









	Press Releases

Employee Benefits and Executive Compensation Compliance Calendar

Scope of Coverage

This calendar covers recent legislative and regulatory guidance affecting the design and/or operation of employee benefits plans or executive compensation arrangements. As such, it is intended to assist plan sponsors with their compliance obligations by providing a brief summary of significant legal developments, steps required to comply, and the relevant deadline for compliance. Where appropriate, penalties for failure to act in a timely manner are also noted. The compliance calendar will be periodically updated to include relevant federal legislative and/or regulatory developments as they occur.

This calendar is not intended to address routine compliance issues, such as deadlines for annual report filings, discrimination testing, changes in plan limits or fee structure; routine notices and reports required upon the occurrence of certain events; matters applicable upon the occurrence of certain events, such as corporate merger; or solely elective design features that are permitted by law. The compliance calendar does not address state laws that may affect the operation of employee benefit plans, such as mandated health insurance coverage or domestic partner benefits.

Retirement Plans

Pension Protection Act of 2006

The Pension Protection Act of 2006 provides sweeping changes affecting qualified retirement plans:

* Reforming pension funding rules
* Providing new interest rate guidelines for lump sum distributions
* Clarifying use of cash balance plans
* Expanding use of automatic enrollements for 401(k) plans
* Simplifying reporting and taxation of ADP/ACP refunds
* Expanding prohibited transaction exemption with regard to rendering investment advice
* Introducing use of single plan to offer 401(k) and defined benefit plan features (starting in year 2010)
* Clarifying fiduciary responsibility during blackout periods and applicability of ERISA Section 404(c)
* Expanding portability of benefits to include non-spuse death beneficiaries (limited to minimum distribution obligations) and the transfer of after-tax contributions (including Roth contributions) between qualified plans and 403(b) plans
* Requiring diversification for defined contribution assets held in publicly traded employer securities
* Expanding the PBGC’s missing participant program to permit administrators of terminated defined contribution plans to participate
* Introducing new disclosure obligations, particularly for defined benefit plans.

Determination Letters and Staggered Remedial Amendment Period

IRS has implemented a new determination letter program designed to provide a system of staggered cyclical remedial amendment periods for individually designed and pre-approved qualified retirement plans.

* Five Year Cycle: every individually designed plan has a regular, five-year remedial amendment cycle
* Six Year Cycle: every master and prototype and volume submitter plan has a regular, six-year remedial amendment cycle.

Action Required: Plan sponsors need to apply for new opinion, advisory, or determination letters generally only once every five or six years. The last day of the initial cycle for individually designed plans that fall under Cycle A is January 31, 2007.

Source Authority: IRS Rev. Proc. 2005-55, 2005-37 I.R.B. 509 (September 12, 2005); clarified by

IRS Notice 2005-95, 2005-51 I.R.B. 1172 (December 19, 2005) (PDF, 42KB)(transitional relief from certain amendment timing deadlines provided).

PBGC Proposed Regulations -- Electronic Filing of Premium Declarations

PBGC proposes to require electronic filing of premium declarations for plans with 500 or more participants.

Effective Date: The rule would apply to all plans for plan years beginning after 2006.

Source Authority: Prop. PBGC Reg. 4000.3, 4, 23; 4000.29(a). 70 Fed. Reg. 11592 (March 9, 2005).

PBGC Final Regulations -- Electronic Filing of Annual Employer Reporting Under ERISA 4010

PBGC has issued final regulations requiring electronic filing of the annual employer reporting under ERISA Section 4010. Compliance with this rule will require additional items of supporting information to be filed.

Effective Date: This rule applies to employer reports due for calendar year filers on April 15, 2005.

Source Authority: 70 Fed. Reg. 11540 (March 9, 2005).

Roth 401(k) Regulations

Final tax regulations provide guidance on certain plan design, administrative, and tax issues relating to Roth 401(k) contributions.

