The Office of the Superintendent of Financial Institutions (OSFI) has issued a new draft Instruction Guide regarding amendments that reduce benefits under defined benefit pension plans. The draft Instruction Guide may be used while in draft form and replaces the previous Instruction Guide issued in April 2006. The new draft Instruction Guide can be found here.
The Canadian Association of Pension Supervisory Authorities (CASPA) issued new guidelines regarding pension plan prudent investment practices and pension plan funding policies. CASPA is an association of pension regulators that develops harmonized regulatory policies and guidelines to improve pension plan administration. Although the guidelines are not “law,” pension plan administrators may use such guidelines in their efforts to implement best practices and fulfill their fiduciary duties. The new guidelines can be found here: Guideline No. 6 and Guideline No. 7.
An Oregon federal magistrate judge granted director defendants’ motion to dismiss a shareholders’ derivative action claiming that the board breached its fiduciary duty of loyalty to the shareholders and harmed the company by raising executive compensation in 2010, despite negative shareholder returns. The court held that the shareholders’ claims did not override the presumption that, in making decisions regarding executive compensation, the board, in exercising its business judgment, acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interest of the company. Plumbers Local No. 137 Pension Fund v. Davis, No. 03:11-633-AC (D. Ore. Jan. 11, 2012).
The Department of Labor recently announced that the 2011 Form M-1 annual report for multiple employer welfare arrangements (MEWAs) is now available for filing. The 2011 Form M-1 is generally the same as the 2010 version, but with some minor changes for laws that became effective in 2011. The 2011 Form M-1 is due March 1, 2012, with an available extension until May 1, 2012. In addition, the DOL recently announced significant proposed changes to the Form M-1. Most notably, the proposed Form M-1 incorporates changes imposed by the Patient Protection and Affordable Care Act, which requires MEWAs to register with the DOL and file at least 30 days prior to operating in a state or expanding their operations in an additional state, and within 30 days of a merger, material change or a participant contribution increase of 50 percent or more. The proposed Form M-1 also requires the provision… Continue Reading
Puerto Rico Treasury Department Issues Guidance on Determination Letter Requirements for Qualified Plans
The Puerto Rico Treasury Department recently released guidance on obtaining determination letters for retirement plans intended to be qualified under the Puerto Rico Internal Revenue Code of 2011 (“2011 Code”). The guidance is effective January 1, 2012 and included in Puerto Rico Internal Revenue Circular Letter 11-10. The new guidance provides that amendments required by the 2011 Code must be adopted by the last day of the plan year beginning on or after January 1, 2012 and must be filed with the Puerto Rico Treasury before the last day that the sponsoring employer’s Puerto Rico income tax return must be filed for the tax year that begins on or after January 1, 2012. The new guidance also details the amendments required for compliance with the 2011 PR Code. The guidance can be found here (in Spanish).
Institutional Shareholder Services Inc. (“ISS”) recently released its 2012 corporate governance policy update which includes changes to the way it evaluates executive pay-for-performance to ensure alignment between compensation and shareholder goals. The new ISS methodology includes measuring both peer group alignment and absolute alignment. Key factors that the ISS will evaluate include a company’s one- and three-year total shareholder return (“TSR”) relative to its industry group, and whether the CEO’s total compensation is aligned with the company’s TSR in both the short and long-term. ISS’s 2012 policy can be found here.
Multiple news sources have reported that Cincinnati Bell has agreed to settlement terms in In re Cincinnati Bell, Inc. Derivative Litigation. The complaint in this case alleged that the board of directors breached its fiduciary duties by approving the company’s 2010 executive compensation plan after certain shareholders voted against it in an advisory say-on-pay vote. The settlement terms include a variety of corporate governance changes that, among other things, will more clearly communicate the Company’s executive compensation practices to its shareholders, and the payment of plaintiff’s attorneys’ fees and expenses. A list of the corporate governance changes can be found in Section 2.1 here.
The U.S. Court of Appeals for the Second Circuit reversed the decision of the Southern District of New York, and ordered Frank Walsh, a former member of Tyco’s board of directors to return a $20 million secret payment he received from Tyco in connection with Tyco’s acquisition of CIT Group, Inc. Walsh claimed that the board ratified the payment. The court determined that under Bermuda law, Walsh failed to disclose that he stood to personally benefit from the acquisition—a duty he owed to the shareholders, not the board. Thus, once the breach occurred, only the shareholders, and not the board, could effect a release. (Tyco Int’l Ltd. v. Walsh, 10-4526-cv (2d Cir. Jan. 11, 2012)(Summary Order)).
The IRS issued a FAQ on Question 8 on the Form 8955-SSA, regarding the required notice to participants who have terminated employment with vested plan benefits payable in a future year. The question may be answered “yes” if the individual statement was timely furnished to participants in other documentation such as benefit statements or distribution forms. A separate statement is not required, and the participant’s social security number, codes used to identify previously reported participants, or any information regarding forfeitable benefits on death need not be included. Retirement Plan FAQs Regarding Form 8955-SSA can be found here. The due date for filing the Form 8955-SSA for both the 2009 and 2010 plan years is the later of (1) January 17, 2012 or (2) the due date that generally applies for filing the Form 8955-SSA for 2010.
The Department of Health and Human Services recently issued its final rule which implements provisions regarding the reporting of gross covered retiree plan-related prescription drug costs and retained rebates by retiree drug subsidy (RDS) sponsors. The RDS program allows subsidy payments to sponsors of qualified retiree prescription drug plans for Medicare Part D drug costs for individuals who are eligible for, but not enrolled in, a Medicare Part D plan. After consideration, HHS decided against requiring RDS sponsors to report the drug costs and retained rebates because it believed that requiring such reporting would cause RDS sponsors to not participate in the RDS program. The final rule is effective on March 12, 2012. A copy of the final rule can be found here.