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District Court Finds No Monetary Damages in ERISA Fiduciary Breach Case, Orders Governance Changes

"[T]he absence of monetary damages is potentially a big deal and may take away some of the economic fuel for copycat cases.... One takeaway ... is that ERISA plan fiduciaries should continue to ensure that all investment decisions, proxy voting, and shareholder engagement in general are driven by pecuniary objectives in the exclusive interest of plan participants." [Spence v. Am. Airlines, Inc., No. 23-0552 (N.D. Tex. Sep. 30, 2025)]

District Court: Arkansas Mandate of Health Plan Reporting Is Not Preempted by ERISA

"Despite Rule 128's express reference to self-funded plans and imposition of a reporting requirement similar to one the Supreme Court found to be preempted by ERISA in Gobeille, the district court found that neither the reporting requirement nor the dispensing fee requirement were preempted by ERISA." [Central States, Southeast and Southwest Areas Health and Welfare Fund v. McClain, No. 25-3938 (N.D. Ill. Sep. 2, 2025)]

SEC Conducts Roundtable on Executive Compensation Disclosure Practices

"The first panel focused on the process surrounding executive pay decisions and how investors interpret and consider disclosure.... In the second and third panels, attention turned to the evolution of disclosure rules implemented over the past two decades, including those arising from the Dodd-Frank Act of 2010, and the ways such rules have (or have not) benefitted investors and burdened public companies."

Executive Compensation Disclosures Are Back on the (Round)table at the SEC

"As a prompt for the roundtable, the SEC has provided nine questions for comment, which center on ... [1] How executive compensation packages are developed and what adjustments can be made to current disclosure requirements to better explain this process. [2] Whether the disclosure requirements adopted in the last 20 years are effective in communicating material information to investors and if changes are necessary for clarity and cost-efficiency. [3] Assessing concerns regarding the disclosure requirements related to executive perquisites, pay-versus-performance and clawbacks."

District Court Allows ERISA Fiduciary Challenge to Alleged 'ESG Investing' Without Any ESG Funds

"The decision in Spence ... highlights how an alleged failure by plan fiduciaries to fully consider proxy voting policies and activities of investment managers for 401(k) investment funds can lead to successful claims that the duty of loyalty has been breached, and at least partially opens another avenue for fiduciary attack on 401(k) plans. The decision may especially suggest a closer look at a plan's relationships and oversight of investment managers who also hold significant economic stakes in the plan sponsor." [Spence v. Am. Airlines, Inc., No. 23-0552 (N.D. Tex. Jan. 10, 2025)]

New York Senate Passes First-In-The-Nation Bill Requiring Mandatory Review and Revocation Period for All Severance Agreements

"[The No Severance Ultimatums Act (S 372) would require] employers to provide employees with at least 21 business days to review a separation agreement, and seven calendar days to revoke the separation agreement (meaning an agreement cannot become effective or enforceable until the revocation period has expired). While employees can voluntarily sign a separation agreement before the required consideration period expires, the revocation period is not waivable."

IRS Issues Proposed Regs on the Expanded Definition of 'Covered Employee' Under Code Section 162(m)

"Companies should keep in mind that an individual can simultaneously qualify as a covered employee by being one of the five most highly compensated employees for the tax year and a covered executive officer from a preceding tax year.... Companies should carefully track the basis for including an individual in their covered employee population to ensure they know which covered employees must remain covered or fall out of coverage year-to-year.... The applicable definition of 'compensation' should ... be carefully reviewed when making these determinations each year."

HIPAA Security Rule Revamp Is on the Horizon

"[T]he proposed rule would require regulated entities to: [1] Maintain an accurate and thorough inventory of their technology assets and create a network map of their electronic information systems, which must be updated at least every 12 months.... [2] Conduct vulnerability scanning at least every six months ... [4] Verify business associate/subcontractor technical safeguards at least every 12 months ... [5] Establish and implement a written contingency plan that includes procedures for data backups, disaster recovery, and emergency mode operations."

California Governor Signs Legislation Impacting Health Care Claim Reimbursement and DMHC Requests for Records

"[AB 3275] requires health plans and insurers to pay claims within 30 calendar days.... [AB 3221 allows] the Department of Managed Health Care (DMHC) to request health plan records in a searchable digital format, take disciplinary action when health care service plans do not either fully or timely respond to records requests, and seek relief on consumers' behalf through administrative hearings rather than court proceedings."

Considerations for Determining Whether a Cyber Incident Is Material

"In late June, the staff of the [SEC's] Division of Corporation Finance released five new compliance and disclosure interpretations regarding the disclosure of material cybersecurity incidents ... The staff makes one underlying theme clear throughout this guidance: No single factor is determinative of whether a cybersecurity incident is material. Once a cybersecurity incident is determined to be material, however, it must be reported within four business days after the company determines that it has experienced a material cybersecurity incident."