On September 14, 2018, the Pension Benefit Guaranty Corporation (PBGC) published final regulations intended to facilitate plan mergers and transfers between multiemployer pension plans under ERISA Section 4231. These regulations become effective October 15, 2018. 

ERISA Section 4231, as amended by the Multiemployer Pension Reform Act of 2014 (MPRA), permits the PBGC to facilitate mergers of multiemployer pension plans and to provide financial assistance for such mergers where at least one of the participating plans is in critical and declining status. Generally, a critical and declining plan is projected to become insolvent within 15 to 20 years.

The Morgan Lewis employee benefits and executive compensation practice proudly announces its new leadership, effective October 1, 2018:

Practice Leader: Craig A. Bitman
Deputy Practice Leader: Amy Pocino Kelly

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

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.

The Internal Revenue Service (IRS) issued guidance on September 18 that modifies its safe harbor explanations that may be (and typically are) used to satisfy Section 402(f) of the Internal Revenue Code (IRC). IRC Section 402(f) requires plan administrators of 401(a) qualified plans to provide a written explanation of an individual’s rollover rights (of eligible rollover distributions) within a reasonable period of time (i.e., no fewer than 30 days and no more than 180 days) before the date a plan distribution is to be made.

The modifications, described in Notice 2018-74, reflect changes made under the Tax Cut and Jobs Act of 2017 (TCJA) relating to the rollover of qualified plan loan offset amounts and guidance issued in IRS Revenue Procedure 2016-47 (Rev. Proc. 2016-47) on self-certification of eligibility for a waiver of the 60-day deadline for completing a rollover.

The Internal Revenue Service has issued Notice 2018-68 providing guidance on changes in Code Section 162(m) made by the Tax Cuts and Jobs Act of 2017. The Notice has some good news and some not-so-good news, but on balance is helpful, particularly in continuing to respect state law in identifying a “written binding contract” under the grandfather rules.

To learn more, please read our LawFlash.

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.