Employee Benefits and Executive Compensation:
Comprehensive Services.
Practical Solutions.

Wednesday, September 16, 2015

Whether it’s contemplating the business impact of the US Department of Labor’s proposed new fiduciary rule, the US Securities and Exchange Commission’s proposed rules on executive compensation, the myriad Affordable Care Act regulations, or any of the other seemingly countless laws and regulations governing employer-provided retirement and healthcare plans, employee benefits and executive compensation is a daunting-but-critical area for all businesses—from just-conceived startups to Fortune 50 giants.

With approximately 75 dedicated professionals across the United States, Morgan Lewis offers comprehensive employee benefits and executive compensation services. We help our clients navigate the ever-changing legal and business landscape and address key strategic issues. Our lawyers advise on a broad spectrum of matters—from plan design, qualification, and documentation matters to fiduciary questions, plan investment issues, payroll tax, fringe benefits issues, executive compensation structure and design, and healthcare and other benefits. We also assist multiemployer plans and their contributing employers, tax-exempt entities, and governmental employers with the unique benefits challenges they face. We work for clients on US and global issues. We approach each engagement with an eye toward our clients’ business operations, benefits and compensation structure, and fiscal reality.

Practice leader Steve Spencer and deputy leader Craig Bitman recently talked about what distinguishes our employee benefits and executive compensation practice, and how the practice is helping clients address the latest regulatory challenges, industry trends, and developments.

What does the employee benefits and executive compensation (EBEC) team do and why does this area matter to clients?

The benefits and executive compensation space is critically important to clients. We hear about these issues in the papers and on the news every day. Just to name a few examples: the implementation of the Affordable Care Act (ACA); the so-called “retirement crisis” (will today’s workers have enough to retire on?); or the ongoing controversy about the amount and structure of executive compensation. Our clients have to deal with these issues and more every day. Just consider the size of the US-funded retirement plan universe—as of the end of the first quarter of 2015, total US retirement assets were almost $25 trillion and accounted for 36% of all household financial assets in the United States. Think also of the size and importance of the employer-provided healthcare industry in the United States. Because these economic factors are so important in US society, it stands to reason that there would be both significant government regulatory and taxation involvement and also significant planning and structuring issues to be addressed. We help our clients with all of that and more.

What are the key strengths that differentiate our employee benefits and executive compensation practice?

The broad range and depth of our benefits practice, which is enhanced by our interdisciplinary approach, sets us apart. We maintain seven task forces that concentrate on the key substantive areas facing our clients; we have deep experience in all of these areas. This is possible because of the size of our practice—we have the resources to devote to developing and maintaining experience and knowledge in all of these areas.

We have a robust interdisciplinary relationship with our investment management, labor and employment, ERISA litigation, securities and corporate governance, tax, and government relations practices. Partnering with our colleagues, we are available to help our clients work through any benefits-related matter that might arise. We also have developed specific experience in a number of industry areas, including financial services, retail, life sciences, and emerging growth companies.

We are also fortunate to work with our non-lawyer advisors who are benefits professionals—typically with between 15 and 30 years of benefits experience in human resources departments, consulting firms, and/or law firms. Our clients rely on our advisors to use their technical skills to address key drafting and administrative issues in a cost-efficient manner.

What are the top three hidden liabilities that you believe clients should be on the look-out for?

  1. Successor withdrawal liability in corporate transactions: Recent case law highlights that asset purchasers need to be aware that they may become responsible for the seller’s contingent withdrawal liability even if the deal document says otherwise.

  2. Misclassifying contingent workers: This issue has surfaced in various benefits, tax, and employment contexts over the years. Now it is a hot-button issue for purposes of the ACA employer shared responsibility mandate. Failure to correctly classify workers can result in significant penalties on the employer.

  3. Identifying fiduciaries under the Department of Labor’s proposed fiduciary rule: With proposed changes to the definition of “fiduciary,” our clients need to be prepared to modify their current practices to account for new types of fiduciaries. Financial institutions, other investment-services providers, and plan sponsors may be caught flat-footed if they wait for the final rule to consider the impact these changes may have on their current practices.

Describe some recent cutting-edge projects that the EBEC team has handled.

We recently worked with our litigators to help our client M&G Polymers win a US Supreme Court battle overturning a major precedent impacting retiree health plans. We are working with a number of clients on freezing or “de-risking” their defined benefit plans. We’ve worked with any number of financial services firms to file comments on the DOL fiduciary proposal, and we are working with states and municipalities to design and implement retirement plans for their employees and citizens.

Partnering with our corporate and business transactions colleagues, we have evaluated the risk of withdrawal liability in connection with potential acquisitions and sales, including the risk of successor liability. Where possible, we have helped to structure transactions to avoid triggering this liability. In those instances where liability has been triggered, we work together with our colleagues in the labor and employment practice to defend against such actions.

What educational services are available to help our clients monitor and address employee benefits and executive compensation issues?

We are committed to client education. To keep in-house counsel, human resources staff, and committee members apprised of recent legal developments, we offer a variety of complimentary WebEx webinars and live roundtables (approximately 35 in the last 12 months). We offer various webinar series, such as our quarterly “Hot Topics in Employee Benefits: What We’re Seeing” webinar that focuses on current trends in benefits law. We also offer “Basics” webinars in key areas. In addition, we disseminate written materials, including client alerts (combined, more than 15 in the last 12 months).

Our live roundtable events give clients the opportunity to meet their counterparts at other companies and talk about the common issues they are facing. Topics covered at roundtable events have included executive compensation, financial services, wellness programs, and ERISA-plan investment issues.

We’re really excited about our recently launched external blog, ML BeneBits, which provides high-level, “bite-sized” information on a broad spectrum of benefits matters. We already have more than 300 subscribers, and encourage you to subscribe.