Author: jfortenberry@fortenberrylaw.com

The deadline for operating in compliance with new mandatory rollover rules applicable to qualified plans has arrived. Read more about it in an article from Faegre.com: “IRS Provides Further Guidance on Mandatory Rollover Rules.” Also, if you subscribe to RIA, you can access a great article here–“Automatic Rollovers – March 28th Deadline is Here” by Elizabeth Dold.

UPDATE: You can now access Elizabeth Dold’s article here. (Source: Benefitslink.com.)

Almost a year has gone by since the EEOC originally announced its approval of a proposal to allow employers to coordinate retiree health benefit plans with eligibility for Medicare or a comparable state health benefit without violating the ADEA. Since that time, AARP filed suit seeking a preliminary injunction to stop the agency from issuing the proposed rule. The plaintiffs in AARP v. EEOC, No. 2:05-cv-00509, argued that the EEOC had exceeded its statutory authority to implement the exemption. The EEOC had agreed to a 60-day hold on issuing the final rule due to the litigation.

You can access the Defendant’s Opposition to Plaintiff’s Cross-Motion for Summary Judgment in the case from the American Benefits Council website via Benefitslink.com. Defendant argues in part as follows:

Plaintiffs have not demonstrated that the EEOC’s proposed exemption is contrary to law or that the exemption is arbitrary and capricious. Accordingly, their motion for summary judgment should be denied, and for the reasons explained herein and in Defendant’s previous filings, judgment should be entered in favor of the EEOC…

Given that Congress has expressly authorized the EEOC to issue exemptions to permit activity that otherwise would be prohibited by the ADEA, the relevant inquiry for the Court is whether the proposed exemption is “reasonable” and “necessary and proper in the public interest.” 29 U.S.C. § 628. As is evident from the Administrative Record before the Court, the EEOC’s decision to establish an exemption for the practice of coordinating retiree health benefits with Medicare eligibility was reasonable and in the public interest, and therefore satisfied the requirements of Section 9. See Defendant’s Opposition to Plaintiffs’ Motion for Preliminary Injunction at 27-40 (“The EEOC’s Decision to Exempt from the ADEA the Practice of Coordinating Employer-Sponsored Retiree Health Benefits with Medicare Eligibility is Not Arbitrary and Capricious”). Plaintiffs’ claims to the contrary represent nothing other than their disagreement with the considered judgment of the EEOC.

A ruling is expected next week. At the recent SHRM Employment Law & Legislative Conference held two weeks ago, Naomi Churchill Earp, Vice Chair of the EEOC, gave a presentation in which she mentioned the case, but stated that she could not comment on it.

For more background on the case:

• EEOC Announces Finalization of Erie Exemption from previous post here at Benefitsblog
• EEOC Rule Allowing Coordination of Retiree Benefits with Medicare Delayed for Sixty Days
  from Morgan, Lewis
• AARP Lawsuit Delays Final EEOC Ruling on Retiree Health Plans from Workforce Management

Where have I been over the last 10 days? Recovering from the flu . . . Wishing there had been more flu vaccine to go around, but thankful that those who needed it received it because it was bad stuff!

In a recent article–“PA Unemployment Authorities Strictly Interpret Court Ruling Requiring Employer Legal Representation
“–Jackson Lewis has provided a report on what is happening when employers appear unrepresented by an attorney before the Unemployment Compensation Board of Reivew, pursuant to the recent court ruling in Harkness v. Unemployment compensation Board of Review (PA. Cmwlth. 2005). (See previous post here.) The firm reports that the Pennsylvania Department of Labor and Industry is strictly interpreting the Commonwealth Court’s decision to prohibit any self-representation by employers at unemployment compensation proceedings by either “refusing to proceed with a hearing when an attorney is not present and continuing the hearing to a later date, or proceeding with the hearing but prohibiting the employer from offering any evidence other than testimony in direct response to questions by the unemployment compensation referee.”

