What are an employee stock ownership plan’s (ESOP) internal trustee’s fiduciary duties? What are some of the most common liability areas for trustees? And how can trustees prevent common liability pitfalls?
In this presentation, McDermott Partner J. Christian Nemeth offers insight into fiduciary duties, standards and best practices.
Over the past year, the regulatory backdrop around environmental, social and governance (ESG) investing has shifted. As McDermott Partner Brian J. Tiemann explains in these slides, the US Department of Labor (DOL) under the Trump administration dropped ESG terminology and set a high standard for considering factors other than purely financial projections for investment alternatives. However, the Biden administration’s DOL has said that it will not enforce Trump-era regulations or pursue enforcement actions against plan fiduciaries for failure to comply with those regulations.
The Internal Revenue Service (IRS) recently updated its guidance for retiree distributions under a defined benefit plan. Specifically, the new IRS guidance addresses rehires following a bona fide retirement due to COVID-19.
As a background, a defined benefit plan may make distributions to a retiree only in the case of a “bona fide retirement,” which is a facts and circumstances analysis. In prior rulings, the IRS indicated that retiree distributions without a bona fide retirement can cause a defined benefit plan to lose its tax-qualified status, where both all contributions and earnings become immediately taxable.
According to the IRS, a rehire due to COVID-19-related “unforeseen circumstances” generally would not disqualify an individual’s prior retirement from being considered a bona fide retirement under a defined benefit plan. However, the IRS cautioned that such a rehire cannot include any prearrangement to rehire the individual prior to the individual’s retirement. Such a prearrangement still yields a retirement that is not “bona fide.”
Finally, although the IRS issued this guidance in question and answer format primarily for defined benefit plans, plan sponsors should be able to apply the same rationale to distributions from defined contribution plans. In short, the new IRS guidance provides welcome relief to plan sponsors and employers who are looking to rehire retirees in a tight job market.
Increasing retirement plan-focused litigation has put insurance carriers and fiduciary service providers in difficult positions. In this article published in PLANSPONSOR, McDermott Partner Erin Turley said such litigation continues to be a “major focus” in the fiduciary insurance marketplace.
“It is a challenging market right now, to the point that we are looking at trying to think about ways that insurance products might be differently structured, to address what we hope will only be a short-term tightening in the market.”
The US Department of Labor (DOL) recently issued guidance concerning a new exemption under the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) in connection with the provision of investment advice. PTE 2020-02, Improving Investment Advice for Workers & Retirees (the Exemption), became effective on February 16, 2021. On April 13, 2021, the DOL issued additional guidance, in FAQ format, to further explain the Exemption.
In this article, McDermott’s Jennifer D. Hill, Todd A. Solomon and Brian J. Tiemann explain the significance of this new guidance.
A recent ruling from a New Jersey federal district court gives ammunition to providers fighting to stop insurers from engaging in cross-plan offsetting, a common billing practice where health insurers attempt to claw back overpaid claim money from one patient by withholding payment from another patient in a different health plan.
The ruling—which found that the practice violates the Employee Retirement Income Security Act (ERISA)—could lead to more lawsuits and changes to plan documents. McDermott partner Judith Wethall said in a recent Bloomberg Law article the ruling was more significant than the U.S. Court of Appeals for the Eighth Circuit’s 2019 ruling in Peterson v. UnitedHealth Group, Inc.
Employment law continues to evolve, and it can be a challenge amid an ever-changing landscape of local employment laws for human resources executives and employment counsel at multinational businesses to maintain a consistent global corporate culture.
McDermott’s Global Employment Law Update brings you the key highlights from across Asia, Africa, Europe, Latin and North America. Developed in collaboration with peer firms operating in more than 50 countries, this resource guide contains summaries of the laws and significant court decisions that impacted employers and employees all over the world. It includes:
Andrew C. Liazos, partner at McDermott Will & Emery, recently moderated an American Bar Association panel on the new cybersecurity guidance for retirement plan sponsors issued by the Department of Labor (DOL). The panel slides included 10 takeaways for the new DOL guidance.
As a background, the DOL’s new guidance formalized its long-held view that retirement plan fiduciaries have an obligation to ensure proper mitigation of cybersecurity risks. More specifically, the DOL expects retirement plan fiduciaries to select and monitor the cybersecurity practices of their service providers.
The DOL guidance is in three parts.
In recent guidance, the Department of Labor clarified the retirement plan standards for environmental, social and corporate governance (ESG) investing without mentioning the term ESG. The new guidance provides that, when selecting and monitoring plan investments, an Employee Retirement Income Security Act (ERISA) fiduciary must never sacrifice investment returns, take on additional investment risk or pay higher fees to promote non-pecuniary benefits or goals.
Teal Trujillo, an incoming associate in our Chicago office, also contributed to this On the Subject.
In June, the US Department of Labor issued an information letter indicating that it will allow defined contribution retirement plans (such as 401(k) plans) to indirectly invest in private equity funds. While information letters are not binding, this new guidance creates a significant opportunity for plan sponsors to consider investment options that include private equity funds. However, it will be important for both plan sponsors and funds to carefully evaluate potential investments for compliance with fiduciary requirements.
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