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Friday, April 19, 2024

Gary Cooper (the other one, from the Braves) and Pensions

So there's a guy, Gary Cooper, who was one day away from qualifying for his MLB pension back in the 70s when his next game was rained out, who was then sent down to the minors never to return, and who's now essentially destitute and . . . pensionless. Can't some baseball team in need of some good press find its way to a one-day contract for him?!? Just asking. 

Friday, December 22, 2023

Should Joaquin's Joker Be Getting a Classification Lawyer Around Holiday TIme?

The question of whether a worker is an employee or an independent contractor has been around for many years.  The question has numerous consequences for tax purposes, and there is significant tax authority on the point.  The issue has relevance in the ERISA world in many contexts, not the least of which are treatment under 401(a)(2) for qualified plans, issues under a host of tax provisions governing welfare benefits, coverage by ERISA itself, and the like.  The benefits side of the issue made a huge splash with the Microsoft case.  And then there's the whole kerfuffle (what a great word (for all you Judge Judy and Better Call Saul fans)) on the regulatory side relating to gig workers in the modern and evolving economy.

Well, now it appears that Joaquin Phoenix's Joker may well need a lawyer, although not for the reasons you might expect.  Was Arthur Fleck, who we now know was working as a real-life clown prior to his ascension to Joker status, classified by his service recipient (who had quite the tough go of it) as an employee or was he left to the vagaries of independent-contractor status?  The case of Angulo v., Inc. (S.D.N.Y.) may be of interest to Arthur, and he may need to decide whether to opt in or out (if he's in the right jurisdiction).  Maybe Joker 2 will shed some more light on the applicable legal intricacies?  Other iterations of the oh-so-festive Clown Prince have also brought about express clown references to our (anti-)hero. 

And, speaking of festive (yes, I strained pretty hard to find a connection that would allow me to write this paragraph), it is, of course, Holiday time.  So I will refer you to my most recent post about Xmas music and to a post about the holiday that (with apologies to Seinfeld's Festivus) I've attempted to establish. 

Merry and Happy ChristmaHanuZaa and Happy New Year!

Sunday, September 3, 2023

Welcome to My ERISA Nightmare - Alice Cooper, HR Manager

While minding my own business, I was treated to a clip pushed out to me by Google that really resonated with me - Alice Cooper on Johnny Carson with a snake that was crawling all over Johnny.  Others may have noticed the utterly nonplussed way in which he handled Alice's snake (and, in all fairness, I did, too).  

But I noticed something else. That's right, the ERISA angle.  

Johnny read from Alice's casting call for the snake, and got to the following line: "Employee benefits include a liberal pension arrangement, free hospitalization, profit sharing, Christmas bonuses and an occasional human sacrifice if you are the right reptile."  It was so satisfying to learn that Alice, one of the true greats, is so focused on employee benefits.   

P.S.: For anyone who's amazed by the internet's knowledge of what we want to see, hear, etc., take a look at Black Mirror's Joan is Awful.

P.P.S.: Speaking of Alice Cooper, I've been trolling around digging into all things Steve Hunter and Dick Wagner.  It started when recently I wanted better to understand the magic behind Lou Reed's live Intro to Sweet Jane.  That led me to those two.  Then that foray took me to the Alice Cooper connection for Messrs. Hunter and Wagner.  Most recently, I've learned that these virtuosos - not Joe Perry - are the magicians playing guitar on Train Keep a Rollin' (a ditty about which I've previously posted).  Wow.  (One can find out a whole bunch of things on the internet.  My oh my, what did we do before Google?)

Sunday, May 28, 2023

A Grab-Bag of Recent References - Guardians, Jeopardy, and Pearls/Swine

So I've come across three ERISA-flavored references in various media over the last several weeks, as follows;

- First, we have what to others may be a throwaway line in the extremely fun (and MUCH more fun than it has any right to be) Guardians of the Galaxy Vol. 3, but which to me was an experience enhancer.  When Our Heroes were trapped {soft SPOILER ALERT - no really big deal, but if you don't want to know ANYthing then stop reading now] trying to infiltrate Orgocorp, one of the sentries holding a clipboard said, "And I appreciate your generous contribution to the Orgosentry retirement fund."  Not sure ERISA really applies to the Orgosentry fund, but - close enough.*

- Then we have a 401(k) reference during the recent Jeopardy Masters tournament.  ERISA has made its way onto Jeopardy before (see, e.g,, this prior post), but it was nice to see a reference in the Masters tournament.  A bit tough to take, though, that a Canadian, Mattea Roach (oooh - tough loss in the finals), got the answer (question?) right.

- And bringing up the rear is a Pearls Before Swine strip that has a besieged Economics professor wistfully stating that he "should retire and live in a van" (shades of Matt Foley?), and being met with the rejoinder from another that, "Hey, that's MY retirement plan."  Funny.

That's it.  I've come across the foregoing, and now so have you.  Happy Memorial Day weekend..

* I'm going to put James Gunn up there with the likes of John Hughes as among the best pop-culture screenwriters I've ever seen. Note that he's the Dawn of the Dead (remake) guy.

Monday, March 13, 2023

Death Benefits at the Oscars

ERISA covers certain death benefits.  Slasher films and zombie movies involve death (and undeath, if you will).  There, connection made.  (This isn't the first time I've used an arguably attenuated (to say the least) ERISA connection to post about things that realllllly interest me.)

In watching the Oscars, I came upon two winners that brought me back to all-time Favorite movies of mine.  To wit:

- As I've said, the Zack Snyder remake of Dawn of the Dead gets my vote as the Best Zombie Movie of All Time.  And now I get to see Sarah Polley win a screenplay Oscar!

- As I've said, John Carpenter's Halloween soundtrack is quite simply unsurpassed.  More generally, the movie's utterly iconic status is indisputable.  And now I get to see Jamie Lee Curtis go from acting in her very first role to getting an Oscar!

Much of the evening focused on movies, performances and other things that (with the exception of Brendan Fraser's (say "razor") turn in The Whale) didn't quite do it for me.  So you go ahead and pay attention to the various ancillary moments from the evening, like Best Director, Best Picture, etc.  I'll just focus on the things that interest me.*

* I did note Jimmy Kimmel's incredible Robert Blake reference (hey, there's another "death benefits" connection (!!)).

Thursday, January 19, 2023

Six Degrees of Kevin Bacon Makes Its WIld Way to ERISA

The Six Degrees of Kevin Bacon trope has become so omnipresent that I guess it should not be surprising that a connection between ERISA and Kevin Bacon would eventually surface. I was just giving the 1998 film Wild Things another peek, and I . . . 

[SPOILER ALERT - THERE MAY BE SOME SPOILERS AHEAD (although they're minor spoilers, in my view)] 

. . . took note of the fact that his Sgt. Ray Duquette, in connection with other sanctions directed his way, was stripped of his (public) pension. Not much more was made of the point, and its interesting that they would go in that direction where, in a lot of jurisdications, forfeiture of pension benefits for bad acts is by no means straightforward, if possible at all. It would appear that in Florida, where Wild Things is set, there may indeed be a path to forfeiture, so the forfeiture may well not be a plot hole. At least they didn't have to navigate or otherwise worry about ERISA Section 206(d) and Code Section 401(a)(13). 

Two other things I would note. First, what a soundtrack! I've lauded some other soundtracks here, but never mentioned this one. It really drives the movie and helps define its vibe. Second, I don't think I've ever seen another movie where the in-credit (not really post-credit but rather in-credit, in this case) scenes unravel, explain and even change the narrative as much as they do here. Incredibly creative; incredibly effective. It's so rare that there's true originality in a movie's presentation, and this, I think, is a great example.

Sunday, December 25, 2022

Xmas Music, Etc. - 2022 Edition

Merry Christmas!  In the past, I've done some ERISA and non-ERISA posts with some Holiday music and other Holiday-themed nuggets.  Sometimes, I go for the obscure.  To wit:

- 2021  

- 2020  (this year's Holiday gift from Messrs. Kurstin and Grohl starts here) (special attention to Night Seven please)

- 2014 

- 2010 

And here are some new entries for you:

- from Sershen & Zaritskaya (as then known) to Daria and the others in (the) Ukraine, be safe and well) - here and here and (with Holocene) here 

- from Augie Bello - here

Merry and Happy ChristmaHanuZaa, and Happy New Year!!


Tuesday, December 20, 2022

401(k)s in Jeopardy?!?

As noted previously, IRAs have made their way onto Jeopardy.  Now, while IRAs got their own column all to themselves, 401(k)s apparently (with apologies to Weird Al (and indirectly Greg Kihn)) didn't want to lose at Jeopardy and wanted their day in the sun, even if just for one answer.  So, under Words with Greek Letters, for $800, we get: "3M, B-52 & 401(k) all have this quality, which begins with two Greek letters".  (I might've preferred "B-52s".)  The question - What is ALPHA/NU/meric?  Not the most dramatic ERISA reference ever, but I'll take what I can get.

