Employee Benefits and Executive Compensation
Schiff Hardin's Employee Benefits and Executive Compensation Group works with clients to determine which retirement and health/welfare benefits plans best suit their needs, and assists in the design and implementation of all types of stock-based plans, deferred compensation and employment arrangements. Our counseling extends to analyzing benefit formulas, investment alternatives and procedures, and issues of securities law and fiduciary concerns.
We assist clients on such matters as:
- Tax qualified retirement plan design, drafting, and administration, including services for profit sharing, 401(k) plans, pension plans, cash balance plans and employee stock ownership plans (ESOPs)
- The design, drafting and implementation of:
- Employment agreements
- Consulting agreements
- Severance and golden parachute arrangements
- Executive deferred compensation
- Supplemental retirement arrangements
- Compliance with securities laws affecting employee benefits
- Analysis of fiduciary responsibility considerations
- Resolution of employee benefits issues in corporate and financing transactions, including mergers and acquisitions
- Health, life, and other welfare plan design and administration
- Review of master and prototype plans
- Review of collectively bargained employee benefits issues (individually sponsored plans or plans subject to the Multi-employer Pension Plan Amendments Act of 1980)
- Analyzing estate planning implications of employee benefit plan distributions
In addition to this, we advise clients regarding compliance with the requirements of the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code (Code) and other applicable statutes.
We have extensive and varied experience in the area of ERISA litigation. We have collaborated with our litigation attorneys in defending employers and ERISA fiduciaries in litigation over plan investment decisions and defending employers in employee participation and other disputes in the health and welfare benefit plan area. We have experience with disputes over the modification, funding and design of retiree medical benefits. We also have counseled clients in dealing with withdrawal liability and other problems arising under multi-employer plans and have worked with our litigation group in defending cases involving multi-employer plans.
Schiff Hardin counsels clients in responding to legislative developments such as:
- The Pension Protection Act of 2006
- The American Jobs Creation Act of 2004 (AJCA)
- Sarbanes-Oxley Act of 2002
- The Economic Growth and Tax Relief Reconciliation Act of 2001
- The Health Insurance Portability and Accountability Act (HIPAA)
- The Americans with Disabilities Act (ADA)
- The Family and Medical Leave Act (FMLA)
- The SEC Executive Compensation Disclosure Requirements for Proxy Statements
Our clients include corporations, banks, insurance companies, employee stock ownership plans and mutual funds, and executives of their companies. In addition, we represent a substantial number of clients in heavily regulated industries, from public utilities and railroads to financial markets. Our clients also include governmental entities.
Tax Qualified Retirement Plans
Schiff Hardin attorneys advise clients on more than 100 qualified retirement plans, including:
- Compliance with applicable provisions of the Internal Revenue Code (Code)
- Employee Retirement Income Security Act (ERISA)
- Federal and state securities laws
- The Age Discrimination In Employment Act (ADEA)
- Other applicable statutes
We counsel clients in connection with:
- All aspects of profit sharing and 401(k) plans
- Thrift and savings plans
- Employee stock option plans (ESOPs)
- Defined benefit pension plans, including cash balance plans
Counseling in connection with these matters includes securing determination letters and individual private letter rulings from the Internal Revenue Service (IRS). We have extensive experience in terminating qualified plans, including dealing with surplus plan assets and securing appropriate approvals from the IRS and the Pension Benefit Guaranty Corporation (PBGC). We also review qualified domestic relations orders and assist plan administrators in processing benefit claims.
Executive Deferred Compensation and Supplemental Retirement Arrangements
Schiff Hardin attorneys work on executive deferred compensation and supplemental retirement arrangements, many of which are related to stock of the employer and range from relatively simple stock option plans to more complicated phantom stock plans and so-called "market basket" arrangements that contain a large variety of compensation vehicles, such as incentive stock options, stock appreciation rights, nonstatutory stock options, stock awards, and restricted stock arrangements.
We are working closely with clients in bringing these plans into compliance with the substantial changes under the new Section 409A of the Internal Revenue Code, as enacted by the American Jobs Creation Act of 2004 (AJCA).
Those arrangements that do not relate to stock of the employer include bonus and incentive performance plans and deferred compensation arrangements. We also have designed employment agreements, consulting agreements, change in control agreements and private pension arrangements for highly compensated executives, including those of governmental authorities, to supplement pension benefits that are limited by various statutory or pension plan provisions. We have extensive experience in the funding of such arrangements, including "rabbi" trusts and "secular" trusts. We also handle golden parachute issues and the $1 million dollar limitation on deductibility of annual compensation under Code Section 162(m).
Schiff Hardin attorneys design and prepare health, life, disability, severance, and other employee benefit plan documents required by the Employee Retirement Income Security Act (ERISA). We review documents prepared by insurance companies to ensure compliance with ERISA and to prevent the ambiguities that can lead to litigation. We also review and negotiate contracts with insurance companies, HMOs, third party administrators, business associates, and others to protect the interests of our clients. We design and implement cost-saving and funding mechanisms for clients' welfare benefit programs.
We represent clients in disputes among participants, unions, third-party administrators, insurance companies, and governmental agencies over health and welfare benefit entitlements, from the claims procedure committee level through litigation or alternative dispute resolution.
We advise clients as to the maintenance, funding, and modification of retiree medical benefits. We have redesigned retiree medical programs to control eligibility and implement cost-savings and established tax-exempt trusts and other mechanisms to fund clients' retiree medical obligations.
We design and draft flexible benefit plans for clients that permit employees to pay for the cost of health and life insurance and other similar benefits on a pre-tax basis. Our attorneys also help clients with the day-to-day problems that arise in connection with welfare plans, including issues that arise under the health insurance continuation requirements imposed by COBRA, and we advise clients with respect to the various anti-discrimination rules that apply to welfare plans.
Schiff Hardin has designed and drafted flexible benefits arrangements for many of its clients. The arrangements typically include premium conversion, medical flexible spending account, and dependent care flexible spending account components. We also provide client counseling with regard to the administration of these plans.
We actively monitor legal developments and assist clients in complying with new legislation and regulations. We have prepared plan amendments and notices required under:
- The Health Insurance Portability and Accountability Act of 1996 (HIPAA)
- The Mental Health Parity Act of 1996 (MHPA)
- The Newborns' and Mothers' Health Protection Act of 1996 (NMHPA)
- The Women's Health and Cancer Rights Act of 1998 (WHCRA)
- The Health Opportunity Patient Empowerment Act of 2006
Our lawyers have been involved in cutting edge legal work related to consumer driven health plans, and we are assisting clients with the opportunities presented by the Medicare Prescription Drug, Modernization and Improvement Act of 2003 (MMA).
Stock-Based Incentive Plans and Related Securities Law Issues
Schiff Hardin has significant experience in drafting stock option and similar stock-based plans and in addressing the securities law issues related to such plans. These types of plans include:
- 401(k) plans
- Offering employer stock investment funds
- Stock purchase plans
- Stock option plans
- LLC unit option plans
- Dividend reinvestment plans
- Deferred compensation plans
- Stock trust plans
- Phantom share plans
We counsel clients with respect to the registration of securities offered under such plans as required by the Securities Act of 1933, state "blue sky" securities laws and the applicability of exemptions from registration, including private placement exemptions and Rule 701 of the Securities Act of 1933.
We also assist clients with the preparation of registration statements on Form S-8 or S-3, disclosure documents, including prospectuses and proxy statements, and with the reporting requirements and short-swing trading prohibitions applicable to officers and directors under Section 16 of the Securities Act of 1934. We have assisted several clients in revising their proxy statements to comply with the new SEC executive compensation disclosure requirements.
Schiff Hardin attorneys have significant involvement in the employee benefits and executive compensation aspects of corporate mergers, acquisitions, dispositions, leveraged buyouts, recapitalizations, and similar transactions handled by the firm.
