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Services Available
The Benefits and Compensation Group works frequently with businesses that provide compensation to their employees in the form of equity. Our work with these businesses has principally focused on developing stock-based compensation plans for senior and middle management. Issues in these projects include (i) a determination of the type or types of stock-based compensation to award, (ii) the total amount of stock to make available for compensation awards in light of the issuer's total capitalization, (iii) the appropriate size of awards based on the grantee's corporate function, (iv) documentation of the plan and individual agreements and (v) together with our colleagues in our Corporate and Securities Group, securities law compliance. In addition, these businesses have considered more broad-based stock programs, such as discount employee stock purchase plans and stock-based matches in "401(k)" plans.
In one year alone, we drafted, revised or terminated more than 50 equity-based compensation plans for private and public companies. In addition, we handled benefits issues in numerous joint ventures, acquisitions, dispositions and attempted acquisitions, including several widely publicized transactions.
As part of our traditional employee benefits practice, we work on a wide range of supplemental executive retirement plans (SERPs) and executive deferred compensation programs. Here, we develop plan design specifications, documentation, communication with executives, devising benefit security arrangements, executing tax deferral strategies, and related securities and ERISA compliance.
Our Benefits and Compensation Group is nationally recognized in the design and administration of qualified retirement plans and employee welfare benefit plans. We represent many multiemployer plans as counsel to employer trustees, and often counsel employers (including large multinational corporations) on their participation in such plans. We represent plan sponsors and fiduciaries in investigations and audits by government regulatory agencies, including the Internal Revenue Service (IRS), the U.S. Department of Labor, the Pension Benefit Guaranty Corporation and state agencies.
In addition, we work closely with our ERISA litigation group to defend employers and fiduciaries in a wide range of individual and class action claims. Recently, we represented an employer whose 401(k) plan had invested in an Executive Life Insurance Company guaranteed investment contract in a matter that went to the U.S. Supreme Court and back down for trial, and another employer whose Employee Stock Ownership Plan design was challenged by a large class of former employees following the employer's widely publicized acquisition.
We also represent financial institutions, including banks and other thrift institutions, insurance companies and investment companies. In those cases, we offer advice on financial products and services, ranging from a review of loan documentation through the preparation and review of master and prototype retirement plans, review of fee arrangements (with particular regard to potential prohibited transaction issues), restrictions on investments and other potential areas of liability for the financial institution. We offer advice on compliance requirements for those institutions when they are the provider of an investment vehicle and an administrator for the investor.
We are particularly proud of our teaching and training activities. Several of our lawyers hold positions in local and national groups, and speak and participate in programs across the country covering recent legislation and regulation, 401(k) compliance, employee benefit litigation and many related areas. For many years, our lawyers have taught the courses on retirement plans for the graduate tax programs at Temple University and Villanova University. We also frequently conduct in-house training for plan administrators and similar educational activities.
Pepper's Benefits and Compensation Group has grown substantially over the last few years and is currently composed of 18 lawyers and 2 non-lawyer benefits specialists.
Recent employee benefit and executive compensation representations include the following:
NASDAQ NMS Employer -- S&P 500 Telecommunications and Entertainment (25,000 Employees)
- design, documentation, administration, $1 million cap and securities compliance of executive compensation programs including restricted stock, stock option, executive cash bonus, divisional cash bonus and deferred compensation plans
- design, compliance and administration of 401(k) plan covering more than 25,000 employees, including securities compliance and registration, day-to-day administration
- compensation programs for divisions, subsidiaries and affiliates
- advice on WARN Act, FMLA, ADA, ADEA, HIPAA and related employment and benefits crossover issues
- benefits and compensation counsel on numerous acquisitions.
Major Investment Company Group
- preparation and review of IRA, Roth IRA, SIMPLE and prototype arrangements
- advice concerning restrictions on cross trading and other potential self-dealing transactions
- preparation of administrative agreements with third-party service providers
- advice on permissible fee arrangements under ERISA
- advice regarding acquisitions of mutual funds and related organizations.
NYSE Employer -- Manufacturing (5,000 Employees)
- design, compliance, administration, securities compliance, communications of defined benefit pension, 401(k) and ESOP
- design and documentation of executive severance arrangements, including executive SERPs
- design, documentation and securities compliance for stock-based compensation arrangements, including restricted stock and stock option
- negotiation of pension agreement in collective bargaining
- representation in connection with change of control issues, including golden parachute taxation, gross up, option and stock conversion, ESOP stock conversion and related issues
- advice on health and welfare, group insurance, COBRA, QDROs, administrative service agreements and managed care.
