Corporations looking to use partnerships to avoid the executive compensation deduction limitation may be out of luck. The new proposed regs (REG-122180-18) on the section 162(m) executive compensation deduction limitation include a rule on compensation paid by a partnership to an executive of a publicly held corporation that’s subject to the limitation.

McDermott’s Andrew C. Liazos contributes to a Tax Notes article that takes a look at these new regulations and what they mean for partnership arrangements.

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Originally published on Tax Notes, December 2019

In a relatively slow year for benefits rulings, multimillion-dollar settlements were the star of the show. And amid the slew of settlements this year, two court rulings stood out.

McDermott’s Richard J. Pearl contributes to a Law360 article that breaks down the Ninth Circuit ruling allowing benefit plan managers to force fiduciary-breach suits into solo arbitration and the Tenth Circuit holding that insurers who determine workers’ profits from 401(k) investments aren’t fiduciaries.

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Originally published by Law360, December 2019

The SECURE Act—the most significant piece of retirement plan legislation in more than a decade—is now law. Plan sponsors should immediately start considering how changes included in the SECURE Act could impact their retirement and health and welfare plans in 2020 and beyond.

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Beginning January 15, 2020, new, more employer-friendly regulations determine how overtime pay is calculated under the Fair Labor Standards Act. We identified the top 10 things you should know about what is being changed or clarified.

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This year, the US Supreme Court will get a chance to say whether federal civil rights law protects gay and transgender employees from discrimination, and California courts will grapple with recent changes making it harder for Golden State businesses to label workers as independent contractors. McDermott’s Michael Sheehan looked at these and other cases to watch in 2020 in a recent article for Law360.

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Originally published by Law360, January 2020

A decision in Texas v. United States was issued by a divided three-judge panel of the US Court of Appeals for the Fifth Circuit on December 18, 2019. This case presented once again the question whether the Affordable Care Act (ACA) is constitutional and sustainable, and questions of severability remain for the near future.

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Mani Mueller was among the millions of working Americans balancing a full time career and providing care for an elderly parent. Mueller, who works for a Madison, Wisconsin biotech firm, was able to balance work and caregiving, but nearly 32 percent of employees have had to leave a job during their career due to caregiving responsibilities. This doesn’t have to be the case. U.S. organizations have the opportunity to do more for this growing population of employees

In recent decades, the American workforce has undergone sweeping changes. Globalization and technology have conspired to reduce the percentage of middle-wage, middle-skill jobs in the economy.401(k) retain employees

The explosive growth of Internet-based communications has made remote work — whether locally or globally — much more central to many employers’ business models. Even the structure of work relationships has changed, as short-term, part-time, and independent work have become commonplace.

These changes, and others, have forced millions of today’s workers to play a much more active role in building and managing their own retirement savings, putting millions of Americans at risk of running out of money in retirement. And that’s a major worry for working Americans. According to the Alliance for Lifetime Income’s “Protected Lifetime Income Index Study,” 80 percent of Americans express anxiety they will outlive their savings.

The most important shift in the workplace affecting workers’ retirement is the migration from defined-benefit retirement plans — known to most of us as pension plans — to defined-contribution plans, like 401(k)s. According to the U.S. Labor Department, in 1975, 75 percent of working or retired Americans who had an employer-provided retirement plan were enrolled in a pension plan. It was one of several defining characteristics of a middle-class job during that era. In 2016, about 26 percent of employer-plan beneficiaries were enrolled in a pension plan.

With a pension in retirement, workers could count on regular, reliable checks for the rest of their lives. They didn’t make them rich, but with Social Security, pension checks allowed people to sustain preretirement lifestyle or something acceptably close. The employer put our pension money aside, hired an expert to invest and manage the money, pooled the money to get better investment and administrative deals and generally figured out how to make it all work.

With 401(k) plans, most American workers save their own money, choose how to invest those savings, and hope they will have enough so they won’t outlive it. There is no protected monthly income. Retirement planning is less institutionalized and more individualized. And more Americans bear more risks: longevity risks, health risks and the risk that investments will decline in value at the wrong time.

So, risks and responsibilities have shifted. But there are other factors at play in American work relationships. According to recent Department of Labor data, later-stage baby boomers have held 12.3 different jobs over the course of their careers.

When workers change jobs, they too often cash out their retirement, pay a tax penalty and reduce their savings. Others may actually lose track of multiple retirement accounts left behind on the trail of former employers. That’s savings they will need.

In addition, millions of Americans are in alternative work arrangements, including the gig economy or as self-employed or temporary staffing workers. Independent contractors can’t have an employer-provided plan because they don’t have an employer, so they are less likely to save. Others in alternative work relationships don’t receive the same retirement benefits as full-time, full-year workers. Even part-time workers are often left out of employer-provided plans.

