Employee Benefits Law Report

Greg Daugherty

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Greg focuses his practice on executive compensation and employee benefits matters for publicly traded and privately held companies and nonprofit organizations. He has extensive experience assisting business owners with their succession planning needs through the implementation of employee stock ownership plans (ESOPs).

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Proposed regulation for long-term part-time employees: Plan sponsors act now

By Rich Helmreich and Greg Daugherty on Categories: IRS, Retirement Plans
Effective Jan. 1, 2024, employers who sponsor 401(k) plans must allow employees who work at least 500 hours a year over a period of consecutive years (“long-term part-time” or “LTPT employees”) to be eligible to make deferrals into the plan. This change requires immediate action by plan sponsors to change the way they administer their … Continue Reading

Unanimous Supreme Court provides victory to plaintiffs in ERISA fee litigation

By Greg Daugherty and Rich Helmreich on Categories: ERISA Fiduciary Compliance, ERISA Litigation
But just how big of a win is it? The U.S. Supreme Court recently issued a unanimous decision in Hughes v. Northwestern University, reversing and remanding a lower court ruling that had dismissed the case against a retirement plan sponsor. This decision reaffirms that the Employee Retirement Income Security Act’s (ERISA) fiduciary duty of prudence … Continue Reading

DOL proposes new ERISA fiduciary ESG and proxy voting rules

By Greg Daugherty and Rich Helmreich on Categories: ERISA Fiduciary Compliance
In what some commentators are describing as the latest volley in a game of regulatory ping-pong, the Department of Labor (DOL) published proposed regulations that would change the way an ERISA fiduciary should consider environmental, social and governance (ESG) issues and related proxy voting decisions with respect to plan investments (the proposed regulations). The proposed … Continue Reading

Plan sponsors now have a deadline for providing lifetime income illustrations

By Greg Daugherty and Rich Helmreich on Categories: Retirement Plans
Employers who sponsor 401(k) plans and other defined contribution plans in which participants may direct the investments of their accounts now have a deadline to provide lifetime income illustrations in those plans’ benefit statements. The Department of Labor (DOL) recently published guidance addressing these requirements. While helpful, the guidance is still subject to change in … Continue Reading

IRS updates Nonqualified Plan Audit Technique Guide—Is a new enforcement initiative on the horizon?

By Greg Daugherty, Dave Tumen and Rich Helmreich on Categories: Audits and Correction, IRS
The Internal Revenue Service (IRS) recently updated its Nonqualified Deferred Compensation Audit Techniques Guide (NQDC). It released Publication 5528 (NQDC guide) on June 1, 2021. The IRS last updated the NQDC Guide in 2015. Interestingly, the 2015 NQDC Guide was published shortly after the IRS sent information document requests to publicly traded companies to determine … Continue Reading

DOL confirms cyber security is an ERISA fiduciary issue and issues guidance for retirement plan sponsors, service providers and participants

By Rich Helmreich and Greg Daugherty on Categories: ERISA Fiduciary Compliance, Retirement Plans
The U.S. Department of Labor (DOL) recently announced new guidance for plan sponsors, fiduciaries, record keepers and participants on best practices for maintaining cyber security. This is the first time the DOL has issued such guidance, and it comes in response to a recent General Accounting Office (GAO) report responding to increased cybersecurity risks to retirement plan … Continue Reading

For public companies, the time to update executive compensation practices is now: Final regulations issued under IRC Section 162(m) and American Rescue Plan Act further expands class of covered employees

By Dave Tumen and Greg Daugherty on Categories: Executive Compensation
At long last, the Department of the Treasury and Internal Revenue Service published final regulations to explain how changes to Internal Revenue Code Section 162(m) under the Tax Cuts and Jobs Act of 2017 (TCJA) affect the deductibility (or lack thereof) of compensation in excess of $1 million paid to covered employees. We have blogged … Continue Reading

Public companies may need to amend nonqualified and incentive compensation plans by Dec. 31, 2020

By Greg Daugherty and Dave Tumen on Categories: Fringe Benefits, Retirement Plans, Tax Issues
Public company nonqualified plans and incentive plans may need to be amended to avoid a potential violation of Internal Revenue Code (IRC) Section 409A as a result of changes to IRC Section 162(m) under the Tax Cuts and Jobs Act. This amendment most likely is required for employers that mandated deferrals of amounts that exceeded … Continue Reading

New IRS guidance reminds employers about new long-term part-time employee eligibility rules for 401(k) plans

By Greg Daugherty and Rich Helmreich on Categories: CARES Act
Much of the employee benefits news this year has related to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, particularly with respect to the greater flexibility it provided 401(k) plan participants with respect to requesting in-service distributions and loans. That is not a surprise during this year of economic upheaval. Updating plan administrative procedures … Continue Reading

Process matters: IRS issues guidance on recognition of income and FICA taxes for stock-settled awards

By Greg Daugherty and Dave Tumen on Categories: Tax Issues
On May 22, 2020, the IRS released an Office of Chief Counsel Memorandum that addresses (i) the date that fair market value is determined and when gross income and federal income tax withholding liability arises for stock-settled awards and (ii) the timing for remitting FICA taxes for such awards. This question comes up frequently and … Continue Reading

CARES Act provides temporary fringe benefit for employer repayments of employee student loans

By Greg Daugherty and Victoria Hanohano-Hong on Categories: CARES Act, COVID-19
The Coronavirus Aid, Relief and Economic Security (CARES) Act has provided a wide range of programs that affect employee benefit plans, employers and employees. One benefit that has flown under the radar is a new, temporary tax-qualified student loan repayment plan. Section 2206 of the CARES Act allows employers to claim a tax deduction for … Continue Reading

