ISS Expands List of Egregious Equity Plan Factors

As reported in prior blogs, Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, uses a proprietary “Equity Plan Scorecard” approach to evaluate public company equity compensation plans and will recommend a “for” or “against” vote depending on a combination of plan features, plan cost, company grant practices, etc.  Last week ISS issued its Proxy Voting Guideline Updates for 2020, which are generally effective for meetings on or after February 1, 2020 (“2020 Update”).  The 2020 Update, among other things, makes changes to the current Equity Plan Scorecard.

Regardless of how a plan scores under the current Equity Plan Scorecard, ISS will generally recommend a vote against a plan proposal if any of the following egregious factors apply: (i) accelerated vesting pursuant to a liberal change in control definition; (ii) provisions that permit the repricing and/or cash out of underwater options or stock appreciation rights without shareholder approval, (iii) provisions that make a plan a vehicle for problematic pay practices or create a pay for performance disconnect, (iv) the plan is excessively dilutive to shareholder holdings, or (v) the plan contains other features that have a significant negative impact on shareholder interests.  Read More ›

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California Cares . . . About Employees Losing Flexible Spending Account (“FSA”) Funds

California recently approved Assembly Bill 1554, adding a flexible spending account notice requirement to § 2810.7 of the California Labor Code.  The new law, which takes effect January 1, 2020, states:

(a) An employer shall notify an employee who participates in a flexible spending account, including, but not limited to, a dependent care flexible spending account, a health flexible spending account, or adoption assistance flexible spending account, of any deadline to withdraw funds before the end of the plan year. Notice shall be by two different forms, one of which may be electronic.

(b) Notices made pursuant to subdivision (a) may include, but are not limited to the following: (1) Electronic mail communication. Read More ›

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Retirement Plan Dreams May Go Up in Smoke for Marijuana Companies

Companies in the medical and recreational marijuana industry continue to face an uphill battle for access to financial services.   Although a number of states have legalized the medicinal and/or recreational use of marijuana, marijuana remains classified as a Schedule I drug subject to the federal Controlled Substances Act.  As such, financial services companies that wish to serve the marijuana industry could find themselves subject to the Bank Secrecy Act and the criminal money laundering provisions.  Those challenges are well documented.  However, do the same types of challenges exist if a marijuana company wants to sponsor a qualified retirement plan for its employees?  Read More ›

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Must Drug Manufacturer Coupons Count Toward Annual Maximum Out-Of-Pocket Limits? Stay Tuned …

What is the Annual Maximum Out-Of-Pocket Limit (“MOOP”)?

MOOP is the most a participant must pay for covered services under a group health plan in a plan year. After a participant spends this amount on deductibles, copayments, and coinsurance, the health plan must pay 100% of the costs of covered benefits.

What are Drug Manufacturers’ Coupons (“Coupons”)?

Many drug manufacturers offer coupons to patients to reduce out-of-pocket costs. Drug manufacturers may offer these coupons for various reasons including: (1) to compete with another brand name drug in the same therapeutic class; (2) to compete with a generic equivalent when released; or (3) to assist consumers whose drug costs would otherwise be extremely high due to a rare or costly condition. Read More ›

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Form 5500 Penalty Relief Deadline Approaching for MEPs

On July 24, 2019, the Department of Labor (the “DOL”) issued Field Assistance Bulletin 2019-01 (the “Bulletin”), which provides transition relief to multiple employer plans (“MEPs”) that failed to comply with certain annual reporting requirements. 

The Bulletin focuses on a Form 5500 reporting requirement added by the Cooperative and Small Employer Charity Pension Flexibility Act, which requires MEPs to report on the Form 5500 all participating employers and an estimate of the percentage of contributions made by participating employers during the plan year.  This disclosure requirement first became effective for plan years beginning after December 31, 2013.             

The DOL has identified widespread and ongoing failure by MEPs to comply with the above reporting requirement.  Read More ›

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Design Considerations for Medical Emergency Leave-Sharing Programs

Employers often allow employees to donate leave to co-workers who are experiencing medical emergencies. If properly structured, these leave transfers can be excluded from the gross income of the donor employee and included in the gross income of the co-worker recipient.  There are no statutes or regulations governing these arrangements. The only formal guidance available to employers seeking this favorable tax treatment for medical emergency leave-sharing programs is Revenue Ruling 90-29 (“Rev. Rul. 90-29”). Other leave-sharing programs, such as those for major disasters or military leave, are subject to different rules and may or may not receive similar tax treatment.

Departure from the medical emergency leave-sharing program design approved by the IRS in Rev. Read More ›

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The Ninth Circuit Reverses Itself and Enforces ERISA Mandatory Arbitration Clause

A three-judge panel of the Ninth Circuit recently decided that Charles Schwab Corp. can require a proposed class action to arbitrate its claim that Schwab breached its fiduciary duties by including Schwab-affiliated investment funds in the Plan, despite the funds’ poor performance, to generate fees for Schwab and its affiliates.  In doing so, the Ninth Circuit overturned its former decision in which it held that ERISA claims cannot be arbitrated.

Specifically, the Ninth Circuit panel determined that the Ninth Circuit’s 1984 opinion in Amaro v. Continental Can Co. should no longer be followed because of more recent precedent permitting ERISA claims to be arbitrated, including the U.S. Read More ›

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Preventive Care Can Now Be Covered for Specified Chronic Conditions Before HDHP Deductible

On July 17, 2019 the IRS released Notice 2019-45  resolving a preventive care problem that has been plaguing many high deductible health plans (“HDHPs.”).  The Affordable Care Act’s free preventive care mandate appears to be working.  People are catching medical problems sooner.  As a result, many employers have embraced the concept of free preventive care and want to go a step further – providing free preventive care for certain chronic conditions, such as asthma, diabetes, and heart disease.  However, they have run into a snag.  Under IRS guidance, treatment for chronic conditions is not “preventive care” and covering it before the deductible is met jeopardizes the plan’s status as an HDHP. Read More ›

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Authorized Representatives – Fresh Look at an Old Rule

Earlier this year, the Department of Labor issued an information letter explaining ERISA’s authorized representative requirement.  Below are some of the takeaways employers may want to consider.

1.     The Authorized Representative Requirement Under ERISA

ERISA’s claims procedure regulations expressly give participants and beneficiaries the right to appoint authorized representatives to act on their behalf in connection with a claim for benefits and an appeal of an adverse benefit determination.  Furthermore, when a claimant clearly designates an authorized representative to assist with a claim and/or appeal, the plan should direct the claimant’s information and notifications to the authorized representative to act on behalf of the claimant. Read More ›

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Reassigning Section 1557: Trump Administration Proposes Reversal of Transgender Benefits Rule

In 2016, the Department of Health and Human Services (“HHS”) Office of Civil Rights issued final regulations implementing the nondiscrimination provisions of the Affordable Care Act (“Section 1557”), which prohibit the categorical refusal of health coverage to transgender participants and require that individuals be treated consistent with their self-selected gender identity. These regulations drew sustained legal challenges and prompted HHS to withdraw, revise and reissue the Section 1557 regulations (the “Proposed Regulations”).

In short, the Proposed Regulations would repeal large portions of the original nondiscrimination rules and would redefine the scope of various protections under Section 1557. Specifically, the Proposed Regulations negate the provisions of Section 1557 covering nondiscrimination based on sex and gender identity. Read More ›

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