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In-house counsel and human resources professionals at tax-exempt colleges and universities often face a variety of challenges when structuring, and determining obligations due under, severance arrangements. There are some key considerations to bear in mind, which are outlined in this article.

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https://www.employeebenefitsblog.com/2019/08/7-severance-structuring-tips-for-tax-exempt-colleges-and-universities/

In the past few years, several states and localities have passed paid sick leave laws. These laws generally require employers to offer workers paid sick leave due to illness or injury, domestic or sexual assault, or care of a family member. Proponents of paid sick leave laws say that they help the local economy by improving workers’ health, safety and welfare and by reducing employee turnover. The ordinance San Antonio passed last year required businesses with more than 15 employees to provide 64 hours of paid sick leave per year. Businesses with 15 or fewer employees were required to provide 48 hours of paid sick leave.

Despite some objections from the business community, which argues the laws create unreasonable costs, the laws had not been challenged until three Texas cities—Austin, Dallas and San Antonio—passed sick leave laws. Business groups and Texas Attorney General Ken Paxton have filed lawsuits challenging both Austin’s and San Antonio’s laws, arguing that the ordinances effectively require employers to pay an hourly wage higher than the state’s minimum. Dallas’s law will go into effect August 1, 2019, although business groups have threatened to sue to block its implementation.

Last August, Texas’s intermediate appellate court blocked Austin from implementing its paid sick leave law. The court found that the law unconstitutionally interferes with the state’s legislative authority, because the Texas Constitution allows only the Texas legislature to set minimum wages and paid time off. The case is currently pending before the Texas Supreme Court. After business groups launched a similar challenge to San Antonio’s ordinance this month, just days before its planned August 1 effective date, San Antonio has agreed to delay implementation until December 1, 2019. The stay will allow time for guidance from the Texas Supreme Court on the law’s constitutionality. In the meantime, San Antonio’s Paid Sick Leave Commission has agreed to work with business stakeholders to recommend changes in the ordinance to the San Antonio City Council.

If the law survives its legal challenges and goes into effect, San Antonio would join cities such as New York City, Chicago, Philadelphia, St. Paul, Minneapolis, Duluth, Los Angeles, San Diego, San Francisco and Washington, D.C., as well as states such as Arizona, Connecticut, California, Massachusetts, Maryland, New Jersey, Oregon, Rhode Island and Vermont, which also have paid sick leave laws.

https://www.employeebenefitsblog.com/2019/08/san-antonio-temporarily-suspends-paid-sick-leave-law-amidst-legal-challenge-from-business-groups/

In Lee v. Argent Trust Co., the court dismissed ERISA claims challenging an ESOP stock transaction because the plaintiff, who “fundamentally misunderstands the nature of the” ESOP transaction, did not allege that she suffered any injury. This decision is important to educate other courts about economics, particularly in cases where plaintiffs rely on little more than the post-transaction valuation as evidence of supposed overvaluation.

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https://www.employeebenefitsblog.com/2019/08/federal-court-dismisses-challenge-to-esop-transaction/

With the uncertainty of the general election just one year away—and change on the horizon—now is the time to take stock of the legal and regulatory environment to prepare your organization for the future.

On September 10 in Boston, the ERISA Industry Committee (ERIC), Fidelity and McDermott invite you to join your peers and colleagues for breakfast and an interactive discussion at 8 am EDT around hot topics in benefits and compensation. Areas of focus will include:

  • Congressional action on healthcare—from Rx costs to surprise billing
  • Direct contracting for health plans
  • Federal and state paid leave
  • Lasting impacts of tax reform
  • New leveraged ESPP funding alternative
  • Student loan repayment plans
  • The SECURE Act and what comes next

Register for the event.

https://www.employeebenefitsblog.com/2019/08/capital-perspective-an-analysis-of-hot-topics-in-benefits-and-compensation/

The federal court affirmed ERISA’s limitations on the types of claims and remedies available under ERISA. This well-reasoned decision affords Congress the deference it deserves by limiting claims and remedies only to those Congress intended to provide in ERISA.

