The ongoing effort to provide relief for troubled multiemployer pension plans took many twists and turns in 2020, and the year ended once again without an agreed-upon solution. Looking forward to 2021, the incoming Biden administration and the new 117th Congress will continue to grapple with how best to avoid the looming insolvency of both the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer pension insurance program and a growing number of plans in critical and declining status.
As we addressed in our recent LawFlash covering the Consolidated Appropriations Act, 2021 (Act), the Act includes several requirements to enhance group health plan transparency. One provision we wanted to further highlight relates to the new requirements to show compliance with the Mental Health Parity and Addiction Equity Act (Mental Health Parity). These new rules will require plan sponsors to take steps to comply and possibly follow up with their third-party administrators (TPAs) to ensure compliance.
Since 2012, US Department of Labor (DOL) regulations under ERISA Section 408(b)(2)—a statutory exemption from the ERISA prohibited transaction provisions—have required certain service providers to employer-sponsored retirement plans to make detailed disclosures about their services and related “direct” and “indirect” compensation to a “responsible plan fiduciary” of the plan. At the time the DOL adopted this requirement, it specifically excluded health and other welfare plans. The DOL explained that while it believed welfare plan fiduciaries would benefit from guidance in this area, it recognized that the significant differences between welfare plan service arrangements and retirement plan service arrangements necessitated a tailored approach to welfare plan disclosures.
The Consolidated Appropriations Act, 2021 was signed into law on December 27, 2020. Two of our recent LawFlash publications discuss the health and welfare provisions and the expansion of the employee retention credit, respectively. Read our discussions here:
Join Morgan Lewis this month for this program on employee benefits and executive compensation:
- Don’t Call It ESG: The Department of Labor’s New Financial Factors Regulations and Their Impact on ESG Investing and ERISA Fiduciary Duties More Broadly | December 17 | Webinar presented by Elizabeth Goldberg and Julie Stapel
We’d also encourage you to attend the firm’s Global Public Company Academy series:
- Issues for Foreign Private Issuers in Cross-Border Transactions | December 16 | Webinar presented by Bradley Edmister, Sin Teck Lim, and Mathew Lewis
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:
- Philadelphia Startup and Grow Series: What’s in It for Me? Discussing Your Company’s Equity Compensation | November 17 | Webinar presented by Mims Maynard-Zabriskie and Erin Randolph-Williams
- Global Public Company Academy: Issues Concerning Cross-Border Employees | November 18 | Webinar presented by Zaitun Poonja, Jonathan Zimmerman, and Pulina Whitaker
- Managing the Workforce in Light of COVID-19: What’s Next for Hospitals and Health Systems | November 19 | Webinar presented by Bob Abramowitz, Jonathan Zimmerman, Susan Feigin Harris, Howard Young, and Daniel Kadish
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