Recent SEC enforcement actions highlight the importance of accurate proxy disclosure of perquisites provided to named executive officers.

The SEC proxy disclosure rules require that companies disclose in the Summary Compensation Table of the proxy statement the perquisites provided to a named executive officer if the officer’s total perquisites exceed $10,000. If the value of a single perquisite exceeds the greater of $25,000 or 10% of the total value of all perquisites reported, then the type and amount of such perquisite must be identified in a footnote. See 17 CFR 228.402(c)(2)(ix), Instruction 4.

Join Morgan Lewis this month for these programs on a variety of topics in employee benefits and executive compensation.

We are pleased to invite you to our San Francisco office for an ML Women Counsel Fireside Chat with four women general counsels.

We’d also encourage you to attend the firm’s Global Public Company Academy series.

Visit the Morgan Lewis events page for more of our latest programs.

Director compensation has come out of the shadows and is a focus of shareholders, plaintiffs’ lawyers, and shareholder advisory firms. In the December 2017 Investors Bancorp case, the Delaware Supreme Court refused to apply the deferential “business judgment” standard of review to discretionary director compensation awarded pursuant to a shareholder-approved plan. Instead, the court applied an “entire fairness” standard of review. Shareholder litigation with respect to director compensation has subsequently increased, as evidenced by several recent settlements relating to fiduciary breach claims over director compensation. ISS and Glass Lewis review director compensation closely, and ISS announced this spring that it would consider issuing “withhold” recommendations with respect to directors who approve director compensation when there is a pattern of excess director pay without a compelling rationale or other mitigating factors.

There are several qualification requirements for an employer’s cash or deferred arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended (Code). One such requirement is that benefits may not be contingent (either directly or indirectly) on an employee’s election to make (or not make) elective contributions to the employer’s arrangement. This requirement is frequently referred to as the “contingent benefit rule.”[1] The Code includes an express exception to the contingent benefit rule for employer matching contributions. Matching contributions may be conditioned upon an employee’s election to make elective contributions.

Many participant-directed 401(k) plans these days include a self-directed brokerage window option as a way to supplement the plan’s menu of designated investment options. While the plan’s menu may be limited to 10–25 investment alternatives, depending on the particular plan (for this purpose, counting a target-date fund suite as a single alternative), a brokerage window can provide access to several thousand mutual funds as well as—depending on the particular arrangement—the ability to trade in individual stocks, bonds, options, or other securities.

Congratulations to the 221 Morgan Lewis lawyers across 72 practice areas and 15 metropolitan areas recognized in The Best Lawyers in America© 2019. Our firm press release provides more details.

Of special note, the following Morgan Lewis employee benefits and executive compensation lawyers were recognized:

Lawyers of the Year

  • Mary B. (Handy) Hevener: Litigation and Controversy – Tax, New York
  • Steven D. Spencer: Litigation – ERISA, Philadelphia

Recognized Lawyers

  • Robert L. Abramowitz: Employee Benefits (ERISA) Law, Philadelphia
  • Andy R. Anderson: Employee Benefits (ERISA) Law, Chicago
  • Rosina Barker: Employee Benefits (ERISA) Law, Washington, DC
  • Craig A. Bitman: Employee Benefits (ERISA) Law, New York
  • Jeanie Cogill: Employee Benefits (ERISA) Law, New York
  • Althea Day: Employee Benefits (ERISA) Law, Washington, DC
  • Brian Dougherty: Employee Benefits (ERISA) Law, Philadelphia
  • John Ferreira: Employee Benefits (ERISA) Law, Pittsburgh
  • Brian Hector: Employee Benefits (ERISA) Law, Chicago
  • Mary B. (Handy) Hevener: Litigation and Controversy – Tax and Tax Law, New York
  • Barbara D. Klippert: Employee Benefits (ERISA) Law, New York
  • Marla Kreindler: Employee Benefits (ERISA) Law, Chicago
  • Robert J. Lichtenstein: Employee Benefits (ERISA) Law, Philadelphia
  • Brian Ortelere: Employee Benefits (ERISA) Law, Philadelphia
  • Zaitun Poonja: Employee Benefits (ERISA) Law, Palo Alto
  • Gary Rothstein: Employee Benefits (ERISA) Law, New York
  • Steven D. Spencer: Employee Benefits (ERISA) Law and Litigation – ERISA, Philadelphia
  • R. Randall Tracht: Employee Benefits (ERISA) Law, Pittsburgh
  • Mims Maynard Zabriskie: Employee Benefits (ERISA) Law, Philadelphia
  • Jonathan Zimmerman: Employee Benefits (ERISA) Law, Washington, DC

The end of summer doesn’t always mean the end of employment for seasonal employees. Employers often rely on the pool of talent they have developed through seasonal hiring when it comes time to fill new or newly vacated ongoing positions. Here are several things to keep in mind when hiring or rehiring a seasonal employee into a year-round, benefits-eligible role.

In our June 21 post, we addressed the provisions of Section 507 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act). Section 507 directs the US Securities and Exchange Commission (SEC) to amend Rule 701 under the Securities Act of 1933 by increasing—from $5 million to $10 million—the amount of securities that an eligible company can sell under the rule during a 12-month period without being subject to the rule’s enhanced disclosure requirements.

In response to the Act’s mandate, the SEC issued a release, Exempt Offerings Pursuant to Compensatory Arrangements, Securities Act Release No. 33-10520 (July 18, 2018), under which it adopted an amendment to Rule 701(e) to increase the enhanced disclosure threshold from $5 million to $10 million. The amendment became effective on July 23, 2018. If a company commenced an offering during the current 12-month period that was continuing on the effective date of the rule amendment, it can apply the $10 million disclosure threshold to the offering.

Employers that do not have large employee populations have for many years struggled to provide competitive health coverage to their employees. In an effort to offer the economies of scale and risk spreading that exist when large numbers of employees are covered in a single group health plan, there have been many attempts to structure health insurance arrangements (typically referred to as multiple employer welfare arrangements, or MEWAs) in which unrelated employers can participate. Unfortunately, many MEWAs have been undercapitalized, unable to provide the cost savings they promoted, and/or noncompliant with state and federal law. Although there has been a recent effort by the US Department of Labor (DOL) (through a final regulation issued in June of 2018) to expand the ability of employer associations to offer group health plan coverage to their members, this effort will primarily benefit small employers who currently obtain health coverage through the individual or small group insurance markets.

Congratulations to our employee benefits and executive compensation partner Julie Stapel for being named among Chicago’s Notable Women Lawyers for 2018 in the employee benefits practice area by Crain’s Custom Media, a division of Crain’s Chicago Business.The series, now in its second year, “represents an impressive cross-section of Chicago-area legal industry leaders, many of whom have served with distinction for decades.” Read more about Julie and Beth Herrington, another Morgan Lewis lawyer who has been recognized among Chicago’s Notable Women Lawyers by Crain’s Custom Media.