American Benefits Council
Benefits Byte

2014-104

October 31, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

Click here to read past issues on the Benefits Byte Archive page.

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Ninth Circuit Sides with Participants in Stock Drop Case Remanded from Supreme Court

A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit again reversed and remanded a district court decision which had previously dismissed the case in which plan participants alleged breach of fiduciary duty in the latest ruling in Harris et al. v. Amgen et al. on October 30. The matter centers on a time period in which the employer's stock price performed below expectations, affecting investment returns, commonly known as a “stock drop” case.

The Council, along with the U.S. Chamber of Commerce, filed an amicus ("friend of the court") brief with the Ninth Circuit in June 2013, supporting the defendant's position.

In this case, the plaintiffs (current and former employees of Amgen and AML) participated in two retirement plans that qualified as “eligible individual account plans” under ERISA. When the value of Amgen common stock fell, the plaintiffs alleged that the employers breached their fiduciary duties under ERISA as a result of alleged misrepresentations to the SEC relating to the company's products. The U.S. District Court for the Central District of California dismissed the complaint, finding that the plan fiduciaries did not violate their ERISA duties and were furthermore entitled to a presumption of prudence, as precedent had been established in other cases at the circuit court level. However, on June 4, the U.S. Ninth Circuit Court of Appeals overturned the district court ruling and remanded the case for further proceedings, concluding that the presumption of prudence (often referred to as the “Moench” presumption) did not apply in this case. The case is significant because it is essentially trying a securities law case under ERISA as a fiduciary breach case.

The Ninth Circuit ruling was subsequently appealed to the U.S. Supreme Court. Because the high court ruled on June 25 in a separate, similar case, Fifth Third Bancorp v. Dudenhoeffer, substituting a different standard of fiduciary prudence (summary available here), the Harris v. Amgen case was remanded back to the Ninth Circuit.

In its October 30 ruling, the Ninth Circuit followed the Supreme Court’s ruling that the defendants “are not entitled to a presumption of prudence” and once again reversed the district court’s decision. The Ninth Circuit also rejected the defendants’ argument that the Supreme Court’s Fifth Third Bancorp decision requires particular pleading when there is an allegation that fiduciaries possessed and should have acted on nonpublic information. The case will now be returned to the district court level for further proceedings under the revised standard set by the Supreme Court.

For more information, contact Jan Jacobson, senior counsel, retirement policy, or Lynn Dudley, senior vice president, global retirement & compensation policy, at (202) 289-6700.



IRS Issues Annual Guidance on Inflation Adjustments for Certain Tax Provisions

On October 30, the Internal Revenue Service (IRS) issued Revenue Procedure 2014-61 to announce the inflation adjustments for certain tax provisions for 2015. Most notably, the dollar limit for contributions to a health flexible spending arrangement (FSA) has been increased from $2,500 to $2,550.

Rev. Proc. 2014-61 sets the 2015 limits for 44 provisions, including the following (with the applicable Internal Revenue Code section in brackets):

 

Cafeteria Plans [125]

The 2015 dollar limitation on voluntary employee salary reductions for contributions to a health FSA is $2,550.

 

Medical Savings Accounts [220]

Self-only coverage: a High-Deductible Health Plan (HDHP) with an annual deductible not less than $2,200 and not more than $3,300 must not exceed $4,450 in annual out-of-pocket expenses required to be paid for covered benefits (other than premiums).

Family coverage: a HDHP with an annual deductible not less than $4,450 and not more than $6,650 must not exceed $8,150 in annual out-of-pocket expenses required to be paid for covered benefits (other than premiums).

 

Refundable Credit for Coverage Under a Qualified Health Plan [36B(f)(2)(B)]

The limitation on tax imposed for excess advance credit payments is determined using the following table:

If the household income (expressed as a percent of poverty line) is:

The limitation amount for unmarried individuals (other than surviving spouses and heads of household) is:

The limitation for all other taxpayers is:

Less than 200%

$300

$600

At least 200% but less than 300%

$750

$1,500

At least 300% but less than 400%

$1,250

$2,500

 

Employee Health Insurance Expense of Small Employers [45R]

The dollar amount for taxable years beginning in 2015 for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit is $25,800.

 

Overall Limitation on Itemized Deductions [68]

For 2015, itemized deductions will be limited to $309,900 in the case of a joint return or a surviving spouse, $284,050 in the case of a head of household, $258,250 in the case of an individual who is not married and who is not a surviving spouse or head of household and $154,950 in the case of a married individual filing a separate return.

 

Eligible Long-Term Care Premiums [213(d)(10)]

For 2015, the limitations regarding eligible long-term care premiums includible in the term “medical care” are as follows:

Attained age before the close of the taxable year:

Limitation on premiums:

40 or less

$380

More than 40 but not more than 50

$710

More than 50 but not more than 60

$1,430

More than 60 but not more than 70

$3,800

More than 70

$4,750

 

Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or under Certain Life Insurance Contracts [7702B(d)]

The dollar amount of the per diem limitation regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual is $330.

For more information, contact Jan Jacobson, senior counsel, retirement policy, or Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.



The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).