Saturday, December 3, 2022

Tim Conway's 35-Year-Old Orphan as . . . Independent Fiduciary?!?

So I was trolling the internet and I came upon Tim Conway as the 35 year-old orphan.  I think in the annals of television Tim Conway's (brazen) efforts to crack up Harvey Norman and the rest of the Carol Burnett* cast rank as some of the best comedy television in the history of television.  See, e.g., the dentist skit and, the best of all, the bit about the Siamese elephants.**  For my money, three of the best physical comics ever are Conway, Chris Farley (e.g., Chippendales,*** (Bob Odenkirk's****) Matt Foley and Michael Richards (e.g., the washing machine).

And who knew that one of the characters in Mr. Conway's stable was ahead of his time in being ready to take on ERISA responsibilities.  The following is from the mouth of his 35-year-old orphan:

Conway's Leon (advocating for his desirability as an adoptee) - "I know a lot of grown-up words, like 'title search' and 'fiduciary'".

I'll tell ya, I'd have hired the guy as my independent fiduciary any time!  I need a good laugh as I watch these transactions slogging through to completion (or failure)!!

* I hope y'all saw her in Better Call Saul.  She somehow stopped being Carol Burnett and became Jeff-y's mom - no easy task for such an icon.  Phenomenal.  

** I've just learned (the value of trolling the internet and being sucked down the rabbit hole) that the version with the Siamese elephants was NOT the version that actually aired.  Wow - amazing. 

*** I believe this is another one where the version that's out there in most archives is again not the one that actually aired.

**** Yet another Saul reference!

Friday, October 21, 2022

Shark Tank and 401(k)s/IRAs

There's a disturbing aspect of Shark Tank, which is generally a great show (but may have Jumped the . . . ahem . . . Shark* when it did it's live show (oh my, about as bad an hour of television, particularly from a good/great show as you'll ever see)).  The aspect in question involves - you guessed it - retirement savings.  I'm talking about the prideful statements from some participants that they've wiped out their 401(k) and IRA savings in order to fund their respective shoot-the-moon ventures.  And then we have to watch the Sharks sit there and droolingly applaud the participants' purportedly wonderful commitment to entrepeneurship.

OMG get a grip.  This reminds me of all of the entertainers who, having indeed hit the lottery on their one-in-a-million dreams, then go and encourage their fans to do take similar risks.  "Yeah, go and quit your job; go and ditch your families; go and mutilate your bodies - follow your dreams, just like me!"   Yeah (with acknowledgment to Jon Levitz), THAT's the ticket.  Except here's the thing: you, oh successful entertainer, were either talented or lucky enough to get where you got.  The odds are that any particular adoring fan is not so much so.

So, coming back to Shark Tank, we have a bunch of super-rich people, who are talented or lucky enough to have gotten there, encouraging random potentially untalented and unlucky people to wipe out their tax-subsidized retirement savings in order to take a chance on the next Scrub Daddy.  And, maybe worse, some of these people indeed succeed, so the seductive aspect of the encouragement to wipe out tax-advantaged savings in a way that is irreplaceable (at least, as to the tax consequences) ratchets up still more.  Sorta like where you're at risk for being addicted to gambling, and then you're neighbor wins a million at the slot machine.

This spectacle is, in a word (or two or three), a disgusting one.  Look, the federal government devotes trillions of dollars in tax subsidies (through tax deferral) to encourage people to save for retirement and to encourage employers to help them do so.  Why?  Because this is important stuff.  If retirement assets are not available to people as they retire they could, at a time where no other employment is available, literally starve.  This potential eventuality would not only be a human tragedy,  but could leave these people as wards of the state, which is a result that the government surely doesn't want.

So that's why it's so hard to withdraw these assets prematurely without penalty.  The idea is that this money is there for retirement, not for some other (even if valid) propose.  The rules are tight.  Hey, the government isn't devoting trillions of dollars in subsidies to get you to build up generic savings.  The idea is to protect your retirement assets.  There are exceptions for real hardships, because at some point penalty-free access really is appropriate.  But, as general matter, this is dangerous stuff.

I remember back when the sub-prime crisis hit and people were hurting in the extreme.  McCain and Obama were running for President, and both, yes both, we're decrying the cruelty of a system that made it hard for people to get to their own (imagine, their own) savings to help them through.  The basic tack was to dump on a retirement system that was inexplicably allowing people to suffer notwithstanding the existence of supposedly available resources.  So when the election was over, the rules would obviously be reformed to open up access, right?  I mean, both political parties were all over this (how often do you see THAT?), and so it's a no-brainer, right?  

And then Obama wins, and, I suspect, policy people (one in particular) in the new administration, said, "Whoa, Nellie.  You can't do this.  This money has to remain in people's accounts for their retirement.  Duh."  And so what happened?  Essentially nothing.  Thank goodness.  We've just seen the play out again with the COVID crisis.  But in COVIDLand the situation became incredibly politicized and they did eventually wind up allowing early penalty-free access.  However, even in this case, if you look at the way the exceptions were ultimately drawn, they were much more narrow, temporary and all-but-unusable than looked like might have been the case when  politicians early on climbed up on their soapboxes and started decrying the supposed cruelty of the retirement system.  

Essentially, you're killing someone with kindness.  Sure you're helping them through hard times now, but maybe they could've struggled through and make it.  However, if they lean on early withdrawals of retirement assets, then, when later in life, when they have no chance to replenish their funds, and when they look around to figure out how they're going to eat and otherwise live, there's nothing there.  Gee, where'd it all go?  Oh, about 25 years ago you decided to use it on other stuff; good luck with the rest of your life.

So you go, Shark Tank people.  You go and encourage someone to rip through retirement savings in order to market the next Hula Hoop or Scrub Daddy or whatever.  Just don't take time away from your estate to notice that the person, after failing, might well be homeless (or whatever) later in life, with no financial means of support.  Yeah.  Sure.  Right.  THAT's the ticket.

* Thank you, John Heim.

Tuesday, October 11, 2022

SNL and 401(k)s - SNAP!

With increasing frequency, 401(k) plans get prominently mentioned in pop culture.  And I've noticed that in the mainstream press economic ups and downs are often (maybe even usually) reported by reference to 401(k) performance.  So, watching the cold open to the 10/8 SNL, my ears perked up at the following exchange during the game show, "So You Think You Won't Snap" -

Bowen Yang's Morgan Freegirl (host): 401(k)s are down 20%.

Devon Walker's Henry: I don't have one.  That doesn't bother me,

Well, Henry was eventually bothered by some Kanye and other stuff.  But the 401(k) comment set the stage.  Good stuff.

Sunday, August 14, 2022

Breaking Bad, Breaking Legs, Breaking HR Rules, Breaking My Heart (just a bit)

So a central part of my life over more than a decade is about to end.  On Monday, we get the last episode of Better Call Saul.  The Breaking Bad universe has given us historically incredible television, and I await Monday with a strange combination of anticipation and dread.  What will the ensuing weeks look like after I have nothing more from Vince G.?!?

After catching up on some of the key BB episodes just to get us more in sync with the history of it all as we're about to head into the <sigh> finale, we were re-watching El Camino.  Aside from its being far better than I had recalled, it has, it turns out, an ERISA-type reference at a critical juncture.  

[SPOILER ALERT (for Breaking Bad and El Camino)]  It happens during a call-back to the BB arc during which Aaron Paul's Jesse's in the Nazis' "kitchen" (shall we say), and there's a need to reinforce certain aspects of the metal track thereover.  After a bet is made as to the strength of the existing track, Jesse's made to run back and forth to test the dependability of the track, leading to the following exchange after Jessie falls over:

Kevin Rankin's Kenny - Alright, c'mon; get up.  I got 50 bucks riding on you.  I gotta eat this month. 

Jesse Plemons' Todd (maybe one of the greatest ancillary characters in the history of entertainment, if you ask me) - Kenny, if he breaks his leg, he's not gonna be able to cook.  

Kenny - What are you, the f***ing HR department?  Jesus, Toddy, relax.

Human Resources makes it into the BB universe.  Close enough to ERISA for me, as we count it down to the end (at least for now) of this incredible ride that Vince has bestowed upon us.  Enjoy Monday . . . 

Friday, August 5, 2022

A "Search Party" Finds the Pillaging of an Employee Benefit Plan

Sometimes, ya gotta listen really carefully to find ERISA references in unexpected places.  In the once-promising Search Party, on HBO Max by way of TBS, the search has indeed turned up such a reference.  

The sad thing, for anyone who's watched the first two seasons before HBO took it over, is how this tight clever little series went so completely off the rails, maybe about as much as anything I've seen.  Season 3 was obviously different, from everything from affect and tone to even cinematography; Season 4 was worse; and Season 5 became  indescribably nuts.  

