Benefits & Payroll Tax

Our ML BeneHelp program recognizes that our employee benefits clients often need an extra pair of hands due to a variety of circumstances—both unforeseen and expected. Through ML BeneHelp, our senior benefits advisors are available for in-person or virtual temporary assignment to assist during crunch times (we expect these assignments would last no more than six months). These professional advisors, many of whom have more than 20 years of experience and have varied backgrounds that include working for corporate human resources/benefits departments, consulting firms, and other law firms (and some are nonpracticing lawyers), bring unique and substantial technical knowledge and practical experience to our benefits practice and clients.

The types of projects ML BeneHelp can assist with include, but are not limited to, the following:

• Drafting, reviewing, and amending plan documents, summary plan descriptions, and summaries of material modifications
• Drafting and reviewing participant communications and notices, including open enrollment materials
• Drafting, reviewing, and processing qualified domestic relations orders (QDROs) and qualified medical child support orders (QMSCOs)
• Conducting internal plan audits (document, operational, and dependent), and assisting with governmental agency audits
• Assisting with and reviewing Form 5500 filings 
• Running point between the client and outside vendors, including assisting with outside vendor RFPs
• Assisting with corrections filings under the Internal Revenue Service Employee Plan Compliance Resolution System (EPCRS) and the US Department of Labor Voluntary Compliance Program (VCP), as well as determination letter submissions
• Assisting with day-to-day administration issues, including benefits claims and appeals matters, enrollment questions, COBRA (and other continuation coverage) questions, tax withholding questions, and other matters
• Assisting with reductions-in-force voluntary severance programs to ensure that the programs and related documentation comply with ERISA, COBRA, tax rules, and plan documents
• Assisting with due diligence reviews and post-closing benefits integration related to mergers, acquisitions, and other transactions

Our senior benefits advisors regularly perform these services and others for health and welfare and retirement plans. They are available to be dedicated to your projects—whether from the client’s offices, remotely, or a combination thereof.

ML BeneHelp services are priced in a variety of ways, including on a fixed-fee basis, which account for the scope of work and whether the senior benefits advisors are working at the client’s location or remotely from their Morgan Lewis offices (or some combination thereof).

Our executive and nonexecutive fringe benefits practitioners advise on the exclusion, substantiation, valuation, and deduction of the following fringe benefits:

• Qualified transportation fringes
• Expense reimbursement/accountable plans
• Meals and lodging (including per diem payments)
• Employer-provided automobiles
• Working condition fringes
• Employee discounts
• No-additional-cost fringes
• Employee prizes and awards
• Employer cafeterias and athletic facilities
• Employee computers and cell phones
• Spousal travel

We also counsel on the following employee-related benefits:

• Accountable plans
• Adoption assistance plans
• Employee leave banks
• Education assistance plans
• Supplemental unemployment benefit (SUB or SUB-Pay) plans
• Severance arrangements
• Alternatives to SUB-Pay plans and severance

Our team further advises clients on the following executive fringe benefits and related regulations:

• Executive loans
• Use of corporate jets and standard industry fare level (SIFL) computations
• Income minimization techniques and tax planning opportunities
• Housing assistance and relocation benefits
• Executive security programs
• US Securities and Exchange Commission (SEC) reporting of executive perks
• Executive physicals 

As IRS National Office and US Department of the Treasury officials, two of our partners helped create, interpret, and administer safe harbors and administrative relief provisions for federal payroll/employment taxes (FICA, FUTA, RRTA, and FITW). When facing IRS payroll tax, fringe benefits, and independent contractor audits, our clients benefit from our lawyers’ substantive and historical knowledge of these provisions, which affect virtually every corporation, executive, and employee in the United States.

Our team helps clients obtain payroll tax relief on worker reclassification, employer-provided cell phones, flights on company-provided aircraft, golden parachute payments, statutory stock options, and next-day payroll tax deposits, among others. We assist with responses to document requests from IRS examining agents, protests filed with the IRS Office of Appeals, and postappeals mediation. We help our clients to settle on favorable terms, but when that is not possible, our litigators represent clients through the ensuing process.

We regularly advise and counsel on the following payroll tax and information-reporting issues:

• FICA taxes
• Shifting payroll tax liability
• Social Security and totalization agreements
• Form W-2 and Form 1099 reporting
• Correcting unreported wages
• Section 530 relief
• Relief under both the Classification Settlement Program (CSP) and Voluntary Classification Settlement Program (VCSP) initiatives
• Payroll tax adjustment and refund processes
• Payroll tax treatment of corporate mergers, acquisitions, and reorganizations (including excise tax withholdings on executives’ golden parachute payments)
• Federal and state income tax withholding
• Payroll information reporting
• FICA tax treatment of nonqualified deferred compensation under Section 3121(v)
• Payroll tax treatment of expatriates
• Interest-free adjustments
• Supplemental unemployment benefit (SUB or “SUB-Pay”) plans
• Internal compliance checks and compliance audits
• Impact of pass-through entities
• Reporting and withholding issues on statutory and nonstatutory stock options
• Employer identification numbers (EINs)
• Tip compliance
• Litigation settlement payments
• Accountable plans and per diem arrangements
• Intercompany employee transfers
• B notices
• Penalty abatements and mitigation
• Participation in state-level voluntary compliance programs 

Working across the firm, we collaborate with our independent contractor initiative colleagues to provide counsel on the many tax and employee benefits aspects associated with contingent workforce and independent contractor planning, compliance, and audits.

As evidenced by independent contractor audit activity and Form SS-8 filings, the IRS considers independent contractor, employee leasing, and other contingent workforce relationships as part of its integrated approach to addressing fringe benefit and payroll tax issues. With this in mind, our lawyers advise clients on the following contingent workforce and independent contractor issues:

• Worker reclassification audits
• Co-employment
• Employee leasing
• Statutory employers–statutory employees
• Statutory nonemployees
• Responding to Form SS-8 filings
• Professional employer organizations (PEOs), administrative service organizations (ASOs), and other outsourcing arrangements
• Independent contractor treatment
• Temps and permatemps
• Payrolling arrangements
• Section 530 relief, safe harbors, and compliance
• Classification Settlement Program (CSP) agreements
• Employee benefits or Microsoft (independent contractor) issues
• Authorized agents and common paymasters 

Drawing on government and private-sector experience, our lawyers monitor and respond to IRS audit activities before they develop into costly litigation. Our practice covers the areas of employee/executive fringe benefits, payroll taxes, and the contingent workforce—all areas that the IRS aggregates in its employment tax audit initiatives. This allows us to respond efficiently to IRS audit efforts while we continue to develop tax planning and refund opportunities for our clients.

Morgan Lewis lawyers aim to achieve an administrative solution for our clients. However, if we cannot resolve an audit issue administratively, our litigators have the technical and government service experience—as well as the firm’s broad tax litigation resources—to deliver the best possible service to our clients.

We anticipate an increase in tax litigation as the IRS devotes more audit resources to our targeted practice areas. To address this growing IRS litigation activity, our lawyers guide clients through all stages of tax controversies. In addition to managing tax audits and IRS Appeals protests, we litigate tax controversies before the US Tax Court, the US Court of Federal Claims, and the US district courts. Our appellate litigators assist on those cases that go to the courts of appeals and US Supreme Court.

Our experience includes FICA taxation test cases that involve tipped employees, medical residents, employee stock purchase plans, and the treatment of downsizing payments. We have also achieved significant success at both the trial and appellate levels in cases that cover excise taxation of frequent flier miles, the deductibility of corporate aircraft operating costs, tax withholding on per diem payments, and the payroll taxation and deductibility of stock option compensation.