Suit Alleges American Home Failed to Meet Pension Promises

November 19, 2004 (PLANSPONSOR.com) - Employees of American Home Mortgage have filed suit against the company alleging fraud, breach of contract and misrepresentation.

In a press release from their lawyers, the plaintiffs in the class action lawsuit allege that they were promised numerous benefits when their former company, Principal Financial Group’s residential mortgage lending business, was sold to American Home in 2003. Approximately 400 of the company’s employees went to work for American Home at that time.

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The suit alleges that at that time, American Home, in writing, promised to honor their years of service with Principal towards the vesting requirements for their new 401(k) retirement savings plan. It also promised to contribute extra money to the plan to compensate the new workers for an additional retirement benefit they had with Principal.

The suit alleged that these written promises were not kept. Instead, they allege, the company extended vesting requirements and has not yet contributed extra amounts to the plan. The written promises were to be implemented by spring of 2004, the suit alleged.

The suit was filed in Suffolk County, New York.

IRS Clarifies 'Dependent' Definition in WFTRA 2004

November 18, 2004 (PLANSPONSOR.com) - The alteration of the definition of a 'dependent' in the Working Families Tax Relief Act of 2004 does not apply to employer-based medical care reimbursements of premiums, according to the Internal Revenue Service (IRS).

>With a notice that states that it will soon issue regulations on the new definition – but that employers should rely on the ruling in the notice in the meantime – the IRS asserted that the Section 152 definition of a dependent does not apply to employer-provided medical care reimbursements or premiums, according to a BNA report.

>The IRS said that the Act contained a conforming amendment to Section 105(b), which would exclude from an employee’s salary the reimbursements and premiums paid to an employee for medical expenses. This would apply to the employee, the employee’s spouse, and other dependents. The conforming amendment states that a person’s dependent status for Section 105(b) would be determined without regard to certain parts of the amended Section 152. Thus, the IRS states that Congress did not alter the definition of dependent for these specific payments, according to BNA.

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>Section 106(a), however, did not contain an amendment, and the section should be revised to provide the same definition of dependent as is seen in Section 105(b). Congresses intent was not to alter the definition with regards to employer-provided health plans, the IRS stated, and thus employers should note that Section 106 was not clear on this subject.

>The revised regulation would be applicable beginning after December 31 of this year.

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