Now, sometimes, as Bilal Hazziez of:90 Day Fiancé fame said, crazy is not always bad.  Here, however, crazy was just crazy.  And, hey [BIG SPOILER ALERT - read NO farther if you don't want a BIG spoiler], this comment is coming from someone (me) who . . . 

. . . likes zombies!!  On the other hand, maybe Search Party itself, in "Kings" (also from Season 3), provides a responsive parry to my critique.  There, we get Jeff Goldblum's Tunnel Quinn (Jeff Goldblum?!?) uttering: "[P]eople confuse ambition for psychopathy. So maybe you're not crazy."  Could be one of the better lines of all time!*

Anyway, here's the ERISA reference to which my NeverEnding search for ERISA references in pop culture recently led me:

Edward Manley's FBI agent - Don't play dumb with us, Witherbottom, we know what you're capable of!  Get your a** down and put your hands where we can see 'em!

Chantal Witherbottom - Wait, what did I do?

FBI agent - You're being charged with the following felony counts: securities fraud, investment-adviser fraud, mail fraud, wire fraud, international money laundering to promote specified unlawful activity, money laundering, false statements, making a false filing with the SEC, theft from an employee benefit plan -

Chantal - I don't remember doing any of that!

What an odd little tidbit to tack onto the end of that laundry list of wrongdoings!  Sounds to me like a writer somewhere had quite the ax to grind from somewhere along the way.   

* Maybe even has an ADA-type quasi- ERISA angle?

** Don't remember stealing from an employee benefit plan?!?  Who do you think you are, Jimmy Hoffa? 

Saturday, July 2, 2022

SNL's Hobson's Choice - 401(k) Contributions or Scratch-Off Lottery Tickets

I happened to find my way to an old Saturday Night Live bit, and was surprised to see my practice area find a way to wheedle its way in.  Leave it to SNL to address in a resonant way the conundrum involving the advisability of making 401(k) contributions and the reality of needing current cash.  While my own view is that you should beg and borrow to increase your 401(k) contributions, here's another view, courtesy of SNL's utterly hilarious Black Jeopardy

Sasheer Zamata's Keeley: [L]et’s stay with "You Better" for $400.

Kenan Thompson's Darnell Hayes: Okay, the answer, your job wants to take $40 a month out of your check for a 401(k).  [buzzer]  Shanice.

Leslie Jones' Shanice: What is, "You better give me that money so I can buy me some scratch offs"?

Darnell: Yeah, you d**n right.  You d**m right.  I mean, why do I need a retirement plan when I got Monopoly Millionaire’s club?

Tom Hanks' Doug: Yeah, I play that every week.

Darnell: Well, that’s good for you. . . . 

I found myself laughing out loud throughout the skit at various points, but I would really commend you to watch the interplay between Thompson and Hanks when Darnell goes to shake Doug's hand.  (Hopefully, the PC police will allow me to point some of this stuff out.)  Anyway, enjoy . . . 

Saturday, December 18, 2021

Some "Cause" for Checking Out a New "Urban" Legend

Well, THIS didn't go well, did it?  Another high-profile for-cause termination now hits the world of sports and entertainment.  

Not surprisingly, the Jags are reportedly going to try to characterize Urban Meyer's termination as being one for cause.  Yet again the importance of the manner in which the definition of cause in an employment contract comes to the fore.  (The Sheen and Weinstein debacles come to mind.)

I'm guessing this will be a mixed bag factually, held up to a carefully drafted pro-employee definition of cause.  And I'm guessing further that, ambiguities and uncertainty being what they are, the case (once brought), will settle in the 35%-to-65% range.  

Gotta be careful about those post-loss bar visits featuring on-camera socializing with female patrons, a habit of kicking players on your team, etc. 


Friday, December 10, 2021

Can I See the Baroness von Hellman's Form of Employment Contract?

So "Cruella" with Emma Stone is certainly an unexpected joy.* To those who say it's the distaff counterpart to "Joker" I say - good point.**

As an added bonus for me, the movie gives us an interesting take on the drafting of employment contracts. In one scene, Estella (as known at that moment) is toiling away playing with fashion designs in the alley at lunchtime, when her boss, Emma Thompson's the Baroness von Hellman,*** takes her to task for not staying focused on projects for the Baroness. 

We then get some insight into the broad scope of the Baroness's employment contracts - 

the Baroness: Oh Estella. I am surprised, Estella - I am surprised at you holding out on me.

Estella: But I was on my lunch break in a public space.

the Baroness: Yes, I own the alley.

Estella: Really? You can own alleys?

the Baroness: Alleys, designs, people, their souls. Check your employment contract.

Can someone please send me the form of contract so I can use it as precedent? Please? Pretty please? Thank you. 

And - Happy Holidays!

* Just saw it thanks to . . . Redbox. Thats right, call me old. Hey, I have Live!y's new Jitterbug Flip2 phone, too (after seeing it in (that's right, you guessed it) Parade magazine). Old old old old old.

** They both even use "Smile" as a key song. 

*** Has Emma Thompson ever been less than spectacular?

Sunday, December 5, 2021

A Metal Christmas Via the . . . Chipmunks?

Well, here we go again for a Holiday note with <shudder> no ERISA component. For prior non-ERISA entries during the Holiday Season, I've laid out a proposed Festivus-like Holiday celebration, summarized my views as to what are the greatest Christmas songs and discussed the incomparable Dave Grohl's (and the not-too-shabby Greg Kurstin's) Hanukkah Sessions (which, by the way, are back again this year). 

Here, given my present obsession with Leo Moracchioli, I wanted to surface a recently released pretty cool metal entry for the Christmas-song lexicon. Alvin and the Chipmunks may never be quite the same. 

 Happy Holidays, all - and please stay safe and well.

Monday, November 29, 2021

Maxwell's Not So Smart

As we head into the Ghislaine Maxwell trial (it certainly has been quite the trials arc we're in), let us not forget the connection (in addition to that little Epstein connection) to pension fraud.

Ghislaine's beloved father, Robert, ran such enterprises as Macmillan Publishers, the Daily Mirror and the New York Daily News. After taking on large amounts of debt and experiencing a series of failures, he took to moving money around, and proceeded to loot £460m from the Mirror Group pension funds, resulting in huge reductions in pension payments. 

He eventually was reported missing from his yacht in 1991, and his body was discovered in the Atlantic Ocean. Maybe an accident; maybe a suicide (sound a little familiar?). His sons eventually declared bankruptcy but were acquitted of wrongdoing. Various other rollicking family hijinks are the subject of a report here. Quite the ol' Silver Hammer for the Maxwell clan!

And now, the Ghislaine trial. As with so many things - yes, you guessed it - it all (sorta) started in the pension world. 

Enjoy the trial!

Monday, November 22, 2021

Control: Let's Take It from Britney to . . . VCOCs?

OK, I admit it.  I like Britney Spears.  I like her music, and she seems (or at least at one time seemed) very nice.  I thought South Park nailed the feeding frenzy that surrounded her (gee, South Park getting something exactly right; what a shock), and I even felt an affinity to the Leave Britney Alone guy.  

The thought of family and hangers-on trying to control her really bothered me, as did her descent that followed.  I guess these stories get to me - I was (and there's no sarcasm here) also pretty broken up about the whole Anna Nicole Smith thing.  Oh well - a cross to bear, I guess. 

So I was really quite happy to see Britney's conservatorship end.  The end of this tragicomic* and horrifically public spectacle was a welcome end to the conservatorship chapter of her life, and we'll see if she's able to shed her anger and recapture herself.  

All of which inexorably now brings me to, of course (!), the topic of VCOCs.  Let's continue to talk about control.

A pet peeve of mine involves the question under the Plan Assets regulation of whether, under the vanilla opco rule (the first sentence of 29 C.F.R. § 2510.3-101(c)(1)) and its "majority owned" language, a parent must own a majority of the value, the vote or both of the operating subsidiary.  To me, it's a matter of value, not vote, and here's my thinking:

- The DOL seemed to be looking for a simple, non-technical approach to vanilla opcos, an approach that's in pretty stark contrast to the one used in respect of VCOCs and REOCs.  In the base case for vanilla opcos, the plan is investing in a widget or services company that's just going about doing its business.  While the majority-ownership thing could cause unexpected hiccups in some circumstances (where, for example, there are material subs. that are not majority owned), the ordinary expectation is that when the plan makes an investment in a widget or service company, the company's assets won't be plan assets that are subject to ERISA.  I don't think that the rules are looking for the plan fiduciary to call up the management of the target and start asking odd questions about the affiliated group's control structure.  Thus, for example, the preamble to the final reg. homes in on the factual nature of the analysis and the "vast number of different activities" in which companies engage; and states that, "other than with respect to [REOCs] and [VCOCs] [!], it would be impractical to provide detailed guidance concerning the types of activities necessary for characterization as an operating company."  (I take the point that the DOL was focusing on the nature of business "activities" rather than on organizational structure, but I would suggest that, consistently with the brevity of the governing rule in the first sentence of -101(c)(1) without any meaningful additional regulatory color, there's a general and palpable tilt towards a simplistic and streamlined regulatory approach to vanilla opcos.)

