For 2020, legislation enacted in December of 2019 dramatically increases penalties imposed by the Internal Revenue Code (the Code) for late filing of certain employee benefit plan notices and reports. In addition, a final rule published by the Department of Labor (DOL) makes inflation adjustments to a wide range of penalties. Learn the penalty amounts that apply beginning in 2020.

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https://www.employeebenefitsblog.com/2020/02/up-up-and-away-2020-increased-penalties-for-employee-benefit-plans/

The United Kingdom is no longer a member of the European Union and has entered into a transition period until December 31 2020, unless an extension of 1 or 2 years is agreed by July 1 2020 (the Brexit Long Stop Date).

During this transition period, the UK will continue to trade with the EU in much the same way as it did before its exit. Negotiations will take place throughout this year to determine the future permanent relationship between the UK and the EU.

The UK’s Prime Minister, Boris Johnson, has repeatedly stated that the transition period will not be extended beyond the end of this year. This is an ambitious deadline to reach a comprehensive agreement with the EU and the possibility of a “no deal” Brexit remains an event for which companies should prepare.

Against this backdrop, this update summarises the current status of the UK’s relationship with the EU and sets out some of the key legal implications associated with a “no deal” scenario for certain areas—one of which being employment, which we examine here.

Employment

In either a deal or “no deal” scenario after the implementation period, there is little if any change expected in relation to UK employment laws in the short term.

The Government’s position has been reasonably consistent during the period since the Brexit vote in June 2016. The Secretary of State with responsibility for employment law told Parliament on 7 November 2016 that the Government would “entrench all existing workers’ rights in British law, whatever future relationship the UK has with the EU”. While Prime Minister, Theresa May reiterated on numerous occasions that the Government “will not only protect workers’ rights, but enhance them”.

Boris Johnson has made similar promises about protecting workers’ current rights but was criticized for the omission from the 2020 Withdrawal Agreement of a section in previous versions of the European Union (Withdrawal Agreement) Bill requiring the Government to report on divergence from new EU rights in the future.

In relation to current employment rights, the Government has issued a series of technical notices which confirm that, in the event of a “no deal” Brexit, workers in the UK will continue to enjoy the rights they are currently entitled to under EU law with one key exception (relating to European Works Councils—discussed further below). To achieve this, the 2020 Withdrawal Act provides for EU law (with necessary technical drafting amendments) to be imported into UK law on Brexit Day.

The Withdrawal Agreement also provides that EU law will continue to apply during the transition period until the Brexit Long Stop Date. Employment law rights derived from EU law (such as anti-discrimination rights, collective consultation obligations, TUPE regulations, family leave and working time rights) will therefore be maintained for this transition period as a minimum.

However, some comfort can be taken from the Political Declaration setting out the Framework for the Future Relationship between the EU and UK (which accompanied the Withdrawal Agreement) which includes a commitment to work together to safeguard “high standards of … workers’ rights” and a statement that the future relationship must ensure open and fair competition, including provisions on social and employment standards.

European Works Council

The only substantive changes relate to European Works Councils (EWCs), which cannot continue to function as they do currently post-Brexit Long Stop Date.

The Withdrawal Agreement provides that no new requests to set up an EWC or information and consultation procedure can be made after the Brexit Long Stop Date.

For existing EWCs, the impact of Brexit will depend on the terms of the EWC. For EWCs which are not governed by UK law, the default position is that UK employees will no longer be entitled to have representatives on the EWCs, and the UK delegates’ seats will need to be reallocated, unless the parties to the EWC agreement agree otherwise.

Those governed by UK law will need to designate another EU country to govern the EWC. The choice of which alternative law will apply should be carefully considered in light of the fact that it will have strategic implications for the composition of the EWC and national legal concepts to which it will be subject.

Changes to Employment Laws in the Future?

In theory, Parliament could make future legislative changes to employment law, but these are likely to be limited given the commitments given by the Government and, in the event of a no deal Brexit, the practicalities of negotiating any future trade arrangements with the EU.

