Presentation on theme: "1 NECA LABOR RELATIONS CONFERENCE SAN ANTONIO, TX OCTOBER 12-14, 2009 Presented by: Dan S. Brandenburg Saul Ewing LLP Defined Contribution Issues (Directed."— Presentation transcript:
1 NECA LABOR RELATIONS CONFERENCE SAN ANTONIO, TX OCTOBER 12-14, 2009 Presented by: Dan S. Brandenburg Saul Ewing LLP Defined Contribution Issues (Directed Investments, USERRA, Hardship Withdrawal)
2 Introduction This presentation will focus on the issues listed in the session title for 401(k) Plans
3 A.Directed Investments 1.Are they a good idea? Fiduciary Issues? – The “Blame Game” 2.Compliance with ERISA Section 404(c) 3.Should you provide participants with a Qualified Default Investment Alternative to invest their Plan assets (vested or otherwise) when the same participants are unable or unwilling to self direct the same Plan assets.
4 Summary of ERISA 404(c) “Safe Harbor” Requirements Notify plan participants that the plan sponsor intends to have a plan be a 404(c) plan; Provide participants at least three investment options (“Core” options”) that have a different risk/return profile; Provide participants with sufficient information so that they can make an informed decision about their investments selections; and Permit participants to change their investment strategy/allocation with a frequency that is appropriate in light of market volatility – no less frequent than quarterly.
5 Qualified Default Investment Alternative (QDIA) satisfies the 404(c) Safe Harbor requirement.
6 B.USERRA USERRA Background Enacted to eliminate or minimize the disadvantages to employment that can result from military service, to provide for prompt reemployment upon completion of military service, and to prohibit discrimination against employees because of military service.
7 Overall objective: Place employees who serve in the military in the same position, to the extent possible, they would have been in if they had remained continuously employed during their military service.
8 USERRA Basics To Whom does USERRA apply to? –USERRA grants reemployment rights and benefits to any member of the “uniformed services” whether voluntary or involuntary. USERRA applies to all employees no matter the level, including temporary, part- time, probationary and seasonal employees
9 What notice must employees provide? –Employees must provide advance notice that he will be serving in the uniformed services. Notice can be verbal or in writing and should be given 30 days in advance though the rules recognize that this may not be possible. What must an employee do upon returning from military service? –Depending on how long the employees’ military service lasted they must report back to work or reapply for a position within a certain period of time.
10 Is there a maximum amount of military service during which an employee is protected? –Generally, USERRA protects employees’ reemployment rights for up to 5 years of cumulative military service.
11 C.Hardship Withdrawals 1.Should a Plan have a hardship withdrawal provision? 2.Use of statutory safe harbors a.two part test 1)the withdrawal must be made because of the participant’s immediate and heavy financial need, and 2) the withdrawal must be necessary to satisfy the need
12 b.Hardship Withdrawal Statutory Safe-harbors i.Certain expenses relating to the repair of damage to the employee’s principal residence that would qualify for the casualty deduction, such as those resulting from hurricane or flood damage, without regard to whether the loss exceeds 10% of adjusted gross income. ii.Deductible medical expenses incurred or anticipated to be incurred by the employee, the employee’s spouse or the employee’s dependents. iii.Costs directly related to the purchase of a principal residence (excluding mortgage payments)
13 iv.Tuition and related educational expenses for the next 12 months of postsecondary education for the employee, the employee’s spouse or the employee’s dependents v.Payment to prevent eviction from the employee’s primary residence or to prevent foreclosure on that residence In addition, 401(k) regulations added two additional safe harbor hardship expenses for plan years that began after Dec. 31, 2005: vi.Payments for burial or funeral expenses for the employee’s deceased parent, spouse, children or dependents, and
14 vii.Certain expenses relating to the repair of damage to the employee’s principal residence that would qualify for the casualty deduction, such as those resulting from hurricane or flood damage, without regard to whether the loss exceeds 10% of adjusted gross income.
15 D.Use of Discretionary Test to Determine Immediate and Heavy Financial Need # v1
16 Saul Ewing’s Office Locations Baltimore, Maryland Lockwood Place 500 East Pratt Street, Suite 900 Baltimore, MD fax: Chesterbrook, Pennsylvania 1200 Liberty Ridge Drive, Suite 200 Wayne, PA fax: Harrisburg, Pennsylvania Penn National Insurance Tower Two North Second Street, 7th Floor Harrisburg, PA fax: Newark, New Jersey One Riverfront Plaza Newark, NJ fax: New York, New York 245 Park Avenue, 24th Floor New York, NY Fax: Philadelphia, Pennsylvania Centre Square West 1500 Market Street, 38th Floor Philadelphia, PA fax: Princeton, New Jersey 750 College Road East Princeton, NJ fax: Wilmington, Delaware 222 Delaware Avenue, Suite 1200 Wilmington, DE fax: Washington, D.C Virginia Avenue, N.W. Suite 1000 | The Watergate Washington, D.C fax: