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Action Required: Reporting Share Transfers Pursuant to ISO Exercises and ESPP Purchases

"Although generally excluded from Form W-2 reporting, the U.S. Internal Revenue Code requires that separate information returns be furnished to most U.S. taxpayers who exercised ISOs during 2023 (an 'optionee') or who transferred shares during 2023 that were acquired under an ESPP (a 'transferor').... The deadline for furnishing Forms 3921 and 3922 to optionees and transferors is January 31, 2024. The deadline for filing Forms 3921 and 3922 with the IRS is February 28, 2024,"

SEC Adopts Final Clawback Rules

"[In] the reopening releases, the SEC stated that including only 'Big R' restatements could lead companies to make questionable materiality judgments in order to avoid recoupment of incentive compensation. By including the more commonplace 'little r' restatements in the final rules, the SEC broadened the scope of the rules considerably."

Congressional Committee Targets Private Equity Firms on Medical Billing Practices

"Pointing to an increasing trend of private equity firms acquiring physician staffing companies and private emergency transportation companies contracting with hospitals, a key congressional committee announced a bipartisan investigation this week into the practices of private equity firms related to surprise billing."

Administration Again Attempts to Lower Drug Prices

"The full impact of the proposed plan on all stakeholders has not been fully evaluated.... For PBMs, would the existence of pathways #1 and #2 alter how the PBMs negotiate formulary drugs with pharmaceutical manufacturers? Could the PBMs' push for manufacturers to use pathway #2 at some time in the future point to remaining on formulary drugs? Would importing drugs create shortages in foreign countries, potentially impacting U.S. diplomacy with them?"

Updated EPCRS Expands Self-Correction Opportunities for Retirement Plan Sponsors

"Under the expanded program, self-correction can be used to correct operational failures by adopting retroactive plan amendments to conform the plan terms to the plan operations if: [1] the amendment would result in an increase of a benefit, right, or feature; [2] the increase is provided to all eligible employees under the plan; and [3] the increase is permitted under the code and satisfies the general correction principles of EPCRS."

HHS Proposed Rule Could Significantly Impact Drug Manufacturers, PBMs, and Other Stakeholders

"The proposed rule ... adds a new safe harbor for point-of-sale price reductions ... [which] requires that the following criteria be met: [1] The reduced price must be set in advance with a plan sponsor under Medicare Part D, a Medicaid MCO, or the PBM acting under contract with either; [2] the sale does not involve a rebate unless the full value of the reduction in price is provided to the dispensing pharmacy through a chargeback or series of chargebacks, or is required by law; and [3] the reduction in price must be completely applied to the price of the prescription drug charged to the beneficiary at the point of sale."

IRS Issues Guidance on Code Section 162(m) Including Grandfathered Arrangements and Covered Employees

"Stock option awards that vest based on continued service granted before the grandfathered date that otherwise qualified as performance-based compensation under the pre-act Section 162(m) rules typically will continue to be treated as performance-based compensation ... Many performance-based restricted stock unit awards granted before the grandfathered date that otherwise qualified as performance-based compensation under the pre-act Section 162(m) rules will not be grandfathered ... Many bonus plans in effect as of the grandfathered date under which the payments would have qualified as performance-based compensation pursuant to the pre-act Section 162(m) rules also will not be grandfathered[.]"

Ninth Circuit Overturns Altera and Revives Regulations on Cost Sharing of Stock-Based Compensation

"The Regulations required related entities to share the costs of employee stock-based compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements under Section 4824 and the relevant Treasury Regulations.... [T]he Ninth Circuit first determined that Treasury had complied with the APA in promulgating the Regulations ... [and] then applied the two-part Chevron analysis to hold that the Regulations were a permissible interpretation of Section 482." [Altera Corp. v. Comm'r, Nos. 16-70496, 16-70497 (9th Cir. July 24, 2018)]

Proposed Tax Reform Bills of Senate and House Now Aligned on Key Compensation and Benefits-Related Tax Provisions

"[B]oth the House and Senate proposals leave the current law regarding the taxation of stock options and restricted stock units (RSUs) largely intact, stepping away from the initial proposals to tax such awards at vesting.... The proposed amendments would eliminate a publicly traded company's ability to deduct compensation above $1 million that it pays in any year to any covered employees... [W]ith the proposed 20 percent corporate tax rate, the lost tax deduction will be smaller than under current law."

Companies Should Review Employee Agreements and Policies Following SEC's Aggressive Stance on Impediments to Whistleblowing

"Whether or not the SEC's asserted positions would ultimately prevail in court, in light of these settlements and the SEC's apparent enforcement position, employers should consider reviewing their policies, codes of conduct, and employee agreements to ensure that that they do not include provisions that the SEC may assert deter employees from coming forward with information about potential securities law violations. Even those companies not subject to the SEC's jurisdiction may wish to undertake such measures, as the SEC's stance is similar to that now taken by the [NLRB] and the [EEOC][.]"