Employee Benefits

With the passage of Federal Health Care Reform and many state and local health care laws and mandates, the regulatory burden on group health plans and other welfare plans has exploded, and our health and welfare practice has grown proportionately. We advise public and private, nonprofit, and government employers with respect to the full range of health and welfare and fringe benefit matters. We provide advice with respect to the design and creation, operation and administration, and termination of all types of health and welfare plans, including group health plans, HSAs, HRAs, disability plans, life insurance plans, cafeteria plans, and severance programs, as well as trusts to fund such plans such as voluntary employees’ beneficiary associations (VEBAs). We frequently advise clients regarding issues arising under the Patient Protection and Affordable Care Act (PPACA), the Consolidated Omnibus Budget Reconciliation Act of 1984 (COBRA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA), including application of the Privacy and Security Rules, as well as state and local health care mandates, such as those in Massachusetts and San Francisco.

We are also often called upon by our clients to assist with the design and implementation of many other types of fringe benefit and other programs. Examples include adoption assistance plans, pre-paid legal service plans, education reimbursement plans, and domestic partner benefits.

Our employee benefits lawyers have significant experience with the rules and regulations applicable to individual retirement accounts and other tax-favored savings accounts. In this regard, we advise a number of financial institutions, including those within mutual fund complexes, that serve as sponsors, trustees, and custodians for all types of individual retirement accounts traditional IRAs, Roth IRAs, SIMPLE IRAs, and Simplified Employee Pension IRAs (SEP-IRAs) as well as Coverdell Education Savings Accounts, Section 529 college savings plans, Health Savings Accounts, and Archer medical savings accounts. Typically, we assist our financial institution clients with new product development, the drafting of the documents by which accounts are established, the review of marketing materials for compliance with the complex requirements of the Internal Revenue Code, and advice in connection with the ongoing administration of accounts. We also assist individuals with respect to income and estate tax issues applicable to their accounts.

Employee benefit considerations often play a critical role in corporate transactions such as reorganizations, mergers, stock acquisition and sales, asset sales and purchases, joint ventures, and bankruptcies. K&L Gates lawyers represent buyers, sellers, lenders, and other participants in corporate transactions, and are familiar with the unique perspectives of each party in the transaction process.

We have extensive experience in analyzing the employee benefit aspects of corporate transactions, including the assessment of employee benefit liabilities, the negotiation of the representations and warranties with respect to employee benefits, formulation of the most advantageous corporate structure, and the development and implementation of post-transaction employee benefit strategies. We conduct due diligence reviews of employee benefit plans and programs to assess potential unfunded liabilities, including liabilities for unfunded pension and other post-retirement benefits, withdrawals from multiemployer pension plans, delinquent plan contributions, severance pay, and executive benefits. In many instances, the liabilities are significant and may require appropriate adjustments to the transaction price or transaction structure.

Through K&L Gates’ employee benefits litigation practice, our lawyers litigate matters related to benefits entitlement, retirement and welfare document interpretation, tax disputes, ERISA preemption of state laws, and claims of breach of fiduciary duties under ERISA. Our lawyers have defended employers against eligibility claims brought by contingent workers. We recently represented a national employer in litigation involving claims for severance benefits by employees of a sold division. We have also represented employers and other plan fiduciaries in suits against service providers for breach of contract or of fiduciary duty. We have litigated in various courts, including the U.S. Tax Court, Federal District Court, the Court of Claims, the Circuit Courts of Appeal, and the U.S. Supreme Court.

We frequently assist clients in their contacts with federal government agencies that have jurisdiction over employee benefit plans, such as the Internal Revenue Service, the Department of Labor, and the Pension Benefit Guaranty Corporation. Our work in this area generally involves assisting plan sponsors in connection with employee benefit plan audits, investigations by federal agencies, and filings under agency correction programs. We also represent plan sponsors in their attempts to obtain favorable rulings from the Internal Revenue Service on uncertain tax issues, prohibited transaction exemptions, and other guidance from the Department of Labor on issues arising under ERISA, and no-action rulings from the Securities and Exchange Commission with respect to federal securities laws issues that may be raised by certain employee benefit plan arrangements.

