Labor Employment Law Blog

Section 403(b) annuity plans have historically been governed by a hodgepodge of Internal Revenue Service ("IRS") rulings and regulations dating back to 1964.  In 2007, however, the IRS finalized new, comprehensive regulations that are generally effective January 1, 2009.  Schools and tax-exempt employers that maintain 403(b) plans and their advisors must thoroughly review and revise their plans to comply with the new regulations.  The consequences of not doing so are dreadful (i.e., the loss of tax-deferred status of employer and employee contributions to the annuity plan).

Voters in San Francisco approved a ballot measure mandating paid sick leave for all employees who work within the geographical boundaries of the city.  The measure requires employers in San Francisco to provide 1 hour of sick leave for every 30 hours worked.  Employees working for small employers (fewer than 10 employees) are allowed to accrue up to 40 hours of paid sick leave.  Part-time and temporary employees count towards the 10-employee figure.  Employees of larger employers can accrue up to 72 hours.  Employees may take paid sick leave for their own illness or to provide care for a sick child, parent, sibling, grandparent, grandchild, spouse, domestic partner, or "designated person."  The requirements of the ordinance do not apply to employees covered by a collective bargaining agreement expressly waiving the requirements in clear and unambiguous terms.

Click here to view a PDF copy of the document.

The IRS just issued Notice 2006-79, which provides transition relief from the December 31, 2006 deadlines of IRC 409A.  Specifically, this Notice provides further transition relief by:

A number of class action lawsuits were recently filed over investment-related fees paid by 401(k) plans, targeting 401(k) plans of large employers. These complaints allege a variety of breaches of fiduciary duties and prohibited transactions resulting from excessive administration and management fees and improper fee sharing arrangements with mutual fund companies and other investment providers and service providers, such as record keepers, trustees and third party administrators, among other things. These lawsuits name the employer, as well as plan committees and their various individual members, directors and employees as defendants.

Section 409A was added to the Internal Revenue Code by the American Jobs Creation Act of 2004, and is generally effective as of January 1, 2005. Section 409A adds a number of complex new rules for nonqualified deferred compensation plans, and imposes severe tax penalties for noncompliance.

These new rules were summarized in our November 2004 Employee Benefits Update. Following that update, the Internal Revenue Service ("IRS") issued Notice 2005-1, providing limited guidance on Section 409A. The IRS anticipates issuing additional guidance later this year. In the interim, in view of the December 31, 2005 deadline for amending plans and arrangements to comply with Section 409A, employers should prepare now to act quickly when the additional guidance is issued.