Stop and review COVID-19 distribution and loan forms carefully

By Greg Daugherty, Deb Boiarsky, Victoria Hanohano-Hong and Rich Helmreich on Categories: CARES Act, COVID-19
The Coronavirus Aid, Relief and Economic Security (CARES) Act, authorizes employers to make changes to their qualified retirement plans to increase loan limits, delay loan repayments, and make distributions to plan participants experiencing certain COVID-19 related circumstances. Due to a lack of guidance from the IRS, there’s confusion among third-party administrators (TPAs) about how to … Continue Reading

How ESOP sponsors can survive the disruption from COVID-19

By Greg Daugherty and Deb Boiarsky on Categories: COVID-19, ESOPs
The spread of COVID-19 and the resulting disruption to the economy has led many employers to think creatively about how to manage cash, provide for the sustainability of their businesses and preserve the culture they have created with their employees and customers. These issues are especially critical for employee stock ownership plan (ESOP) companies, many … Continue Reading

IRC Section 409A v. COVID-19: The nonqualified and executive compensation clash, and how employers can navigate it

By Greg Daugherty, Dave Tumen and Rich Helmreich on Categories: COVID-19, Executive Compensation
Unintended consequences are a fact of life. As one of many examples, after the Titanic sank, the United States enacted a law that required any American ship carrying over 100 tons of weight to have enough lifeboats for every passenger. It was a noble thought – no more rationing of lifeboats in the event of … Continue Reading

Final IRS hardship regulations – Less of a hardship to take and administer

By Greg Daugherty, Deb Boiarsky and Victoria Hanohano-Hong on Categories: Retirement Plans
Special thanks to Victoria Hanohano-Hong, Porter Wright law clerk, for her assistance on this article. The IRS recently published final regulations, which amend the hardship withdrawal rules for 401(k) and 403(b) plans. The regulations reflect statutory changes to 401(k) and 403(b) plans, including changes made by the Bipartisan Budget Act of 2018. Most of the changes … Continue Reading

Sellers beware: Recent court case shows sellers – as well as ESOP fiduciaries – should be engaged in ESOP due diligence and valuation process

By Greg Daugherty and Deb Boiarsky on Categories: ESOPs
As we have explained in prior ESOP blogs, the Department of Labor (DOL) remains acutely concerned with private company employee stock ownership plan (ESOP) valuations in the formation of ESOPs. In particular, trustees who approve an ESOP trust’s purchase of shares from a seller must demonstrate that they have satisfied ERISA’s fiduciary duties with respect … Continue Reading

Sixth Circuit nonqualified deferred compensation plan decision highlights importance of Code Section 409A compliance and ERISA claims procedures

By Greg Daugherty and Dave Tumen on Categories: ERISA Litigation
We often receive questions about whether different types of bonus plans and nonqualified deferred compensation plans (NQDC plans) are subject to ERISA. We explain that being subject to ERISA may be a good thing for an NQDC plan, particularly with respect to resolving disputes and claims for benefits. Even if it is questionable whether an … Continue Reading

New health reimbursement account rules provide alternative path to Affordable Care Act compliance

By Greg Daugherty and Porter Wright on Categories: Health and Welfare Plans, Health Care Reform
Seemingly unfazed by the recent setbacks with the Association Health Plan regulations, the Departments of Treasury, Labor and Health and Human Services have released new health reimbursement (HRA) regulations that could reshape the group health plan landscape by providing employers with potentially cheaper options than traditional group health plan coverage for satisfying Affordable Care Act … Continue Reading

IRS issues guidance on excise tax on executive compensation of tax-exempt entities

By Greg Daugherty on Categories: Executive Compensation, Tax Issues
The IRS recently issued Notice 2019-09 (Notice), which provides guidance with respect to the 21 percent excise tax on remuneration in excess of $1 million and excess parachute payments by “applicable tax exempt organizations” (ATEOs) applies under Code Section 4960. In general Code Section 4960 and the Notice apply concepts from Code Sections 162(m) (which … Continue Reading

IRS publishes transition relief regarding part-time employees and 403(b) plans

By Greg Daugherty and Porter Wright on Categories: Tax Issues
The IRS recently issued Notice 2018-95 (the Notice), which clarifies the circumstances under which part-time employees must be given the opportunity to make deferral elections under their employers’ 403(b) plans. In particular, the Notice provides transition relief from the once-in-always-in (OIAI) condition for excluding part-time employees. Tax-exempt and governmental employers who sponsor 403(b) plans will … Continue Reading

IRS letter ruling generates interest in employer student loan benefit plans, but be aware of testing and other issues

By Greg Daugherty on Categories: Tax Issues
The Internal Revenue Service (IRS) recently issued a private letter ruling, PLR 201833012 (PLR) that has generated interest among employers about student loan benefit programs. An IRS official at a recent conference, however, cautioned practitioners to read the PLR because the scope of the PLR is more narrow than what some headlines may have led … Continue Reading

Recent IRS guidance affects corporate tax deductibility of public company executive compensation arrangements and related proxy statement disclosures

By Greg Daugherty and Dave Tumen on Categories: Executive Compensation
We previously blogged about how the Tax Cuts and Jobs Act (the Act) amended Internal Revenue Code Section 162(m). In general, the amended Code Section 162(m) restricts the ability of publicly traded companies to recognize a tax deduction for amounts paid to “covered employees” in excess of $1 million. It does this primarily by expanding … Continue Reading
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