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DOL Rolls Out Public Search Engine for Top-Hat Plan Statements

Top-Hat plans are unfunded plans for a select group of management or highly compensated employees that are exempt from a number of ERISA provisions (such as reporting, funding, testing, and certain fiduciary obligations).  In order to ensure that a plan is exempt from those provisions of ERISA, a plan sponsor must file a one-time “top-hat statement” with the Department of Labor within 120 days of the plan’s effective date.

The Department of Labor has rolled out a top-hat plan statement search engine, which is available to the public generally.  The engine is searchable by looking up employer names, plan names, and/or employer identification numbers (EINs).  Sponsors of top-hat plans that have previously filed a statement should consider searching the database to ensure that the statement shows up in the Department of Labor’s records.  If a statement is not found for a plan, review internal records for filing confirmations previously received.

If a top-hat statement has not been timely filed, an application may be made to the Department of Labor’s Delinquent Filers Voluntary Compliance Program to correct the error.

Guidance on Employee Benefits and the Coronavirus (COVID-19)

As the Coronavirus has continued to spread, there has been guidance from various entities on a myriad of topics pertaining to employee benefits. Summaries and links to such guidance can be found below. This information will be updated regularly as more guidance becomes available.

The Health Insurance Portability and Accountability Act (HIPAA): The Office for Civil Rights, a division of the U.S. Department of Health and Human Services, published a bulletin outlining privacy of protected health information and when covered entities may disclose such information without a patient’s authorization. Covered entities may be able to disclose needed protected health information without individual authorization to public health authorities, to persons at risk of contracting or spreading a disease, or to prevent a serious and imminent threat, among other limited circumstances. Covered entities must make reasonable efforts to limit the information disclosed to that which is the minimum necessary to accomplish the purpose. In a prior post, we provided a review of the bulletin and ongoing HIPAA obligations for covered entities.

The Family and Medical Leave Act (FMLA): The U.S. Department of Labor released a Q&A addressing various questions about employee rights and employer responsibilities under the FMLA. Eligible employees are typically entitled to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month period due to their own illness or that of a family member. Covered employers must continue to abide by federal FMLA laws as well

Fiduciary Responsibilities under ERISA in an Uncertain Market

If you are an ERISA fiduciary charged with management or investment of plan assets, and recent market activity has not tripped any alarm bells — or, if the alarm bells have been tripped, but you are are looking for a bit of guidance on how to respond, then keep reading.  Due to a combination of recent factors, including the spread of the Coronavirus (COVID-19), the stock market suffered its worst drop in over 30 years this past week. Moreover, the market outlook will likely continue to be uncertain for the near future as businesses around the world adjust and take action in response to the COVID-19 outbreak and many consumers are quarantined in their homes.

In this volatile market, it is important for fiduciaries of retirement and other funded plans governed by the Employee Retirement Income Security (ERISA) to keep their fiduciary duties in mind and take appropriate action. As a reminder, those duties under Sections 404 and 406 of ERISA include:

  • The duty to act prudently;
  • The duty to diversify assets of the plan;
  • The duty to comply with provisions of the plan;
  • The duty of loyalty;
  • The duty to pay only reasonable plan expenses; and
  • The duty to avoid prohibited transactions.

The first three of these are particularly relevant when the market is uncertain.

  • The duty to act prudently: It is important to remember that this duty requires the fiduciary to act with the care, skill, prudence, and diligence that a prudent person acting in

ISS Updates its U.S. Compensation and Equity Compensation Plan Policies for 2019

In December 2018, Institutional Shareholder Services (“ISS”) published updates to its FAQs for its U.S. Compensation Policies and its policies related to U.S. Equity Compensation Plans with respect to annual meetings occurring on or after February 1, 2019.  While ISS did not make major changes for 2019, reporting companies should be aware of the following key updates.

