- On November 2, the New York City Council passed a bill that will require chain restaurants with 15 or more locations to post added sugar icons and factual warning statements on menus or menu boards next to menu items and on or near food items on display that exceed a specified level of added sugars. The icon must be displayed on food items that exceed 100% or more of the daily value for added sugars as determined by the FDA (i.e., 50g) or another amount as specified by the Department of Health and Mental Hygiene (DOHMH).
- This new legislation, Int 0687-2022, builds on the “Sweet Truth Act,” which was passed in 2021 and requires the same added sugar notifications on certain prepackaged food items at covered NYC establishments.
- The bill has been sent to the Mayor for a hearing and signature, to be held on November 17. If signed, covered establishments will be required to display the added sugar icons no later than one year after the DOHMH issues its rules for the bill. Any covered restaurant that violates the provisions of the bill is liable for a civil penalty of $200.
Category: Legislation
European Commission Action on Climate Taxonomy and ESG Rating Provider Regulation
On June 13, 2023, the European Commission published “a new package of measures to build on and strengthen the foundations of the EU sustainable finance framework.” The aim is to ensure that the EU sustainable finance framework continues to support companies and the financial sector in connection with climate transition, including making the framework “easier to use” and providing guidance on climate-related disclosure, while encouraging the private funding of transition projects and technologies. These measures are summarized in a publication, “A sustainable finance framework that works on the ground.” Overall, according to the Commission, the package “is another step towards a globally leading legal framework facilitating the financing of the transition.”
The sustainable finance package includes the following measures:
- EU Taxonomy Climate Delegated Act: amendments include (i) new criteria for economic activities that make a substantial contribution to one or more non-climate environmental objectives, namely, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems; and (ii) changes expanding on economic activities that contribute to climate change mitigation and adaptation “not included so far – in particular in the manufacturing and transport sectors.” The EU Taxonomy Climate Delegated Act has been operative since January 2022 and includes 107 economic activities that are responsible for 64% of greenhouse gas emissions in the EU. In addition, “new economic sectors and activities will be added, and existing ones refined and updated, where needed in line with regulatory and technological developments.” “For large non-financial undertakings, disclosure of the degree of taxonomy alignment regarding climate objectives began in 2023. Disclosures will be phased-in over the coming years for other actors and environmental objectives.”
- Proposed Regulation of ESG Rating Providers: the Commission adopted a proposed regulation, which was based on 2021 recommendations from the International Organization of Securities Commissioners, aimed at promoting operational integrity and increased transparency in the ESG ratings market through organizational principles and clear rules addressing conflicts of interest. Ratings providers would be authorized and supervised by the European Securities and Markets Authority. The regulation “provides requirements on disclosures around” ratings methodologies and objectives, and “introduces principle-based organizational requirements on” ratings providers activities. The Commission is also seeking advice from ESMA on the presentation of credit ratings, with the aim being to address shortcomings related to “how ESG factors are incorporated into methodologies and disclosures of how ESG factors impact credit ratings.”
- Enhancing Usability: the Commission set out an overview of the measures and tools aimed at enhancing the usability of relevant rules and providing implementation guidance to stakeholders. The Commission Staff Working Document “Enhancing the usability of the EU Taxonomy and the overall EU sustainable finance framework” summarizes the Commission’s most recent initiatives and measures. The Commission also published a new FAQ document that provides guidance on the interpretation and implementation of certain legal provisions of the EU Taxonomy Regulation and on the interactions between the concepts of “taxonomy-aligned investment” and “sustainable investment” under the SFDR.
Taking the Temperature: As previously discussed, the Commission is increasingly taking steps to achieve the goal of reducing net greenhouse gas emissions by at least 55% by 2030, known as Fit for 55. Recent initiatives include the adoption of a carbon sinks goal, the launch of the greenwashing-focused Green Claims Directive, and now, the sustainable finance package.
Another objective of these regulatory initiatives is to provide increased transparency for investors as they assess sustainability and transition-related claims made by issuers. In this regard, the legislative proposal relating to the regulation of ESG rating agencies is significant. As noted in our longer survey, there is little consistency among ESG ratings providers and few established industry norms relating to disclosure, measurement methodologies, transparency and quality of underlying data. That has led to a number of jurisdictions proposing regulation, including (in addition to the EU) the UK, as well as to government inquiries to ratings providers in the U.S.
