EMPLOYEE BENEFITS ROUNDTABLE

1. EMPLOYEE BENEFITS ROUNDTABLE Additional offices in: Chicago, IL; Lincoln, MA; Palm Beach Gardens, FL; St. Louis, MO; Tampa, FL www.wagnerlawgroup.com

2. Roundtable Topics • Susan E. Rees: Missing participants, Open MEPS, AHP/MEWA, Governmental Plans, State Secure Choice, DOL Advisory Opinions • Israel Goldowitz: MEP Insolvency/Legislation, Tools Available Under Current Law, Hot Topics Litigation • CandaceQuinn: SEC Proxy Season, Compensation Disclosures, ESG issues • Dan S. Brandenburg:Code Sec 4960   • Stephen P. Wilkes: SEC Reg. Best  Interest/ State Level Fiduciary Activity, RESA provisions on Code Sec 403(b) and Collective Investment Funds

3. ERISA Title I Update Susan E. Rees, Esq. Email: srees@wagnerlawgroup.com

4. Missing Participants Defined Benefit Plans • DOL Initiative – Recovered 1.1 billion • ERISA 209 – Every employer shall . . .maintain records for each employee sufficient to determine the benefits due or which may become due . . . • PBGC Program – Diligent search required • Forfeiture Practice under Tax Code Defined Contribution Plans • 2019 GAO Report – Tax treatment of unclaimed benefits voluntarily transferred by plans to states • DOL Guidance for terminating and for abandoned plans – FAB 2014-01 • PBGC Program – Added terminating defined contribution plans • Legislation – Retirement Savings Lost and Found Act Proposal to use Treasury Securities Uncashed Checks

5. Governmental Plans • IRS ANPRM – November 8, 2011 • Facts and circumstances • Tri-agency • Post ANPRM case - ERISA class action against Atrium, formerly Carolinas HealthCare System, which claims its benefit plans are governmental because the system was created as a hospital authority in Charlotte, North Carolina. The system has more than 40 hospitals in three states, and employs more than 65,000 • Charter Schools – IRS Notice 2015-07 – Charter school employees may remain in state retirement systems

6. State Secure Choice Laws • DOL issued a rule in 2016 that describes how states may design and operate an auto IRA program for private sector employees without creating an ERISA plan for either the state or the individual employer • Congress rescinded the DOL rule in 2017 • States moved forward anyway • CalSavers– Open this July for voluntary participation, mandatory participation for employers with no other retirement plan phased in starting in 2020 • Challenged by a Taxpayers group as preempted by ERISA

7. Association Health Plans (AHPs) • New DOL Rule – 29 CFR 2510.3-5. Under the Rule, employers may continue to rely on existing DOL definition of “bona fide group or association of employers” under ERISA 3(5), capable of establishing a single “multiple employer” group health plan (Pathway 1). Advisory Opinion 2017-02AC. The Rule provides for the phase in of a new alternative AHP (Pathway 2) : • Commonality - can use geographic membership not just industry • Eliminates other restrictions on the purpose of the association and its members’ preexisting relationships • Working owners without common law employees are now eligible – treated as both employer and employee • Requires use of level premiums, must include spouses, and other Part 7 Requirements • Broadens the AHP definition for purposes of the Affordable Care Act requirements for large group coverage versus small group or individual coverage • MEWA? Under either alternative, an AHP is a “multiple employer welfare arrangement” (MEWA) under ERISA 3(40), and, as Plan MEWAs, are still required to file an annual Form M-1 and acknowledge on Form 5500 • DOL Rule Challenged Eleven states have sued – State of New York v. U.S. Dept of Labor

8. Association Retirement Plans • DOL Proposed Rule Under ERISA 3(5) for defined contribution plans • Two types: • Modified Traditional – Bona fide employer group or association • As with AHPs – broadened commonality and purpose tests, and may include working owners who are sole proprietors. • PEO Plans – PEO may act on behalf of employer • Open MEPs? – AO 2012-04A still applicable? • Pending Legislation • Open MEPS and “Bad Apple” Correction - currently one legally noncompliant employer could cause the entire MEP to be disqualified.

