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Recent Guidance on Compensation Practices from Glass Lewis in Light of COVID-19

On March 26, 2020, Glass Lewis released its governance report discussing its approach to corporate governance in light of the COVID-19 pandemic. According to the report, Glass Lewis expects all governance issues to be impacted by COVID-19 and will be taking a pragmatic approach to corporate governance and voting on affected proposals, prioritizing disclosure and timing and certainty on such matters, and exercising discretion as appropriate. Glass Lewis states in the report that: “The stark reality is that for many workers, including executives, they should not expect to be worth as much as they were before the crisis, because their free market value as human capital has now changed. There is a heavy burden of proof for boards and executives to justify their compensation levels in a drastically different market for talent . . . Trying to make executives whole at even further expense to shareholders and other employees is… Continue Reading

Health and Welfare Issues and COVID-19: Reminder: Decrease in Pay/Hours Does Not Permit Dropping Health Plan Coverage If There is No Loss of Eligibility

As many employers reduce employees?ÇÖ work hours, employers should consider that employees will remain responsible for their health plan contributions even though their pay is decreasing. As long as eligibility for coverage does not change, an employee is not permitted to change his or her health plan elections due solely to the decrease in pay or hours. One exception to this general rule is a change in status event created in connection with the Affordable Care Act, which provides that, in certain circumstances, an employee with reduced work hours may drop health plan coverage if the employee enrolls in other health plan coverage. Because the reduced pay may not cover all payroll deductions, employers should consider adopting a priority order for payroll deductions (e.g., health plan deductions are made before 401(k) plan deductions). In addition, an employer may want to consider a waiver of premiums, which is permitted if done… Continue Reading

Retirement Plan Issues and COVID-19: Additional Relief Issued By IRS

The IRS issued Notice 2020-23 (the ?Ç£Notice?Ç¥), postponing various employee benefit related deadlines under the Internal Revenue Code. Under the Notice, the due dates of many tax payments and filings that would ordinarily fall on or after April 1, 2020 through July 14, 2020 were automatically extended to July 15, 2020. For example, Forms 990 that would have been due for calendar year filers on May 15, 2020 and Form 990-T that would have been due for calendar year filers on April 15, 2020 are now not due until July 15, 2020. Note that this relief will not apply to Forms 5500 for plans with calendar year plan years since those Forms 5500 are due July 30, 2020, which is currently outside of the relief period. The Notice also provides relief to any plan performing one of 44 time-sensitive actions that are listed under Revenue Procedure 2018-58. To the extent… Continue Reading

Retirement Benefit Expenses Covered under the CARES Act?ÇÖs Paycheck Protection Program

The Paycheck Protection Program (the ?Ç£PPP?Ç¥) under the CARES Act aims to assist small businesses affected by COVID-19 by covering certain operating expenses as an incentive to retain employees during the crisis. Expenses, such as ?Ç£payroll costs,?Ç¥ are used in the calculation of the amount of the available loan and in the amount that may be forgiven under the program. Notably, the PPP does not consider an individual?ÇÖs compensation in excess of $100,000 annualized, prorated for the covered period, to be covered as a payroll cost. The ?Ç£payment of any retirement benefit[s]?Ç¥ are among the payroll costs that are included. However, at this time, it not entirely clear what is intended to be included in the ?Ç£payment of any retirement benefit.?Ç¥ No formal guidance has been issued by the IRS or Treasury, and initial guidance issued by the U.S. Small Business Administration does not shed much light on this question.… Continue Reading

COVID-19 Puerto Rico Tax Exemptions for Employer Payments and Changes to Puerto Rico Qualified Plans

The Puerto Rico Treasury Department (?Ç£Puerto Rico Treasury?Ç¥) issued Internal Revenue Circular Letter (?Ç£CC RI?Ç¥) 20-22 to offer tax exemptions for certain employer-provided payments for COVID-19. Specifically: CC RI 20-22 extends the provisions of CC RI 20-08, which provides income tax exemptions for ?Ç£Qualified Payments Made for Disaster Assistance?Ç¥ (?Ç£Qualified Payments?Ç¥) made by employers to employees and independent contractors, to include certain payments made as a result of the COVID-19 emergency. Qualified Payments must: (i) be made be during the period from February 1, 2020 to April 30, 2020; (ii) be in addition to the compensation that the employee or contractor ordinarily receives; (iii) not discriminate in favor of highly compensated employees; (iv) not be attributable to or related to the position or salary of the employee or independent contractor; and (v) be limited to maximum payments of $2,000 per month and $4,000 in total (including both Qualified Payments made… Continue Reading