Source Authority: Treas. Reg. 1.401(k)-1(f), 1.401(k)-2(b)(1)(ii) and (b)(2)(vi)(B) and (C), 1.401(k)-6, 1.401(m)-2(b)(1)(vi)(C), 1.401(m)-2(b)(2)(vi)(B) and (C), and 1.401(m)-5, 71 F.R. 6 (January 3, 2006); Notice 2006-44, 2006-20 I.R.B. (May 15, 2006)(sample amendment for plans that accept Roth 401(k) contributions).

Proposed tax regulations explain reporting requirements applicable to distribution of Roth 401(k) contributions.

Source Authority: Prop. Treas. Reg. 1.402A-1 and 1.402A-2, 71 F.R. 4320 (January 26, 2006).

Multiemployer Plan Annual Funding Notice

DOL issued final regulations implementing the annual funding notice required of multiemployer plans under ERISA 101(f). The regulation provides an exception to the requirement for plans receiving financial assistance from the PBGC. The regulation provides requirements regarding the content, timing, format, manner and recipients of the notice. A model notice is provided as an Appendix.

Source Authority: DOL Reg. 2520.101-4, 71 Fed. Reg. 1904 (January 11, 2006).

QJSA & QPSA Relative Value Regulations

“Relative value” regulations amended to incorporate modifications described in Announcement 2004-58.

Actions Required: Revisions to participant distribution notices and QJSA & QPSA explanations to include disclosure of relative value and financial effect of optional forms of benefit available to retirement plan participants.

Source Authority: Treas. Reg. 1.401(a)-20, Q&A-16, Q&A-36; 1.417(a)(3)-1(c),(d) and (f). 71 Fed. Reg. 14798 (March 24, 2006);IRS Announcement 2004-58.

401(k) Plan Regulations

The final regulations incorporate guidance issued by the IRS since 1994 and certain statutory changes made by the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997 and the Economic Growth and Tax Relief Reconciliation Act of 2001. The final regulations adopt the language of the proposed regulations with some modifications and clarifications.

Effective Date: Final regulations effective for plan years beginning after December 31, 2005. Employer may apply final regulations in their entirety to any plan year that ends after December 29, 2004.

Actions Required: Review existing plan operations and amend plan, as necessary, to comply with new regulations.

Source Authority: Treas. Reg. 1.401(k)-1, et. seq.; 1.401(m)-1, et. seq. ; 69 Fed. Reg. 78144 (December 29, 2004).

Rollovers to IRAs

IRS has issued Notice 2005-5, which provides guidance relating to the automatic rollover provisions under Code Section 401(a)(31)(B), including a sample amendment. Plans that provide for mandatory distributions, and that do not already include the automatic rollover provisions, must adopt a good faith plan amendment reflecting the automatic rollover requirements by the end of the first plan year ending on or after March 28, 2005.

Source Authority: IRS Notice 2005-5.

Retroactive Annuity Starting Date

IRS has extended the deadline by which amendment for the final retroactive annuity starting date regulations must be adopted. The deadline to adopt an interim amendment depends on whether the plan amendment is required or discretionary. If the plan does not already permit retroactive annuity starting dates, an amendment to permit them is a discretionary amendment and must be adopted by the last day of the plan year in which the retroactive annuity starting date provision is added. If a plan already permits retroactive annuity starting dates, but not in accordance with the new rules, it must be corrected to comply by adoption of an interim amendment by the latter of the deadline under Rev. Proc. 2005-66 that would otherwise apply to the plan sponsor or employer, or December 31, 2005.

Source Authority:

Rev. Proc. 2005-66, 2005-37 I.R.B. 509 (September 12, 2005) (PDF, 98KB); IRS Notice 2005-95, 2005-51 I.R.B. 1172 (December 19, 2005).

Tax- Sheltered Annuity Plans

Proposed 403(b) regulations effective for taxable years beginning after December 31, 2005, subject to certain transition rules. No reliance permitted pending final regulations.

Penalties: Contributions that do not comply with the 403(b) requirements generally are taxable under Code §403(c) (annuities) or Code §§61, 83 and 402(b) (custodial accounts). However, the IRS provides a correction procedure for 403(b) plans under EPCRS.
This update of current regulations delete provisions no longer applicable; include IRS rulings and guidance; expand guidance on administrative practice

Source Authority: Prop. Treas. Reg. 403(b)-1, et. seq.