These trends have only made establishing a guaranteed and reliable stream of lifetime income in retirement — like a pension — more strenuous and less likely.

There is another way for benefits managers to help employees secure protected lifetime income in retirement in addition to pensions and Social Security: annuities. Weekly, bi-weekly or monthly annuity checks function similar to the paychecks most Americans receive from their jobs, providing the reliability of protected lifetime income that most American workers are currently lacking in their retirements.

The good news is that Congress seems poised to enact legislation that will make it significantly easier for employers sponsoring defined-contribution retirement plans to offer annuities to their employees who participate. The bad news is that only 56 percent of employees participate in an employer-provided retirement plan.

So, even if their employer plans include annuities, there will still be a large number of working Americans — some employees, independent contractors, temporary staffing workers and others — who will have to find their own way to annuities.

The task is to make protected lifetime income a regular part of retirement planning discussions in public policy circles, around the dining room table among family members, and between financial professionals and their clients.

No single retirement strategy will work for everyone. But broadening the conversation will benefit millions of Americans who are worried about the effects of workplace change on their retirement.

As we wrote in a previous On the Subject, the Ninth Circuit Court of Appeals had signaled that it might rehear its August 2019 decisions in Dorman v. The Charles Schwab Corp., in which the Court compelled arbitration of ERISA class-action claims relating to a 401(k) plan. After ordering additional briefing, however, the Ninth Circuit denied the plaintiff’s petition for rehearing, leaving the Court’s decisions unchanged and requiring the plaintiff to arbitrate his ERISA breach-of-fiduciary-duty claims.

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I love writing about mental health, and I finally had the hour to watch the American Association of Suicidology’s Facebook Live conversation between suicide prevention expert and psychiatrist Dr. April Foreman and one of my favorite television personalities, Rachel Bloom.

She’s the Emmy Award winning creator and star of “Crazy Ex-Girlfriend,” a television show that does a good job of destigmatizing people who have a mental illness. The main character on the show, Rebecca Bunch, has borderline personality disorder, or BPD.

This interview originally came out in October during National Suicide Prevention Month, and I found a few valuable lessons for employers.

A major theme was the importance of therapy for anyone with a mental illness, like anxiety, depression or personality disorders. That being said, accessing care isn’t simple. This is a topic I’ve written about before, but I find it important to point out to employers. About half of Americans are dependent on employer-sponsored health care, and even this type of insurance poses access issues for people who have a mental illness.

The hurdles to getting into therapy are significant for someone who is feeling healthy, let alone someone struggling with mental illness, Foreman said. “It’s not OK, and we didn’t design the mental health care system with the person who uses it in mind. That’s wrong.”

One viewer asked about educating people who are uninformed regarding mental illness. I think this is such an important question. As Foreman said, “Think about how much you need this person on your side.” If this person doesn’t matter in your life, as frustrating as it may be, “can you tell them to fuck off?” she said.  But it’s different, for example, if this person is your boss, and you’re asking for sick time off.

Bloom suggested that when confronting uninformed people on this issue, it could help to try to relate it to them: Imagine how it felt when some traumatic thing happened to you. Now imagine that happening at other times, for no reason, and you don’t have a choice in the matter.

My question for employers: Do your managers respect employees with behavioral health issues? Are some of them ignorant or disrespectful? If so, how do you deal with that ignorance? Something like this could impact an employees ability to take care of themselves and get better.

Also, consider the generational divide. Bloom, speaking about BPD, explained how the term was coined in the 1980s. Before that, people with BPD were basically seen as difficult or unpleasant people. They’re just having an off day! Decades later, younger people generally are more accepting of the fact that they have a personality disorder and actually get treatment.

So many stories and research I’ve read have perpetuated the idea that younger generations now are mentally sicker than older generations (thanks to video games, social media, dating apps or whatever modern thing is on the chopping block that day). That idea is even shared with employers in different business journalism stories I’ve read. Offer mental health benefits to attract millennial talent! Health care costs are increasing because young people need to access mental health benefits more than any generation has had to before! Blah blah blah.

I would argue that this type of thinking is dangerous to both older and younger generations. The younger generations sound like the cliche “snowflakes” unable to handle the stresses of the real world, and the older generations sound totally in denial. Let’s give people more credit.

Many older generations didn’t grow up in a time where mental illness was talked about openly, and younger generations grew up differently. Instead of spreading this message that older generations just aren’t as anxious or depressed, maybe we could spread the message that it’s OK to start going to therapy when you’re 50, 60 or 70 years old.