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Preparing to Implement New Participant Fee Disclosures

The Department of Labor has issued final regulations addressing new disclosure rules that apply to plan administrators of ?Ç£participant-directed individual account plans.” While these new rules do not apply until plan years beginning on or after November 1, 2011 (for calendar year plans?ÇöJanuary 1, 2012), employers should begin talking to their third party adminstrators early this year to be sure the necessary disclosures and comparative information will be provided in accordance with these final regulations. You can find a detailed memorandum describing the new rules, along with links to the final regulations and the DOL’s model chart for providing the comparative information by clicking?áhere.

Changes to Polish Income Tax Treatment of Employee Equity Awards

The Polish government recently adopted an amendment to Article 24.11 the Polish Personal Income Tax Law (PPIT) which, effective January 1, 2011, restricts the ability to defer tax on the awards.?á Article 24.11 of the PPIT provides an exemption for employees to defer the taxation of their equity based awards until the sale of the underlying shares so long as: (i) the shares which were delivered at vesting or exercise were newly issued shares, and (ii) the equity awards were approved by a resolution of the shareholders of the granting company.?á Effective January 1, 2011, the amendment broadens Article 24.11 by expanding the types of shares eligible for the exemption to existing shares (in addition to newly issued shares), but narrows the exemption by limiting the types of shares to those issued by an entity headquartered in the European Union or the European Economic Area.?á U.S. companies with equity based… Continue Reading

IRS Announces Changes to Rules for Income Tax Withholding for Nonresident Aliens Performing Services in the United States

The Internal Revenue Service recently announced that the withholding tables for wages paid on or after January 1, 2011 will not reflect the Making Work Pay Credit, and that Notice 2009-91 will not apply in determining the withholding on nonresident aliens.?á According to IRS Notice 2011-12, employers must determine income tax withholdings for nonresident aliens performing services within the United States using the procedure explained in Notice 2005-76, together with the tables in the revisions of Publication 15 (Circular E), Employer?ÇÖs Tax Guide, and Notice 1036, Early Release Copies of the 2011 Percentage Method Tables for Income Tax Withholding that are in effect when the wages are paid.?á Employers should implement the new withholding tables as soon as possible, but not later than January 31, 2011.

Asset Purchaser May Have Successor Liability for Delinquent Contributions to Multiemployer Plan

?á The Third Circuit ruled that the purchaser of assets of an employer obligated to contribute to a multiemployer plan may, under certain circumstances, be held liable for the seller’s delinquent contributions to that plan.?á?áAccording to the Court,?ásuccessor liability?ámay?áexist where the purchaser had notice of?áthe liability prior to the sale and there exists sufficient evidence of continuity?áof operations?ábetween the purchaser and seller.?á Einhorn v. M.L. Ruberton Construction Co., No. 09-4204 (3rd Cir. Jan. 21, 2011).

Second District Court Holds Health Care Reform Unconstitutional

A federal district court in Florida has held that the individual insurance coverage mandate under the federal health care reform law is unconstitutional. Further, the court concluded that the insurance mandate could not be severed from the broader health reform law and that it therefore rendered the entire law unconstitutional. Texas was among 26 states that brought the action challenging the constitutionality of the individual coverage mandate, which is not scheduled to take effect until 2014. This is the second district court to hold the individual coverage mandate unconstitutional, while two other district courts held it constitutional. Florida vs. U.S. Dept. of Health and Human Services, Case No.: 3:10-cv-91-RV/EMT (N.D. Fla. January 31, 2011).

SEC Adopts Final Rule on Say-on-Pay and Golden Parachute Compensation

On January 25, 2011, the Securities and Exchange Commission (SEC) adopted final rules implementing the approval of executive compensation (and frequency of approval of executive compensation) and golden parachute compensation as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the final rules, public companies subject to the federal proxy rules are required to: (1) provide their shareholders with an advisory vote on executive compensation at least once every three calendar years (?Ç£say-on-pay?Ç¥), (2) provide their shareholders with an advisory vote on the desired frequency of these votes at least once every six calendar years (say-on-frequency); (3) provide shareholders with an advisory vote on golden parachute arrangements and understandings in connection with merger and other corporate transactions (say-on-golden-parachute compensation); and (4) provide additional disclosure of golden parachute arrangements in merger proxy statements. The say-on-pay and say-on-frequency votes are required at least once every three years and every… Continue Reading

Sixth Circuit Limits Reach of Yard-Man Inference on Vesting of Welfare Benefits

The U.S. Court of Appeals for the Sixth Circuit recently addressed the enforceability of a plan amendment limiting to a period of two years the duration of collectively-bargained occupational disability benefits under a pension plan. The opinion is notable because it distinguishes existing case law on the vesting of welfare benefits cited by both the participant and the plan. The plaintiff, a participant who was already receiving the disability benefits at issue, argued that the amendment violated ERISA because his benefits were vested as a matter of law. The district court agreed, relying on Int?ÇÖl Union, United Auto., Aerospace, & Agric. Implement Workers of Am. v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir. 1983), under which an inference in favor of vesting is used to determine whether a right to retiree health benefits continues beyond the expiration of a collective bargaining agreement. The Sixth Circuit vacated the district court… Continue Reading

Forfeiture of Unvested Benefits in Mandatory Plans is Not A Refusal to Pay Wages Under CA Law, Court Says

Plaintiffs alleged that they were required to accept part of their wages in the form of awards under the Company’s bonus programs and?á “top hat”?á plan.?á When Plaintiffs terminated employment, they forfeited their unvested benefits in these plans.?á Under California labor law, an employer must pay any wages earned and unpaid at the time of termination of employment.?á In order to be “wages” under California law, all the conditions agreed to in advance for earning those wages have to be satisfied.?á The court found that the unvested benefits were not “wages” because the specific terms of the bonus programs and the top hat plan controlled whether the Plaintiffs were entitled to such wages and the bonus programs and top hat plan provided that such benefits were forfeited.?á Callan v. Merrill Lynch & Co., No. 09 CV 0566 BEN, 50 EBC 1449 (S.D. Cal. Aug. 30, 2010).

IRS Deadline for Reporting ISO Exercises and ESPP Stock Transfers for 2010 is Approaching

Section 6039 of the Internal Revenue Code requires companies to furnish a written statement to any employee or former employee who either (i) exercised an incentive stock option (ISO) during 2010 or (ii)?á acquired shares under an employee stock purchase plan (ESPP) during 2010.?á The company must furnish these statements?á to employees on IRS Forms 3921 (for ISO exercises) and Form 3922 (for ESPP transfers) or an acceptable substitute, no later than January 31, 2011.?á In addition, beginning for ISO exercises and ESPP transfers occurring in 2010, companies must file returns with the Internal Revenue Service on IRS Forms 3921 and 3922 no later than February 28, 2011, for paper filings, or March 31, 2011, for electronic filings.?á Failure to file proper reports with the IRS or to provide information statements may result in penalties under the Internal Revenue Code.?á A copy of the Form 3921 and 3922 are available… Continue Reading

IRS Updates Guidance on Determination Letters

The IRS issued Revenue Procedure 2011-6 this week, updating the process of requesting employee plans determination letters from the agency on the qualified status of pension, profit-sharing, stock bonus, annuity and employee stock ownership plans. In addition, the IRS published Revenue Procedure 2011-8, increasing user fees effective February 1, 2011. This guidance is available here.

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