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https://www.employeebenefitsblog.com/2019/08/kruse-western-wins-partial-dismissal-in-erisa-lawsuit-over-244-million-stock-sale/

The 2019 ESOP National Conference, an annual gathering for employee owners from all levels, association volunteer leaders and expert professionals, took place May 22–24. Two McDermott partners, Theodore (Ted) M. Becker and Erin Turley, presented three sessions during the conference, the slides of which are available for download on the conference website. See descriptions of the presentations below:

  1. New & Notable ESOP Valuation Issues
    Co-Presented by Erin TurleyESOP valuation methodology and theory continue to evolve in part due to ESOP litigation, DOL investigations, academic studies and other outside factors that may potentially impact ESOP valuations today. This advanced valuation session discussed recent “hot topics” to consider when valuing an ESOP company.
  2. Legislative, Regulatory and Judicial Update
    Moderated by Ted BeckerThis session provided an update of court decisions, IRS and DOL guidance and activities, and federal legislation of significance to ESOP companies, fiduciaries and service providers.
  3. Recent DOL Audits, Investigations and Claims
    Co-Presented by Ted BeckerThis session provided information regarding some of the emerging best practices in the ESOP community with respect to, and as a result of, positions taken by the DOL in audits and investigations of ESOPs and ESOP transactions and claims made by the DOL and court decisions in related litigation. The session addressed how an ESOP transaction should be structured, who should be involved, and how the parties can proceed in a way that is least likely to trigger concern or claims by the DOL.

https://www.employeebenefitsblog.com/2019/08/on-top-of-esop-developments-insights-from-the-42nd-esop-national-conference/

The Departments of Labor, Treasury, and Health and Human Services have released final rules removing the prohibition on pairing HRAs with individual health policies. The final rules also allow certain HRAs and other account-based group health plans to qualify as limited excepted benefits. These rules are generally effective for plan years beginning on or after January 1, 2020.

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https://www.employeebenefitsblog.com/2019/07/a-new-day-for-the-hra/

A new IRS notice will allow many with chronic health conditions who participate in high-deductible health plans (HDHPs) with health savings accounts (HSAs) to receive necessary care that may otherwise be out of financial reach. The notice expands the list of preventive care benefits that can be covered by an HDHP prior to a participant meeting the minimum deductible without disqualifying them from making or receiving HSA contributions.

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https://www.employeebenefitsblog.com/2019/07/irs-expands-scope-of-preventive-care-under-health-savings-account-rules/

The US Supreme Court recently agreed to review the Eighth Circuit’s decision in Thole v. US Bank, in which the Eighth Circuit held that participants in an overfunded defined benefit pension plan lack standing to sue for fiduciary breaches under ERISA. The Supreme Court’s decision in this case—the third ERISA case accepted by the court this term—could have significant implications for plan sponsors and plan fiduciaries. Many believe that if the Supreme Court rules that the plaintiffs have standing to bring suit, it could encourage a proliferation of litigation against plans where there is no actual impact on participants’ benefits.

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https://www.employeebenefitsblog.com/2019/07/big-erisa-decisions-on-the-horizon-scotus-to-review-third-erisa-case-this-term/

Executives are no longer reluctant to lawyer up. News reports on executive/employer contretemps at Papa John’s, Barnes & Noble, Uber and other companies have drawn press attention in the past year; countless other executive/employer disputes have flown below radar.

Underlying these controversies is the executive’s employment agreement, typically the most high-stakes and closely negotiated employment agreements to which companies will contract. Yet, these agreements often contain less clarity and less certainty than either executives or their employers need. Indeed, there appear to be three areas where these contracts could and should be upgraded. Let’s look at each.

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Originally published by Law360, February 2019.

https://www.employeebenefitsblog.com/2019/07/3-aspects-of-executive-agreements-that-need-an-upgrade/