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Australian Treasury Issues Draft Amendment to Impose Director Liability for Superannuation Obligations
Under new legislation that has been introduced into Parliament, directors would be personally liable for their company’s unpaid superannuation guarantee amounts. When a company fails to meet its superannuation funding obligations, the Commissioner of Taxation would be authorized to step in and assess personal liability against the directors for the unpaid amounts. This is in addition to liability that directors could face for pay-as-you-go tax withholding liability. In addition, the Commissioner of Taxation would no longer be required to give 21 days notice before starting proceedings against directors. The proposed legislation can be found here.
Ontario (Canada) Issues Draft Regulations Under the Pension Benefits Act
The Ministry of Finance issued changes to Regulation 909 that would (1) enable the proclamation of the “retired member” provisions in the PBA; (2) implement immediate vesting for plan members and increase the threshold for the small pension payout rule; (3) further clarify the surplus payment rules; and (4) reflect changes to the Income Tax Act (Canada) regarding Individual Pension Plans. Draft Regulations are here. Discussion paper can be found here.
Court Finds Personal Jurisdiction Over a Foreign Parent Regarding Controlled Group Liability for U.S. Subsidiary’s Pension Plan
The Pension Benefit Guaranty Corporation (PBGC) brought suit against Asahi Tec Corporation, a Japanese company, asserting controlled group liability against Asahi for the underfunding of the terminated pension plan maintained by its bankrupt U.S. subsidiary, Metaldyne. Asahi filed a motion to dismiss, asserting that the U.S. Federal District Court for the District of Columbia lacked personal jurisdiction over Asahi. Asahi argued that because it did not commit any acts with respect to the pension plan (with either funding or the termination), and because its sole contact with the United States was its ownership of a U.S. subsidiary, there was no basis for personal jurisdiction. The court disagreed, noting the PBGC’s claims against Asahi were not based on the pension plan’s termination or underfunding, but were predicated solely on Asahi’s status as a member of the controlled group through its acquisition of Metaldyne. The court denied the motion to dismiss on… Continue Reading
California Court Dismisses Say-on-Pay Shareholder Derivative Lawsuit
A California Superior Court recently dismissed a say-on-pay shareholder derivative lawsuit that was based, in part, on statements made by the defendant in its Compensation Discussion and Analysis (CD&A) section of the proxy statement. The basis for the lawsuit against the defendant’s board of directors was the approval of the compensation plan in January 2011, after a shareholder vote rejected that plan. Despite alleged poor performance results in 2010, and statements by the defendant that its pay for performance policy provided that compensation would be decreased for poor performance, the defendant’s board of directors nevertheless increased executives’ compensation for 2011. The court held that the plaintiffs had not overcome the presumption of the business judgment rule. Notwithstanding what appears to be boilerplate language in the CD&A, the court found the statements to be evidence that the defendant exercised valid business judgment. In finding so, the court held that the plaintiffs… Continue Reading
JOBS Act FAQs Regarding Disclosure Exemption for Emerging Growth Companies
As previously reported, the JOBS Act exempts an “emerging growth company” from certain executive compensation reporting requirements. Recent SEC FAQs provide additional guidance regarding the scaled down reporting requirements. An emerging growth company may amend its registration statement that was initially filed prior to April 5, 2012 to provide the scaled disclosure by either a pre-effective amendment to a pending registration statement or in a post-effective amendment. In addition, an emerging growth company that completed its initial public offering after December 8, 2011 and prior to April 5, 2012 may file its next periodic report using the scaled disclosure provisions. Finally, an emerging growth company may decide to comply with some of the scaled disclosure provisions and some of the regular disclosure requirements if it does not want to comply with all of the scaled disclosure provisions. The SEC’s FAQs can be found here.
IRS Announces Health Savings Account Limits for 2013
The IRS released the 2013 inflation adjusted deduction limitation amounts for annual contributions made to health savings accounts under Section 223 of the Internal Revenue Code. For the 2013 calendar year, the annual limitation on deductions under Section 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,250. The annual limitation for the 2013 calendar year for an individual with family coverage under a high deductible health plan is $6,450. For the 2013 calendar year, a high deductible health plan is defined under Code Section 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,250 for self-only coverage or $2,500 for family coverage, and the annual out-of-pocket expenses do not exceed $6,250 for self-only coverage or $12,500 for family coverage. Revenue Procedure 2012-26 can be found here.
Guidance Clarifies that Self-Funded Group Health Plans are Not Subject to Medical Loss Ratio Rules
An informational bulletin published by the Center for Consumer Information and Insurance Oversight clarified, among other things, that self-funded group health plans are not subject to the medical loss ratio (MLR) reporting and rebate requirements. The bulletin explained that the MLR requirements apply to health insurance issuers offering group or individual health coverage, and that a self-funded group health plan did not fit within the Public Health Service Act’s definition of health insurance issuer. The bulletin also provided guidance on the applicability of the MLR rules to employer groups of one, counting employees for determining market size, individual association policies, reinsurance and reporting, exchange user fees, and “mini-med” experience. A copy of the bulletin is available here.
Failure to Offer Comparable Severance Package Could Be Discriminatory Under Title VII
The U.S. Court of Appeals for the Fourth Circuit reversed and remanded a district court’s dismissal of a claim by a former employee that she was not offered the same severance benefits as other similarly situated male counterparts when they were terminated from employment. In this case, the employee was offered three months of continued pay and health benefits when her employment as the county’s human resources director was terminated. The employee claimed that males in similar positions were customarily offered six months of pay and benefits, or were transferred to positions with less responsibility while continuing their pay and benefits. The district court dismissed her claim, finding that there was no factual basis for an “adverse employment action” because there was no contractual right to the severance package and she was a former employee at the time the severance package was offered. The Court of Appeals reversed the district… Continue Reading
SEC Sues to Recover Bonuses and Stock Profits of “Innocent” Former Executives
The Securities and Exchange Commission (“SEC”) sued the former CEO and CFO of an Austin-based company for failure to reimburse the company for cash bonuses, incentive and equity-based compensation (“SOX 304 compensation”) and profits received from sales of company stock during the 12-month periods following the issuance of the company’s inaccurate quarterly and annual financial statements, which were later restated. The company was required to restate its financial statements due to a fraudulent scheme by two sales executives to overstate the company’s revenues and earnings. The SEC did not allege the former CEO and CFO participated in the wrongful conduct; however, the SEC alleged they were still required to reimburse the company for the SOX 304 compensation and stock sale profits they received following the filing of the inaccurate statements. The SEC complaint can be found here.
IRS Releases Proposed Regulations on the Comparable Effectiveness Fee
The Internal Revenue Service (“IRS”) released proposed regulations regarding the “comparable effectiveness fee” applicable to certain health insurers and plan sponsors of self-insured health plans under PPACA. The comparable effectiveness fee will assist in financing the Patient-Centered Outcomes Research Institute (the “Institute”) which was established under PPACA to fund research of the clinical effectiveness of medical treatments, procedures and drugs. PPACA imposes the comparable effectiveness fee on an applicable issuer or plan sponsor for each plan or policy year ending on or after October 1, 2012, and before October 1, 2019, to support the Institute. The fee is $2.00 (for plan or policy years ending before October 1, 2013, the fee is $1.00) multiplied by the average number of lives covered under the plan or policy. The proposed regulations address the health insurers and plan sponsors which will be subject to this fee and explain how to calculate the average… Continue Reading
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