Related Practices
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Our lawyers regularly appear before Congress and federal agencies to advocate employee benefits legislative and regulatory proposals. We are deeply involved in many of the most important issues of the day, affecting such matters as pension funding, cash balance and other “hybrid” pension plans, the taxation of deferred compensation, and health care reform. We also obtain private letter rulings and advisory opinions to resolve issues that affect our clients’ benefit programs.
Our clients for these matters include Bank of America, The ERISA Industry Committee, Honeywell, IBM, John Hancock, Kodak, Lucent, and Xerox. We also represent ad hoc coalitions formed to pursue specific legislative or regulatory objectives.
Federal Legislation
These are a few of the many areas that Covington lawyers have helped to shape through federal legislation:
- Rules permitting employers to adopt cash balance and other “hybrid” pension plans;
- Rules allowing employers to use surplus pension assets to fund retiree health benefits;
- Diversification rules that apply to employer stock held in § 401(k) accounts;
- The tax treatment of long-term care insurance and corporate-owned life insurance;
- The tax treatment of nonqualified deferred compensation; and
- Restrictions on a state’s ability to tax the retirement income of a retiree who lives in a different state.
Covington lawyers with technical and legislative experience work together to make key contacts with members of Congress and their staffs, to design and draft legislation, and to provide point papers and other supporting documents. We also monitor pending legislation and provide strategic advice to clients whose benefit programs might be affected.
Regulations & Agency Guidance
Covington represents clients before the Treasury Department, the Labor Department, the Pension Benefit Guaranty Corporation, and the EEOC to influence the development of regulations and other agency guidance. We testify at agency hearings, submit written comments, and speak informally to agency officials. Where appropriate, we present our views to the agency before it issues proposed regulations.
- We have participated in formal and informal regulatory proceedings on countless issues affecting retirement plans, executive and equity compensation programs, health and other welfare benefit plans, and fringe benefits. Our lawyers have helped develop rules that secure important advantages for our clients. For example, we were instrumental in persuading federal agencies to issue guidance that permits employers to:
Make pension distributions to employees transferred in business sales (IRS Gen. Couns. Mem. 39824);
- Offer recurring early retirement window programs (IRS Rev. Rul. 92-66);
- Provide generous transition benefits under safe harbor defined benefit plans (Treas. Reg. § 1.401(a)(4)-13);
- Identify the PBGC’s “early warning” criteria for intervening in corporate transactions (PBGC Technical Update 00-3);
- Refinance ESOP loans (DOL Field Assistance Bulletin 2002-1); and
- Coordinate retiree medical programs with Medicare (EEOC Prop. Reg. § 1625.32).
Where appropriate, we have also persuaded agencies not to issue guidance that would have been detrimental to our clients’ benefit programs.
Rulings & Advisory Opinions
Covington also helps clients obtain private letter rulings and advisory opinions addressing their specific plans and circumstances. Listed below are a few examples of the favorable private rulings and advisory opinions we have obtained for our clients:
- Rulings from the IRS and an advisory opinion from the Labor Department approving an innovative trust and insurance arrangement that protects executive medical benefits following a change in control;
- Rulings from the IRS allowing an employer to use post-retirement life insurance reserves to fund post-retirement health benefits without adverse tax consequences;
- An advisory opinion from the Labor Department concluding that a contract obligating an acquiring company to buy a majority interest in an unrelated target company does not make the target a party in interest with respect to the acquirer’s benefit plans;
- Rulings from the IRS that a qualified employee stock purchase plan may exclude union-represented employees and may allow participants to purchase fractional shares;
- Rulings from the IRS that a welfare benefit trust established pursuant to the settlement of class action litigation qualifies as a collectively-bargained trust for purposes of the tax deduction and unrelated business income tax rules; and
- Rulings from the IRS that supplemental unemployment benefit payments made to former employees are not “wages” for FICA and FUTA purposes.
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