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Soaring to New Heights: The IRS’s Crackdown on Aircraft Usage by Corporations and High-Income Earners

The Internal Revenue Service (IRS) has announced plans to initiate dozens of new audits this spring in an attempt to ground high-flying taxpayers and their personal usage of corporate aircrafts. These audits will focus primarily on “highest risk” corporations and large partnerships, IRS Commissioner Danny Werfel stated. Werfel added that audits of high-income earners will likely follow to “ensure that high-income groups are not flying under the radar.”

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IRS Announces 2024 Employee Benefit Plan Limits

The Internal Revenue Service recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2024. Certain health and welfare plan limits have not yet been released.

Most of the dollar limits that are subject to adjustment for cost-of-living increases will increase for 2024. The Social Security Administration released separate adjustment amounts.

See the limits here.




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Deadlines for the Adoption of Clawback Policies Extended

The US Securities and Exchange Commission (SEC) recently approved amendments to clawback policy listing standards proposed by the New York Stock Exchange (NYSE) and the Nasdaq Stock Market LLC (Nasdaq) that extend the effective date of the exchanges’ respective listing standards to October 2, 2023. Issuers listed on the NYSE and Nasdaq now have until December 1, 2023 (60 days from the new effective date) to comply with their respective exchange’s listing standards.

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Court of Chancery Holds That Corporate Officers Owe Duty of Oversight in Sexual Harassment and Misconduct Case

On January 25, 2023, the Delaware Court of Chancery held, for the first time, that the rationale for a duty of oversight (Caremark duty) owed by directors of Delaware corporations applies equally, if not to a greater degree, to officers. In re McDonald’s Corp. Stockholder Derivative Litigation, C.A. No. 2021-0324-JTL (Del. Ch. Jan. 25, 2023).

However, this officer duty of oversight will be more context-driven than the duty owed by directors. Some officers, like a chief executive officer or a chief compliance officer, will have company-wide oversight duties while other officers with more constrained areas of responsibility will have a more constrained duty of oversight (i.e., establishing information reporting systems and upward reporting of red flags will be based on the particular officer’s responsibilities and authority). Additionally, as with a director’s duty of oversight, oversight liability for officers will require a showing of bad faith, meaning a plaintiff will need to establish that the officer consciously failed to make a good faith effort to establish information reporting systems or consciously ignored red flags.

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ERISA 401(k) Fee Case Victory for Schneider

A Massachusetts federal judge recently gave a major win to Schneider Electric in an employee benefits lawsuit brought by former workers. According to this Law360 article, seven former Schneider Electric employees accused the company and its investment manager of running afoul of the Employee Retirement Income Security Act of 1974 when they replaced well-performing funds with those of the investment manager. McDermott Partners Sarah E. Walters, Jennifer B. Routh and Margaret H. Warner represented Schneider Electric.

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Webinar Replay: What to Know About SECURE 2.0

What do retirement plan professionals and participants need to know about the recently passed SECURE 2.0 Act of 2022? In this webinar replay, McDermott’s Employee Benefits team discusses the many changes to retirement plans and individual retirement accounts, including the key changes for 401(k), 403(b) and defined benefit plans as well as other changes impacting health and welfare plans. Discussion topics include the following:

  1. Automatic plan enrollment and escalation
  2. Allowance of matching contributions for elective deferred student loan repayments
  3. Emergency savings option
  4. Expansion of Roth account contributions
  5. Automatic cashout, hardship and disaster changes
  6. Penalty-free distributions
  7. Changes to required minimum distributions

Access the webinar.

Access the webinar’s slides.

Read the On the Subject about SECURE 2.0 here.




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JOIN US: SECURE 2.0 Takes Second Bite at Retirement Security

Join partners from McDermott’s Employee Benefits team on Wednesday, January 25, 2023, as they discuss the impact of the recently passed SECURE 2.0 Act of 2022. With over 90 changes to retirement plans and individual retirement accounts (IRAs), this webinar will highlight the key changes for 401(k) and 403(b) plans and defined benefit plans, as well as changes in the Consolidated Appropriations Act, 2023 impacting health and welfare plans.

