their qualifying dependents) who experience COBRA qualifying events between September 1, 2008 and December 31, 2009 with a 65 percent subsidy on their COBRA premiums.  On March 31, the Treasury Department issued eagerly awaited guidance on the definition of "involuntary termination" for this purpose.

Read the entire article.

This blog was posted by Terry Mumford and Albert Lee.

NCPERS Annual Legislative Conference was held February 3, 2009 and the NAPPA Tax Section Meeting was held February 4, 2009.  Both were in Washington, D.C. and included speakers from Congress, the U. S. Treasury and the IRS. 

National Conference on Public Employee Retirement Systems (NCPERS)

The NCPERS conference is designed to educate attendees about hot topics on Capitol Hill so that they can be well informed in making calls on their U.S. representatives and senators.  I was particularly interested in the comments made by Mildeen Worrell, tax counsel to the Ways and Means Committee because she focused on issues that she believes governmental plans will face in the future.  In particular she talked about the following issues that "cross-over" from the private sector to affect governmental plans:

• Funding.  Worrell observed that articles about the funding levels of public plans can have a negative effect unless governmental plans make their voices heard. 
• Benefit Design.  If Congress allows the private sector retirement plans to be increasingly based on individual plans, that will also threaten traditional DB governmental plans.  In her personal opinion, hybrid plans (cash balance plans) are the future of defined benefit plans.  However, political forces prevent Congress and regulators from doing what should be done on cash balance plans.  Leaving the situation to the courts does not make sense.
• Fee Disclosure.  According to Worrell, the fee disclosure issue will likely expand outside of the 401(k) context – at least to 403(b) and 457(b) plans.
• Other issues on the horizon include providing for independent investment advice and the "auto IRA."

Many Ice Miller governmental clients will be challenged in 2009 and beyond to address these issues at the state and local level.

Read a discussion of regulatory topics at the NCPERS conference.

National Association of Public Pension Attorneys (NAPPA) Tax Section
Terry Mumford is the lead chair of the NAPPA Tax Section.

The NAPPA Tax Section meeting is intended to educate public pension attorneys on statutory and regulatory developments that affect the qualified status of public pension plans and the taxation of member benefits. Martin "Marty" Pippins, IRS EP technical guidance and quality assurance, has addressed this group for many years with regard to IRS guidance projects.
 
Pippins discussed a governmental plan questionnaire (Form 14035) that at the time of the conference had not yet been released.  As stated by Pippins the survey went to 25 governmental plans that were randomly selected to answer the survey.  At the same time the survey was posted on the Web site for a 90 day comment period.  Based upon the comments, the questionnaire will be revised and then sent to additional plans (100-200) for completion.

Read a question and answer session with Marty Pippins that contains more information.

The IRS has announced a public hearing to take place on April 16, 2009, at 10 a.m. (EST), at the Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, D.C. for discussions concerning the proposed rulemakings on 26 U.S.C. § 3402(t), added by the Tax Increase Prevention and Reconciliation Act of 2005, that will require federal, state, and local government entities to withhold income tax when making payments to persons providing property or services.  The proposed regulations were published in the Federal Register on December 5, 2008 (73 FR 74082).   The effective date of Section 3402(t) was extended for one year by the American Recovery and Reinvestment Tax Act of 2009, so the section will now apply to payments made after December 31, 2011.  Ice Miller has prepared a summary of the proposed regulations.

Those who have submitted written comments and wish to make oral comments at the hearing must submit an outline of the topic of discussion and the amount of time to be devoted (signed original and eight copies) by March 25, 2009, to:
 
CC: PA: LPD: PR (REG-158747-06)
Room 5203
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
 
Hand deliveries may be made between the hours of 8 a.m. and 4 p.m. (EST) to:

CC: PA: LPD: PR (REG-158747-06)
Courier's Desk
Internal Revenue Service
1111 Constitution Avenue, N.W.,
Washington, D.C.
 
Electronic deliveries may be made via the Federal eRulemaking Portal at http://www.regulations.gov.
 
