PLANSPONSOR - April/May 2019 - 12

Rules & Regulations
types of contributions and earnings a plan
may make available for hardship distributions.
In addition, it directs the IRS and
Treasury Department to eliminate the safe
harbor requirement to suspend participant
contributions for six months while
it is determined whether the distribution
is necessary to satisfy an immediate and
heavy financial need.
Also in the OC list for this year are
proposed regulations regarding hardship
withdrawals, which reflects the
legislation prohibiting suspension of
401(k) plan contributions. The IRS says
taxpayers may rely on the proposed regulations
until the final ones are published
in the Federal Register.
IRS Expands SelfCorrection
Program
The IRS has issued Revenue Procedure
2019-19 to expand the list of plan document
failures and plan loan failures that
may be remedied under its self-correction
program (SCP). The agency also provides
an additional method by which plan
amendment can correct operational failures
under the SCP.
The agency says the revenue procedure
updates the comprehensive system
of correction programs available to retirement
plan sponsors that need to satisfy
the requirements of Internal Revenue
Code (IRC) Sections 401(a), 403(a), 403(b),
408(k) or 408(p) but have failed to do
so " for a period of time. " The Treasury
Department and the IRS have concluded
that expanding the SCP will make it easier,
more cost-effective and less burdensome
for plans to comply, allowing plan sponsors
to self-correct in certain additional
circumstances. The new procedures were
effective April 19.
Legislation to Protect AHPs
Last June, the Department of Labor
(DOL) finalized regulations to enable
more small businesses to offer employment-based
health insurance, through
12 PLANSPONSOR.com April - May 2019
small business health plans-aka association
health plans (AHPs). In early April,
however, a district court determined
that the DOL's regulations are unlawful,
leaving in limbo the legality of current
AHPs and the creation of new ones.
Now, a group of senators, led by
Senator Mike Enzi, R-Wyoming, have
introduced legislation that would keep
the pathway open for small businesses to
offer AHPs under the DOL's final rule.
" ... expanding the
SCP will make it
easier, more costeffective
and less
burdensome for
plans to comply ... "
AHPs-similar to multiple employer
plans (MEPs)-are intended to allow small
businesses to group together and leverage
power in numbers to obtain comprehensive
and affordable health insurance as
though they were a single large employer.
According to a release on Enzi's website,
roughly 30 AHPs have formed under the
rule so far. The Congressional Budget
Office has estimated that about 4 million
people would enroll in an AHP by 2023,
including 400,000 who would otherwise
be uninsured.
New Allegations in LongStanding
Cigna DB Suit
The nearly two-decade old Cigna Corp.
et al. v. Amara case is not closed yet.
Plaintiffs in the case regarding Cigna's
conversion from a traditional defined
benefit (DB) plan to a cash balance plan
have filed a motion to enforce court
rulings and request sanctions.
In its first decision, the U.S. District
Court for the District of Connecticut ruled
there was no wrongdoing on Cigna's part
in its calculation of benefits when it moved
from the traditional plan (what the court
calls Part A) to the cash balance plan (Part
B), but it found liable for inadequate disclosures
relating to the conversion.
The case was brought before the
U.S. Supreme Court on the question of
whether a court could order reformation of
a plan. The high court said in its opinion,
the provision of the Employee Retirement
Income Security Act (ERISA) " does not
suggest that it authorizes a court to alter
those terms here, where the change, akin
to reforming a contract, seems less like the
simple enforcement of a contract as written
and more like an equitable remedy. " The
Supreme Court also rejected the solicitor
general's alternative rationale that the
District Court enforced the summary
plan descriptions (SPDs) and that they
are plan terms. However, on remand,
the District Court-and, in an appeal,
the 2nd U.S. Circuit Court of Appeals-
agreed with its own earlier reformation of
Cigna Corp.'s cash balance pension plan,
and the Appellate Court decided the lower
court had discretion to reform it.
Now, the plaintiffs in the suit argue
that Cigna has violated the District Court's
rulings by: " using 'lookback' interest rates
to annuitize the offsets that this court has
allowed Cigna to take; using 'outdated'
mortality tables from the date of the Part
B lump-sum distributions rather than
the 'successor' mortality tables to annuitize
the offsets that this court has allowed
Cigna to take; eliminating early retirement
benefits until the 'later of' the Part
A early retirement age or the date the Part
B cash balance account is distributed; and
refusing to pay 'small benefit cash-outs'
to class members who have not received
their Part B cash balance accounts. "
Cigna has not responded to a request
for comment. -PS
For in-depth coverage of these topics and more, go to plansponsor.com/compliance.
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PLANSPONSOR - April/May 2019

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