In an important civil rights development, the U.S. Supreme Court today issued a 6-3 opinion in Bostock v. Clayton County, Georgia, holding that gay and transgender employees are protected under the prohibition against workplace sex discrimination in Title VII of the Civil Rights Act of 1964 (“Title VII”). Justice Gorsuch delivered the majority opinion, joined by Justices Roberts, Ginsberg, Breyer, Sotomayor, and Kagan. Dissenting opinions were filed by Justices Alito (joined by Thomas) and Kavanaugh.
On May 22, 2020, the IRS released a Generic Legal Advice Memorandum, GLAM 2020-004, which addresses the timing of the taxation and withholding of payroll taxes on certain stock-settled awards issued to employees. Specifically, the GLAM focuses on the treatment of stock options, stock-settled stock appreciation rights (SARs), and stock-settled restricted stock units (RSUs).
Employers should be aware that the GLAM does not appear to alter the Service’s existing position with respect to such awards — the fair market value of the stock underlying the award is includible in gross income when the stock is deemed transferred to the employee. However, the GLAM does appear to offer some additional insight into the timing of income inclusion with respect to RSUs. Perhaps most importantly, the GLAM reiterates the IRS’s 2003 administrative position regarding the application of late deposit penalties to payroll tax deposits due on the exercise of nonqualified stock options. A question had arisen regarding whether SEC guidance shortening the standard settlement cycle for securities transactions to two business days had the effect of shortening the period for depositing payroll taxes. Deposits owed with respect to option exercises will continue to be deemed timely if deposited within one day of settlement, so long as settlement occurs within three days of the exercise date.
The Society of Actuaries recently published an essay by our own Jack Lund. The essay discusses some of the subtle effects a widespread but short-lived unemployment event might have on the American retirement system.
On May 12, 2020, the Internal Revenue Service (“IRS”) published Notices 2020-29 and 2020-33. Notice 2020-29 is the latest installment in COVID-19 relief guidance targeted at health and welfare benefits. The Notice enables employers to provide flexibility to employees to modify their health coverage and flexible spending account (“FSA”) elections and gives employees until the end of 2020 (but not 2021) to use certain FSA amounts that may otherwise be forfeited. Unlike certain COVID-19 relief related to retirement plans, employers may make the relief under Notice 2020-29 available to all participants, regardless of whether they have suffered a COVID-19-related loss.
Notice 2020-33 allows employers to adopt an indexed maximum carryover amount for health FSAs, beginning with amounts that may be carried over from the 2020 plan year to the 2021 plan year.
On April 11, 2020, the Departments of Labor, Treasury, and Health and Human Services issued joint guidance on certain provisions of the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act relating to health and welfare benefits. This post analyzes some of the key provisions in the guidance.
On March 27, 2020, President Trump signed the largest economic stimulus bill in U.S. history: the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). In this blog article, we take a closer look at the provisions affecting health and welfare plans.
In response to the growing unemployment numbers due to business slowdowns across the country, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides expanded unemployment insurance (UI) benefits to workers impacted by COVID-19. The move is no doubt well intentioned, but serious questions have been raised about the specific benefit design adopted by Congress and the ability of state unemployment agencies—hardly models of efficiency in the best of times—to respond to the deluge of claims now inundating them. In fact, one of the potentially most attractive UI features in the new law—its short-time compensation provisions—seems likely to face serious obstacles to implementation due to lack of administrative resources and the vagaries of state law.
As reported in our Client Alert, the new Coronavirus Aid, Relief, and Economic Security (CARES) Act includes provisions to increase the use of short-time compensation (STC) programs (also known as work sharing or shared-work programs). Section 2108 of the CARES Act provides federal funding for 100% of the STC paid by states with programs already in place. In addition, Section 2109 provides federal funding for 50% of the STC paid by states that currently do not have formal programs but implement arrangements, and Section 2110 provides grants for implementing and improving STC programs.
On Friday 20th March, the U.K. Government announced various support measures for UK businesses. One of these was the Coronavirus Job Retention Scheme (the “Scheme”), which it is hoped will reduce the risk that U.K. employers promptly dismiss employees in response to the Coronavirus outbreak. Further guidance was published on 26th March, providing some much needed detail on various aspects of the Scheme, which is expected to be operational by the end of April.
Any employer in the U.K. can access the Scheme for assistance with salary payments to those employees that would otherwise have been at risk of dismissal for redundancy and who are described for the purposes of the Scheme as “furloughed workers” (a new concept in English law). Some questions remain, but the key details of the Scheme are:
Following its announcement on Friday 20th March to provide much-needed assistance to UK employers and employees in the short-term through the Coronavirus Job Retention Scheme, and intense pressure to provide similar assistance to self-employed workers, the UK Government has released details of a similar scheme intended to support this group: the Self-Employment Income Support Scheme (the “SEISS”).
The SEISS will support self-employed individuals (including consultants and members of partnerships) whose income has been negatively impacted by COVID-19, but is unlikely to apply to consultants who provide their services through a personal services company, given the criteria set out below. Further, the Chancellor indicated that tax payable by the self-employed would, in future, need to be brought in line with that paid by employees.