Employee Benefits Blog : Employee Benefits & Executive Compensation Lawyers & Attorneys: McDermott Will & Emery Law Firm

by Lionel Lesur and Lisa A. Linsky

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by Amy Gordon and Jamie Weyeneth

On May 29, the U.S. Departments of the Treasury, Labor (DOL) and Health and Human Services issued final regulations amending the 2006 HIPAA nondiscrimination wellness regulations to implement the employer wellness program provisions of the Affordable Care Act.  In their article “Final ACA Wellness Rules Issued,” published by Employee Benefits Advisor, Amy Gordon and Jamie Weyeneth discuss the updated and expanded requirements for health-contingent wellness programs.

To read the full article, click here.

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by Joseph S. Adams, Todd A. Solomon and Brian J. Tiemann

On March 26 and 27, 2013, the Supreme Court of the United States heard oral arguments in cases challenging the constitutionality of the federal Defense of Marriage Act (DOMA) and California’s Proposition 8.  A Supreme Court ruling in either case may have significant implications for employee benefit plans given the many federally mandated spousal benefits that currently do not extend to same-sex spouses in light of DOMA.

To read the full article, click here.

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by Katie Clark and James Noble

Following recent discussions on this topic, lawmakers in the European Parliament have now adopted legislation intended to cap the value of bonuses paid to certain bank staff.

Background

The measure forms part of the Capital Requirements Directive IV package of reforms implementing the Basel III regulatory framework, which aims to improve stability in the financial sector. The proposed reforms will apply to a range of credit institutions and investment firms.

The final text will be subject to a detailed review of the legal drafting and translation into the official EU languages, before being presented to the Council of Ministers for formal adoption later this year.

What Does This Mean for Employers?

If formally adopted, the new rules will limit the potential bonus entitlement of certain staff at credit institutions and investment firms, whether they work within the European Union (regardless of their employer’s country of origin), or abroad (if working for a European bank covered by the rules).

The rules will apply to employees whose professional activities have a material impact on their risk profile — such as senior managers, risk takers and staff performing control functions — and to other employees who receive equivalent remuneration. The European Banking Authority will develop criteria to help employers identify staff covered by the rules.

The proposals envisage that the default position for all staff covered by the rules will be a cap on annual bonus payments of 1 x salary. An institution could increase the cap to 2 x salary with shareholder approval. This would require the votes of at least 66 per cent of shareholders owning half the shares represented, or 75 per cent of votes if there is no quorum. An element of long-term deferral will also be necessary for any bonus payment exceeding 1 x salary. The European Banking Authority will, again, prepare guidelines in this regard.

It is envisaged that, once adopted, the new measures will affect bonuses paid in 2015 in relation to performance in 2014. This will clearly have a considerable impact on remuneration practice in the financial services sector, particularly given the potential effect on any bonus years that fall wholly or partly after the rules come into effect.

Employers in the United Kingdom will also eagerly await details of how, if adopted, the legislation will be implemented domestically, given the shift in emphasis from deferral to fixed remuneration that the new rules will have in practice.

What Happens Next?

The final text of the legislation will be prepared and presented to the Council of Ministers for formal adoption later this year. If approved and published before 1 July 2013, which appears likely, the rules should then be implemented into the laws of each Member State by 1 January 2014.

We will keep the situation under review and will issue a further update as it develops. Please contact your usual McDermott lawyer or Katie Clark if you would like to discuss in more detail.

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by Amy M. Gordon

On May 8, 2013, the U.S. Department of Labor (DOL) published Technical Release No. 2013-02, which provides temporary guidance addressing the Patient Protection and Affordable Care Act's (ACA) required notice to employees regarding their coverage options under state and federally facilitated health insurance exchanges (Exchanges).

As part of the ACA, an applicable employer was required to provide each employee at the time of hiring (or with respect to current employees, not later than March 1, 2013), a written notice: 

• Informing the employee of the existence of the Exchanges, including a description of the services provided by the Exchanges and the manner in which the employee may contact the Exchanges to request assistance
• If the employer’s plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an Exchange
• If the employee purchases a qualified health plan through an Exchange, that the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes

FAQs about ACA Implementation Part XI published in January of this year pushed back the timing for distribution of these notices until late summer or early fall.  This new technical release provides guidance on the notice requirement, including setting a notice deadline of October 1, 2013 for current employees. More importantly, the new technical release provides model notices.

The following are links to the DOL model notices:

• Model notice for employers who offer a health plan to some or all employees
• Model notice for employers who do not offer a health plan
• COBRA model election notice (Adobe PDF format)
• COBRA model election notice redline version (Adobe PDF format)

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by Amy M. Gordon, Megan Mardy and Todd A. Solomon

Recently issued guidance addresses the unique compliance issues surrounding expatriate health plans under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (ACA).

To read the full article, click here.

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by Amy M. Gordon and Joanna C. Kerpen

The U.S. Departments of Labor, Health and Human Services, and the Treasury recently issued new guidance and templates regarding the summary of benefits and coverage requirement under the Patient Protection and Affordable Care Act.