© Copyright 2023 Cadwalader, Wickersham & Taft LLP
For more financial legal news, click here to visit the National Law Review.
Does the “Patent Eligibility Restoration Act of 2023” Revive Diagnostic Claims?
On June 22, Senator Chris Coons, along with Thom Tillis introduced the “Patent Eligibility Restoration Act of 2023” (hereinafter “the Act”) to amend 35 USC s. 101 to clarify the scope of patent-eligible subject matter. Section 101(b) would be amended to delete “includes a new use of a known process” and insert “includes a use, application, or method of manufacture of a known or naturally occurring process.” A section (k) would be added to define the term “useful” as meaning that the invention or discovery has a “specific and practical utility” from the perspective of a POSA. So far, so good. The use of a naturally occurring process can be read to cover the use of a naturally occurring correlation, an “If A then B” claim. The recognition of the discovery of the utility of a naturally occurring correlation, which leads to a diagnostic conclusion would seem to be included in this broad language.
But now things get a bit sketchy. The Act would abolish all the current judicial, e.g. Chakrabarty, exclusions but would add a set of statutory exclusions that overlap the judicial exclusions in some places. The exclusions include “an unmodified human gene”—good-bye Myriad—and an unmodified natural material as that material exists in nature, e.g., water. This exclusion would not jeopardize diagnostic claims since a per se is not being claimed.
More troublesome, Section C of the exclusions would include a process that “occurs in nature wholly independent of, and prior to, any human activity.” Diagnostic claims are process claims that are based on the recognition of the utility of a correlation that takes place in the body. The utility of the diagnostic claim lies solely in the recognition of the utility of the correlation. If a man has an elevated level of PSA he is at risk of developing, or may already have, prostate cancer. But isn’t the relationship between PSA levels and cancer/no cancer a process that occurs in nature wholly independent of, and prior to, any human activity, such as sampling and measuring the level of PSA in the blood? Please read the Act and tell me why I am wrong.
© 2023 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.
For more Intellectual Property Legal News, click here to visit the National Law Review.
Delaware Legalizes Recreational Marijuana
Delaware became the latest state to legalize recreational marijuana on April 23, 2023 when the state’s Governor failed to veto two bills that allow for the legalization of marijuana, effective immediately. Individuals who are 21 years of age and older may possess and use up to one ounce of marijuana. It will be taxed in a manner similar to alcohol.
The law provides that nothing in the law is “intended to impact or impose any requirement or restriction on employers with respect to terms and conditions of employment including but not limited to accommodation, policies or discipline.” This means that employers in Delaware do not have to permit marijuana use at work or during work time and still may drug test for marijuana and take disciplinary action for positive test results.
Employers should bear in mind, however, that the use of medical marijuana still is protected under Delaware law, as it has been since 2011. The new recreational marijuana law does not change the rights of users of medical marijuana. Specifically, the Delaware Medical Marijuana Act provides, in pertinent part, that “an employer may not discriminate against a person in hiring, termination, or any term or condition of employment . . . if the discrimination is based upon either of the following: a. [t]he person’s status as a cardholder; or b. [a] registered qualifying patient’s positive drug test for marijuana . . . unless the patient used, possessed or was impaired by marijuana on the premises of the place of employment or during his hours of employment.”
Delaware joins a growing list of states that have adult-use recreational marijuana laws. Employers should review their drug and alcohol policies frequently to ensure that they are complying with all applicable state and local marijuana laws.
Jackson Lewis P.C. © 2023
For more Cannabis legal news, click here to visit the National Law Review
Diving Into SECURE 2.0: New Changes Ease Plan Sponsor Administrative Burdens
The SECURE 2.0 Act of 2022 (SECURE 2.0) significantly changes the legal and administrative compliance landscape for U.S. retirement plans. Foley & Lardner LLP is authoring a series of articles that take a “deep dive” into key SECURE 2.0 provisions that will affect how employers structure and administer their 401(k) plans, pension plans, and other types of employer-sponsored retirement plans.