We analyze the employee benefits plans and compensation arrangements of parties to the transaction, draft appropriate language for the purchase agreements, advise buyers and lenders as to funding and other potential problems, and deal with retiree medical issues, health insurance continuation rights, and severance benefit issues that may be present.
These transactions involve a review of numerous types of qualified and non-qualified employee benefit plans, including:
- Pension plans
- Group health plans — including self-insured arrangements
- Stock benefit plans
- Employment agreements
- Change in control arrangements
- Severance plans
Our counseling has included the analysis and settlement of incentive bonus arrangements and golden parachute payments, conversions of stock plans, the integration of seller's retirement and welfare plans into buyer's, and the assumption of Consolidated Omnibus Budget Reconciliation Act (COBRA) health coverage liability and retiree medical benefits.
Fiduciary Responsibility and Plan Investment Issues
Schiff Hardin is skilled in counseling plan sponsors seeking to appoint investment managers or select pooled funds and in advising the investment managers themselves. Problems addressed include the Employee Retirement Income Security Act's (ERISA) prohibited transaction rules, the rules concerning default investments under the Pension Protection Act of 2006 and compliance with ERISA's prudence and diversification requirements.
We advise insurance companies and investment firms on the use of venture capital operating companies (VCOCs) and real estate operating companies (REOCs) to deal with "plan asset" issues, and on the sources of funds that may be accessed in financings without causing prohibited transactions.
Employee Stock Ownership Plans
Schiff Hardin's employee stock ownership plan (ESOP) practice is recognized nationwide. Our attorneys have been involved in hundreds of ESOP transactions, serving as legal counsel to clients all over the country. These transactions range from a few million dollars to nearly two billion dollars.
Schiff Hardin's attorneys act as legal counsel to companies in establishing ESOPs and in executing employee and management-led buyouts. Our clients have run the gamut from large publicly held companies to closely held companies with a single individual owner.
We frequently serve as the lawyers for institutional and individual trustees. In some cases, our representation is solely for purposes of completing a specific ESOP transaction. In other cases, our representation continues after the closing of the transaction, with our members representing the trustee with respect to continuing administrative and fiduciary issues.
Schiff Hardin also represents senior lenders and other lenders that are making loans to companies or ESOPs in leveraged ESOP transactions.
Schiff Hardin attorneys have represented companies in all lines of business, such as:
- Banks and bank holding companies
- Home health agencies
- Nursing homes
- Oil and gas distributors
- Public utilities
- Real estate managers
- Restaurant chains
- Service providers of all types
This experience has given our ESOP attorneys in-depth knowledge of the business issues facing the companies in these industry segments.
Approach to ESOP Transactions
We counsel clients on:
- Corporate law
- ESOP design
- Executive compensation
- Securities law
- Tax aspects of ESOP transactions
Our attorneys work as a team with accountants, business appraisers, financial advisors, commercial bankers, investment bankers, institutional trustees, private equity funds and other sources of capital, and third party administrative firms in order to design, document and execute transactions for our clients efficiently.
Government Audits of ESOPs and ESOP Transactions
Our attorneys have extensive experience representing companies and ESOP trustees in U.S. Department of Labor and Internal Revenue Service (IRS) audits of ESOPs and ESOP transactions. We have an in-depth knowledge of the legal issues surrounding valuation of closely held companies — issues that often are a focus of these audits. We also have years of experience with using the remedial programs of the Department of Labor and the IRS to correct mistakes and oversights in the administration of ESOPs.
Cash Balance Plans
Schiff Hardin attorneys have significant experience in drafting cash balance pension plans and counseling clients regarding the conversion of their existing defined benefit pension plans to cash balance retirement plans. We also counsel clients on the effect of the cash balance provisions in the Pension Protection Act of 2006 on existing and new plans.
Employment, Consulting, Severance and Golden Parachute Agreements
Schiff Hardin attorneys recognize how important it is for our clients' businesses to retain key employees. Our clients turn to us to design and help implement employment and consulting agreements, golden parachute agreements, severance plans, retention arrangements, and stay bonus plans for key executives.