Government Relations
Our lawyers regularly appear before Congress and federal agencies to advocate legislative and regulatory proposals regarding employee benefits. 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, Verizon, and Xerox. We also represent ad hoc coalitions of companies 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 non-pension benefits, such as retiree health benefits;
- The diversification rules that apply to shares of company stock held in an employee’s § 401(k) account;
- The income tax treatment of nonqualified deferred compensation;
- Restrictions on a state’s ability to tax the retirement income of a retiree who lives in a different state; and,
- Reform of the health care system.
We work closely with our colleagues in Covington’s legislative practice 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
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 the agency 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 to 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);
- Refinance ESOP loans (DOL Field Assistance Bulletin 2001-1); and,
- Coordinate retiree medical programs with Medicare (EEOC Prop. Reg. § 1625.32).
Rulings and 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 in 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 when an acquiring company enters into contracts that obligate it to buy a majority interest in an unrelated company, the target company does not become a party in interest with respect to the acquiror’s benefit plans until the acquiror actually owns at least 50% of the target’s stock;
- 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 were not “wages” for FICA and FUTA purposes.
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