Photo of Diane Morgenthaler

Diane M. Morgenthaler focuses her practice on employee benefits and executive compensation. She represents clients in matters before the US Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation. Diane serves as employee benefit counsel to Fortune 500 corporations and other global corporations, and represents both public and private clients. She regularly designs and implements a variety of employee benefit plans and programs. Diane has extensive experience in employee benefit issues involved in acquisitions, reorganizations and divestitures and in the design of employee benefits plans following such transactions. She also advises clients in matters involving multi-employer withdrawal liability, fiduciary liability and benefit claims. Read Diane Morgenthaler's full bio.

Section 162(m) of the Internal Revenue Code (Code) previously limited the tax deduction to $1M annually for covered employee compensation paid by a company that is publicly traded, subject to some important exceptions. The Tax Cuts and Jobs Act modified the reach of Code Section 162(m) in several significant ways.

  • Expanding the number of companies to which Section 162(m) will apply, including non-public companies that register debt or equity securities with the Securities and Exchange Commission, like foreign companies publicly traded through American depositary receipts (ADRs);
  • Expanding the number of covered employees to five and including the chief financial officer, with a provision that any covered employee after 2016 permanently remains a covered employee;
  • Eliminating performance-based and commission-based exceptions to the $1M deduction limit; and
  • Grandfathering certain compensation provided under a written and binding agreement in effect on November 2, 2017, if no material changes are made to such agreement.

These changes will have a significant effect not just on performance-based compensation, but also on stock options, stock appreciation rights and even nonqualified deferred compensation plans and supplemental executive retirement plans. To navigate these changes, Andrew Liazos stressed the importance of understanding the new grandfathering provisions under Section 162(m) and their corresponding planning opportunities at the Mid-Year Meeting of the American Bar Association’s Tax Section on February 10, 2018 in the attached slides.

The Department of Labor announced increased penalties for employee benefit plans under ERISA. The increases generally apply to penalties that involve employee benefit reporting and disclosure failings if the penalty is assessed after January 2, 2018, and if the violation occurred after November 2, 2015. We’ve compiled a resource outlining the ERISA penalty amounts assessed for violations on or before January 2, 2018, and those amounts assessed after January 2.

Continue Reading.

The new Disaster Tax Relief and Airport and Airway Extension Act of 2017 provides additional relief and flexibility for retirement plan participants impacted by recent hurricanes, including relaxed rules for plan distributions, withdrawals and loans.

Continue reading.

Since the announcement by the Internal Revenue Service (IRS) that sponsors of individually designed retirement plans may no longer receive a periodic determination letter, plan sponsors have faced uncertainty about how to demonstrate compliance for their retirement plans. Our McDermott Retirement Plan Compliance Program, a new opinion letter and operational review program for individually designed 401(a) and 403(b) retirement plans, will allow plan sponsors to document their plans’ compliance with tax code requirements in response to the curtailment of the IRS’ determination letter program.

Continue reading.

According to U.S. News & World Report, estimates for the cost of Hurricane Harvey’s damage have come in as high as $190 billion, and damage estimates for Hurricane Irma are still rolling in but range up to $100 billion. To assist taxpayers affected by these devastating storms, the Internal Revenue Service, Department of Labor, and Pension Benefit Guaranty Corporation have granted multiple forms of relief to taxpayers impacted by Hurricane Harvey, Hurricane Irma, and other disasters enumerated by the Federal Emergency Management Agency.

Continue reading.

The Internal Revenue Service (IRS) recently 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 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, and 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 several years ago in an earlier IRS Notice. This relief was already extended on two prior occasions, and the recent IRS Notice further extends the relief until the end of plan years that begin before 2019, as long as the conditions of the original IRS Notice continue to be satisfied.  In 2018, 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 still rely on the proposed 2016 IRS regulations under Section 401(a)(4) for plan years that begin before 2019.




The Internal Revenue Service and the Department of Labor relaxed some deadlines for eligible employee benefit plans and expanded the availability of withdrawals and loans for eligible defined contribution plan participants in the disaster area. However, the Pension Benefit Guaranty Corporation announced that some of its required filings will not be extended automatically.

Continue reading.

The US Department of Labor increased the penalties for specified violations of the Employee Income Retirement Security Act of 1974.  Most of the penalty increases involve reporting and disclosure failures related to benefit plans and will be effective for penalties assessed after August 1, 2016, if the violation occurred after November 1, 2015.

Read full article here.

A 401(k) plan has a qualified cash or deferred arrangement that is part of a profit sharing plan or stock bonus plan. Under the Internal Revenue Code Section 401(k)(2), an employee may elect to make contributions to the plan, the covered employee’s contributions are not distributable before severance from employment, disability, death, attainment of age 59 ½, financial hardship, or termination of the plan, and under which the covered employee’s contributions are nonforfeitable.

This presentation will address the following objectives:

  • Who gets the money?
  • What money do they receive?
  • Where does the money go?
  • When do they get the money?
  • How is the money administered?

View the presentations slides.