- I think it's worth further comparing the general vanilla opco rule to the VCOC/REOC rules.  VCOCs and REOCs are different from vanilla opcos at the core.  They are creatures of detailed regulatory provisions that serve as ERISA-specific exceptions (and, apparently, begrudgingly included exceptions) to being covered by the full panoply of ERISA's rules.  The VCOC/REOC exceptions generally have no meaning outside of the plan-assets reg.,** and were apparently included by the DOL only begrudgingly.  I frankly think that what I perceive to be an analytical disconnect here is that ERISA lawyers are often only really unpeeling the analytical onion regarding vanilla opcos in the context of exploring whether the opco is a qualifying VCOC investment.  So, the basic context in which the opco is being examined is marked by the control-type and highly detailed thinking surrounding VCOCs.  And then I think that color finds its way over to the consideration of the first sentence of -101(c)(1).  But I would respectfully suggest that that's missing the forest for the trees.  The vanilla opco rules just don't have all of this trouble-making baggage.  Again, in the base case, the plan is investing directly in a company that's just going about doing its business; there's not VCOC at all.  The reg. protects that company and the people running it, totally separate and apart from whether that company could be tucked under a VCOC.  Thus, the single sentence that governs vanilla opcos has fundamental import and meaning totally outside of the regulatory regime for VCOCs and REOCs, and, for me, should be applied intuitively, straightforwardly and simply, without the laying of complicated and potentially treacherous control notions over basic concepts of economic ownership. 

- With that said, and taking a step back, I would argue that, intuitively, ownership for these purposes is economic ownership.  If some asks me if I own something, I look to whether or not I have the economics of the thing.  Indeed, engrafting a control requirement under the "majority owned" rule could have the perverse consequence of rendering a parent not an opco, even where that same parent could be a VCOC.  In this regard, let's say (see also the 95-04A discussion below) an entity owns 99% of an operating subsidiary as an LP.  If the entity gets management rights, it could be a VCOC.  Are we really suggesting that the very same entity, which could be a VCOC under the specific and delineated requirements applicable to hybrid operating companies / investment funds, can't be a vanilla opco, under rules where the bar is so much lower?***

- Maybe most significantly in respect of the structure and text of the reg., the DOL darn well knew how to worry about control-type considerations in the operating-company rules of the reg.  Indeed, arguably at the very heart of the VCOC/REOC rules are the rights "to substantially influence"**** downstream activities.  It would have been so easy for the DOL to establish express control/influence requirements in the first sentence of (c)(1), but the DOL rather proceeded with a "majority own[ership]" approach.  I think that reading a control requirement into that generic language is unwarranted.  

- Under 95-04A, I can run a VCOC through a wholly-owned sub., and have the sub. essentially be completely disregarded.  Footnote 8 of the AO expressly contemplates a GP not owned by the VCOC.  So the DOL is allowing an entity controlled to no extent by the VCOC (so long as there is mere substantial influence) to be used as a way of having the VCOC make qualifying investments, and yet an entity that is a 99% LP in an operating entity is somehow not an "operating company"?  I'm not saying it's steel trap, because the VCOC-related considerations do not foursquare line up with the considerations surrounding vanilla opcos, but I would suggest that the 95-04A footnote pushes you away from control concerns, except where the control-related requirements are specified expressly in the rules.  

For me, some ERISA lawyers who day in and day out deal with complicated control/influence issues under the VCOC/REOC rules may be making unnecessary mischief under a simple rule (in the first sentence of -101(c)(1)) for run-of-the-mill operating companies.  I would suggest that, if I own most of the economics of a company, I, simply put, majority-own the company.  Sometimes, the obvious and straightforward answer really is the right answer. 


** Well, there is at least one place where the VCOC rules have some impact, and that's under (believe it or not) the Small Business Administration regulations (and I'm not talking about 95-04A here).  Indeed, under what seems like an utterly bizarre result (maybe, I would suggest, resulting from the mistaken belief on the part of the drafters of the SBA rules that being a VCOC allows the VCOC and its managers to satisfy ERISA while investing and managing plan assets, whereas to the contrary being a VCOC causes the fund or other entity and its managers to get out from under the ERISA rules altogether), Section 29 C.F. R. § 121.103(b)(5) seems generally to say on its face that if I park a parent holding company over an SBA borrower and have the parent be a VCOC (even without any ERISA investors in the VCOC), which is really really easy to do where the borrower is an operating company (indeed, I would suggest that somewhere between 99.8% and 100% of the time I can plop a holding company over an operating company and have the holding company be a VCOC), then the general affiliation rules of Section 121.103(a) do not apply.  The result?  That the owners of the VCOC, even if behemoths, would not be taken into account for purposes of determining whether the "small" borrower is an eligible to borrow under certain SBA rules. 

*** I recognize that a possible analytical weakness here centers on the DOL's use of the word "through" when discussing how the parent operates in respect of its subs.  I happen to think that the use of that word was nothing more than a way of referring to the existence of the subsidiary.  Having said that, I would concede some marginally increased level of concern where for whatever reason the parent is not allowed to have any contact whatsoever with anyone at the subsidiary regarding how the subsidiary's business is run (although, even on those extreme facts, I'd ultimately get comfortable).

**** Boy, do I hate that split infinitive.  How about "substantially to influence" or "to influence substantially"?  And that's to say nothing of the lack of parallelism of "directly or through".  I mean, c'mon.  How about "directly, or indirectly through a majority owned subsidiary or subsidiaries,"?  But there I go again, tilting at windmills.

Sunday, November 21, 2021

Gary Gulman, . . . ADA Expert?!?

So we just saw Gary Gulman earlier tonight.  We've been fans of his for what seems like centuries, ever since his initial appearances on Last Comic Standing.  [spoiler alert - I'm about to ruin a joke]  Hooked ever since his quip that what he wants for Hanukkah is Christmas.  Genius.  When I see that he was the comedian heckled by Joaquin Phoenix's Arthur Fleck in Joker I could not believe it.  And his HBO entry, "The Great Depresh", was remarkable for its combination of depth and humor.  

[spoiler alert - I'm about to ruin a joke]

So now he launches into this bit about UFOs and IFOs and FOs and flying saucers, and he's remarking that, notwithstanding the talent of aliens to travel across the galaxy, they can't seem to do better with their flying saucers than slowly descending ramps.  He then noted that, well, the ramps are ADA-compliant.  

So he's an ADA expert, too!  Who knew?  I mean, I knew he was worldly and smart (so many grammar jokes; right up my alley), but . . . the ADA?!?  Cool. 

Saturday, November 20, 2021

Pension Investing for "Succession" Planning

ERISA practitioners have long known that pension money is a (if not the) main source of investment in the global capital markets. ERISA money was once referred to by an NBC white paper  as the "biggest lump of money in the world."

So, when you hear that IBM or Lockheed or Honeywell or  or GM or GE or . . . well, you get the idea . . . is in a deal, no it's not. It's the IBM pension plan, the Lockheed pension plan, the Honeywell pension plan, the Weyerhaeuser pension plan, the GM pension plan, the GE pension plan, etc., etc., etc. ERISAns have knows this for years. 

And it's not just ERISA money. You've got state-governmental and both private and public non-US pensions, as well, rivaling and in some contexts surpassing ERISA money in terms of magnitude and relevance. 

[minor spoiler alert - if you don't want ANY discussion of episodes you may not have seen, read no further]

HBO Max's Succession seems to get it. During the November 14, 2021 episode, Kieren Culkin's Roman Roy, in bemoaning a key shareholder vote bearing on (what else?) succession, made the sarcastic suggestion, “Let's just throw it open to the f–ing retired janitors of Idaho.” The reference here (especially given the word "retired") is almost certainly a reference to pension ownership of company shares. Not sure the quip is entirely on the (so to speak) money, in that, unless it's a participant-directed plan with a passthrough, it's the fiduciaries and not the participants who are making the decisions - but it's just a quip, and you get the point. 

And, just for emphasis, the concept even makes it into the rarified air inhabited by the very title of the episode: "Retired Janitors of Idaho". Nifty. 

Indeed, this is not the first time Succession has indicated that the point is well-understood. Back in Season 1, the ubiquitous Canadian pension fund surfaced during a private-equity hostile-takeover play for the Roy company (when, for example, a bunch of Canadian pension-fund guys made some extremely disparaging remarks about poor Kendall). 

Janitors, Canadians, whatever - with apologies to Billy Joel, it's still pension money to me.