Call Jean Casey at (202) 622-6040 for questions concerning the proposed regulations.  Call Richard A. Hurst at (202) 622-7180 or email at richard.a.hurst@irscounsel.treas.gov for questions concerning the hearing, submissions, or being put on the building access list.

On March 19, 2009, the U.S. Department of Labor issued four new model COBRA notices to implement the COBRA subsidy provisions of the American Recovery and Reinvestment Act of 2009.  These notices must be provided by employers who sponsor group health plans to individuals who become eligible for COBRA between September 1, 2008 and December 31, 2009.  At least one of the notices must be provided by April 18, 2009.  The notices may be used by any public or private employer that is subject to COBRA (whether through ERISA, the Internal Revenue Code or the Public Health Service Act).

Read the entire alert on the new model COBRA notices.

The IRS issued Publication 15-T, regarding the new withholding tables designed to accelerate the benefit of the "Making Work Pay" tax credit passed under the American Recovery and Reinvestment Act of 2009, effective February 17, 2009.  The Publication formalized the IRS position that the new withholding tables are to apply to pensions in addition to wages.  Governmental plans should be aware of the impact of the new tables on two separate groups: (1) employees receiving wages under the plan's payroll, and (2) retirees and/or their beneficiaries receiving monthly benefit payments from the plan.  The IRS asks that the new tables be implemented as soon as possible but no later than April 1, 2009.

In what promises to be a series of guidance pieces from the federal government on the new COBRA premium subsidy, the Internal Revenue Service (IRS) issued a group of questions and answers addressing how employers (both public and private) can claim a payroll tax credit for providing the 65 percent COBRA premium subsidy required under the American Recovery and Reinvestment Act of 2009 (ARRA).

Read the entire alert.

The American Recovery and Reinvestment Act of 2009 (Act), signed by President Obama on February 17, 2009, contains important changes to group health plan continuation coverage requirements that take effect immediately.

Read about the most important COBRA-related provisions of the Act.

Plan administrators may now feel secure in following participant directions on death benefits regardless of conflicting divorce decrees or state laws.  The United States Supreme Court on January 26, 2009, held that a former spouse's waiver of her interest in her ex-husband's retirement benefit did not override the terms of the plan that required the participant to designate a beneficiary.  The divorce decree containing the waiver did not qualify as a qualified domestic relations order and thus did not override the participant's written beneficiary designation form.

Read the entire alert on the key implications.

The Department of Labor issued final guidance on the provision of investment advice by a fiduciary advisor to participants and beneficiaries in participant-directed plans, such as 401(k) plans.  In general, such investment advice will be exempt from ERISA's prohibited transaction provisions, where such advice is provided by a "fiduciary advisor" under an "eligible investment advice arrangement" that is expressly authorized by a plan fiduciary.

Read the entire alert.

On December 23, 2008, President Bush signed into law the "Worker, Retiree, and Employer Recovery Act of 2008" (Act).

The Act provides numerous technical corrections to the Pension Protection Act of 2006 (PPA) and provides pension funding relief in light of the current economic crisis.  

Read a summary of some of the Act's provisions of interest to single employer plans.

The House and the Senate passed H.R. 7327, also known as the "Worker, Retiree, and Employer Recovery Act of 2008" (Act), with unanimous consent.

H.R. 7327 provides numerous technical corrections to the Pension Protection Act of 2006 and other relief applicable to governmental plans. 

Read the summary of some of the Act's provisions of interest to governmental plans.

On December 11, 2008, the IRS issued Notice 2009-3, which provides relief for sponsors of 403(b) retirement plans with respect to the requirement to have a written 403(b) plan in place by January 1, 2009.

According to the IRS news release that accompanied the notice, the IRS is extending the deadline for plan sponsors to adopt new written plans or amend existing plans to satisfy the requirement of the final 403(b) regulations because of difficulties expressed by numerous plan administrators in meeting the current deadline of January 1, 2009.  This extension will give plan sponsors one more year to put their plan documents in place.

Read the entire alert.