Plans and Arrangements Sponsored by Tax Exempt Organizations

Proposed 414(c) regulations effective for years beginning after 2005. Taxpayers may rely upon proposed regulations pending issuance of final rules.

Proposed regulations addresses the controlled group and common control rules as they affect tax-exempt organizations. Good faith compliance with proposed regulations required for plan years prior to 2006.

Source Authority: Prop. Treas. Reg. §1.414(c)-5.

Notice of USERRA Rights

The Act requires employers to post a notice informing employees of their USERRA rights; extends to employees in military service option to maintain employer sponsored health insurance coverage for up to 2 years.

Actions Required: Post notice of USERRA rights.

Source Authority: Veterans Benefits Improvement Act of 2004 – amends USERRA, 38 U.S.C. 4301-4333. 70 Fed. Reg. 12105 (March 10, 20005); 70 Fed. Reg. 75313 (December 19, 2005).

USERRA Regulations

Final Regulations provide guidance on rights and obligations of employers and employees under USERRA, including make up benefits under pension plans. The regulations clarify that uypopn reemployment, within various period of time depending upon the length of military service, a returning service member must not be treated as having a break in service with his employer for purposes of participation, vesting and accrual of benefits. For defined benefit plans, once the returning service member is reemployed, his employer is liable to the plan to fund any obligation to provide benefits that are attributable to the period of military service. For defined contribution plans, once the returning service member is reemployed, the employer must allocate the amount of its employer make-up contribu tion, the amount of the make-up employee contribution, and the amount of the employee’s elective deferrals in the same manner as it allocates such amounts for other employees during he period of military service.

Effective Date: January 18, 2006.

Source Authority: 20 CFR Part 1002, Subparts A through F, 1002.1-1002.317. 70 Fed. Reg. 75246 (December 19, 2005).

Form 5500 – Annual Reports

Proposed DOL Regulations would mandate electronic filing of Form 5500 via the Internet for plan years beginning on or after January 1, 2007. This proposed regulation would not apply to any reporting requirement imposed solely under the Internal Revenue Code.

Actions Required: Under the proposed regulations, the first electronically filed Form 5500 would be due in 2008.

Source Authority: Proposed DOL Regulations 2520.104a-2, 2520.103-1(f), 103-2©, 103-9(d) and 1-03-12(f). 70 Fed. Reg. 51542 (August 30, 2005).

Use of Electronic Media

Proposed Regulations issued by the IRS set forth the exclusive rules for the use of electronic media to provide required communications to a participant regarding the participant’s rights. The proposed rules would apply to any notice required to be provided to a participant in writing that relates to a qualified retirement plan under Code Section 401(a) or 403(a), cafeteria plans, accident and health plans, HSAs, Archer MSAs, qualified transportation [plans, and qualified educational assistance programs, and would also function as a safe harbor for electronic communications that are not required to be in writing. The rules would not apply to any notices, elections, consents or disclosures required under ERISA over which the DOL or the PBGC has interpretative or regulatory authority, or to other requirements under the Code, such as tax reporting, tax records, or substantiation of expenses.

Effective Date: Not effective until after they are adopted as final regulations and cannot be relied on until that are adopted as such.

Source Authority: Prop. Reg. 1.72(p)-1, 1.401(a)-21, 1.402(f)-1, 1.411(a)-11, 1.417(a)(3)-1, 1.7476-2, 35.3405-`1, and 54.4980F-1,70 Fed. Reg. 40675 (July 14, 2005).

Welfare Plans

Cafeteria Plans with Dependent Care Assistance

Tax definition of “dependent” changed effective beginning in 2005.

Actions Required: Amend plan definition of “dependent.”

Source Authority: Working Families Tax Relief Act of 2004 (H.R. 1308); IRS Notice 2004-79.