CARES Act Relief Checklist: Considerations in Deciding What Relief is Right for Your Business

The Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥) offers relief to businesses affected by COVID-19 through various programs, including forgivable loans and federal income tax credits. However, the CARES Act prevents businesses from claiming certain benefits that are considered duplicative.?á The following checklist outlines key considerations for businesses when selecting among the Paycheck Protection Program (the ?Ç£PPP?Ç¥), the Employee Retention Tax Credit, the Employer Social Security Tax Deferral, and Work Opportunity Tax Credit. Certain industries, such as aviation, have specialized relief, which is beyond the scope of this checklist. In deciding what relief is appropriate, businesses should consider, as discussed in detail below, employer size, what may be best for the business?ÇÖs employees, and the business?ÇÖs long-term prospects. While this checklist is designed as a tool to assist businesses in choosing the proper relief, the best way to determine which option is optimal for a particular business… Continue Reading

IRS Issues Additional Guidance on Coronavirus-Related Employment Tax Relief

In a series of news releases, notices, and FAQs, the IRS has begun to issue guidance on the various employer payroll tax credits and payment deferrals enacted by the Families First Coronavirus Response Act (the ?Ç£FFCRA?Ç¥) and the Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥). Links to the guidance are below, and more detailed information on the employee benefits, compensation, and employment tax provisions of the FFCRA and CARES Act can be found on our blog here. FFCRA Tax Credits: News Release: Implementation of Paid Leave and Tax Credits under the FFCRA. FAQs: COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses. Notice 2020-21: Effective Date for Employment Tax Credits under the FFCRA. CARES Act Tax Relief: News Release: Employee Retention Credit. FAQs: Employee Retention Tax Credit under the CARES Act. Notice 2020-22: Relief from Penalty for Failure to Deposit Employment Taxes. Forms… Continue Reading

EMPLOYEE BENEFIT/EXECUTIVE COMPENSATION CHANGES MADE BY THE CARES ACT

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥). This historic $2 trillion relief package received bipartisan support and is part of the third wave of federal government support as the nation copes with the acute economic fallout from the coronavirus (COVID-19) pandemic.  Some of the key provisions of the CARES Act that apply to health and welfare plans, educational assistance programs, retirement plans, executive compensation programs, and employment and payroll taxes are outlined below. Health and Welfare Plans Q1.      What COVID-19 testing and treatment is our company?ÇÖs employer-sponsored group health plan required to cover? The Families First Coronavirus Response Act (?Ç£FFCRA?Ç¥) requires an employer-sponsored group health plan (including a grandfathered plan under the Affordable Care Act (?Ç£ACA?Ç¥)) (a ?Ç£Plan?Ç¥) to provide coverage for COVID-19 diagnostic testing and services related to the diagnostic testing without any cost sharing (including deductibles, copayments, and… Continue Reading

COVID-19 EMPLOYEE BENEFIT AND EXECUTIVE COMPENSATION QUESTIONS AND ANSWERS

In light of the recent economic developments stemming from the COVID-19 pandemic, many employers are evaluating their employee benefit plans and how employee and employer costs will be impacted. The following summary provides a list of questions we have been receiving from clients over the past week, along with action items to help employers address these issues. Health and Welfare Plans and Fringe Benefits Should benefits coverage continue while an employee is on an unpaid furlough? If so, how would the employee pay the employee?ÇÖs portion of the premium? Could the employee elect to drop coverage due to the reduction in hours of active service? Could the employer pay for coverage for some or all of its furloughed employees? Continued eligibility for benefits will depend on whether the employer treats the furlough as a termination of employment or as an unpaid leave of absence. The terms of the plan, including… Continue Reading

IRS Guidance Regarding High Deductible Health Plans and Expenses Related to COVID-19

In Notice 2020-15 (the ?Ç£Notice?Ç¥), the IRS provides relief for certain expenses related to the 2019 novel coronavirus (?Ç£COVID-19?Ç¥). Generally, a high deductible health plan (?Ç£HDHP?Ç¥) must satisfy the minimum deductible and maximum out-of-pocket expense requirements under Section 223(c)(2) of the Internal Revenue Code. However, ?Ç£[t]o facilitate the nation?ÇÖs response to [COVID-19],?Ç¥ the Notice provides that a health plan that otherwise satisfies the requirements to be an HDHP will not fail to be an HDHP merely because the plan provides health benefits for testing and treatment of COVID-19 before satisfying the applicable minimum deductible requirements. Notice 2020-15 is available here.

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