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San Francisco voters on November 3 approved Proposition L, which imposes an additional tax on businesses whose highest paid executive makes 100 times or more than the median salary of the business’s employees based in San Francisco.

Proposition L. Proposition L amends the San Francisco Business and Tax Regulations Code by adding a new Article 33 (titled Overpaid Executive Gross Receipts Tax). Article 33 imposes a tax on any business engaged in business in San Francisco if the business’s highest paid managerial employee’s annual compensation for a tax year, as compared to the median compensation paid to the company’s full-time and part-time employees based in San Francisco for that tax year, exceeds a ratio of 100:1.

Join Morgan Lewis for these upcoming programs that address employment, employee benefits, and executive compensation topics:

To alleviate plan sponsor financial burdens during the height of the coronavirus (COVID-19) pandemic, Section 3608 of the CARES Act delayed the due date for required minimum contributions for defined benefit pension plans otherwise due in 2020. The delayed payments, plus interest for the period of the delay using the plan’s effective interest rate, are due on or before January 1, 2021. The January 1, 2021 deadline applies notwithstanding that it is a legal holiday.

There was an important development recently in the US Department of Labor’s (DOL’s) efforts to regulate ERISA plan fiduciaries’ use of environmental, social, and governance (ESG) factors in investment decisionmaking. On October 30, the DOL announced publication of the final version of its proposed Financial Factors in Selecting Plan Investments rule (the Rule). A fact sheet is also available.

The DOL has been issuing various forms of guidance on the topic of using ESG factors in making fiduciary decisions over the last two and a half decades, with successive administrations altering interpretations. That back-and-forth guidance has consistently mandated that plan fiduciaries make investment decisions solely in the interest of plan participants, but how ESG factors fit into that decisionmaking, as well as the tone and nuances, have varied with the issuing administration.

The US Department of Labor (DOL) released its 2020 statistics on ERISA enforcement activities on October 27, affirming that the agency’s investigations remain robust. In sharing the statistics, the DOL not only boasted that it had restored $3.1 billion to employee benefit plans, participants, and beneficiaries, but also that this amount is the “most ever” that the agency has recovered in one year. The DOL further emphasized its active enforcement program by pointing out that its investigatory recoveries increased 175% from fiscal year 2017 to 2020, and 310% from fiscal year 2016 to 2020. The DOL reports that these results were obtained through 1,122 civil investigations, with 67% of such cases resulting in monetary recoveries or other corrective actions

As we noted in a post last year at this time, pension plans that are not fully funded for PBGC purposes have two parts to their PBGC premium. One part is a flat rate premium of $83 per participant in 2020 ($86 for 2021, as just announced by the PBGC). The other is a variable rate premium that looks to the value of the plan’s “unfunded vested benefits,” which is the excess, if any, of the plan’s Premium Funding Target over the fair market value of plan assets.

Recent LawFlash publications include:

  • IRS Notice 2020-68 Provides Secure Act And Miners Act Guidance. Notice 2020-68 from the IRS provides clarifications for sponsors and administrators of 401(k) plans and other qualified retirement plans, 403(b) plans, and 457(b) governmental plans on certain provisions in the SECURE Act of 2019 and the Bipartisan American Miners Act of 2019. The notice also provides valuable guidance for sponsors of multiple employer plans and pooled employer plans. Read more in our LawFlash.
  • SECURE Act: IRS Sets Amendment Deadline For IRA Providers and Addresses Other IRA Issues. The IRS recently released new guidance in IRS Notice 2020-68 to assist owners of individual retirement accounts and annuities and IRA providers implement certain provisions of the SECURE Act. Read our LawFlash for further discussion and guidance.

Congratulations to Elizabeth (Liz) Goldberg and Erin Randolph-Williams on their election to the Morgan Lewis partnership in our employee benefits and executive compensation practice! Effective today, Liz (resident in Pittsburgh) and Erin (resident in Philadelphia) will join 23 other newly elected partners from 10 offices and eight practices. For more information about all of the firm’s newly elected partners, please see our press release, Morgan Lewis Elects 25 Partners.

Congratulations to our employee benefits and executive compensation partner Bob Abramowitz, who has been recognized as a Distinguished Leader by The Legal Intelligencer. In giving Bob this award, The Legal Intelligencer noted that as “a trailblazer in the ERISA and employee benefits field since the passage of ERISA in 1974, Abramowitz has impacted the Philadelphia workplace by helping numerous hospitals, educational institutions, and companies of all sizes throughout the United States shape their retirement benefits, health and welfare benefits, and executive compensation programs.”