BCG Pension Insider

April 2020 - Volume 102, Edition 1

BCG Hires Dan Atkinson

We are pleased to announce that Dan Atkinson has decided to join the BCG team.

Dan is a Fellow of the Society of Actuaries and an Enrolled Actuary. He has over 22 years of pension plan experience covering all aspects of single-employer corporate plans. Dan has advised on a range of plans from small to jumbo plans (including multi and multiple employer plans) with ten to tens of thousands of participants. Dan graduated from Worcester Polytechnic Institute with a BS in Actuarial Mathematics.

ERISA Lawsuit Activity Continues Despite Court Lockdowns 

PLANSPONSOR | April 3, 2020 | By Rebecca Moore

Plan sponsors should continue to pay attention to litigation and consider what litigation may arise.

Despite the novel coronavirus pandemic, with courts around the country closed, there continues to be daily activity related to Employee Retirement Income Security Act (ERISA) cases.

In the past two weeks, there have been new cases filed, decisions on motions to dismiss and other orders in federal courts.

Jamie Fleckner, partner at Goodwin Procter in Boston, says, typically, trials are held in person, but with courts on lockdown, judges are not taking live testimony and not doing trials. However, much activity happens before trial.

He says that beginning 10 or 15 years ago, the federal courts at different stages started allowing parties to a case to file complaints, motions—anything to get the attention of judges—in an electronic filing system called ECF, and this has continued. “Many judges, even before the outbreak, were sometimes deciding motions what they call ‘on the papers’ without lawyers coming in to present oral argument. They are doing so exclusively now,” Fleckner adds.

“A month ago, we filed a motion to dismiss a case, and I was supposed to be in Green Bay, Wisconsin, yesterday for that. However, a few weeks ago, the judge canceled oral argument and said he would make a tentative ruling based on paper evidence and we could make written submissions in response to that,” Fleckner offers as an example.

He says judges are either coming up with creative ways to keep cases moving or are continuing their own practice of not seeing lawyers until trial. Before the coronavirus outbreak, many things would happen before trial by paper or telephonically.

“I participated in a telephonic hearing right around the time the outbreak started, but that was that judge’s typical way of hearing from parties. We can continue calling from our home office rather than our regular office,” Fleckner says.

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Furloughs Vs. Layoffs: Which May Trigger a Partial Plan Termination?

PLANSPONSOR | April 3, 2020 | By Lee Barney

As reports of employee layoffs and furloughs are increasing, some may wonder, “What’s the difference?”

Retirement plan sponsors should keep in mind that the IRS may consider a partial termination of the plan has occurred if a company undergoes layoffs, but not furloughs, attorneys say.

“Companies tend to use the terms interchangeably, which is why it can be confusing,” says Lorie Maring, a partner at Fisher Phillips. “A furlough is not intended to be a permanent separation of work. A company might ask employees to take a week off, or reduce the work week from five days to four, as a way of avoiding a layoff.”

With a layoff, employers may intend for it to be temporary, hoping that they will rehire the workers at some point in the future, Maring says. But what actually happens will determine whether a partial plan termination is triggered.

“Then there is the ‘reduction in force,’” she adds. “This is the clear message that a worker is being terminated and not coming back.”

The IRS views cases where there is a true separation from employment of 20% or more of the employees participating in the retirement plan in a plan year as a partial plan termination, Maring says.

“In a partial termination of a plan,” says Kevin Brown, a partner with McCarter & English’s Employee Benefits and Executive Compensation Practice, “the benefits to the participants being terminated become fully vested. If the company match and profit sharing contributions in the plan were not otherwise vested, in the case of a termination, they would be.” Accounts for participants who voluntarily terminated during the plan year also become 100% vested.

Maring says that while there is “no bright line test” that the IRS applies to the number of retirement plan participants being terminated, she has generally found it to be 20% or more. However, Brown says, it can be as little as 10%.

Stephen Ferszt, practice group leader for employee benefits at Olshan Frome Wolosky, says, “In determining whether there could be a partial termination of a qualified retirement plan resulting from some form of an employee’s separation from service, the first thing that you need to examine is how the plan counts an employee’s service. Is it counting actual hours of service performance? Is it using an elapsed time method, or some other method? The IRS’s bottom-line decision is based on an analysis of all facts and circumstances.”

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Standard Pension Closeout / Terminal Funding Case Rates
(No lump sums, disability or unusual provisions)

Retirees - 1.78%
Term Vesteds - 1.83%
Actives - 1.90%

Annuity Purchase Rates as of April 13, 2020