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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Fifth Circuit issues mandate that vacates the ERISA fiduciary rule: What plan sponsors should do next

After years of revising regulations and even more years of legal battles, the Department of Labor’s (DOL) 2016 ERISA fiduciary regulations (the regulations) essentially end up right where they started. That is because the U.S. Court of Appeals for the 5th Circuit issued its mandate officially vacating in toto the regulations, including the Best Interest … Continue Reading

IRS provides guidance to 403(b) plan sponsors who can’t locate participants required to receive distributions (but be mindful of DOL rules too)

The IRS’s Tax Exempt and Government Entities Division recently issued a memorandum (the memo) to its auditors that directed them not to challenge a 403(b) plan as failing to satisfy the required minimum distribution (RMD) standards under circumstances set out in the memo. This guidance is helpful to 403(b) plan sponsors and consistent with missing … Continue Reading

Tax reform will affect public company executive compensation arrangements and related proxy statement disclosures

While opinions on the Tax Cuts and Jobs Act vary, one thing everyone can agree on is that it is a game changer in many areas of law and business. We explain this change and outline what it could mean for public companies in our recent post over at our firm’s Banking & Finance Law Report … Continue Reading

Department of Labor continues to watch ESOP valuations with recent trustee settlements

In recent years, the Department of Labor (DOL) has had a laser-like focus on valuation issues when privately held companies establish employee stock ownership plans (ESOP). In particular, the DOL is concerned with valuations that rely upon unrealistic growth projections, which lead to the ESOP paying too much (in the DOL’s view) for the shares … Continue Reading

House and Senate have their sights on deferred compensation in proposed tax bills

A week after telling everyone to “relax” about the proposed executive compensation changes in the Tax Cuts and Jobs Act, we have to admit that we have been watching anxiously as the proposed bills move through the legislative process. The executive compensation items that we discussed last week  have experienced quite a journey in the … Continue Reading

Proposed tax bill would make big changes to (and create new opportunities for) executive compensation

Three games into the 2014 National Football League season, the Green Bay Packers had a 1-2 record. Fans were panicking. Many were questioning whether the Packers and its quarterback, Aaron Rodgers, were doomed to have a bad season. Rodgers responded with a simple message for fans: “R-E-L-A-X”. The Packers redoubled their efforts and made the … Continue Reading

Are the ERISA disability claims procedure regulations going to be delayed? How qualified and nonqualified plan sponsors should respond to the latest guidance

While the fiduciary rule has received most of the attention in the world of ERISA as of late, a lesser known regulation that was finalized late last year also may require action by plan sponsors. This regulation , issued by the Department of Labor (DOL) in December 2016, requires applicable plans to satisfy additional procedural … Continue Reading

The “final” countdown: DOL fiduciary rule still applies June 9, 2017

Much has been written to speculate what may become of the Department of Labor’s (DOL) fiduciary rule. Recently, the DOL issued a FAQ confirming that the new fiduciary rule will become effective June 9, 2017. Transition exemptions that were previously announced also will go into effect on that date. The DOL also issued non-enforcement guidance … Continue Reading

IRS issues proposed Code Section 409A regulations clarifying many nonqualified deferred compensation plan issues

The Internal Revenue Service (IRS) recently published proposed regulations under Internal Revenue Code Section 409A. The proposed regulations clarify 19 policy items addressed in the final regulations published in 2007 and also in proposed income inclusion regulations published in 2008. These clarifications generally are not surprising, and we do not expect that employers will need … Continue Reading

IRS previews qualified plan determination letter changes in new guidance

The Internal Revenue Service (IRS) issued guidance on Jan. 4, 2016, that clarifies certain implications of its previously announced changes to the employee plans determination letter program. These clarifications, announced in Notice 2016-03 (Notice) are necessary to cover open issues raised from prior guidance that in effect shuts down the determination letter program for most … Continue Reading

Fiduciaries in stock-drop suits should be evaluated on real-time conduct, not 20-20 hindsight—Sixth Circuit decision Pfeil, et. al. v. State Street Bank & Trust Co.

ERISA fiduciaries of employee stock ownership plans (ESOPs) and plans with employer stock funds increasingly find themselves in a Catch-22. If they continue to invest in employer stock and the stock price falls, the fiduciaries could be sued for violating their duty of prudence. If they stop investing in employer stock and the price rises, the … Continue Reading

Nonqualified deferred compensation plan guidance from the IRS appears to be on the horizon

Ever since the series finale of “Mad Men,” I’ve been thinking a lot about old commercials. One commercial in particular involves Heinz ketchup. In the ad, someone would turn the bottle upside down, and the ketchup would take an extremely long time to pour out of the bottle and onto a sandwich. An announcer would … Continue Reading

New IRS Equity-Based Compensation Audit Guide Highlights Importance of Documenting Compensation Practices

The IRS recently released an audit techniques guide (the “Guide”) to advise its internal auditors who are examining cases involving equity-based compensation (i.e., compensation based on the value of specified stock). Examples include stock transfers, stock options, stock warrants, restricted stock, restricted stock units, phantom stock plans and stock appreciation rights paid to an employee, … Continue Reading

Public companies should review stock option plans to ensure they qualify for exception to $1 million deduction limit

The IRS and Treasury Department recently issued final regulations under Code Section 162(m) that, as the IRS describes it, “clarifies” stock and equity-based compensation plan drafting issues. Of course, whether something represents a clarification or a substantive change lies in the eye of the beholder (particularly if that beholder is a politician or regulator in … Continue Reading

Ninth Circuit decision illustrates importance of clearly designating beneficiaries under a nonqualified plan

In a recent blog, we discussed the importance of clearly defining who is a “participant” in a nonqualified plan and who is a former participant or retiree. A more recent Ninth Circuit decision in E & J Gallo Winery v. Rogers highlights a related issue that faces tax-qualified and nonqualified plans alike—who is the beneficiary? While cases like … Continue Reading

Who is “participant” in a nonqualified plan? Second Circuit case highlights importance of defined terms

One issue that sometimes arises when drafting a nonqualified plan document (or qualified plan for that matter) is how to define a “participant” in the plan. Typically, a plan will define “participant” broadly to include anyone who has an account balance or an accrued benefit under the plan and who has yet to be paid his … Continue Reading

ERISA plan service provider avoids fiduciary status—what it means for service providers and plan sponsors

A recent Third Circuit decision (Santomenno v. John Hancock, et. al.) has been described as a win for service providers to ERISA plans. It certainly is important because this decision, along with other fairly recent decisions, helps to illustrate when service provider actions become significant enough to make them fiduciaries. A somewhat less discussed point, … Continue Reading

Here we go again: Does the DOL’s request for information regarding self-directed brokerage accounts mean new fee disclosure requirements are coming soon?

If you’re a fan of the tv show “The Simpsons,” you might remember an early episode where Homer Simpson launched a crusade against every public safety issue in the city. The result was practically every square inch of the town contained signs alerting people to every dip, pothole, and other nuisance on the roads. After … Continue Reading

SEC money market reform – ERISA impact

Our sister blog reported recently that the Securities and Exchange Commission (the “SEC”) published final regulations that reform money market mutual funds (“MMFs”). The regulations provide for two core reforms: (1) “Institutional” MMFs, other than those invested primarily in government securities, are prohibited from using a stable net asset value (“NAV”), and (2) MMFs must … Continue Reading
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