Friday, November 12, 2021

ESPN's Max Kellerman on Aaron Rodgers and HIPAA

During the November 4, 2021 installment of ESPN's Keyshawn, JWill and Max, we get a well-placed HIPAA reference from Max Kellerman regarding the Aaron Rodgers debacle: "[Rodgers] hides behind 'it's a personal [thing]'.  We're not talking about HIPAA rights everybody.  This is a public pandemic.  It's a health crisis, a public health crisis."  Spoken like a true HIPAA wonk, Max.  

Wednesday, November 10, 2021

Body Heat - Not About ERISA but About . . . the Rule Against Perpetuities?!?

Previously, I've pointed out movies that are ERISA-centric, with my favorite example being Wall Street (a pension-overfunding movie*).  See also a follow-on post (focusing on Casino).  Well, I am now pushed to venture out into the non-ERISA world, as my friend Phil S. has pointed out to me that Body Heat** is a movie that is about . . . are you ready? . . . the Rule Against Perpetuities!!!!***  It turns out that the estate-planning mistake in the movie centered on the Rule.  Wow.

In terms of my own fascination with the Rule, when I was in law school my T&E professor cited us to the case of Lucas v. Hamm (thanks to Jed B. for knowing the long-forgotten citation), which in effect stands for the proposition that, since negligence is a standard that harkens back to what the reasonably prudent person might do, and that in turn arguably looks to how the general populace (or maybe a subset thereof) acts, mistakes relating to the Rule Against Perpetuities don't rise to the level of legal malpractice because: NO ONE understands the Rule Against Perpetuities!  Hilarious - absolutely hilarious. 

Sorry for the non-ERISA distraction here, but this is just too good to pass up.

* Note that the movie would not have worked after the enactment of Sen. Metzenbaum's excise-tax on reversions, as the takeover strategy there was essentially torpedoed by the tax.

** William Hurt was my favorite actor at around that time, after he appeared in Altered States.

*** The Rule apparently also figures significantly in The Descendants. 

Tuesday, November 9, 2021

Working at a Pension Fund Goes Straight into the Toilet at SNL

During the November 6, 2021 episode of Saturday Night Live, we are treated (if that's the right word) to a bunch of guys, and their innermost thoughts, in the bathroom. We learn, during that skit, that it must be really boring - or something like that - to work at a pension fund: 

Chris Redd (aloud, about to finish up and leave) - Alright, whiteman, see you on the ice! 

Kieren Culkin (aloud) - Oh yeah, yoo too. 

Redd (to himself) - See you on the ice?!? We work at a pension fund. Is that even an expression? I don't know who I AM in here? 

Is it that those working at a pension fund wouldn't use a cool little exiting catchphrase?* Is it that there're no frozen bodies of water in pension offices? I dunno. What I DO know, however, is that pension funds, at least in their capacity as employers, have now made their way into SNL bathrooms.

* Cf. Mena Suvari's Angela Hayes, American Beauty, "I don't think that there's anything worse than being ordinary."

Sunday, April 18, 2021

From CIGNA v. Amara to . . . Leo Moracchioli?!?

Some things confuse me.  Like how I and the rest of the world (the DOL excluded) could've missed CIGNA v. Amara's eventual surcharge solution as the silver bullet to address ERISA's theretofore mission-critical missing-remedy conundrum.  Too late for Mrs. Amschwand, but still better late than never, eh? 

Then there's - how it can be that Leo Moracchioli is not recognized by the world at large as a, if not the, top rocker on the scene today?  I mean, I know his thing is covers rather than originals (more on this in a moment), but there are big-time artists all over the place who don't write their own stuff.  And, while I know the turn of phrase is hackneyed, the extent to which he makes other people's stuff "his own" is a thing to behold.  His talent level on multiple instruments (every freakin' instrument?) is utterly stratospheric (a trait echoed by certain other members of his Frog Leap band (when he deigns to play with others)). 

(OK, OK, I know the Amara/Leo connection is tenuous or maybe even altogether nonexistent, but (i) as I've said, the case is my favorite case and so I'll mention it whenever I get the chance, and (ii) I was going to find a way to talk about Leo no matter what.)

Just for starters, check out Zombie, Africa, Sultans of Swing, What's Up, the Pok[é]mon Theme (yes, that's right; trust me), House of the Rising Sun, Kiss (need to find that one on Facebook for some reason), Thriller, WAP (but be VERY careful with this one and do not not click if you're sensitive or if you have any reasonable sensibilities at all), Tragedy (for you Korn fans) and Hello, to name several from this seemingly endless wellspring.  Heck, I don't even like some of these songs, and yet here they're just phenomenal.  And, by the way, for those haters who are really dug in on the covers/originals thing, check out the Africa outro, an original that might be one of the finest instrumentals you'll ever hear.  (While we're at it, for anyone who's interested, another crazy-good cover team is Sershen & Zarítskaya.)

One disclaimer/warning - once you go down this treacherous path, prepare to give up the rest of your day, as the Leo rabbit hole pretty much has no bottom. 

Rock on . . . 

Thursday, April 15, 2021

Nobody Can Beat a 401(k) for the Russian Mob (except maybe Bob Odenkirk)!

[originally posted 4/15/21 - typographical error later corrected]

OK, so I go to “Nobody” (that’s right: f COVID, now that I'm double-vaccinated) and, as a Saul (and Breaking Bad, before (after?) that) fan, and with a tip of the hat to Matt Foley, I’m already all in before it starts.  All Odenkirk all the time would be fine with me.  

Then it starts.  It’s awesome out of the gate.  And I’m thinking, “How can this get any better?” 

Until I get to the line (and I will give you no background here, so there’s no need for a spoiler alert): “Think of it like the 401(k) of the Russian mob.”  It truly can get no better for this ERISA lawyer.  And, I'm here to tell you, it's all uphill from there!  Think John Wick, but with a plot.   

Hey – ‘Ts All Good, Man!!*  I will now go back to pining away for way-too-delayed Season 6 . . . 

* I hope you know that that’s how Jimmy got his name.

Tuesday, March 23, 2021

From Spic and Span to SPAC and Spam - Maybe With an ERISA Angle?

Well, the flavor du jour is clearly special purpose acquisition companies ("SPACs").  It's becoming pretty apparent they they raise a variety of issues on the executive-compensation side, and maybe (depending on the facts) even an issue or two on the ERISA "plan assets" side. 

So as a result all I'm hearing is SPAC SPAC SPAC SPAC.  Here a SPAC there a SPAC everywhere a SPAC SPAC. 

Which got me to thinking.  Can we get Monty Python or some clever and capable third party (fair use?) to recut the incessant repeats from the Spam sketch (which, as you may or may not know, is. the reason that people refer to junk email as "spam"), but substituting "SPAC" for "Spam"?  SPAC SPAC SPAC SPAC; SPAC SPAC SPAC SPAC; etc.*  

Just a thought . . .

* We can always clean it up later with some SPAC and Spam - ooh, sorry: Spic and Span.

Monday, January 18, 2021

Tom Brady and Aaron Rodgers Are . . . Diversified 401(k)s?!?

I had to laugh while reading the yahoo!sports commentary on the wins by the Bucs and Packers that have set up a truly epic Conference Championship battle between Tom Brady and Aaron Rodgers.

The set-up for the piece is:

Somewhere behind that collective Champagne pop for the next generation, Tom Brady emerged as the aging “all-in” gamble of a hapless Tampa Bay Buccaneers franchise.  And further north, Aaron Rodgers absorbed the Green Bay Packers spending a first-round draft pick on a player who is being groomed to eventually take his job.  On Sunday [January 24, 2021], Brady or Rodgers is going to advance from the NFC title game with a shot to break up an NFL party that seems to be trying hard to rage on without them.  Regardless of whether the AFC title game produces the Kansas City Chiefs and Mahomes or the Buffalo Bills and Allen, the quarterback storyline is set.

Super (if you'll forgive me) exciting.  For me, the Tom Brady storyline is particularly captivating.  But whatever your affiliation, there's a truly human element here.  43 (43!) today is just simply not what 43 was yesterday.  Even Brees is over 40, and that barely even got noticed because of Brady.  (A hilarious take on this can be found with the Blanda/Brady comparison found here.)

So why this post on this site?  Well, after the piece's set-up, there's the following passage:

It’s then versus now, with Brady or Rodgers representing the final gasps of a golden era, and Mahomes or Allen repping a budding era of “everything” quarterbacks.

Youth against wisdom.

Porsche 911s against diversified 401ks.

Decades of big-game experience against big bodies, bigger arms and crazy off-script plays.

So Brady and Rodgers are "diversified 401ks"!  I had no idea that a core element of my practice area is so coooooooool.  Thanks for that, Mr. Robinson!  (And I'll try to forgive you the unfortunate reference to the Porsche 911 as opposed to the far preferable reference to the much more desirable Chevrolet Corvette.)