  • The passing scores for all U.S. Equity Plan Scorecard (“EPSC”) models remain the same as in effect for the 2018 proxy season. However, ISS made the following notable changes and clarifications to EPSC’s scoring model:
    • Full points will be awarded for the change in control (CIC) vesting factor if the plan discloses with specificity the CIC vesting treatment for both time- and performance-based awards. If a plan is silent on CIC vesting treatment or provides for discretionary vesting, then no points will be awarded for this factor.
    • Weighting on the plan duration factor has been increased to encourage plan resubmissions more often than listing exchanges require (and following the repeal of Section 162(m), which required periodic stockholder reapproval). To receive full points for plan duration, the proposed share reserve should last five to six years or less (based on the issuer’s 3-year annual average burn rate).
    • Equity plan amendments that involve removal of general references to Section 162(m) qualification (including references to approved metrics for use in performance plan-based awards) will be viewed as administrative and neutral. However, the removal of individual award limits in

Glass Lewis Updates Proxy Voting Guidelines for 2019

Glass Lewis Updates Proxy Voting Guidelines for 2019

November 30, 2018

Authored by: Denise Erwin and Lisa Van Fleet

On October 24th, Glass Lewis published its updated proxy voting guidelines for 2019.  Some key compensation-related changes for reporting companies to keep in mind are highlighted below:

Excise Tax Gross-ups

When any new excise tax gross-ups are provided for in executive employment agreements, Glass Lewis may recommend against members of the compensation committee, particularly where a company previously committed not to provide gross-ups in the future.  Glass Lewis is particularly opposed to gross-ups related to excise taxes on excess parachute payments.  New gross-up provisions with respect to these excise taxes may lead to negative recommendations for a company’s say-on-pay proposal.

Contractual Payments and Arrangements

The new guidelines clarify the terms that may contribute to a negative voting recommendation on say-on-pay proposals.  When evaluating sign-on and severance arrangements, Glass Lewis will consider the size and design of any payments as well as U.S. market practice.  Glass Lewis will consider the executive’s regular target compensation level, the sums paid to other executives and, in special cases, whether the sums paid to departing executives were appropriate given the circumstances of the executive’s departure.  Excessive sign-on awards and multi-year guaranteed bonuses may result in negative recommendations.   In addition, key man clauses, board continuity conditions and excessively broad change in control triggers are also terms that could result in a negative recommendation.

Executive Compensation Disclosure for Smaller Reporting Companies

When assessing the performance of compensation committees, Glass Lewis indicates that it will consider the impact of materially decreased CD&A disclosure for smaller reporting companies when

Bryan Cave Publishes 2018 In-House Counsel Guide to Data Privacy and Security

Bryan Cave is proud to present the third version of our in-house counsel’s guide to data privacy and security. The guide provides an overview of laws relevant to a variety of data matters topics, statistics that illustrate data privacy and security issues, and a breakdown of these data-related issues. It covers a range of privacy and security issues that apply in the HR and employee benefits areas, including HIPAA compliance and enforcement.

You may download a copy of the 2018 guide by clicking here.

Revised VCP Fees – Simple Isn’t Always Better

Revised VCP Fees – Simple Isn’t Always Better

January 18, 2018

Authored by: benefitsbclp

The Internal Revenue Service (“IRS”) has described its recent changes to its Voluntary Correction Program (“VCP”) user fees as “simplification.”  This simplification is achieved by significantly changing the way user fees are determined and by eliminating alternative and reduced fees that were previously available.   At first blush, this simplification appears to result in a general reduction in user fees, however, in certain circumstances, the changes will actually result in significantly higher fees.   If you are the person responsible for issuing or requesting checks for your plan’s VCP application(s), it is important to note the differences from the past fee structure so that you will know what your plan is in for (good or bad) the next time a VCP application is necessary.

In case you are not familiar with the VCP, the IRS created the program under its Employee Plans Compliance Resolution System, to allow tax-favored retirement plans not currently under examination to correct certain failures that would otherwise result in the loss of tax-favored status.  If a plan sponsor elects to submit an application under the program, the fee that must be paid with each application is called a “user fee.”  This user fee has always been subject to change, but never before has the user fee structure undergone such an extreme makeover from one year to another.

