ML BeneBits

Seeking shareholder approval of an equity compensation plan has become a multi-step, often complex process. Gone are the days when management simply would discuss a share increase with the board of directors, and the company would include a brief discussion of the proposal in the proxy.

In a prior post, we discussed the first eight of 15 recommended steps to consider when submitting an equity plan for shareholder approval. In this post, we discuss the final steps. While we know each situation is different, we hope you find these 15 steps a useful guide to consider when submitting an equity plan for shareholder approval.

This is the third in a series of blog posts aimed at getting the human resources, benefits, and executive compensation functions of your organization ready for a potential sale or similar corporate transaction. Part I provided general guidelines and suggestions on how to get organized. Part II addressed change of control documents that may be affected by a potential sale, as well as the treatment of outstanding equity compensation. This post addresses the impact of a sale on your organization’s retirement plans.

As the US Department of Labor (DOL) continues to contemplate the role of environmental, social, and governance (ESG) considerations in ERISA plan investing, ESG issues surrounding retirement plans are cropping up in another way: as a target for proxy vote proposals that seek to require companies to evaluate their ESG commitments in retirement plans.

Many traditional defined benefit plans, such as final average pay plans, offer a lump sum distribution as an optional form of benefit. The amount of the lump sum distribution is sensitive to the applicable interest rate (calculated under Internal Revenue Code Section 417(e)) and varies inversely with the rate level. Higher interest rates result in smaller lump sums, and lower rates result in larger lump sums. Plans must update the applicable interest rate on a monthly, quarterly, or annual basis. With interest rates increasing rapidly, upcoming changes to the applicable interest rate may cause lump sum payments to decrease. In some cases, the decrease may be significant.

The US Securities and Exchange Commission (SEC) recently approved a proposed environmental, social, and governance (ESG) rulemaking for investment advisers and funds. This proposed rule and form amendments will impact SEC-regulated asset managers, but may also be of interest to investors, including ERISA plans, that consider ESG factors and/or invest in ESG funds.

This blog post is Part 2 in the “Ready for a Sale?” series, which is aimed at getting the human resources, benefits, and executive compensation functions of your organization ready for a potential sale or similar corporate transaction. Part 1 provided general guidelines and suggestions on how to get organized and start the process. This second part will address key considerations in the process that often arise early: (1) identifying, assembling, and analyzing documents that will be automatically triggered or impacted by the potential sale, and (2) determining the expected impact of the transaction on any outstanding equity compensation.

In light of the active M&A market, we think this spring could be an ideal time for companies to evaluate the order of their executive compensation arrangements and employee benefit plans, particularly companies that are considering (or hoping for) a sale within the short-term future.

The Internal Revenue Service (IRS) issued Notice 2022-24 on April 29 to provide the inflation-adjusted amounts for health savings accounts (HSAs) in calendar year 2023.

In Pizzella v. Vinoskey, 2019 U.S. Dist. LEXIS 129579, the US Department of Labor (DOL) brought a case against an independent transactional ESOP trustee (the trustee), but also named the seller of stock to an employee stock ownership plan (ESOP) as a defendant (the seller). The court found that the ESOP overpaid for Sentry Equipment Erectors, Inc. (the company) stock, in violation of ERISA, and that the trustee breached its duties of prudence and loyalty and engaged in a prohibited transaction by paying more than adequate consideration for shares in the ESOP transaction.