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Goodwin Procter ERISA Litigation Update, March 28, 2013 (PDF)

Articles include: [1] Ninth Circuit Addresses Numerous ERISA Issues in Affirming District Court's Rulings in Tibble Case; [2] Fourth Circuit Affirms Dismissal of Claims and Summary Judgment in Case Challenging Financial Services Company's Use of Proprietary Products in Its Retirement Plans; and [3] Second Circuit Vacates Dismissal of Stock Drop Claim As to Plan That Neither Required Nor Encouraged Holding of Employer Stock.

Executive Order to Facilitate Availability of Alternative Assets in Defined Contribution Plans: What Does It Mean?

"The DOL could [1] issue a new Information Letter similar to the 2020 version or simply rescind the 2021 Supplemental Statement.... [2] issue a formal advisory opinion containing the current Administration's view.... [3] issue a class exemption providing legal relief from ERISA's prohibited transaction rules, including permitting DC plan fiduciaries to include proprietary products in their plans.... [4] programmatically file amicus briefs consistent with the Executive Order.... A more ambitious approach would involve promulgating a safe harbor through a new regulation."

Online Filing of Section 83(b) Elections Is Here

"Although the IRS previously required taxpayers to submit section 83(b) elections via physical mail, the IRS now permits taxpayers to submit Form 15620 online via the IRS website. Because of the importance of making a proper and timely section 83(b) election, taxpayers should consider making any such elections online."

Internal Revenue Code Section 162(m): Proposed Regs

"[To] determine whether an employee is an additional covered employee, the proposed regulations define compensation as compensation that would but for Section 162(m) be allowable as a deduction. This is a departure from the definition of compensation applicable to the original covered employees, which is defined as the total compensation required to be disclosed in the Summary Compensation Table under [SEC] rules. This means that a separate methodology for calculating compensation under Section 162(m) will be required for additional covered employees."

Deadline Approaching for Reporting 2024 ISO Exercises and ESPP Share Transfers

"With respect to ISO exercises and ESPP share transfers that occurred in 2024, Copy A of the respective form must be filed with the IRS no later than February 28, 2025, if filing on paper, or March 31, 2025, if filing electronically.... Copy B of the respective form must be furnished to the applicable employee or former employee by January 31, 2025."

A New Form for Section 83(b) Election: IRS Form 15620

"Section 83(b) elections can provide significant tax benefits for those receiving equity that is subject to vesting, but they must be carefully considered and executed within the required time frame. If filing a Section 83(b) election is advantageous, taxpayers should consider using Form 15620 to ensure that all applicable requirements of a Section 83(b) election are satisfied."

Unanticipated ESG Issues Affecting ERISA Fiduciary Supervision

"Many plan fiduciaries currently rely on policy disclosures and contractual representations by a plan's investment managers regarding how they will vote proxies, and/or fiduciaries rely on consultants to evaluate proxy voting practices and may not otherwise devote significant time to proxy voting matters. The court's summary judgment decision suggests that relying on such disclosures and representations, without additional diligence, may subject the plan fiduciaries to litigation risk.... The outcome of the trial and any appeal will need to be taken into account in assessing litigation risks posed by the case." [Spence v. Am. Airlines, Inc., No. 23-0552 (N.D. Tex. Jun. 20, 2024)]

DOL Finalizes Changes to the QPAM Exemption: A Favored Management Tool Gets Less User-Friendly

"The changes make reliance on the QPAM Exemption more burdensome and challenging and may result, over time, in fewer choices for ERISA and IRA plan investors, their managers and their counterparties.2 The changes go into effect on Monday, June 17, 2024.... Changes will be particularly important to debt, real estate, alternatives and private strategies, where the QPAM exemption is often the favored exemption."

Rushing to Chaos: The DOL's Well-Intentioned, Yet Unworkable Proposal to Redefine Fiduciary Investment Advice

"Select issues with the proposal: [1] Proposal will likely result in continued regulatory uncertainty ... [2] No carve-out for transactions with sophisticated institutional investors ... [3] Fiduciary adviser status may result from others' discretion over unrelated assets ... [4] Fiduciary adviser status may result from one time advice ... [5] Fund sponsors and other investment product providers may be deemed fiduciaries by virtue of selling activities or even recommendations by third parties ... [6] Lawyers, accountants, and consultants may be deemed fiduciaries based on regular provision of investment-related legal, tax and other advice traditionally viewed as non-fiduciary.'  

A Step Towards Guidance Instead of Regulation by Litigation in the ESOP Space

"[The DOL] has committed to move forward with public notice-and-comment rulemaking to establish a clear definition regarding the 'adequate consideration' requirement for ESOP acquisitions ... The absence of formal valuation guidance has proved challenging not just for plan fiduciaries but even for the DOL itself."