ESOPs and Artisan Distilling

Employee Stock Ownership Plans (ESOPs) are becoming a popular—and tax effective—way for companies to manage succession planning. When structured properly an ESOP can provide huge financial benefits to companies and their employees alike. There have been several craft brewers who have taken advantage of the ESOP structure in the past year, and we expect this trend to pique the interest of craft distilleries. In this article, originally published in Artisan Spirit, Marc E. Sorini and Emily Rickard explore at a very high level some of the issues involved with starting and maintaining a craft distillery ESOP.

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PCORI Fee Due by July 31, 2017

The Patient-Centered Outcomes Research Institute (PCORI) fee was established under the Affordable Care Act (ACA) to advance comparative clinical effectiveness research. The PCORI fee is assessed on issuers of health insurance policies and sponsors of self-insured health plans. The fees are calculated using the average number of lives covered under the policy or plan, and the applicable dollar amount for that policy or plan year. Although there is recent discussion in the press about the repeal and replacement of the ACA, the PCORI fee has not currently been repealed. The fee is indexed for future years, and is scheduled to end in 2019.

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Senate Republicans Unveil ACA Repeal Bill

Last week, Senate Republicans unveiled draft legislation to move toward repealing portions of the Affordable Care Act (ACA). The draft health care bill, known as the Better Care Reconciliation Act, was hatched behind closed doors without public committee hearings or debate, in response to concerns raised by the House’s American Health Care Act (AHCA), which passed by the slimmest of margins on May 4, 2017. The bill faces an uphill battle as several Republican senators have already come out in opposition to the draft bill, conservatives have criticized the bill not going far enough to repeal the ACA and moderates are uneasy about the impact severe cutbacks to the Medicaid system will have on their constituents. Senator Mitch McConnell has vowed to bring the draft bill to a vote this week before Congress recesses for the Fourth of July holiday.

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Proposed Changes to § 409a Regulations: Greater Clarity and Better Planning Alternatives

Andrew Liazos and Allison Wilkerson wrote this bylined article on Tax Code Section 409A’s deferral and payment requirements for nonqualified deferred com­pensation plans. Recent IRS Section 409A guidance makes “several helpful changes that employers will want to consider and take advantage of,” the authors wrote, and they warned employers that they ignore final IRS “at their peril…in light of the more limited ability to correct errors.”

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Originally published in The Practical Tax Lawyer, Spring 2017

The Quandary of Publicly-Traded Employer Stock in a 401(k) Plan

Offering employer stock in a 401(k) plan investment lineup can seem like a win-win situation. It can enable employees to become company owners—real, skin-in-the-game, participants in their employer’s economic future—through a simple deferral election. The U.S. Supreme Court has even recognized the value of employer stock funds, confirming that Congress sought to encourage their creation through provisions and standards contained in the Employee Retirement Income Security Act of 1974 (“ERISA”).

However, in the wake of a series of high-profile employee lawsuits seeking recovery against Enron, Lehman Brothers, and other employers for losses from 401(k) investments in employer stock, such funds can—almost as easily—seem a recipe for disaster. This article examines the quandary that employer stock funds pose for plan sponsors, who must navigate ERISA’s careful balance of (1) ensuring fair and prompt enforcement of employee rights under employer-provided retirement plans while (2) encouraging employer creation of these plans.

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Originally published in Bloomberg Law, May 25, 2017

Legally Mandated Benefit Plan Changes Still Require Bargaining

A unanimous panel of the NLRB, including Chairman Philip A. Miscimarra, held that ACA mandates do not relieve an employer of its duty to bargain with a union representing its employees regarding certain health insurance benefit plan changes.

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District Court Dismisses Shareholder Claim that Equity Award Share Withholding Triggers Section 16(b) Liability

A US District Court recently dismissed a claim that an insider’s election to satisfy an income tax obligation by having shares withheld from the delivery of an award constituted a non-exempt sale of shares back to the issuer for purposes of Section 16(b) of the Exchange Act, unless the share withholding was required, rather than merely permitted.

While an encouraging development, this decision is now on appeal to the US Court of Appeals for the Fifth Circuit and there are similar unresolved complaints in other jurisdictions. Until this matter is resolved, public companies should continue to consider what steps are appropriate to avoid Section 16 exposure and to review this situation with their executive officers.

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Supreme Court Rules in Favor of Church-Affiliated Hospitals in Church Plan Litigation

In a major victory for church-affiliated hospitals, the US Supreme Court overturned three appellate court rulings and decided unanimously that church-affiliated hospitals can maintain their pension plans as “church plans” exempt from the Employee Retirement Income Security Act of 1974, as amended (ERISA), regardless of whether a church actually established the plan. Impacted health systems, and especially their management, should evaluate how best to document and demonstrate their common religious bonds and convictions with the church.

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Proposed 457(f) Regulations: Opportunities and Challenges

The 2016 proposed regulations significantly expanded 457(f) plan sponsors’ ability to permit elective deferrals, use noncompetition agreements and make larger severance payments than otherwise permitted under 409A without immediate taxation to participants. In a recent presentation, Ruth Wimer, Mary Samsa and Joseph Urwitz discuss the surprising opportunities with respect to tax-exempt and governmental entities’ “ineligible nonqualified deferred compensation” arrangements in 2016 regulations. They also address the rules and limitations of the short-term deferral exception, the interaction of the 2016 regulations with existing regulations, other types of arrangements potentially affected, as well as best practices for employers.

View the full presentation.

More Federal Legislation Aimed at Expanding Medicare Coverage of Telehealth Services

Shelby Buettner, Marshall Jackson, Jr., Lisa Schmitz Mazur and Dale Van Demark wrote this bylined article on a proposed US Senate bill to expand Medicare’s coverage of telehealth services. The bill would require the Center for Medicare and Medicaid Innovation to test the effectiveness of telehealth models, and cover through the Medicare program those models that meet criteria for effectiveness, cost and quality improvement.

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