ML BeneBits

Besides being Valentine’s Day, February 14, 2024 is an important day for employers with any California employees: It is the last day for employers to notify California employees (including former employees who were employed after January 1, 2022) that any unlawful noncompetes applicable to them are void. These notices need to be specific to each employee and individually addressed, and so will likely involve some investment in time and effort by employers to ensure compliance with the law.

US state and federal laws have increasingly sought to regulate environmental, social, and governance (ESG) investing—a trend that continued in 2023. This increased regulatory focus has impacted benefit plans, including ERISA plans and, especially, public retirement plans.

The letter of intent has been executed. The due diligence is done. The purchase agreement is signed. The money has been wired. The deal has closed. You’re done—back to business as usual! Think again. For the folks responsible for employee benefits matters, whether it be the CEO, CFO, comptroller, or human resources team, the real work after a merger or acquisition may be just beginning.

Effective as of January 1, 2023, payors of qualified plan distributions have been required to use a redesigned IRS Form W-4P for payee withholding elections on periodic payments and a new Form W-4R for nonperiodic payments and eligible rollover distributions. Since then, we have fielded myriad questions on the new forms, from the basic requirements for their use and who is responsible for implementation to interpreting long-standing qualified plan withholding regulations that have not yet been fully updated to align with the new forms.

Publicly traded companies generally file registration statements on Form S-8 to register the offering of the company’s stock pursuant to the company’s equity incentive plans under the Securities Act of 1933, as amended (Securities Act). This same filing requirement applies under certain circumstances to a company’s nonqualified deferred compensation plans.

In January 2022, the Internal Revenue Service (IRS) changed the withholding election rules applicable to distributions from pension plans (a term that includes 401(k) plans, money purchase pension plans and defined benefit pension plans). Specifically, the IRS issued a revised Form W-4P, to be used for reporting periodic payments only (such as monthly pension payments) and creating a new Form W-4R, to be used for nonperiodic payments (such as lump sum distributions and eligible rollover distributions). Use of the new forms was optional for 2022 but became mandatory as of January 1, 2023.

The US Department of Labor (DOL) recently issued DOL Advisory Opinion 2023-01A, (Advisory Opinion) addressing racial equity and supplier diversity. The Advisory Opinion answered an inquiry about the application of ERISA’s fiduciary duty requirements to an employer’s racial equity program.

As discussed in a previous LawFlash, the US Department of Labor’s Final Rule on Prudence and Loyalty in Selecting Plan Investment Options, also known as the ESG Rule, contains provisions on proxy voting, which are not limited to environmental, social and governance issues. As a reminder, the ESG Rule, including the changes regarding proxy voting, will go into effect on December 1, 2023.

Since its effective date in February 2023, the Department of Labor’s (DOL’s) rule officially titled Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, and colloquially called the “ESG rule,” has been challenged in both the courts and US Congress. In September 2023, a federal district court in one of the two court challenges ruled in favor of the DOL and its authority to adopt the ESG rule.

With the expiration of COVID-19 pandemic relief suspending loan payments and interest accruals on federal student loans (interest accruals resumed September 1 and loan payments are set to resume in October), now is a good time for employers to take a closer look at the student loan matching contribution feature of the SECURE 2.0 Act of 2022 (SECURE 2.0).