LOOKING AHEAD TO 2025
EMPLOYEE BENEFITS AND TAX
MORE OF 2024 IN REVIEW
2024 PREDICTIONS RECAP
ERISA Class Actions Against Group Health Plans ERISA class action lawsuits against retirement plan fiduciaries have become commonplace over the last few decades, but now, thanks to new disclosure requirements and transparency laws, health plan fiduciaries are starting to face similar class actions. This year also brought a wave of class-action lawsuits against employer-sponsored health plans that include tobacco surcharges, with plaintiffs arguing that surcharges added to tobacco users’ premiums are not compliant with federal laws such as ERISA, the Affordable Care Act, and HIPAA. Battles Over Union Pension Plan Withdrawal Liabilities In March, a federal appeals court ordered a Teamsters pension fund to return approximately $2 million in withdrawal liability payments to an employer that had stopped contributing in 2005. But a bankruptcy court in September upheld rules issued by the Pension Benefit Guaranty Corporation that severely impact post-bailout withdrawal liability calculations. And a waste hauler contractor settled a lawsuit in November after the contractor had been blindsided by a $7.5 million withdrawal liability demand filed by a pension fund based on a theory of successor liability. New HIPAA Requirements and Concerns Federal health officials finalized a rule in April adding more compliance requirements aimed at supporting reproductive healthcare privacy. And a cyber attack on a leading healthcare claims processing provider in February had an unprecedented impact on patients and healthcare providers across the country – reminding group health plans to ramp up their cybersecurity efforts to comply not only with HIPAA but also with fiduciary rules under ERISA.
Reversal of the Biden Administration’s “ESG Rule” for 401(k) Plans This rule established standards for employers to consider environmental, social and governance factors in choosing 401(k) plan investment options (as opposed to considering only the traditional factors of risk and return). In lieu of the prior focus on ESG-related investments, we will see a focus on the ability to offer other non-traditional investment options in a 401(k) plan, such as private equity and electronic currency. Dialing Back the Affordable Care Act While attempts at a full ACA repeal are possible, it is more likely that the Trump administration will dial back prior regulatory efforts related to nondiscrimination, preventative care mandates, tax subsidies, and association health plans. Employment-Related Taxes and Exclusions will Play a Large Part in Further Tax Reform A big focus of the new administration and Congress will be the extension of the 2017 tax reforms that are set to expire at the end of 2025. Add to this the need to consider campaign promises of no taxes on overtime and tips, and the result will be a renewed interest in reforms that will replace the lost revenue and “pay for” other initiatives. One target will be the COVID ERTC payroll tax credits through a retroactive repeal and an extension of the time period for IRS audits. Also on the table will be the largest “tax expenditure” of them all – the exclusion for employer-paid health coverage.
Employers Fine-Tuned Long-Term Remote Work Policies
The rise of remote work has forced employers to tackle one challenge after another, and 2024 was all about figuring out how to effectively manage remote and hybrid workforces for the long term – just as we predicted. This year employers worked to create solid plans and robust policies to manage payroll tax obligations and deliver top tier benefits across multiple locations.
401(k) Plan Changes and Opportunities Rolled Out Under SECURE 2.0
As we correctly predicted, employers sponsoring 401(k) plans implemented mandatory and other changes that took effect this year, such as an increased age for Required Minimum Distributions and eligibility for long-term part-time employees. Employers also explored new opportunities created by SECURE 2.0, such as emergency savings accounts and matching contributions for student loan payments. And the IRS issued guidance just before 2024 began clarifying various SECURE 2.0 provisions.
HOW’D WE DO ON OUR PREDICTIONS? We got the predictions RIGHT
Sheldon J. Blumling
Irvine Partner and Chair, Employee Benefits Practice Group sblumling@fisherphillips.com
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