On the surface, the biggest change to the VCP user fee structure is that for applications submitted prior to January 2, 2018, the user fee was based on the number

Payroll and HR Professionals Beware: Phishing Schemes are now Trying to Lure You

March 7, 2016

Categories

ThinkstockPhotos-465512675 (2)ALERT, ALERT!!!! The IRS has renewed a consumer alert for e-mail schemes regarding phishing and malware incidents targeted at individuals. That renewal came after an approximate 400 percent surge in such incidents so far this tax season. The 400 percent surge was not the end of the phishing schemes this tax season, and now a phishing scheme is emerging to target payroll and HR.

The IRS has also issued a second alert to warn about additional scams this tax season which are designed to trick HR and payroll professionals to provide personal information on employees. Unlike prior scams, the e-mails are no longer just designed to trick taxpayers into thinking the IRS is attempting to contact them for personal information. This latest phishing scheme is a variation known as a “spoofing” e-mail crafted to look as though it came from within the company being targeted – e.g., company executives.

A common example described in the most recent alert indicates that the e-mail will use the actual name of the company chief executive officer so that the email appears to be from the “CEO” to a company payroll office employee. The “CEO” will ask that the employee provide a variety of personal information for “review”. Some of the reported requests include:

  • Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company

The FAST Act – If You Blinked You May Have Missed It.

The FAST Act – If You Blinked You May Have Missed It.

January 7, 2016

Authored by: Denise Erwin

MovingDeadlinesOn December 3, 2015, the President signed into law the Fixing America’s Surface Transportation Act (the “FAST Act”) which provides for five years of funding for highway projects.  If you just skimmed the news on this one, you may not have noticed that the FAST Act included a repeal of the extension to the Form 5500 filing deadline that was provided under the stop-gap Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 that was passed in August.

As we reported in our previous blog post, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 provided that, beginning in 2016, the automatic extension for the Form 5500 would be extended from 2½ months to 3½ months from the initial deadline.  Calendar year plans would be allowed to file as late as November 15th.

In response to a luke-warm reception to the extended deadline (which was apparently viewed by many as serving only to prolong misery), the FAST Act provides that the old October 15th automatic extension deadline has been restored.

Don’t get tripped up by this legislative game of “now-you-see-it-now-you-don’t.”  As we embark on the new year, mark your calendars for October 15th as the automatic extension due date for filing Form 5500.

 

Congress Engages in Some Holiday Spending on Benefits

Congress’s recent $1.8 trillion holiday shopping spree (aka The Consolidated Appropriations Act, 2016, which became law on December 18, 2015) included a few employee benefit packages. We recently unwrapped the packages. Here is what we found.

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1.   Cadillac Tax Delayed. The largest present under the employee benefits tree is a delay in the so-called “Cadillac” tax, which as originally enacted imposed a 40% nondeductible excise tax on insurers and self-funded health plans with respect to the cost of employer-sponsored health benefits exceeding statutory limits. The tax is now scheduled to take effect in 2020 rather than 2018. Once – or if – the delayed tax provision becomes effective, it will be deductible. The cost of this gift is $17.7 billion.

Since the Cadillac tax is basically unadministrable in its current form, we can’t imagine there is even one person at Treasury who would champion it. Expect a full repeal of the tax shortly after a new administration, whether Republican or Democrat, takes office in January 2017.

2.  Medical Device Excise Tax Suspended for 2016 and 2017 and Health Insurance Tax Suspended for 2017. The Affordable Care Act, as adopted in 2010, imposes an excise tax equal to 2.3% of the sales price of certain medical devices. Opponents of the medical device tax argued that it has been a drain on the economy and has halted investment in research and development for life-saving technologies. Many members of Congress agreed. Thus, a two-year

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