During the most recent Tax in the City event in Dallas, Partners Erin Turley and Judith Wethall, presented on the rise of consumer driven health care. Some popular programs they discussed include wellness, smoking cessation, high deductible health plans and HSAs, telemedicine, direct contracting and affordable care organizations. They also discussed the compliance complexities associated with these programs, including ERISA, FLSA and HIPAA privacy concerns.
US businesses expanding abroad, and international businesses moving into the United States, can find the differences between employment laws both unexpected and costly.
Companies of all sizes are eager to expand their businesses, and their workforce, into new markets. US employers already know that operating in multiple states can feel like operating in different countries because of state- and locality-specific employment laws. But if operating in California versus Wyoming is comparing pools to puddles, then operating in the United States versus other countries is comparing puddles to oceans.
US-based companies looking to expand abroad, and foreign companies opening their first US locations, must proceed with caution before jumping in. One error can commit a business to employing its workforce until retirement, cost months and a small fortune to terminate the employment relationship, or keep it embroiled for years in class action litigation.
The US Court of Appeals for the Eighth Circuit recently affirmed a Minnesota district court’s dismissal of a claim against Wells Fargo & Company (Wells Fargo) under ERISA. A former employee had alleged Wells Fargo breached fiduciary duties by retaining Wells Fargo’s own investment funds as a 401(k) option, and defaulting to those funds when plan participants failed to elect another option.
In holding that the former employee failed to state a claim, the court in Meiners v. Wells Fargo & Co. reasoned that the plaintiff failed to plead facts showing the Wells Fargo investment funds were an imprudent choice. Specifically, the court found that the plaintiff’s allegations that an allegedly comparable fund performed better was not sufficient, especially given the other fund’s differing investment strategy. The court’s prior decision in Braden v. Wal-Mart Stores, Inc. established that plaintiffs could show that “a prudent fiduciary in like circumstances” would have selected a different fund by providing a basis for comparison–in other words, a benchmark. However, the Eighth Circuit declined the plaintiff’s invitation to extend the rationale of Braden by allowing a plaintiff to demonstrate imprudence with a benchmark that only possesses some similarities to the fund at issue.
The Eighth Circuit’s decision is in line with other courts’ rejection of ERISA claims based on the plaintiffs’ subjective views of which funds are the best overall investment. A US district court judge for the Northern District of Illinois recently labeled such breach of fiduciary duty claims “paternalistic” while dismissing a class action against Northwestern University.
Creating a gender identity and/or expression inclusive workplace allows employers to attract and retain talented employees, boosts engagement and productivity, and mitigates risks of legal claims. In a presentation at the 37th Annual ISCEBS Employee Benefit Symposium, Todd Solomon creates a business case for transgender inclusion by exploring legal trends. He discusses best practices for workplace policies, such as introducing transgender employee benefits. Todd also provides practical steps for cultivating an inclusive work culture.
The Internal Revenue Service (IRS) has again extended the temporary nondiscrimination relief for closed defined benefit plans. This extended relief is intended to enable closed pension plans (defined as pension plans that have been closed to new participants before December 13, 2013 but continue to provide ongoing benefit accruals for certain participants) to more easily satisfy certain nondiscrimination testing requirements. In most cases where the relief applies, the closed defined benefit plan is aggregated with a defined contribution plan to satisfy the nondiscrimination testing requirements. The relief assists the aggregated plan in passing nondiscrimination requirements that apply to accrued benefits and to certain rights and features relating to those benefits.
The original nondiscrimination testing relief for closed pension plans was provided in a 2014 IRS Notice. This relief was already extended on three prior occasions, and the most recent IRS Notice further extends the relief until the end of plan years that begin before 2020, as long as the conditions of the original 2014 IRS Notice continue to be satisfied. In 2019, the IRS also intends to issue final regulations under Section 401(a)(4) of the tax code that address the nondiscrimination requirements for closed pension plans. Until then, the IRS indicated that plan sponsors can rely on the proposed 2016 IRS regulations under Section 401(a)(4) for plan years that begin before 2020.
Join us on Thursday, September 6 at 1:00 PM EDT for a webinar designed to address questions around the Massachusetts Noncompetition Agreement Act (the Act), signed into law by Governor Baker on Friday, August 10. The Act, which takes effect on October 1, requires all employers doing business in Massachusetts to change the way they establish and structure noncompetition agreements and related forfeiture provisions under compensation arrangements.