Topics Include:

  1. Automatic Plan Enrollment and Escalation
  2. Allowance of Matching Contribution for Elective Deferred Student Loan Repayments
  3. Emergency Savings Option
  4. Expansion of Roth Account Contributions
  5. Automatic Cashout, Hardship and Disaster Changes
  6. Penalty-Free Distributions
  7. Changes to Required Minimum Distributions

To learn more, read the full On the Subject here.

REGISTER FOR THE WEBINAR HERE.




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Conversations on Healthcare Governance

In this three-part podcast series focusing on healthcare governance, McDermott Partner Michael Peregrine joins the American Health Law Association to discuss a range of governance issues, including the following:

  • The nature and scope of the fiduciary responsibilities facing board members within nonprofit health systems;
  • Standards of conduct, expectations and the line between governance and management;
  • The board’s role in tackling the pressing challenges facing nonprofit health systems, including environment, social and governance issues;
  • How to handle issues related to charitable status, cybersecurity and the US Department of Justice’s recent pronouncements on corporate compliance;
  • How legal counsel can advise their clients who are board members of nonprofit health systems; and
  • How chief legal officers can effectively share information with the board, approaches to board education and training, and the role of board assessments.

Access the first episode.

Access the second episode.

Access the third episode.




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IRS Announces 2023 Employee Benefit Plan Limits

The Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2023. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2022 and 2023.*

RETIREMENT PLAN LIMITS (guidance link) 2022 Δ 2023 Annual compensation limit $305,000 ↑ $330,000 401(k), 403(b) & 457(b) before-tax contributions $20,500 ↑ $22,500 Catch-up contributions (if age 50 or older) $6,500 ↑ $7,500 Highly compensated employee threshold $135,000 ↑ $150,000 Key employee officer compensation threshold $200,000 ↑ $215,000 Defined benefit plan annual benefit and accrual limit $245,000 ↑ $265,000 Defined contribution plan annual contribution limit $61,000 ↑ $66,000 Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period $245,000 ↑ $265,000 ESOP limit for determining the maximum account balance subject to the general five-year distribution period $1,230,000 ↑ $1,330,000 HEALTH AND WELFARE PLAN LIMITS (guidance links here and here) 2022 Δ 2023 Health Flexible Spending Accounts Maximum salary reduction limit $2,850 ↑ $3,050 Health FSA Carryover Limit $570 ↑ $610 Dependent Care Flexible Spending Accounts± If employee is married and filing a joint return or if the employee is a single parent $5,000 = $5,000 In employee is married but filing separately $2,500 = $2,500 Excepted Benefit Health Reimbursement Arrangements (EBHRAs) $1,800 ↑ $1,950± Qualified Transportation Fringe Benefit and Qualified Parking (monthly limit) $280 ↑ $300 High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA) HDHP – Maximum annual out-of-pocket limit (excluding premiums): Self-only coverage $7,050 ↑ $7,500 Family coverage $14,100 ↑ $15,000 HDHP – Minimum annual deductible: Self-only coverage $1,400 ↑ $1,500 Family coverage $2,800 ↑ $3,000 HSA – Annual contribution limit: Self-only coverage $3,650 ↑ $3,850 Family coverage $7,300 ↑ $7,750 Catch-up contributions (age 55 or older)± $1,000 ═ $1,000 SOCIAL SECURITY WAGE BASE (guidance link) 2022 Δ 2023 Social Security Maximum Taxable Earnings $147,000 ↑ $160,200

 

Plan sponsors should update payroll and plan administration systems for the 2023 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.

For further information about applying the new employee benefit plan limits for 2023, contact your regular McDermott lawyer.

* The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.

± Not indexed for cost-of-living adjustments, with the exception of limited guidance issued for certain years.




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