This is turning into quite the postseason - enjoy the upcoming games!  

Thursday, December 24, 2020

Bad Cyber Actors Find Their Way to Hollywood ERISA Plan

One of the main ERISA plans for our friends in Hollywood is allegedly at the center of a new cyber breach.  The complaint in Gilbert v. AFTRA Retirement Fund sets forth a number of legal claims.

I would note, given some of the data-related ERISA noise making its way into the discourse, some of which comes out of the Vandy settlement agreement (particularly Section 10.9 thereof), that the complaint makes no ERISA allegations.  Putting aside for the moment the question of whether that omission is a thoughtful one, I want to take this opportunity to log my own view that any suggestions that plan officials have somehow mishandled "plan assets" if and when data is misused are off-base.  While there may or may not be fiduciary aspects to the way the plan is administered in respect of confidential data, I think that the assertion that the data itself is a plan asset is a bridge too far (sorry - needed a movie reference here), and would result in much analytical mischief.  Just sayin' . . .

Monday, December 21, 2020

A Holiday Gift from Dave Grohl and Greg Kurstin

Holiday time has returned, and I want again to do a post devoid of an ERISAn theme.  In the past I've focused on my own favorite Xmas songs and have even tried to create my own version of a Holiday season.*  Now, once again, back to music.

This year, Dave Grohl, working with Greg Kurstin, has bestowed upon us a Hanukkah gift: The Hanukkah Sessions!  I honestly think that Grohl may be the single most all-around talent that rock has ever seen.**  One can only wonder whether he would have emerged like he has were it not for Nirvana's tragic and untimely demise.***

Anyway, check out the eight offerings.  In particular, I'd commend you to Sabotage and Rock and Roll, which bookend the presentation.  I'm blown away that he included those on this short list.  Sabotage is a Top-10 song for me, and Rock and Roll is a Velvet Underground treasure that more people need to hear.*****  

Thank you Dave Grohl, for this***** and for everything else you do.


* What?  The David/Seinfeld team can do Festivus and I can't do Snohanumas, just because they're creative and talented and I'm not?!?

** And I guess that Kurstin is the latest Mark Ronson.  Guys like that are just incredible.

*** My own personal Grohl faves are All My Life and No One Knows.  For me, the SNL performance of All My Life is as good as anything that's ever been, and the drums on No One Knows are as good as it gets.  And the way he brings up audience members to play at his concerts is flat-out sick.  See, e.g., the "Kiss Guy" performance.

**** Check out what I think is the song's best treatment on the incredible Rock n Roll Animal.  And while we're on the topic of the VU's Rock and Roll, let's review the Best of . . . Amputee Songs.  Here are three songs, in no particular order.  Rock and Roll is clearly on the list ("Despite all the amputations, you know you could just go out and dance to a rock 'n' roll station.").  Yet another Lou Reed song appears here as well: She's My Best Friend ("Ah, here's to Mullberry Jane (here's to Mullberry Jane).  She made jam when she came.  Somebody cut off her feet.  Now, jelly rolls in the street.").  Then there's a song with what I think are phenomenal lyrics from its beginning to its end, Harvey Danger's Flagpole Sitta ("They cut off my legs, now I'm an amputee God d**n you."). 

***** It's fitting that maybe the two best rock poets - Robbie Zimmerman a.k.a. Bob Dylan (not a big fan, but there's no denying his status) and Lou Reed (the ultimate urban poet?) - would wind up in the same compilation.

****** So this Hanukkah treasure joins the unsurpassed Chanukah Song by Adam Sandler for non-Xmas Holiday fare.  And while we're on the topic of Sandler, you must check out his tribute to Chris Farley, if you haven't already.  I don't care if you don't even know who Farley (maybe a Top-5 physical comic of all time?) is - if this heart-felt memorial doesn't bring tears to your eyes you're a tougher soul than am I.

Friday, November 27, 2020

Bruce Willis Promotes Retirement Savings

So what is it with Bruce Willis, maybe my all-time fave? In Live Free or Die Hard, he battles Timothy Olyphant's* Thomas Gabriel in order to stop the theft from millions of 401(k) accounts. 

Now in Hard Kill, we get the following exchange:

Texas Battle's** Nick Fox - Oh, man, Maggie wanted me out of the game while I still had all my limbs. 

Jesse Metcalfe's Derrick Miller - Wives. 

Fox - Yeah, tell me about it. She made me sell my soul for a fancy [pause] 401(k).

[SPOILER ALERT - the following may give away key elements of the movie; read no further if you may see it but thus far haven't] 

So then later, after our heros survive, we get a bit more of a welfare/pension employee-benefits vibe: 

Miller - You OK?
 . . . 

Natalie Eva Marie's Sasha Zindel - [F] you.  I've got a helluva workman's comp. claim.

Fox - So what now? 

Miller - Retirement sounds pretty [f]ing good right about now. 

Now Bruce's got me waiting for "Die 401(k)ill". I'll be patient.

* I hope y'all got to see his awesome self-effacing turn in The Good Place (which, just to say it, might have the cleverest writing in the history of television). 

** I'll take it on faith that Texas Battle is not named for the California v. Texas kerfuffle surrounding Obamacare.

Saturday, November 21, 2020

ADEA or A/D-EA? - the AC/DC in Employment Act of 2020


I will choose to remember an otherwise horrific 2020 as the AC/DC in Employment Act ("A/D-EA").  I've been listening to AC/DC's tantalizing teasers, and then to Shot in the Dark since the day it was released.  I tuned in in real-time to watch the premier of the Shot in the Dark video and listened to the entire PWR UP album on it's release date.  Even generated myself a pretty cool logo.  Try it

I really believe that what this greatest-of-all-time band has done here is unprecedented.  These guys are from 63 to 73 years old and sound like they just got together yesterday.  The album doesn't sound in the least bit tired or hackneyed, and maybe even sounds fresher than some of their older stuff.  And Shot in the Dark is right there with their all-time best.  Sure, it all sounds like AC/DC, but - important message - that's a GOOD thing.

Getting Rudd back (from God-knows-where) was key.  (No disrespect there to Slade, who's great.)  And Brian Johnson at 73 might well sound as good or better than Brian Johnson at 30.  (Sorry, Axl, but this is Brian's (and before him, Bon's) band when it comes to vocals.)  Stevie is right there alongside of dear departed Uncle Malcolm (who lives on in the riffs used here) and Cliff is as always spot on (Thom, when ARE you going to get me to meet him?!?).  And then there's Angus ('Nuff said). 

But what's truly unprecedented is that this new music 50 years later is not some dinosaur-like homage to days gone by.  No, it's a current release that's great in its own right.  People from 8 to 80 are going to bang heads to this music, and it will soon become hard to remember what's from the fifth-plus decade and what's from earlier times gone by.  There's no wistfulness for better times in these tunes; rather, there's just a celebration of some great new rock 'n' roll.  With all due respect to the Stones (nice COVID song, I guess), no one's ever done anything quite like this at this stage of their careers and lives, and I wonder if anyone else ever will. 

So, at Thanksgiving, let's give thanks to those who can show us that you never need to grow old in the head - age is just a number.  Congress may not do much, but now we've got a whole brand-new A/D-EA.

Better than a walk in the park.  Crank it (PWR it) UP, and rock on . . .

Saturday, October 3, 2020

How Not to "Gett" Out of a Multiemployer Plan

Sometimes the dissolution of the marriage between an employer and a multiemployer plan can end in a messy divorce.  

In American Federation of Musicians & Employers Pension Fund v. Neshoma Orchestra & Singers, Inc., No. 19-1093 (2d Cir. Sept. 3, 2020), a Jewish wedding band from Long Island was held to have failed timely to challenge a $1.1 million withdrawal-liability assessment.  The band had contested the liability by sending a letter to the pension fund - rather than by filing an arbitration demand with the American Arbitration Association within 60 days of the receipt of the assessment, as the applicable contract provisions had required. 