K&L Gates’ employee benefits practice includes advising plan sponsors, investment advisers, trustees, third party administrators, and other parties with respect to the fiduciary and prohibited transaction issues arising under ERISA that are presented by various transactions and arrangements involving the investment of assets of employee benefit plans and the fiduciaries of those plans. Through the combined efforts of our Investment Management and Employee Benefits practices, we counsel a number of providers of multiple services to 401(k) and other types of defined contribution plans (including a number of mutual fund complexes and other financial services firms) with respect to the fiduciary duty, prohibited transaction, and securities issues raised by the bundled nature of their services. We have also worked extensively with plan sponsors and their service providers to prepare for and comply with DOL fee reporting and disclosure requirements.

Plan governance is another important area in which we assist plan sponsors and plan fiduciaries. We help develop an appropriate governance regime, make sure that it is consistent with plan documents, and provide fiduciary training.

Our clients include state and local governmental entities and nonprofit organizations. As a result, we are experienced in the unique employee benefits needs of these types of organizations and the employee benefit opportunities available to them. This experience includes the design, implementation, and administration of 403(b) plans, defined benefit plans, 401(k) plans, and other retirement and welfare plans, as well as qualified and nonqualified Section 457 plans and other executive compensation and incentive programs.

We advise trustees and contributing employers regarding funding, fiduciary, and other obligations for union-sponsored multiemployer pension and welfare plans. Our lawyers represent the trustees before regulatory agencies, in litigation, and in negotiations with service providers and other vendors. In addition, we assist the trustees with plan design, documentation, and benefit claims appeals. We also work with investment managers and third-party administrators in connection with issues arising under these programs for active and retired workers.

In conjunction with our Private Clients practice, we advise our individual clients with regard to their qualified retirement plan and individual retirement account withdrawals and beneficiary designations, and their other employee benefits, including deferred compensation plans and stock options, with a view toward minimizing federal income and estate tax liabilities.

Qualified retirement plans - such as defined benefit pension plans (including cash balance plans), profit sharing plans, 401(k) plans, money purchase plans, stock bonus plans, and Employee Stock Ownership Plans - are among the most heavily regulated of all employee benefit plans. We help our clients navigate the complex qualification rules of the Internal Revenue Code in all phases of the life of a qualified retirement plan’s design and creation, administration and operation, freeze and termination. We maintain a strong practice in collectively bargained plans, particularly in the steel and related heavy industries.

In the design and creation stage, we help many of our clients determine which type of plan best suits their needs and assist in the documentation of the plan, generally either by drafting the plan document and summary plan description or reviewing the documents prepared by the provider of a prototype plan. For many clients, the adoption of a new plan entails the freezing or termination of another plan, and we assist in both the transition to the new plan as well as the termination of the old one. We also assist clients making plan changes or adopting new plans with legally required notices and other participant communications.

In the administration and operation stage, we help plan sponsors and recordkeepers monitor and maintain compliance with the qualification rules for established plans. Areas in which we frequently advise our clients include nondiscrimination testing, defined benefit plan funding rules, cutbacks in accrued benefits, maximum benefits under Section 415 of the Internal Revenue Code, and many other areas. We assist employers in handling benefit claims disputes, including advising the plan fiduciaries through the ERISA claims procedures.

We help many plan sponsors negotiate the rules applicable to the freeze and/or termination of qualified retirement plans, including defined benefit plans, for which the rules are particularly complex. We have structured defined benefit plan spin-off terminations, thereby allowing the sponsoring employers to recapture excess plan assets. In response to changes in the law that complicate plan termination/reversion transactions, we develop strategies for merging underfunded and overfunded defined benefit plans into a single plan to help strengthen the overall plan asset-to-liability ratio and to reduce the 50 percent excise tax on plan reversions. The transition from defined benefit plans to defined contribution plans can be particularly complex. We have worked with several plan sponsors to navigate the transition from evaluation and design, to documentation, implementation, and communication.

A substantial part of our qualified retirement plan practice involves the preparation and submission of applications under the Internal Revenue Service’s Employee Plans Compliance Resolution System (EPCRS). EPCRS, which allows employers to correct qualification defects in the design and operation of their qualified retirement plans, has expanded significantly over the past several years. The expansion of EPCRS has made voluntary correction of qualified plan defects easier, less costly, and more palatable for employers. As a result, more and more employers are taking advantage of EPCRS, and our practice in this area has grown proportionately. Our experience with EPCRS enables our employee benefits lawyers to negotiate timely, efficient, and cost-effective sanctions and corrections of qualified plan defects on behalf of our clients. In addition, we assist clients in identifying areas of risk with a proactive approach to plan compliance.