In terms of case law, under the 2020 Withdrawal Act, in theory at least, the Supreme Court could re- examine and potentially overturn doctrines derived from European case law. Much-litigated issues such as holiday pay could, therefore, theoretically at least, be re-opened. However, again, in light of the reassurances given about the continued protection of employment rights, any significant roll-back would be surprising.

Immigration

Immigration is an area that has the ability to have significant impact on some employees and their families.

If the UK leaves the EU with a deal, it has been agreed that there will be a “transition period” from Brexit Day to the Brexit Long Stop Date (being December 31 2020 at the time of writing). During the transition period, free movement will effectively continue between the UK and the EU.

The UK Government has promised that, whether or not there is a Brexit deal, under the “EU Settlement Scheme” all EEA nationals and their families living and working in the UK as at December 31 2020 will have the continued right to reside and work in the UK and to acquire rights of permanent residence in the UK after five years of qualifying residence.

The scheme came into effect on March 29 2019. The Government has stated that applications for Settled or Pre-Settled Status must be made before the end of June 2021 if there is a Brexit deal (or December 31 2020 in the event of a “no deal” Brexit), to protect an individual’s rights to remain in the UK.

The latest information on the “EU Settlement Scheme” is published by the UK government. Please see https://www.gov.uk/settled-status-eu- citizens-families for further information.

Practical Steps for Employers

The key impact will be for employers who recruit or second employees cross-border. Employers with affected employees will wish to ensure that they are familiar with the “Settled Status” procedure and the relevant deadlines.

Employment Taxes: Social Security

EU regulations currently help internationally mobile employees pay social security contributions in only one Member State. In the event of a “no deal” Brexit, these regulations will cease to have effect in the UK post-Brexit Long Stop Date. Although the UK has legislated for the status quo to continue, whether it will do so will depend entirely on reciprocal action by the EU, which has not been agreed. The UK had a limited number of agreements with some, but not all, of the EU Member States before the regulations took effect; however, these are far less comprehensive than the EU regulations, and may be limited in duration and scope.

Employers will therefore need to review the social security status of employees moving into or out of the EU, and will also need to review all international working arrangements to determine whether new social security obligations are triggered.

https://www.employeebenefitsblog.com/2020/02/brexit-update-effects-on-employment/

There are requirements for a qualified domestic relations order (QDRO) that apply whether the QDRO is for splitting up defined contribution (DC) plan assets or defined benefit (DB) plan assets, notes McDermott’s Lisa K. Loesel.

However, the mechanics of setting up QDROs vary between DC and DB plans. Read on to discover the different paths for getting the right benefits to the right people when a plan participant divorces.

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Originally published on PLANSPONSOR, January 2020

https://www.employeebenefitsblog.com/2020/02/mechanics-of-db-plan-qdros-differ-from-those-for-dc-plans/

Public companies would have a harder time evading a stricter limit on deductions for compensation paid to top executives under an IRS proposal. The proposed regulations (REG-122180-18) implement a 2017 tax law provision that expanded the scope of tax code Section 162(m), which prevents public companies from getting a tax deduction for executive compensation exceeding $1 million. The rules target a workaround under which corporations could potentially skirt the limit by paying certain top executives part of their compensation through a partnership.

McDermott’s Andrew C. Liazos contributes to a Bloomberg Law article that takes a look at how the IRS is working to curb the workaround of the limit on executive pay tax break.

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Originally published on Bloomberg Law, December 2019

https://www.employeebenefitsblog.com/2020/01/irs-aims-to-curb-workaround-of-limit-on-executive-pay-tax-break/

Student loan debt skyrocketed in the past decade, topping $1.5 trillion among millions of Americans. The crisis has prompted US employers to address it in their benefits programs.

McDermott’s Jeffrey M. Holdvogt contributes to a Plan Sponsor article that provides a review of how employers can help employees break free from the bind student loan debt has on financial wellbeing and retirement savings.

Access the full article.

Originally published on Plan Sponsor, December 2019

https://www.employeebenefitsblog.com/2020/01/addressing-employees-student-loan-debt-in-2020/