Wednesday, August 5, 2020

Dividend Equivalent Rights II, the 409A Sequel; and Toy Story 3, the Oscar-Nominated Sequel

[originally posted in 2011; see note at end below]
General Background
Dividend equivalent rights ("DERs") were specifically addressed in the 162(m) regulations regarding the question of whether the grant thereof in connection with an option grant disqualifies the option from favorable treatment as performance-based compensation. Not a whole lot of fuss was made about it at the time.
Now we get DER II, set in 409A-Land, and, just when you thought it was safe to go back in the water (thanks, Jaws II), things get a little scary. At their speeches and other presentations, Treasury and IRS officials have for a while been informally indicating concern under 409A about arrangements under which option-related DERs cut off once the option is exercised. Supposedly, so they say, in such a case the DER is somehow contingent in the exercise of the option.
A DER by its nature would, however, generally cut off on exercise of the underlying option, in that, once the option is exercised, the actual dividend then becomes payable. Thus, if there is really a problem here, DERs on options could be fundamentally at odds with the requirements under Section 409A. The informal position being taken is confusing to me and I'm extremely surprised it's being taken.
Unfortunately, the position seems to be being taken repeatedly, and in some circles is having a bit of a chilling effect on the granting of DERs connected to options. As described below, I think that the position is wrong, and indeed clearly so.
The issue arises under Section 1.409A-1(b)(5)(i)(E) of the Treasury Regulations. Section 1.409A-1(b)(5)(i)(E) provides that "the right, directly or indirectly contingent upon the exercise of a stock right, to receive an amount equal to . . . dividends . . . between the date of grant and the date of exercise . . . constitutes an offset to the exercise price . . . (generally causing such right to be subject to Section 409A)."
DERs and Section 162(m) - Happier Times
First, some history. Section 1.162-27(e)(2)(vi)(A) of the Treasury Regulations set out the predecessor rule, which applied, and still applies, for purposes of the exception for certain performance-based compensation from the $1 million limit on deductions under Section 162(m). The 162(m) rules state: "Whether a stock option grant is based solely on an increase in the value of the stock after the date of grant is determined without regard to any dividend equivalent that may be payable, provided that payment of the dividend equivalent is not made contingent on the exercise of the option." Treas. Reg. § 1.162-27(e)(2)(vi)(A) (third sentence). The idea was that, if the option-related DER were to be made contingent on exercise, then the DER would effectively constitute a purchase-price reduction. And, if that's true, the option, even if otherwise granted at grant-date FMV, would nevertheless essentially be an in-the-money option not eligible for favorable treatment (as performance-based compensation) under 162(m).
Treasury pithily described the foregoing, when it issued the 162(m) regulations that included this rule, as follows: "If the payment of the dividend equivalent is conditioned upon the employee exercising the option, the dividend effectively reduces the exercise price of the option, thereby causing the option to be nonperformance based upon its exercise." 60 Fed. Reg. 65,534, 65,535 (Dec. 20, 1995). Historically, in those cases in which favorable 162(m) treatment was sought, the practical effect of this rule under 162(m) in at least some cases has been that the employer pays the DER up until the time the option is exercised, and keeps paying it throughout the term of the option until its expiration if the option remained unexercised.
It would seem to be evident that, using that approach, the DER does not operate as a mere purchase-price reduction, as the DER would be paid when there's never a purchase under the option at all (i.e., when the option expires unexercised so that there's no purchase whatsoever under the option). (Sometimes, in the case of certain more generous programs, the DER will be retained even if the option never vests. Other employers provide that the DER won't be paid if the underlying option didn't vest.
But the question of whether to hold the DER back depending on whether the option has vested is a different matter than the one being considered herein - the key point here is that the DER is to be paid regardless of whether the option is exercised, and indeed regardless of whether the option is ever exercised.) That all makes eminent sense - so far, so good.
DERs, Redux - A Scary 409A Sequel
409A then proceeds to make use of similar thinking in connection with requiring, for treatment as an option (or other stock right) not subject to 409A, that the option (or other stock right) not be granted in the money. Thus, as noted above, Section 1.409A-1(b)(5)(i)(E) of the Treasury Regulations says that "the right, directly or indirectly contingent upon the exercise of a stock right, to receive an amount equal to . . . dividends . . . between the date of grant and the date of exercise . . . constitutes an offset to the exercise price . . . (generally causing such right to be subject to Section 409A)."
Conversely, Section 1.409A-1(b)(5)(i)(E) expressly and properly confirms that, "A plan providing for a right to dividends . . . , the payment of which is not contingent upon . . . the exercise of a stock right, may provide for a deferral of compensation, but the existence of the right to receive such an amount will not be treated as a reduction to the exercise price . . . . Thus, a right to such dividends or distributions that is not contingent, directly or indirectly, upon the exercise of a stock right will not cause the related stock right to fail to satisfy the requirements of the exclusion from the definition of a deferral of compensation . . . ." Treasury seems to have described all of this correctly when the 409A regulations were finalized, saying: "The final regulations adopt the rule that a right to a payment of accumulated dividend equivalents at the time of the exercise of a stock right generally will be treated as a reduction in the exercise price of the stock right, causing the stock right to be deferred compensation subject to the requirements of section 409A. The final regulations provide that an arrangement to accumulate and pay dividend equivalents the payment of which is not contingent upon the exercise of a stock right may be treated as a separate arrangement for purposes of section 409A." 72 Fed. Reg. 19,234, 19,242 (Apr. 17, 2007).
Still, so far, so good. Again, this all makes sense. Now, how and why does it all go awry? The notion seems to have developed in some governmental circles* that contingency is somehow a two-way street. As the thinking apparently goes, if (i) the DER is impermissibly contingent on the exercise of the option where the right to retain already-accrued DER payments is contingent on the exercise of the option, then (ii) the DER is likewise impermissibly contingent on the exercise of the option where the right to receive new, continuing and additional DER payments is contingent on the non-exercise of the option.
 But this thinking turns the whole thing topsy-turvy; that is, in the foregoing clause (ii) it is the right to continue to receive additional DER payments (not the right to retain DER payments) that is contingent on the non-exercise of the underlying option (as opposed to contingent on exercise). So let's see if it is or should be true that a DER that is only paid if an option is exercised really is the same, on an analytical or policy basis, as a DER that turns off when the option is exercised.
Perhaps it's worth examining the fundamental difference between what the anti-contingency rule really addresses, and what is being suggested as being addressed by the anti-contingency rule. What you're not allowed to have is the following: option exercise --> retaining DER accruals. That would make the retention of the accrual "contingent" on exercise. It is suggested here, however, that the rule plainly does not (and should not) address the following: option exercise --> cessation of additional DER payments. Stated another way, "if A then B" ≠ "if A then not-C" (where (i) A is the exercise of the option, (ii) B is being able to retain accrued DER payments, and (iii) C is being able to continue the receipt of additional DER payments). Thus, the regulation expressly and properly confirms that, "A plan providing for a right to dividends . . . , the payment of which is not contingent upon . . . the exercise of a stock right, may provide for a deferral of compensation, but the existence of the right to receive such an amount will not be treated as a reduction to the exercise price . . . . Thus, a right to such dividends or distributions that is not contingent, directly or indirectly, upon the exercise of a stock right will not cause the related stock right to fail to satisfy the requirements of the exclusion from the definition of a deferral of compensation . . . ."
As can be seen, the reduction-in-price rationale is specifically baked into the above-quoted words of the 409A regulatory language itself, and the cessation of future additional DER payments simply does not involve a reduction in the exercise price of the underlying option. If there is no required exercise of the underlying option (no contingency!) in order to retain the DER payments , then there can be no putative impermissible exercise-price-reduction, which is the only thing the rule are or should be after. In the case of a DER that turns off on exercise of the underlying option it's not the payment that's contingent on exercise - it's the nonpayment that's conditioned on exercise! They're just not the same thing. Maybe symmetry of equating the two is facially seductive - there’s often an equitable sense of that "what's good for the goose is good for the gander, even though different considerations may apply to the goose and the gander. Cf. my prior post on provisions in employment agreement relating to attorneys’ fees.
From an analytical perspective, the logic underlying this distinction is arguably steel-trap. Surmise that an option vested but then expires unexercised, and there were DER accruals linked to the option which will be retained by the optionee. In that case, the DER will have gotten paid (or will at least have vested) either at or before vesting** and yet the option never got exercised. Conclusively, then, last I looked at what "contingent" means, that DER just ain't contingent. A lack of a policy problem naturally and inexorably follows. Indeed, there's not even any policy reason to try to engraft the other-way (dare I say "wrong way") directionality onto the contingency rule. As reflected right on the face of the Section 1.409A-1(b)(5)(i)(E) rule, the question is whether there's a "reduction" in "exercise price", and that's just not a concern where it's nonpayment, as opposed to payment, that's contingent on exercise. Since the DER is retained regardless of whether the option is exercised, it simply doesn't act as a purchase-price reduction, and therefore doesn't implicate the price-reduction concerns underlying the 409A (and 162(m)) regulations.
The rule I’m suggesting here also has the advantage of being a rational one from a business perspective. It's at least sensible to pay the DER whether the option is exercised. It makes no sense, however, for the DER to be paid after the option is exercised. That's a double payment - the continuing DER, coupled with the actual payment of the real dividend on the actual stock. In this regard, one would hope, the tax rules just don't require the implementation of an irrational or otherwise silly program. Maybe having DERs be inherently inconsistent with 409A would make some sense if DERs were somehow evil or otherwise undesirable, such that they should be discouraged altogether.
But I don’t think that DERs are somehow always "bad" by their very nature. The fact is - the rules do not require a DER to be structured irrationally. And the key is that it's not the payment of the accrued DER that's contingent on exercise; it's the continued payment that’s contingent on non-exercise. They're just not the same thing. So maybe you're saying that this is sophistry on my part - a manipulative exercise in linguistic gymnastics. So maybe you’re saying, "Oh, c'mon, even if the stock might not go up right away, it's bound to go up someday."
But that's not right. Is it possible, not only as a theoretical matter but as a practical matter, that a given option will fail to be exercised? Of course it is. First, plainly, the stock might not go up. Are we forgetting that stock does not always increase in value, maybe not ever? The internet bubble burst a long time ago, with the subprime crisis having followed, and it's now quite clear that, yes, stock can actually go down and stay down. Has anyone ever heard of attempts to reprice hopelessly out-of-the-money options? (See also Treas. Reg. § 1.162-27(e)(2)(vii) (ex. 3) (whether there will be net income is always substantially uncertain).)
Second, even if a given stock would be destined or otherwise likely to go up someday, it might not be up at the time the option would otherwise expire. In this regard, an optionee will commonly wait until expiration to exercise (i) for tax reasons and (ii) so as to be able to continue to ride the investment in the underlying stock without having to make a capital investment (indeed, that's a hallmark of an option - the value of the option embedded in the optionality of the option). The compensatory landscape is littered with worthless, unexercised options - proof positive that the exercise of an option is anything but inevitable.
I think that, at the end, the analysis is ultimately quite straightforward and definitive, and can be demonstrated with the use of a baseline fact pattern. Take a vested option that is never exercised.*** Now assume a DER has been granted in connection with the option and the DER is paid (or vests) before or when the option vested. Assume further that, if the option is not exercised, the DER payment will be retained and, to make it easier, assume that the option is never exercised. On those facts: - Has the option been exercised? No - Will the option be exercised? No. - Has the DER been paid and retained? Yes. - Was the payment of the DER contingent on the exercise of the option. Uh - no. Like I said, steel-trap. I'm surprised that this has been made into an issue, even informally. I really think a technical misstep here is leading to confusion. To me, turning off a DER upon option exercise is fine under 409A, and, as asserted above, even clearly so.**** Now, in honor of the Oscars, it’s onto a more traditional kind of sequel . . . .
I noticed today (Oscar Day ‘11) that Toy Story 3, one of my favorite movies of all time, is nominated for best adapted screenplay. I have by this time been disabused of my flirtation, reflected in an earlier post, with the notion that TS3 will win the Oscar for Best Picture (go ahead, mock and otherwise laugh); however, the nomination for best adapted screenplay is fascinating. What is the source material on which the TS3 screenplay is based? The answer lies in the fact that the rules aren't really clear regarding into which of the two writing categories (original, adopted) a screenplay goes. Apparently, according to one helpful post (assuming it's right), the actual name of the category is, “Best Writing, Screenplay Based on Material Previously Produced or Published” - thus explaining that a sequel which itself has no direct source material could somehow be considered adopted by virtue of having been based indirectly on the sequel's predecessor(s).*****
Cool. And, of course, good luck to TS3 in this mainstream category!!
[originally posted in 2011; errant citations corrected thanks to my friend Jay D.]
* It's not clear that there's uniformity within the government on this.
** See also Treas. Reg. §§ 1.409A-1(b)(2), 3(e) (regarding deferred payment in the case of DERs connected with RSUs).
*** I can almost hear Henny Youngman intoning, "Take my wife - please."
**** The issue can be a big one where dividends are material, such as, for example, would generally be the case for options granted by REITs. But, whether the issue is economically a big one or a small one, the analysis should not get mucked up.
***** Cf. Treas. Reg. § 1.409A-1(b)(5)(i)(E) (twice using the "directly or indirectly" concept to cover something with either character by the same rule) (thus (ha ha) bringing this post full circle).

