Our knowledge of the issues impacting tax-exempt employers, combined with our experience in retirement, health and welfare and executive compensation, uniquely positions us to serve our tax-exempt clients’ legal needs effectively and cost efficiently.
We have worked on employee benefit issues with health care systems, colleges and universities, museums, associations, charities and other types of tax-exempt employers for many decades, and have developed a deep understanding of their culture, organizations, missions and values. Our team has worked with clients on a wide variety of matters including retirement plans, church plan status, health and welfare plans and executive compensation.
We have significant experience working with tax-exempt employers on the following matters:
Our lawyers work with our tax-exempt clients to develop, implement and maintain retirement plans (defined contribution plans and defined benefit plans) that meet the needs of diverse organizations and workforces. We understand that our role in plan design decisions is much more than simply determining whether a proposed change is legally compliant. For example, we also work with our clients, often in collaboration with other service providers, to identify other issues that should be considered in connection with plan design changes, such as cost implications, impact on employee retention and participant communications.
Examples of our work on retirement plans for tax-exempt employers include the following:
- Helping clients address the issues involved in designing, implementing and administering 401(k) and defined benefit retirement plans
- Reviewing and negotiating agreements with third-party vendors
- Implementing plan mergers, spin-offs and terminations
- Representing clients before various government agencies, including the Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation on tax qualification and funding issues
- Correcting plan operational issues under the Internal Revenue Service’s Voluntary Compliance Program
- Assisting clients in incorporating negotiated benefits into their retirement plans
- Assisting employers with implementation of early retirement windows
- Undertaking detailed legal compliance reviews of retirement plan operations and administration
- Analyzing nondiscrimination testing and plan design issues related to the controlled group and affiliated service group status of affiliated entities
A number of our employee benefit attorneys counsel clients in the areas of retirement plan governance and how to meet your fiduciary duties (for both ERISA and church plans). We advise clients on setting up an appropriate governance structure, best practices to operate a retirement plan committee and suggest procedures for selecting and monitoring plan administrative and investment advisors (and other fiduciaries). We also provide related advice including: drafting or reviewing committee charters; providing fiduciary committees with legal updates; conducting fiduciary legal compliance audits; advising on issues related to plan investments; drafting or reviewing investment policies; and reviewing ERISA section 408(b)(2) service provider disclosures. We also regularly conduct ERISA fiduciary training for fiduciary committees and our clients.
Church Plan Status
We are well-positioned to provide advice on the unique challenges that organizations with church plans face, including issues such as:
- Addressing the special state law, fiduciary and administrative issues arising from “church plan status”
- Counseling church plan organizations on whether to maintain church plan or ERISA status for their retirement plans
- Working with church-related organizations to obtain rulings on church plan status from the IRS
- Developing the proper committee structure that an organization must maintain to keep its church plan status and proper legal and fiduciary standards for church plans
- Advising on the various employee benefit laws that apply to retirement plans and on how these laws should be incorporated in the church plan documents (if at all)
- Counseling on avoiding the new wave of church plan litigation and on how church plan organizations can defend themselves against such an attack
- Helping clients address the issues involved in designing, implementing and administering tax-sheltered annuity/403(b) retirement plans
- Plan mergers, spin-offs and terminations
Health and Welfare Plans
We have one of the largest teams of lawyers of any firm in the country that focuses on health and welfare benefit plan issues. Advising clients on health and welfare benefits—including cafeteria plans, medical and dental plans (whether insured, self-funded or provided through an HMO, PPO or similar arrangement), group-term life insurance plans, disability plans and dependent care plans—constitutes a significant portion of our employee benefits practice. During the past few years, we have also developed a team of lawyers who understand the new Health Care Reform Law and work with our tax-exempt clients to help them understand the potential impact (both as a provider and an employer).
While we counsel many clients on the broad range of issues related to these benefits, we are acutely aware that the health and welfare benefits needs of a tax-exempt health care organization are very different from those of a non-health care provider. For example, some of the issues on which we have experience and would expect tax-exempt health care employers to consider include:
- Deciding how best to use each organization’s internal talent to design, administer and operate its health plans (perhaps through an active health and welfare plan committee)
- Considering the pros and cons of church plan status with regards to the health and welfare plans an organization sponsors
- Addressing recent court decisions regarding the steps that a church-related organization should take to elect ERISA status for its health and welfare plans
- Designing health and welfare plans to encourage use of the organization’s facilities (to help control costs and improve the participant experience) while recognizing that a potential prohibited transaction exists (to the extent that ERISA applies)
- Addressing the special conflict-of-interest rules (based on recent court decisions) that arise when a tax-exempt health care system is the plan sponsor, administrator (where a captive TPA is used) and provider; and
- Considering whether it is best to offer decentralized health and welfare plan offerings to plan participants or whether a more centralized benefits platform makes sense.
Drinker Biddle has a long history of working closely with our tax-exempt clients in the area of executive compensation. This experience includes helping those involved in the process (including the Board, Compensation Committee, HR, legal and others in administration) in:
- Discussing, drafting and approving a compensation philosophy
- Developing a regular Compensation Committee meeting schedule with an annual calendar of important events and required decision dates
- Understanding and staying current with the obligations that are imposed on tax-exempt organizations by the IRS, state attorneys general, the media, unions, Congress and others
- Understanding and staying current with the obligations that are imposed on licensed tax-exempt hospitals that participate in Medicare and Medicaid, including the Stark Laws and Anti-Kickback Laws with respect to physician compensation
- Receiving training on the numerous responsibilities and liabilities that your organization faces as a result of the executive compensation process
- Reviewing existing and proposed compensation and benefits arrangements for executives and other key employees to determine how to minimize the risk of scrutiny (by the state attorney general, for example) and how to lessen the “media sanction” that can occur when arrangements are publicized
- Reviewing proposed compensation and benefits arrangements and advising clients on reasonableness issues, including how to qualify for the “rebuttable presumption of reasonableness” with respect to all forms of compensation and benefits provided to individuals who are likely to be considered “disqualified persons” under the intermediate sanctions rules
- Reviewing existing incentive compensation arrangements and advising clients on how to modify and administer these arrangements in a manner that benefits the organization, rewards the executives fairly and stays within legal compliance boundaries (i.e., to answer the question, “Our incentive program does not seem to be working the way we intended—how do we fix it?”);
- Analyzing, designing, and keeping in legal compliance every type of deferred compensation arrangement, including 457(b) “eligible” plans, 457(f) ineligible plans, split-dollar and other insurance arrangements, and after-tax plans
- Designing and preparing executive employment agreements, severance pay agreements and retention agreements for executives
- Reviewing “reasonableness opinion” letters prepared by independent compensation consultants