Flexible Spending Arrangements – Forfeiture of Unused FSA Money

The IRS has slightly relaxed the “use-it-or-lose-it” rule which prevented carry forwards of unused FSA money into a subsequent plan year. Under Notice 2005-42, an employer may permit an employee to carry forward balances for a maximum of two and one half months, and receive reimbursement for qualified expenses incurred during those months.

Action Required: Notice 2005-42 permits, but does not require, an employer to amend its cafeteria plan to permit a grace period that allows the carry-forward of unused account balances. Notice 2005-42 identifies several requirements that would apply to the carry-forward. Adoption of the new grace period for the current plan year requires the employer to amend its cafeteria plan document by the end of the current plan year.

Source Authority: Notice 2005-42; also see, Notice 2005-86 (grace period must apply to all participants covered on the last day of plan year, including participants covered under COBRA); Notice 2005-61 (clarifies that an employer that adopts a grace period for a dependent care FSA may report on participant’s W-2 the dependent care FSA salary reduction amount for the year without regard to reimbursements attributable to carry over amounts from the prior year); Notice 2005-86 (clarifies that employees will not be able to have contributions made to their health savings account until the first day of the month after the end of the grace period for the general purpose health FSA).

COBRA Notice Obligations

Notice obligations under COBRA effective on or after first day of first plan year beginning on or after November 26, 2004.

Penalties: Failure to comply can result in excise taxes of $100 per day for each failure
(not exceeding $200 per day per family), a court-imposed penalty of $110 per day for each failure, and exposure to possible claims to compel coverage for health benefits.

Actions Required: Final regulations require revision of notices and procedures to comply with COBRA rules; update summary plan descriptions; review and revise service contracts; check applicable state law for more stringent continuation coverage requirements.

Source Authority: DOL Regulations 2590.606-1 through 2590.606-4, as corrected June 23, 2004; several model forms available in final regulations.

Download COBRA Election Notice (PDF, 145KB)

Download COBRA General Notice (PDF, 122KB)

HIPAA Security Regulations

Final regulations effective April 21, 2003; compliance date of April 21, 2005, except for small plans (annual premium receipts of less than $5M) that must comply by April 21, 2006. Severe civil and criminal penalties for noncompliance.

Actions Required: Compliance with policy and procedural requirements of HIPAA standards for security of certain electronic identifiable health information of health plans, health care clearinghouses, and certain health care providers. Final regulations require review of current security operations and development and implementation of security policies and procedures in compliance with standards set forth in final rules.

Source Authority: DHHS Reg. 160.101, et. seq.; DOL Prop.Reg. 1002.1, et. seq.

Prescription Drug Coverage: Medicare Part D-- Annual Notice Requirements

Effective: January 1, 2006.

Employers offering prescription drug coverage to active or retired employees eligible under Medicare Part D are subject to annual notice requirements. Medicare eligible employees must be issued a notice each year as to whether their group health plan offering prescription drug coverage constitutes "creditable coverage" for purposes of Medicare Part D. Also, CMS must also receive an electronic notice whether the plan coverage is creditable or noncreditable.

Actions Required: Determine creditable coverage status of prescription drug coverage for notice purposes; prepare and arrange for annual issuance of notice to Medicare Part D eligible employees (including retirees); electronically notify CMS as to whether private coverage constitutes "creditable coverage." [Note: creditable coverage disclosure notices are not required for health FSAs, HSAs, and Archer MSAs. An HRA can be creditable coverage for purposes of Medicare Part D and, therefore, must provide disclosure notices to Part D eligible individuals.]

Employers may use one of two CMS created forms of model language when disclosing creditable coverage status to Part D eligible individuals. To determine creditable status for purposes of issuing the correct notice, employers may use either the "actuarial equivalence test" or the "safe harbor plan design," the requirements of both are discussed in detail in CMS guidance issued on May 26, 2005.

Download CMS Model Creditable Coverage Notice (PDF, 27KB)

Download CMS Model NonCreditable Coverage Notice (PDF, 28KB)

Deadlines:

* Annual notice to Part D eligible individuals must be provided before November 15 each year (and also on several other occasions as noted in regulations). CMS has issued guidance, including model language, regarding employee notice requirement.