For those of you following developments in the health care subrogation arena, the Third Circuit has issued an important opinion reversing a decision reached by a federal district court in New Jersey. The district court had ruled that a New Jersey statute which prohibited the enforcement of health care subrogation claims was saved from preemption under ERISA’s insurance savings clause. The Third Circuit decision–Levine v. United Healthcare Corp.–held that the statute was preempted under ERISA and not “saved” from preemption under the ERISA insurance savings clause. The decision will apparently impact several class action lawsuits which are pending against major health care insurers in New Jersey, brought by plan participants seeking to recover amounts that insurers had recovered from plan participants who in turn had recovered against tortfeasors. The Third Circuit utilized the new factors set forth in the Miller case, and held that the New Jersey statute was not “specifically directed toward entities engaged in insurance” so that it did not fall within the “savings” clause of ERISA:

To avoid ERISA preemption a state law must be “specifically directed” toward the insurance industry. The New Jersey statute is not. Because the New Jersey statute could be applied to any contributor in any civil action, it is merely a statute that has a significant impact on the insurance industry. As in Pilot, this is not sufficient.

There is a very interesting dissent in the case which argued that the New Jersey collateral source statute was a “law specifically directed towards the insurance industry that has some bearing on noninsurers.”

Read more about ERISA preemption in previous posts which you can access here.

Also, you can access the DOL’s Amicus Brief in yet another well-known subrogation case–the QualChoice case–here. This article here from Law.com indicates the QualChoice case is one the U.S. Supreme Court will consider as a possibility for review.

Earlier this week, the IRS and the U.S. Department of Treasury held a hearing to receive comments regarding the proposed regulations on phased retirement (discussed in a previous post here). SHRM has posted an article which discusses the comments received from the various groups represented at the hearing: “Groups Ask IRS for Phrased Retirement Flexibility.”

Comments on phased retirement presented by:

• ASPPA
• ERIC
• American Benefits Council

Also, a report by AARP: “Attitudes of Individuals 50 and Older Toward Phased Retirement.”

Jason J. Fichtner (Joint Economic Committee) has posted The Taxation of Individual Retirement Plans: Increasing Choice for Seniors on SSRN. Here is the abstract:

For many senior citizens, individual retirement plans, such as IRAs and 401(k)s, are a primary saving vehicle for retirement. Along with Social Security, individual retirement plans (“IRPs”) represent a major source of money for retirement. However, even though IRPs are a valuable saving vehicle for many seniors, many IRPs have one major drawback: the forced distribution of assets and the associated taxation of those assets for senior citizens at age 70½ for traditional IRAs and the later of age 70½ or the year in which the account holder retires for 401(k)s. This requirement forces many seniors to take distributions when they do not need them. Worse, in cases of a down market, the forced distributions may require seniors to sell assets at depressed prices to pay taxes, even if investment losses have been incurred. This study addresses the minimum distribution requirement that effectively forces senior citizens to withdraw funds from IRPs or face a 50 percent excise tax, the reasoning behind the requirement, and the economic harm it can have on seniors, and some policy alternatives to this requirement that would help mitigate the bias against seniors and their retirement that this requirement creates. This study proposes several options that would either repeal or modify the minimum age requirement for forced distributions beginning at age 70½. These options include: repeal, limited repeal, an increase in the minimum withdrawal age, a limited exclusion, a credit for excess withdrawals, allowing losses to be applied to other gains, and a grace period. Any of the proposals would enhance efficiency by providing seniors with the choice of determining when it is in their best interest to make a withdrawal from their IRP, how much to withdraw and subsequently pay the appropriate tax. The individual is in the best position to know when is the right time to elect to make withdrawals, not the government. Further, forcing seniors to sell assets in market conditions that have reduced their retirement plan assets may undermine the retirement security of seniors and produce less tax revenue to the government.

(Source: The TaxProf Blog)