9. Recent DOL Opinions • AO 2019-01A – Fiduciary opinion on Auto Portability Program - Employers using rollovers to default IRAs may select this “Locate, Match, and Transfer” program which will facilitate transferring the IRA account to any new employer’s plan • Information Letter 12/04/2018 – Auto enrollment for disability benefit plan not protected by ERISA preemption unlike statutory protection for auto enrollment feature in 401(k)s • Information Letter 02/27/2019 – Three cautions for plans on the right of participant or beneficiary to name an authorized representative for claims processing. 1. Plan SPD and Claims procedures must include, 2. Plan may provide all notices to both, but must provide all notices to the authorized representative for the specific aspect covered by the authorization, and 3. Plan is required to comply with the specifics of the authorization, and for subsequent aspects, must insure that all notices are provided to the participant or beneficiary

10. THE STATE of MULTIEMPLOYER PLANS • Israel Goldowitz, Esq. • Email: igoldowitz@wagnerlawgroup.com

11. Scope of the Problem • Looming insolvency of Central States, UMWA Funds, and PBGC insurance fund • “Butch Lewis” Bill and elements of possible legislative compromise • “GROW” Bill and other proposals to assure sustainable benefit growth

12. Tools Available Under Current Law • “Construction Industry” rules • Two-pool methods, alternative settlement rules, and PBGC “soft guidance” on approval process • Funding improvement and rehabilitation plans, benefit suspensions, partitions, and PBGC proposed withdrawal liability regulations. • Spinoffs and mergers, including “facilitated” mergers 

13. Hot Topics in Litigation • “Segal Blend” -- Appeal in New York Times v. Newspaper Deliverers Fund • Private Equity Exposure – Decisions in Sun Capital v. New England Teamsters Pension Plan • Successor Liability – Decisions in Man-Web and Heavenly Hana

14. EXECUTIVE COMPENSATION Candace Quinn, Esq. Email: cquinn@wagnerlawgroup.com

15. SEC Proxy Season 2019 • Compensation Disclosure • Pay Ratio Disclosure • Section 162(m) performance based exception eliminated under Tax Cuts and Jobs Act • Environmental, Social and Governance (ESG) Disclosure • ESG has become increasing more prevalent in the performance framework of executive compensation • ESG impact on executive compensation • Transparency – Shareholders • ISS implemented ESG Quality Score to accompany Governance Quality Score • Glass Lewis partnered with Sustainalytics for reporting ESG information • Scores and voting policies • Status of SEC rule making on ESG

16. SEC Proxy Season 2019 – continued… • ESG Investment Considerations • DOL Interpretive Bulletin 2015-01 • DOL Interpretive Bulletin 2016-01 • DOL Interpretive Bulletin 2018-01 • Executive Compensation Incentive Plan performance frameworks

17. IRC Section 4960 – Tax On Excess Tax-Exempt Organization Executive Compensation Dan S. Brandenburg, Esq. Email: dbrandenburg@wagnerlawgroup.com 17

18. IRC Section 4960 Tax on Excess Tax-Exempt Organization Executive Compensation • IRC Section 4960 was added by the Tax Cuts and Jobs Act (“TCJA”) enacted on December 22, 2018, generally effective for taxable years beginning on or after December 31, 2017. • The IRS issued Interim Guidance under IRC Section 4960 on December 31, 2018 as Notice 2019-09. • Section 4960 added a new excise tax that applies to certain compensation of a tax-exempt organization. The tax is applied against the applicable tax-exempt organization (not the affected individual) at a rate equal to 21% of the amount involved. • The tax is also applied to certain related or controlled for profit entities.

19. IRC Section 4960 Tax on Excess Tax-Exempt Organization Executive Compensation (Cont.) • The excise tax applies to the compensation of the 5 highest compensated employees of the organization for the taxable year (“covered employees”) and to employees who were covered employees for any preceding taxable year beginning after December 31, 2016. Once an employee is a covered employee, even for a year, the employee remains a covered employee. • The information has to be retained. • Section 4960 imposes tremendous record-keeping requirements. • The amount involved for purposes of the excise tax is (1) the annual amount of compensation over $1,000,000 (no adjustment for increases in the cost of living) for the current year and applicable prior years, and (2) certain post termination payments (“excess parachute payments”) so long as the employee would be considered a “highly compensated employee,” currently set at $125,000/year.