Monday, June 29, 2020

Idris Elba Took Your 401(k)

I just came across a dose of retirement-related reality that crept into an (indeed "The" ) Office over a decade ago.  During some economic hard times, the Dunder Mifflin crew were given a hard dose of reality.  None other than the "not unattractive"* Idris Elba's Charles Miner (sans British accent) stoically informed them: "[W]e are cutting three percent across the board, which means we will no longer be matching 401(k) contributions; and all overtime requests will need to come through the corporate office."**  Well, I guess that, if you're going to lose your 401(k) match and have your overtime pay cut back, you might as well be told by Idris Elba.
* . . . as Angela Kinsey's Angela Martin so informs.

 ** Research discloses that someone else with clearly too much time on her hands also noticed this loss of 401(k) benefits, although she did so in a much more timely fashion.

Saturday, June 6, 2020

Slayer, Part II - The Karavas File

I've previously commented on (what I think are interesting) developments regarding so-called "slayer" statutes and the effect they may have on a murderer's ability to collect insurance or other benefits on account of the death of the victim.  (Indeed, at least one commentator found my take on the matter interesting, as well - see "When Do State Laws Determine ERISA Plan Benefit Rights?" 47 John Marshall L. Rev. 145, 392 n.1434 (2013) (a 250-pager!!).)

Well, I was sitting at the September 2019 filming of a Carie Karavas stand-up show (you can see it on Crackle), at the urging of Sal (the Turtle) Governale.  Along the way, Ms. Karavos starts talking about the possible demise of her husband at her hands (or, more accurately, her legs), and, after a pause, asks, "Do I still get the pension?"

You just never know when you're going to be treated to an ERISA reference, do you?  You just gotta keep your eyes, and ears (and legs?!?), open!

Sunday, May 31, 2020

A Hater CARES Maybe Too Much While Swimming with the Sharks

I watched an old Shark Tank segment the other day.  The guy with the Hater dating app, in chronicling his path, noted how, among the things he did, he raided the money put away for his retirement, saying: "I liquidated my 401(k)".  Maybe he even paid early-withdrawal penalties.  Predictably, the Sharks fell all over themselves with admiration and adulation, maybe even adoration.  

For the record, I think the show is great and maybe often amazing, but here I think the message is a wrong-headed and dangerous one.  Is the idea to people that taking a flier with retirement assets is somehow a good, wise thing?  And is this entrepreneur's success somehow a validation of this rash and patently inadvisable approach?  Reminds me of the resource-constrained person who spends untold sums on lottery tickets and then wins, and who says, "See, I was right all along."  Oh, and, by the way, maybe not everyone can navigate such a self-imposed gauntlet as well as a Brown graduate with a Goldman pedigree.  Sheeeeesh.  

Guess what?  There's a reason that the rules encourage saving for retirement.  The money is there for when salary and other income is no longer coming in.  The thought of retirement funds being unavailable at a time when there are no other visible means of support is a potentially devastating and frightening one.  Thus the incredibly large tax subsidy for retirement programs, not to mention the associated comprehensive statutory scheme that may well be unsurpassed in its reach and complexity.  "Sure, go ahead, and put your 401(k) at risk.  Hope you guess right, like I did.  If not, hope you can eat when you're older."

This whole kerfuffle brings me back to one of the statutory responses to the COVID19 pandemic.  Under the CARES Act, there is dramatically increased access to retirement funds, through the mechanism of penalty waivers, tax relief and loan expansion.*  Surely, this is well-intended, with Congress's heart being in the right place, but I worry greatly about hurting people with kindness.  The effect of facilitating access to retirement money now is, of necessity, to eliminate its presence later, when it may most be needed.  Maybe there will be real suffering in the current environment, but if people access their retirement money now and then don't have later it when no new income is coming in - well, what then?  The Law of Unintended Consequences can be a real drag.**  I would submit that employers should be very thoughtful and contemplative (CARE(S)ful?) before choosing to amend their plans to facilitate access for their employees.

Indeed, the CARES Act itself does have a contrary tilt, as well.  Standing in contrast to the provisions facilitating access is a provision suspending RMDs and even allowing certain repayments thereof.  Now THERE's a good idea!

Be safe and be well, all, during these crazy, craaaazy, craaaaaaaazy times . . . 

* I want to vent about loans here for a moment.  People have the view along the lines of, "Hey, this is great.  I'll take a loan and I'm just paying myself back.  What a great deal."  But the insidious nature of this access, it turns out, is that the money loses its tax-preferred status while borrowed, and may ultimately come completely out of the retirement system if there's a default. 

** I'm reminded of when Obama and McCain were running against each other, and agreeing on almost nothing.  One proposal was to loosen up access to retirement funds to help deal with the financial crisis.  Both candidates supported the idea.  Imagine that!  Clearly, the loosening up was going to happen, right?  Well, it turns out, Obama won and you basically never heard the proposal again.  I can only imagine the policymakers telling our new President what a dangerous and potentially bad idea this was, notwithstanding its visceral appeal.  Anyway, went this supposedly wonderful, agreed-upon proposal.