The competition among employers to attract and retain the best and the brightest talent has never been more intense. The competition is waged, at least in part, through employee benefit programs such as retirement plans and health plans, which consistently rate among the top employment concerns for employees. In light of the importance that employees place on employee benefits and the high cost of such benefits, employers have become increasingly focused on employee benefits. K&L Gates employee benefits lawyers provide employers, and a wide variety of other stakeholders in the employee benefits industry, the tools they need to engage in the competition for talented labor and to manage the consequent regulatory burden and cost of providing competitive employee benefits.
Our employee benefits lawyers provide the full range of legal services relating to employee benefits, including tax, labor, securities, regulatory and legislative, litigation and fiduciary issues relating to plan administration and the investment of plan assets. We feature a broad employee benefits practice with lawyers located around the country through which we provide our clients with a variety of legal services related to the implementation, administration and termination of retirement plan matters, health care programs, equity compensation plans, executive compensation programs, employment contracts, welfare benefit plan and, fringe benefit programs; advice concerning fiduciary responsibility and prohibited transaction issues; representation and advocacy before federal governmental agencies with jurisdiction over employee benefit plans such as the Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation; strategic advice concerning employee benefit plans in corporate mergers and acquisitions; and litigation with respect to a variety of employee benefit matters.
Our employee benefits practice also serves as the platform through which K&L Gates conducts its Executive Compensation and Employee Stock Ownership Plan practices. In light of the never-ending need for employers to recruit talented labor, the employee benefits universe continues to expand in new and sometimes unforeseen ways. We are well positioned by the diversity of our employee benefits practice to assist our clients in the development of nontraditional forms of employee benefits.
Our clients are employers, including publicly traded, closely held, nonprofit and governmental organizations, that maintain one or more tax-qualified retirement, employee stock ownership, incentive stock option, deferred compensation, employee stock purchase plans and/or welfare plans. We also advise trustees of multiemployer pension and welfare plans. Clients that utilize our employee benefits practice serve in virtually every capacity associated with employee benefit plans, such as plan sponsors; plan trustees; investment managers; third-party administrators, record keepers and other service providers for qualified and non-qualified retirement plans. Our employee benefits lawyers provide comprehensive employee benefits counseling for many of our clients, from Fortune 500 companies to start-up businesses. A number of other clients — both public and private, large and small — engage our employee benefits lawyers to provide advice in connection with limited engagements such as corporate transactions, plan terminations, compliance reviews and correction of operational errors.
Employee Stock Ownership Plans
K&L Gates has over 30 years of experience with employee stock ownership plans dating to the creation of ESOPs as part of ERISA in 1974. We have advised our ESOP clients in virtually every conceivable type of ESOP matter, including leveraged ESOP transactions, ESOP refinancings, terminations of leveraged ESOPs, ESOP audits and investigations, and litigation defense, including bankruptcy proceedings. Our clients have included trustees, administrative committees, financial institutions lending to ESOPs, financial advisors, investment managers, selling shareholders and ESOP participants.
Our ESOP experience is described in more detail in our Employee Stock Ownership Plans practice area.
Executive Compensation
We advise employers in connection with the design, implementation and negotiation of executive and director compensation programs, including performance-oriented cash bonus plans, employment, severance and “golden parachute” plans and broad-based equity compensation plans such as stock option plans and qualified and nonqualified stock purchase plans, stock appreciation rights, phantom stock, restricted stock, profits interests, unit appreciation rights and restricted stock units. We assist in the design of equity compensation plans to maximize federal and state tax law savings and to ensure compliance with federal and state securities laws. We advise officers and directors on all matters concerning equity compensation.
Our experience in the design and administration of equity compensation plans is described in more detail in our Executive Compensation practice area.
Health and Welfare Benefit Plans, Fringe Benefits and Other Programs
The Internal Revenue Service has increased the pace of its regulatory guidance with respect to health and other welfare plans in recent years, and our health and welfare practice has grown proportionately. We advise public and private, not-for-profit and government employers with respect to 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 health care plans, HSAs, HRAs, disability plans, life insurance plans, cafeteria plans, and severance programs, and trusts to fund such plans such as through voluntary employees’ beneficiary associations (VEBAs). We frequently advise clients regarding issues arising under 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.
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.
Tax-Favored Savings Accounts
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/or 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. K&L Gates publishes Financial Institution Tax-Favored Savings Account Alerts on a periodic basis for the purpose of keeping financial institutions abreast of developments in the tax-favored savings account industry.
Mergers and Acquisitions
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.
We also advise clients with respect to the proper handling and integration of executive compensation plans in connection with corporate transactions.
ERISA Litigation
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.
Federal Agency Practice
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 and investigations by federal agencies. 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.
Fiduciary Duties and Prohibited Transactions
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 practice areas, 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.
Governmental and Nonprofit
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.
Multiemployer Pension and Welfare Plans
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.
Personal Income Tax Planning
In conjunction with our Private Clients practice group, 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 Plans
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, 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.
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 (e.g., 401(k) plan contributions testing (the so-called “ADP” and “ACP” tests), top-heavy testing, and coverage testing under Section 410(b) of the Internal Revenue Code), 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.
Finally, we help many plan sponsors negotiate the rules applicable to the 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% excise tax on plan reversions.
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.