20. IRC Section 4960 Tax on Excess Tax-Exempt Organization Executive Compensation (Cont.) • A payment is considered a parachute payment so long as it is contingent upon an employee’s involuntary separation of employment with the employer, and the contingent compensation equals, or exceeds, 3 times the base amount. The base amount is the affected employee’s average W-2 income for the five calendar years ending before the year in which employment terminates. • The new excise tax is applied to the employer(s) with affected employees on a controlled group basis including related for-profit entities. For purpose of the control test, 50% ownership is used instead of an 80% ownership. • There is a special carve out on applicable compensation for licensed medical professionals, including veterinarians, for compensation attributable to the provision of medical (veterinary) services. • Amounts credited and “earnings” on those amounts under 457(f) Plans are counted against the $1,000,000 annual earnings limit only when vested rather than when paid.

21. IRC Section 4960 Tax on Excess Tax-Exempt Organization Executive Compensation (Cont.) • Upcoming Deadlines • April 2, 2019 – Deadline to submit comments to the IRS on Notice 2019-09 • Given that the provisions of IRC Section 4960 were generally effective for taxable years beginning on or after December 31, 2017, May 15, 2019 is the deadline for calendar year organizations to file excise tax returns for 2018. As with Form 990, a 6-month extension is available if Form 8868 is filed by May 15th.

22. SEC Reg Best  Interest / State Level Fiduciary Activity RSSA Provisions on Code Sec 403(b) and Collective Investment Funds Stephen P. Wilkes, Esq. Email: swilkes@wagnerlawgroup.com

23. Agenda • Current State of Fiduciary Rule • SEC Proposals • State Initiatives • Regulatory Agendas • Legislation introduced by Sens. Portman and Cardin: Retirement Security and Savings Act of 2018

24. SEC’s Proposed BD Standards and Other Guidance • On April 18, 2018, SEC issued a set of three proposed rules: • Release No. 34-83062 - regulates the standard of conduct for broker-dealers (“Regulation BI”) • Release No. 34-83063 - requires broker-dealers and investment advisers to deliver a new form CRS • Release No. IA-4889 - SEC proposed an interpretation of the fiduciary standard of conduct for investment advisers • Regulation BI is separate and distinct from fiduciary duty under Adviser’s Act • Regulation BI has no effect upon SEC’s interpretation of investment adviser’s fiduciary obligations

25. State Fiduciary Initiatives • States Proceed with Fiduciary or “Best Interest Standards” • New York’s – DFS’ “best interest” standard eff. Aug. 1, 2019 and Feb. 1, 2020; Investment Transparency Act introduced on January 20, 2019. • New Jersey – bill requiring disclosure of non-fiduciary status is pending; Bureau of Securities pre-proposal amendment imposing a fiduciary duty also pending • Nevada – Proposed regulations implementing NRS 628A • Connecticut – disclosure of conflicts of interest eff. 1/1/19

26. Regulatory Agendas • SEC regulatory agenda has set a target date of September 2019 to finalize its proposed package of investment advice rule making • EBSA regulatory agenda hopes to have fiduciary rule cleanup regulations finalized by September 2019 • To pass the proposal for release as scheduled, Chairman Clayton needs the votes of 3 of the 4 commissioners • 11 former SEC economists called the proposals “weak and incomplete” in a February 16, 2019 comment letter.

27. Retirement Security and Savings Act of 2018 • Introduced by Sens Rob Portman (R-OH) and Ben Cardin (D–MD) on December 19, 2018 • Nearly 60 retirement provisions • Section 118: Enhancement of permitted investments of 403(b) plans

28. Important Information This presentation is intended for general informational purposes only, and it does not constitute legal, tax or investment advice from The Wagner Law Group. Financial advisors and other plan service providers should consult with their own legal counsel to understand the nature and scope of their responsibilities under ERISA, Investment Advisers Act, and other applicable federal and state laws.

29. QUESTIONS?

30. EMPLOYEE BENEFITS ROUNDTABLE