NYSE Employer -- International, Pharmaceuticals (25,000 U.S. Employees)
- design, documentation, communication, securities compliance for U.S.-wide pension and 401(k) programs
- advice on executive compensation arrangements, including SERP, bonus investment phantom stock program
- benefits and compensation advice in connection with corporate transactions
- advice on health and welfare, group insurance, COBRA, QDROs, administrative service agreements and managed care, including extension of benefits program to domestic partners.
NASDAQ NMS Employer -- Telecommunications and New Media (5,500 Employees)
- newly public employer, spin-off to public shareholders
- design and implementation of ESOP (unleveraged) as part of justification for tax-free spin-off
- executive compensation advice -- tax and securities law issues for stock options, restricted stock and compensation arrangements for affiliates and joint ventures, including parachute, severance, $1 million cap and section 16b issues, and NASDAQ and shareholder approval issues
- benefits and compensation advice in connection with corporate transactions, including acquisition of public company target and two private company targets since October 1997.
NASDAQ NMS Employer -- Telecommunications (1,000 Employees)
- Initial Public Offering
- design and documentation of new stock option and equity based compensation arrangements
- revision of 401(k) plan to add company stock as investment fund and matching investment vehicle
- implementation of Employee Stock Purchase Plan
- benefits and compensation advice in corporate transactions, including acquisition of public company target.
NYSE Employer -- Real Estate
- development, documentation and board presentations regarding executive and directors compensation, employment and severance, bonus and equity-based compensation
- implementation of Employee Stock Purchase Plan
- expansion of 401(k) plan and addition of company stock as investment fund and matching vehicle.
Private Company -- Computer Consulting and Services
- advice regarding executive, stock-based and qualified plan arrangements in preparation for IPO.
NYSE Company -- Utilities
- advice to acquiring company in consolidation regarding all benefits and compensation aspects of combination and transition, including severance, combination of pension and savings plans, coordination and combination of group insurance arrangements, advice on change of control issues and related matters.
NYSE Company -- Transportation
- defense of litigation against ESOP sponsor regarding allocation of proceeds of $500 million fund of proceeds realized on sale of ESOP stock in connection with corporate takeover.
NYSE Company -- Banking
- defense of litigation for benefits and compensation against employer in connection with claims arising out of "outsourcing" of internal service department.
Executive Compensation
Pepper Hamilton LLP's Executive Compensation Group assists employers and executives with the design, drafting, implementation and operation of executive compensation programs. In this area, we counsel businesses regarding executive employment and severance agreements, equity-based compensation programs and supplemental executive retirement and deferred compensation programs. We also work on the compensation aspects of corporate transactions, which typically involves the negotiation of representations, warranties and indemnities regarding executive compensation, resolution of change in control agreements, and conversion or cash-out of stock options and other equity incentives. We work closely with lawyers from the firm's tax, corporate, labor and litigation practices to offer depth and efficiency.
The Executive Compensation Practice Group works frequently with publicly traded companies on the development of stock-based compensation plans. Issues arising in these projects include:
- selection of the type or types of stock-based compensation to award
- determination of the total amount of stock to make available for compensation awards in light of the issuer's total capitalization
- determination of the appropriate sized of awards based on the grantee's corporate function
- documentation of the plan and individual agreements
- compliance with short-swing profit and anti-fraud rules
- compliance with SEC reporting and disclosure requirements
- application of the so-called "$1 million compensation cap" of Section 162(m) of the Internal Revenue Code.
In addition, we work on a wide range of supplemental executive retirement plans (SERPs) and executive deferred compensation programs. Here, we are involved in developing plan design specifications, documentation, communication with executives, devising benefit security arrangements, executing tax deferral strategies and related securities and ERISA compliance.
Also, we advise employers and executives regarding the application of the "golden parachute" rules in Sections 280G and 4999 of the Internal Revenue Code, and regarding techniques to minimize or avoid the impact of those rules.
Finally, as part of our traditional employee benefits practice, we help employers design and implement more broad-based stock programs, such as discount employee stock purchase plans and stock-based matches in "401(k)" plans.
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