To read the full article, click here.

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by Lisa K. Loesel, Todd A. Solomon, Jacob Mattinson and Brian J. Tiemann

Two recent cases challenging benefit eligibility for same-sex spouses highlight the need for employer-sponsored retirement and welfare plans to clearly define "spouse" for eligibility purposes. Employers may want to review their plan documents to determine whether plan amendments are needed to clarify benefit eligibility for same-sex spouses in light of the upcoming ruling by the Supreme Court of the United States on the constitutionality of the federal Defense of Marriage Act.

To read the full article, click here.

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by Joseph S. Adams and Jeffrey M. Holdvogt

In a corporate spin-off, both the existing company and the new company (spinco) must consider the implications for employees, employee benefit plans and executive compensation arrangements.  Benefit plans and compensation arrangements can represent significant liabilities and responsibilities, and typically are expressly allocated in an employee matters agreement (EMA).  This article provides a brief summary of some of the key employee benefit plans issues to consider in a spin-off.

To read the full article, click here. 

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by Joseph S. Adams, Anne S. Becker, Karen A. Simonsen and Ashley McCarthy

Recent U.S. Department of Labor (DOL) guidance underscores the need for plan fiduciaries to rigorously examine and monitor target date fund (TDFs), and potentially explore the use of custom or non-proprietary TDFs.

To read the full article, click here.

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by Jorge R. Arciniega, Elisabeth Malis Morgan and Heather Egan Sussman

The U.S. Federal Trade Commission (FTC) released updated guidance on how to make online advertising and marketing disclosures “clear and conspicuous” to avoid consumer deception.  The guidelines affect the structure and format of digital advertisements and marketing initiatives such as the use of endorsements and testimonials.

To read the full article, click here.

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by Katie Clark and Richard Cook

On October 8, 2012, George Osborne announced that the UK Government was proposing a new type of employment contract, dubbed the “employee-shareholder” contract.

The proposals were designed to allow employers to offer their employees shares in the business, at a minimum value of £2,000.  In exchange, the employee would forgo certain statutory rights including, most pertinently, unfair dismissal and the right to a redundancy payment.  The employees would receive favourable tax treatment on the disposal of the shares, up to a value of £50,000.

During the consultation process, the Government received little positive feedback on the approach, but confirmed in its consultation response that it intended to implement the proposals in any event.

On 24 April 2013, having twice rejected the Government’s proposals, the UK House of Lords accepted concessions made by the Government and voted to accept employee-shareholder status. The proposals are expected to become law in the autumn of 2013.

Details of The New Regime

Employers will now effectively be able to buy certain of their employees’ statutory rights for as little as £2,000. 

For the rights to be effectively waived, however, a number of criteria must be met:

• Each individual must be given a written statement of the particulars of their employee-shareholder status.  This must specify the employment rights that he/she will forgo and detail the rights, restrictions and other conditions attached to the shares.
• The individual must be given independent legal advice as to the terms and effect of entering into the scheme.  Unless independent advice is received, and the individual has been given seven days to consider the advice, the employee’s employment rights will not have been waived.
• The employer will need to meet the reasonable cost of the legal advice, even if the offer is not taken up.

The right to claim discrimination and claims of automatically unfair dismissal, including whistleblowing, are excluded from the waiver.

What Does This Mean for Employers?

In theory, employee-shareholder status will provide more flexibility for employers in recruitment, and the potential to mitigate legal risk, by offering an up-front payment, in the form of shares, of as little as £2,000.

In practice, however, the intricacies of the offer-acceptance process are likely to mean that employees will be very well informed, making them less likely to “sell” their valuable employment rights for as little as £2,000. There is also scope for technical errors to be made in the new, more complex, process that may result in the employee receiving £2,000 but still retaining his or her statutory rights.

Nonetheless, if implemented properly, employee-shareholder contracts could be a valuable tool for employers who are looking to build flexibility into their workforce.  The question is whether employees, given the inherent value of the rights they are being asked to give up, and the risk of a fall in the value of their shares, will find the proposition an attractive one.

For further information, or for assistance in setting up an employee-shareholder arrangement, please contact Katie Clark or your regular McDermott lawyer. 

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by Mary K. Samsa, Todd A. Solomon and Joseph K. Urwitz

The Internal Revenue Service (IRS) recently released a revenue procedure establishing a new program for the pre-approval of 403(b) plans.  The program opens June 28, 2013, and the IRS will begin accepting applications for opinion and advisory letters on whether the form of prototype plans and volume submitter plans meet the requirements of Code Section 403(b).

To read the full article, click here.

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by Jonathan J. Boyles, Paul J. Compernolle and David Diaz

The U.S. Court of Appeals for the Seventh Circuit ruled that owners can be personally liable for multiemployer withdrawal liability where the owner leases property to its own closely held corporation.  The decision highlights the dangers of related-party transactions, failing to observe business formalities and holding property personally.

To read the full article, click here.

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