The ERISA Advisory Council held a hearing last week on “Model Notices and Disclosures for Pension Risk Transfers.” The Council, which advises the Secretary of Labor on the Labor Department’s administration of ERISA, is working to develop model disclosures to participants who receive lump sum offers in connection with de-risking transactions. While the Council is focused on lump sums offered in connection with limited election windows, the model disclosures might apply any time an individual is offered a lump sum distribution in lieu of an annuity benefit.
The Council heard testimony from several witnesses, many of whom proposed text or offered suggestions to be included in model disclosures—including testimony by our own Robert Newman of Covington & Burling LLP. While the Council deliberates, employers conducting lump sum windows might wish to consider some of the disclosures suggested at the hearing. Continue Reading
A few weeks ago we posted about a new out-of-pocket limit for group health plans that provide family coverage. HHS announced that the ACA cost-sharing limit for self-only coverage applies to each individual who has family coverage. This embedded individual limit is in addition to the existing limit for family coverage, which applies to the aggregate costs of the covered individuals. Continue Reading
As business becomes increasingly globalized, multinational corporations are sending more executives on international assignments and hiring more expatriates to fill local positions overseas. Compensation connected to these employment patterns can create a series of legal and regulatory challenges. For example, unless an exception applies, U.S. citizens and U.S. residents are subject to U.S. federal income tax on their worldwide income, regardless of where they perform services or earn their compensation. Significantly, this extraterritorial reach of U.S. federal income tax extends to the complex and confounding deferred compensation rules of section 409A of the Internal Revenue Code. Continue Reading
by Seth Safra and Jonathan Goldberg
A recent appellate court decision, Cottillion v. United Refining Co. et al. (3d Cir. Mar. 18, 2015), is a good reminder of the high cost that a drafting error can have for a plan’s sponsor. Although courts have recognized a “scrivener’s error” doctrine, the bar for establishing a scrivener’s error is high and the outcome can be unpredictable. The Cottillion case illustrates that the sponsor’s intent will not always win the day–even where the outcome does not make sense economically. Continue Reading
Finding a 409A violation generally prompts a sometimes frantic search for a means of correction under various IRS pronouncements. One previously helpful — but now slightly limited — such item was included in the proposed income inclusion regulations, which were issued in December 2008. Those regulations, which have not been finalized but which may be relied upon, state that a 409A violation results in income inclusion under section 409A (including the additional 20% tax) if the violation occurs in a year in which the deferred compensation is vested. The result: If a violation is corrected before the deferred compensation vests, no adverse tax consequences occur under section 409A. A recently released chief counsel advice memorandum clarifies this mechanism for correction. The memorandum indicates that this means of correction is effective only if completed before the taxable year in which the compensation vests, and not merely before the date on which the compensation vests. Continue Reading
By David Engvall, Reid Hooper, Keir Gumbs, and David Martin
On April 29, 2015, the Securities and Exchange Commission (the “SEC”) proposed a new rule that would require public companies to provide new disclosures annually regarding the relationship, over a five-year period, between executive compensation actually paid and a measure of financial performance of the company. The purpose of the rule, according to the SEC, is to elicit disclosure to provide greater transparency and allow shareholders to be better informed when they vote to elect directors and in connection with advisory votes on executive compensation. The proposed rule would implement Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Our analysis of the rule is here.
After years of confusing and sometimes contradictory signals (described in previous posts here and here), the Equal Employment Opportunity Commission has finally proposed a regulation explaining how employment-based wellness programs can satisfy the Americans with Disabilities Act. Continue Reading
By Helena Milner-Smith, Kamakshi Venkataramanan and Jenna Wallace
Vodafone announced recently a new progressive and generous mandatory minimum global maternity policy. According to the company, under the new policy, to be in effect by the end of this year, female employees of Vodafone in 30 countries will be offered two maternity benefits: (1) at least 16 weeks of maternity leave at full pay, and (2) the opportunity to work a 30-hour week at full pay for the first 6 months after they return to work from leave.
On March 26, 2015—just one day before the Final Rule for the Family Medical Leave Act (“FMLA”) was to take effect—a federal court in Texas blocked the Final Rule’s application to the states of Texas, Arkansas, Louisiana, and Nebraska, pending a full determination of the issue on the merits in Texas v. United States.
The plaintiff States sued the U.S. Department of Labor (“DOL”) over the promulgation of the Final Rule, arguing that the DOL exceeded its authority by requiring states to violate Section 2 of the Defense of Marriage Act and their respective state laws prohibiting recognition of same-sex marriages from other jurisdictions. Under the Final Rule, which we discussed here, legally married same-sex couples are included in the FMLA’s definition of “spouse” and are eligible to use FMLA leave to care for their spouse or family member, regardless of whether their marriage would be recognized in the state where they live. In response to the plaintiff States’ lawsuit, the U.S. District Court for the Northern District of Texas ordered a preliminary injunction staying the implementation of the Final Rule to the plaintiff States.
The court first held that the plaintiff States have a substantial likelihood of succeeding on their claims that the Final Rule improperly conflicts with (i) the FMLA’s traditional definition of “spouse,” (ii) the Federal Full Faith and Credit Statute, and (iii) the states’ own definitions of marriage. According to the court, the Final Rule interferes with the ability of state agencies to abide by the states’ definitions of marriage, causing the plaintiff States to suffer irreparable harm.
The Supreme Court held on March 25, 2015 in Young v. UPS that a plaintiff alleging pregnancy discrimination based upon the denial of an accommodation may proceed under the familiar McDonnell Douglas framework generally applied to Title VII discrimination claims. The Court’s decision, which resulted in a remand to the Fourth Circuit, surprised many observers in rejecting the arguments set forth by both parties in the case and instead setting forth a new rule for applying the Pregnancy Discrimination Act (“PDA”). Continue Reading