Supreme Court to Decide Whether RIF Severance Payments are Taxable FICA Wages
In the fall of 2012, the Sixth Circuit held in U.S. v. Quality Stores, Inc. that severance payments made as part of an involuntary reduction in an employer’s workforce are not taxable wages under FICA. This created a split with the Federal Circuit and went against the IRS’ long-standing position with respect to the taxation of severance payments in reduction-in-force situations. Earlier this year, the federal government asked the U.S. Supreme Court to review and overturn the Sixth Circuit decision, claiming that more than $1 billion in refund claims were at stake. The Supreme Court has agreed to review this case during its current term. In the meantime, taxpayers may continue to file protective FICA refund claims with the IRS for the 2010 through 2012 tax years.
When Charitable Donations Become ERISA-Prohibited Transactions
If you are a charity, your lawyer and other service providers to your ERISA plans are likely to become interested in your cause. Are their donations to your charity prohibited transactions under ERISA? The answer is “it depends,” according to informal responses by the Department of Labor to the ABA Joint Committee on Employee Benefits. A prohibited transaction – and perhaps a crime – will occur if the plan’s retention of a service provider is explicitly or implicitly contingent on donations.
New $500 Health FSA Carryover Option
Starting with unspent balances remaining at the end of 2013, Health Flexible Spending Account programs can now allow unspent balances of up to $500 to be rolled over for use at any time in the following year. This new $500 carryover option cannot be used in conjunction with the grace period, which allows unspent balances of any amount to be rolled over for a limited, 2-1/2 month time period. Employers who currently use the grace period would have to terminate that feature before adopting the new $500 carryover rule. The $500 carryover rule is optional, but employers who wish to adopt it will have to amend their Health FSA plan documents.
Fee Litigation: International Paper Settlement Provides Tangible Guidelines
International Paper is the latest in a trend of settlements in fee litigation cases involving retirement plans. International Paper agreed to pay $30 million in damages and reimburse the plaintiff’s attorney fees in the amount of $11.7 million. The settlement agreement sets forth the following guidelines for ongoing plan administration: requiring that plan participants be allowed at any time to change the investment of company contributions that are invested in company stock; the prohibition of retail mutual funds on the menu; the inclusion of a passively managed large-cap mutual fund; prohibiting the use of basis points for recordkeeping; allocating revenue from revenue sharing, discounts and securities lending solely to the plan; and recurrent, competitive bidding for plan services. For more information, see “Have You Done the Math
Michigan Teachers Sue MEA over “August Window”
Michigan’s new right-to-work law continues to pose thorny challenges to unions and their members alike. A group of Michigan teachers have filed unfair labor practices claims against their union, the Michigan Education Association, alleging that the MEA violated Michigan’s new right-to-work law by failing to allow them to withdraw from the union outside of a prescribed time to withdraw. The MEA’s bylaws provide that union members may only withdraw during the “August window,” from August 1 to August 31. The teachers claim that the MEA hid information about the proper procedure for withdrawing in order to keep them in the union. The MEA has countered by stating that information regarding the August window was freely available to the teachers. The August window “has been there for 40 years,” said one union representative, noting that approximately 1,500 teachers managed to successfully opt out since the passage of Michigan’s right-to-work law. The eight teachers will be represented by the Mackinac Center Legal Foundation as their case moves forward.
Change in Rules Allows Workers’ Compensation to Use Electronic Transfers
A change in Michigan’s Workers’ Compensation Agency Administrative Rules allows workers’ compensation claimants to receive wage replacement benefits by means of electronic transfers. Indemnity payments may be deposited in a claimant’s bank account or debit card. The new option for payments, effective earlier this year, is intended to increase efficiencies and reduce costs. Claimants preferring to receive paper checks may continue to do so.
OSHA Addresses Employee Exposure to Hazardous Chemicals
The Occupational Safety and Health Administration recently advised employers that the permissible exposure levels for hazardous chemicals are out-of-date and inadequately protective. As a result, OSHA encourages employers to identify safer chemicals that can be used in place of more hazardous ones and to utilize the exposure limits on the annotated tables prepared by OSHA. These annotated tables provide a side-by-side comparison of OSHA’s permissible exposure limits to California’s Occupational Safety and Health Administration’s permissible exposure limits, the National Institute for Occupational Safety and Health recommended exposure limits and the American Conference of Governmental Industrial Hygienist threshold limits values. (A copy of this table can be found at http://www.osha.gov/dsg/annotated-pels/index.html
.) While these comparisons are not enforceable by OSHA, this information may cause employees to question the safety of chemical exposure in the workplace.
Forfeitures Need to be Used or Allocated By Year-End
Many 401(k) plans require participants to complete a period of service before becoming fully vested in matching contributions or other employer contributions. If a participant leaves the company before becoming fully vested, the non-vested portion of his or her account may be forfeited. The IRS requires these forfeitures be used or allocated before the end of each plan year. The plan document should specify how these amounts may be used, such as for the payment of plan expenses or to reduce employer contributions.
NLRB Ruling Clears Way for “Micro Units”
Late this summer, the Sixth Circuit Court of Appeals upheld a National Labor Relations Board certification of a bargaining unit consisting of only certified nursing assistants at a nursing facility. In rejecting the employer’s argument that the unit should have included other employees working at the facility, the court approved of the NLRB’s controversial Special Health Care decision that allows unions to organize discrete groups of employees unless they share an “overwhelming community of interest” with other employees in a larger group. Judicial approval of these so-called “micro units” means that employers must be even more vigilant in their efforts to engage all employees in all areas of the organization. Focusing on keeping most of the employees happy most of the time is no longer a viable non-union employee-relations strategy.
December 1 Deadline for Hazard Communication Training
In 2012, the state of Michigan revised its Hazard Communication Standard to align with the Globally Harmonized System of Classification and Labeling of Chemicals. As a result, employers must provide training on the new label elements and Safety Data Sheet format by December 1. Additional information on training can be found on the Michigan Occupational Safety and Health Administration website, www.michigan.gov/miosha.