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No Top-Hat Plan When Sales Clerk Permitted to Participate

A nonqualified deferred compensation plan can be an important part of an employer’s overall compensation program. Unlike qualified retirement plans, which limit benefit amounts and require broad coverage, nonqualified plans provide a virtually unlimited opportunity to defer income and may be targeted to key individuals. Additionally, nonqualified plans are generally exempt from ERISA’s fiduciary, funding, and vesting requirements.

PPA Preempts State Wage Laws to Encourage Automatic Employee Deferrals

Under an automatic enrollment feature, employees accumulate retirement savings through payroll deduction by default – unless they make an affirmative election to opt out of the program. For the past several years, in keeping with the federal government’s efforts to shore up the nation’s retirement savings, government agencies have actively encouraged such arrangements under employer-sponsored defined contribution plans.

New Executive Compensation Disclosure Rules Require Significant Changes

Final rules adopted by the Securities and Exchange Commission on July 26, 2006, will require companies with publicly-traded securities to significantly alter the way that they disclose their executive compensation practices in proxy and registration statements. These rules are generally designed to require the disclosure of all of the compensation that executives receive. They expand the list of executives for whom disclosures must be made, substantially modify the format and content of the required disclosures, and place heightened scrutiny on options-granting practices.

Employer Deemed Plan Administrator and Fined After Failing to Provide Plan Information

ERISA guarantees plan participants and beneficiaries the right to request and receive certain information about their plans. If the plan administrator receives such a request and fails to respond within 30 days, ERISA authorizes the federal courts to impose statutory penalties on the administrator. According to a recent district court decision, those penalties may be assessed against the plan sponsor – even if the plan identifies someone else as the plan administrator – when the identity of the plan administrator is unclear and the sponsor either “acts like” the plan administrator or makes it difficult for participants to locate the plan administrator.

New Guidance on Automatic Substantiation of Debit Card Payments Under Flexible Spending Accounts

The IRS has issued additional guidance regarding the use of debit cards, credit cards, and stored value cards for flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs). The new rules may spark a renewed interest among employers in offering an electronic payment card feature with their FSAs and HRAs.

What’s An Ounce of Preservation Worth?– The Price of Purging Electronic Data

Remember the days when employees actually had face-to-face conversations in the office? Now, thanks to the miracle of e-mail, often there is little reason for people to walk down the hall. A few taps on the keyboard and a click of the “send” button get the same result, right? Well, not exactly. (One obvious difference is the degree of human interaction involved, but that’s a topic for a different professional.) The focus here is the “e-paper trail” left by computer communications. Experts estimate that by 2006 approximately 60 billion e-mails will be sent per day worldwide. Much of that traffic occurs on the information highways of corporate computer networks, whose electronic mailboxes and trash bins are teeming with employee messages.

THE FIDUCIARY CORNER: Failure to Distribute SPD Makes Sponsor Liable For Benefit

Long-standing ERISA regulations require plan administrators to distribute summary plan descriptions (SPDs) to individuals within 90 days after they become plan participants.

DOL Issues Guidance on Mutual Fund Settlement Distributions

The Department of Labor (“DOL”) recently issued guidance regarding the distribution and allocation of mutual fund settlement payments made to employee benefit plans and their participants. This guidance is directly related to SEC enforcement actions alleging late trading and market timing activities. As a result of these actions, numerous mutual funds have established settlement funds.

THE FIDUCIARY CORNER: Fiduciaries Must Read Insurance Policies

Fiduciaries who rely on insurance brokers for an explanation of policy language should think twice before merely paraphrasing that explanation for participants and beneficiaries. Not only do fiduciaries have a duty to understand a policy’s coverage, they also must accurately describe that coverage. If the broker’s summary proves to be inaccurate or incomplete, the fiduciaries may be liable.

DOL Facilitates Distributions To Missing DC Plan Participants

In the context of final regulations concerning abandoned defined contribution plans (so-called “orphan plans”), the Department of Labor (“DOL”) has also clarified its 2004 guidance on the permissible means of distributing accounts of participants and beneficiaries who cannot be located at the time of a plan’s termination.

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