Our panel of lawyers focused on litigation, employment and employee benefits law from Massachusetts and other states, will discuss key aspects of this legislation, strategies and best practices. Questions that will be addressed by the panel include:
- What changes should be made to support noncompetition agreements going forward?
- How can a noncompetition agreement be used in connection with providing severance benefits?
- What is the status for existing non-competition agreements? When is grandfathering available?
- Are there other available types of agreements that can adequately protect employers’ interests?
- Might ERISA preempt the new Massachusetts noncompetition law as related to benefit plans?
- How will the changes to Massachusetts law impact corporate transactions?
- How will the changes in Massachusetts law affect restrictive covenant litigation in Massachusetts courts?
- What approaches to address the Massachusetts changes will make sense for multi-state employers?
When passed in 2010, the Affordable Care Act (ACA), often called “Obamacare,” had three basic goals: increase access to health insurance, reduce costs and spending, and offer patients stability with respect to their insurance coverage. By offering a subsidy for low- and middle-income Americans to purchase private insurance plans, the ACA was successful in expanding coverage for about 14 million previously uninsured individuals, including those with pre-existing medical conditions.
Gary Scott Davis authored this bylined article about the future of the ACA. “We need to learn from both the strengths and weaknesses of the ACA to build a long-term sustainable approach that promotes access to care, brings insurance coverage within the reach of the many, contains costs, and aligns economic incentives among payors, providers and patients, while improving the nation’s overall level of health,” he wrote.
The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) made some significant changes to the executive pay area for tax-exempt organizations with the imposition of a new excise tax on certain amounts paid to some employees of the tax-exempt organization. Imposing taxation in areas which previously had no such result will warrant tax-exempt organizations reviewing their compensation structures in light of the new rules to ensure not only an understanding of the new rules but to evaluate feasible options in minimizing any taxes.
On August 21, 2018, the IRS issued guidance regarding recent statutory changes made to Section 162(m) of the Internal Revenue Code. Overall, Notice 2018-68 strictly interprets the Section 162(m) grandfathering rule under the Tax Cuts and Jobs Act.
Public companies and other issuers subject to these deduction limitations will want to closely consider this guidance in connection with filing upcoming periodic reports with securities regulators. Further action to support existing tax positions or adjustments to deferred tax asset reporting in financial statements may be warranted in light of this guidance.
On Friday, the IRS released a private letter ruling (PLR) which will help clear the way for employers to provide a new type of student loan repayment benefit as part of their 401(k) plans. By issuing the PLR, the IRS gave its blessing to an employer-provided student loan repayment benefit offered through an employer’s 401(k) plan. Historically, many plan sponsors had questioned whether such an approach would be permissible under IRS rules. As a result, the PLR provides welcome confirmation that such an arrangement is permissible under certain circumstances.
Generally speaking, the PLR confirmed that, under certain circumstances, employers may be able to link the amount of employer contributions made on an employee’s behalf under a 401(k) plan to the amount of student loan repayments made by the employee outside the plan. More specifically, as explained in our On the Subject published on Friday, the IRS concluded that an employer could make a non-elective contribution to its 401(k) plan where the amount of the non-elective contribution would be based on an employee’s total student loan repayments and would be contributed to the plan in lieu of the matching contributions that would otherwise be made to the plan had the employee made pre-tax, Roth 401(k) or after-tax contributions.
Because student loan benefit programs are becoming an increasingly powerful way for employers to attract and retain key talent, particularly employers with a young and educated workforce, the PLR will very likely cause many employers to consider offering a student loan benefit as part of their retirement program. Importantly, employers who wish to do so should take care to review their 401(k) plans for special rules, features or design elements (outside those discussed in the PLR) that might create additional hurdles to linking the amount of employer contributions made on an employee’s behalf under a 401(k) plan to the amount of student loan repayments made by the employee outside the plan. For example, some of the special rules that apply to safe harbor plans could limit an employer’s ability to create a similar student loan benefit structure.
For more information about this groundbreaking ruling, including the key features of the student loan benefit program described in the PLR, the advantages of such programs and other important considerations, please see our On the Subject published on Friday.