Compliance July 12, 2012

Pension Fund to Correct for Improper Plan Loans

July 12, 2012 (PLANSPONSOR.com) - A federal judge in Chicago has signed a consent order to resolve a lawsuit between the U.S. Department of Labor (DOL) and the United Employee Benefit Fund in Northbrook, Illinois.
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An investigation by the department’s Employee Benefits Security Administration (EBSA) found that the fund’s trustees made loans to participants that were improper, unsecured and allowed to become delinquent. Pursuant to the consent order, the amount of the improper loans – totaling more than $1.7 million – will be subject to corrected loan documentation, repaid by plan participants or treated as taxable distributions.

David Fensler and Anthony Monaco, as trustees to the fund, allegedly approved at least 194 improper loans from the fund to individual participants between January 1997 and December 31, 2009. As of that date, none of the loans approved by the trustees had been paid back to the fund in full, and only six of the participants had ever made any payments for loans issued to them. Fensler and Monaco allegedly made no effort to enforce the terms of the loan documents or collect payments, in violation of the plan’s governing documents and the Employee Retirement Income Security Act (ERISA).

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Under the terms of the consent order, the fund’s trustees will correct all prohibited transactions in which they engaged since August 2008 and will ensure that all loans meet all the requirements of ERISA and the Internal Revenue Code (IRC) going forward. Specifically, the plan’s governing documents will be amended to include requirements that a participant must demonstrate and document an emergency need before he or she can receive a loan from the fund.

The fund will issue an Internal Revenue Service Form 1099 at the end of the plan year for the full unpaid loan, in the event a loan is delinquent for more than 120 days. For all loans issued after August 30, 2008, the fund will issue a notification to the participant within 45 days that the individual will receive a Form 1099 for plan year 2012 for the outstanding loan balance plus any outstanding interest in accordance with IRC rules.

The United Employee Benefit Fund was established by the Professional Workers Master Contract Group and the National Production Workers Union Local 707 to provide welfare, medical, death, disability and child care facility benefits to the fund’s participants. As of December 31, 2009, the fund had approximately 281 participants.

Benefits July 12, 2012

PPACA Presents Special Challenge Concerning Part-time Workers

July 12, 2012 (PLANSPONSOR.com) – The Patient Protection and Affordable Care Act (PPACA), which requires employers to provide full-time employees with reasonable health insurance, presents a special challenge for employers of part-time workers.
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While the government defines a full-time employee as someone who works 30 or more hours a week, the status of those who work less is not always clear, said Amy Bergner, a partner in Mercer’s Washington Resource Group, during a webcast.

Some employers have temporary or seasonal employees whose hours fluctuate. This raises the question: are they part-time or full-time employees?

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The question is important because seasonal and part-time employees could qualify for coverage tax credits, and the PPACA generally requires employers with an average of at least 50 full-time employees (“applicable large employers”) that do not offer the opportunity to enroll in minimum essential coverage to full-time employees and have at least one employee receive a federal tax credit for coverage through an Exchange to pay a $2,000 annual fee for each full-time employee (minus the first 30), as calculated on a monthly basis.   

In addition, applicable large employers that offer minimum essential coverage to full-time employees and have at least one full-time employee receive a federal tax credit for Exchange coverage (because the employer coverage does not provide minimum value or is unaffordable), are required to pay the lesser of $3,000 for each full-time employee receiving the credit or $2,000 per employee for each full-time employee, after subtracting the first 30.   

One proposed solution by lawmakers is to allow employers to “look back” over a certain time period, such as a year (see “Seasonal Employees Under the PPACA”) to calculate an “average” of hours worked. This could cause seasonal or part-time employees to fall out of the definition of full-time.

“We do expect to hear more from regulators on that issue hopefully in the next few months,” said Bergner. “But for now it’s something employers can start working at in terms of their workforce.”

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