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Soaring New Heights: The IRS’s Crackdown of 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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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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Addressing DOJ’s New Compliance Focus on Executive Compensation

The new compliance focus on executive compensation, as announced by the US Department of Justice (DOJ) on March 3, 2023, has significant implications for how healthcare organizations address both corporate compliance and compensation programs for their executives. It also raises new issues for the board of directors’ oversight of compliance and compensation functions.

In a recent webinar, McDermott’s Ralph E. DeJong, Michael W. Peregrine, Sarah E. Walters and Eugene I. Goldman discussed the new policies, possible responses by management and boards, and potential strategies for responding to the policy goals of the DOJ and the Delaware Chancery Court.

Access the webinar and top takeaways here.




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Prescription Drug Data Reporting: What the “Good Faith Compliance” Extension Really Means for Self-Funded Group Health Plans

We recently reported on an FAQ issued December 23, 2022 (FAQ About Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 56) by the US Departments of Labor, Health and Human Services and the Treasury (collectively, the Departments). The FAQ provides limited, albeit welcome, relief by extending the time for reporting information under the prescription drug data collection (RxDC) rules, which were enacted by Section 204 of Title II of Division BB of the Consolidated Appropriations Act, 2021.

Under the statute, the first RxDC reports for the 2020 calendar (or reference) year, were due to be filed by December 27, 2021. However, in response to concerns expressed by stakeholders, enforcement was pushed back a full year to December 27, 2022, at which time the reports for both the 2020 and 2021 reference years were due. The RxDC reporting process required the submission of one or more “plan lists,” a series of eight data files (files D1 through D8) and an accompanying narrative response. (The contents of the plan lists, data files and narrative responses are comprehensively explained here (the Instructions).)

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Why More Companies Are Linking CEO Pay To ESG

An important new governance survey suggests an increasing willingness to consider linking a company’s ESG performance measures to executive incentive compensation. Such a practice would demonstrate a significant corporate embrace of social responsibility principles. But implementing such measures may present boards and their compensation committees with practical implementation challenges.

The new survey from The Conference Board, “Linking Executive Compensation to ESG Performance” (the “Survey”), essentially concludes that tying some portion of executive compensation to
ESG principles is becoming a mainstream governance practice. Indeed, Survey data suggests that the percentage of S&P 500 companies that have adopted ESG performance measures is
increasing at a steady pace—from 66 percent in 2020 to 73 percent in 2021.

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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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Washington State’s Pay Transparency Law Takes Effect January 1, 2023

Effective January 1, 2023, Washington employers must comply with SB 5761, commonly known as Washington’s Pay Transparency Law, signed by Governor Jay Inslee on March 30, 2022. SB 5761 amends Washington’s Equal Pay and Opportunity Act (RCW 49.58) to require employers with 15 or more employees to include in each job posting the wage scale or salary range of the job and a general description of all of the benefits offered and to identify other compensation offered. The law also requires employers to provide existing employees who are promoted or offered a new position with the wage scale or salary range of the new position.

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Insights and Challenges for the Executive Compensation Committee

The board’s executive compensation committee is the focus point for many of the extraordinary financial, economic and operating challenges currently facing healthcare organizations. Executive compensation increases are impacted by both an inflationary economy and significant revenue downturn. In addition, the US Department of Justice has identified executive compensation as an important conduit through by which corporate compliance incentives and deterrence can be implemented. Furthermore, executive recruitment and retention amidst the “Great Resignation” remains a key compensation concern.

These and similar issues have become important agenda items for the board’s executive compensation Committee. Michael Peregrine is joined by industry experts Tim Cotter and Ralph DeJong for the first in a two-part conversation about the impact of the developments on the compensation committee, including:

  • Key topics for briefing the board’s compensation committee.
  • Increasing communication between the compensation committee and the C-Suite.
  • Addressing pressures felt by executive committee members.
  • Insights from the Sullivan Cotter compensation data survey.
  • Projections for the impact of inflation on next year’s salary increases.
  • Expectations for future CEO salary increases and organization departures.
  • The segmenting approach to leadership plans.
  • Coordination with the Audit & Compliance Committee on compensation incentives

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A Light in the Dark: Seventh Circuit Helps Clarify New Pleading Standards for 401(k) Fee Cases

A recent US Court of Appeals for the Seventh Circuit case supplies answers to many questions left open in 401(k) fee litigation cases after the US Supreme Court’s ruling earlier this year in Hughes v. Northwestern University. Specifically, to survive a motion to dismiss in the Seventh Circuit, the recent ruling in Albert v. Oshkosh Corp. reiterated that plaintiffs must allege both high fees and substandard services or performance in comparison to other similar 401(k) plans.

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