* Annual notice to CMS must be provided by March 31, 2006 for plans with plan years that end in 2006; and within 60 days after the firsts day of the plan year for plan with plan years that end in 2007 and beyond. (A separate disclosure form must also be filed within 30 days after the termination of a plan’s prescription drug coverage or a change in its creditable coverage status).

Source Authority: CMS-4068-F, 70 Fed. Reg. 4194 (Jan. 28, 2005).;www.cms.hhs.gov/medicarereform/CCguidances.asp ; link: http://www.cms.hhs.gov/! www.cms.hhs.gov/apps/ccdisclosure/default.asp

Executive Compensation

409A & Nonqualified Deferred Compensation Plans

New Code Section 409A provides that all amount deferred under a nonqualified deferred compensation plan or arrangement for all taxable years are includible in a taxpyer’s current gross income to the extent such amounts are not subject to a substantial risk of forfeiture, unless the deferred compensation plan or arrangement contains certain specified restrictions on elections and distributions, and is operated in accordancew with those restrictions. Such tax treatment applies to plan failures and operational failuires, but is limited to participants to whom the failure relates.

Effective: In taxable years beginning on or after January 1, 2005. Proposed regulations are generally applicable for taxable years beginning on or after January 1, 2007.

Penalties: A failure to comply with 409A will result in current income tax recognition of such deferred amount, increased by an additional tax equal to 20% of the compensation includable in income, plus interest.

Action Required: Review affected deferred compensation plans and programs to ensure good faith operational compliance, required as of January 1, 2005; plan amendments to be adopted on or before December 31, 2006.

Source Authority: IRC Section 409A -- American Jobs Creation Act of 2004; IRS Notice 2005-1 (as clarified on Jan. 5, 2005). ; 409A Prop. Reg., REG-158080-04, 70 Fed. Reg. 57929 (October 4, 2005); see also, Notice 2005-94 (postponement of deferred compensation W-2 reporting until 2006), IRS Notice 2006-4 (interim guidance with respect to the application of 409A to outstanding stock rights), and Notice 2006-33, 2006-15 I.R.B. (April 10, 2006)(transition relief to comply with Code Section 409A(h) with respect to certain assets transferred or restricted by March 21, 20006).

SEC Reporting of Compensation – Form 8-K Disclosures

Form 8-K disclosure rules accelerate the due dates for required filings, and significantly expand the items that trigger filings as they relate to executive and director compensation, employment agreements and termination from service.

Actions Required: Registrants should review and revise as needed their disclosure controls and procedures to ensure they satisfy the expanded Form 8-K disclosure requirements with respect to director and executive compensation, employment agreements and termination from service.

Suggested Procedures: To avoid filing a Form 8-K to disclose individual awards every time they are made, registrants may publicly file each of the forms of awards to be used under the particular plan or program as exhibits to a Form S-8 registration statement, a Form 10-Q or 10-K, or a separate 8-K current report. Registrants may avoid a separate Form 8-K filing if the triggering compensatory decision is made within four days of the filing of Form 10-Q or Form 10-K periodic report.

Source Authority: SEC Div. Corp. Finance, Current Report on Form 8-K, Frequently Asked Questions, November 23, 2004.

SEC Reporting of Compensation – Proposed Executive Compensation Disclosure Rules

Proposed SEC rules would amend current executive compensation, related party transaction, and director independence rules.

Executive Compensation: Summary Compensation Table required to make clear total compensation that is granted to principal executive officer, principal financial officer, and other three highest paid officers. In addition, there is Outstanding Equity Awards at Fiscal Year End Table; Retirement Plan Potential Annual Payments and Benefits Table; Nonqualified Defined Contribution and Other Deferred Compensation Plans Table; and Change in Control Payments Table.

Related Person Transaction and Director Independence: New requirements include disclosure of policies concerning related party transactions. New disclosure requirements on whether each director and director nominee is independent, relationships considered when determining independence, and audit, nominating and compensation committee members who are not independent.

Source Authority: SEC Notice 2006-10 (January 17, 2006).