Last month, we discussed SECURE 2.0’s new required minimum distribution (RMD) rules. In this article, we examine certain SECURE 2.0 changes designed to simplify plan administration for sponsors of defined contribution plans (including Code Section 401(k), 403(b) plans, and 457(b) plans)1 and encourage employees to save for their retirements.
In a 1986 press conference, President Ronald Reagan infamously quipped: “the nine most terrifying words in the English language are: ‘I’m from the government, and I’m here to help.’” While legislation affecting retirement plans can sometimes be frustratingly complex (can you say “ERISA”?), SECURE 2.0 contains a number of provisions designed to lessen the administrative burdens faced by 401(k) plan sponsors (employers).
Optional Changes/Effective Date
Each of the administrative changes discussed below is optional – employers aren’t obligated to adopt any of them.
If an employer elects to do so, however, the changes are generally effective for plan years beginning after SECURE 2.0’s enactment. So, an employer with a calendar year plan (i.e., a plan using a January 1 to December 31 plan year) may incorporate the changes into its 401(k) plan in 2023 (depending on the employer’s own objectives and the ability of its recordkeeper to accommodate any requested changes).
Loosening Hardship Withdrawal Documentation Requirements
Many 401(k) plans permit participants to request hardship withdrawals from their plan accounts to help alleviate the impact of any “immediate and heavy” financial need the participant may be facing. Certain life events (such as funeral expenses, college tuition, expenses to repair a participant’s residence, etc.) automatically constitute an “immediate and heavy” financial need. In the past, 401(k) plan participants requesting hardship withdrawals had to prove both that: (i) the event leading to the financial hardship had occurred, and (ii) the participant lacked the cash or other resources to meet it.
Following a 2019 change in the IRS’s rules, however, employers were permitted to rely on a participant’s certification that he or she had insufficient cash or liquid assets to reasonably meet his or her financial need. To receive a hardship withdrawal, though, the participant still had to prove the hardship event itself occurred.
Now, under the new SECURE 2.0 changes, participants can self-certify both that: (i) the hardship event occurred, and (ii) they lack the financial resources to alleviate it. Unless the employer knows the participant’s certifications are untrue, it may rely on the certifications when determining whether to grant a hardship withdrawal. Employers should nevertheless caution participants to retain underlying documentation of both the hardship event and their financial circumstances, in case the IRS requires the employer to produce such documentation under audit.
This change should streamline the hardship withdrawal process considerably. Employers will no longer need to determine whether a participant has experienced a true hardship or if the participant lacks the funds to address it, and participants will get the funds they need quicker.
Eliminating Unnecessary Plan Notices to Unenrolled Participants
Employers know that printing and distributing required participant notices (describing investment options, fees, and participants’ rights under their 401(k) plan) isn’t cheap. Even if employers provide such notices electronically, they must still take time and effort to ensure the notification process meets IRS and DOL standards.
Another SECURE 2.0 change attempts to ease this burden. Under that change, an employer won’t violate ERISA if it fails to provide required notices to individuals eligible for, but not enrolled in, the employer’s plan. However, this exemption will only apply if those individuals (called “unenrolled participants” by SECURE 2.0) received a summary plan description and other eligibility notices when first eligible to participate in the 401(k) plan.
Consistent with Congress’ aim of improving retirement readiness in the U.S. workforce,2 employers can’t just ignore unenrolled participants. SECURE 2.0 requires employers to provide unenrolled participants with annual notices reminding them of their eligibility to participate in the plan. The notice must also describe any employer contributions, vesting schedules, and election deadlines. The employer must also provide unenrolled participants with any otherwise-required documents upon request.
SECURE 2.0 doesn’t specify which notices are covered by this change, and we anticipate further guidance from the agencies addressing that issue, and describing the content of the annual reminder notice. Nevertheless, this change will allow employers to save time, money, and internal resources previously spent on the printing and distribution of unnecessary plan notices.
Offering De Minimis Financial Incentives for Participation
Before the enactment of SECURE 2.0, the only incentive employers could use to encourage 401(k) plan enrollment among employees was the promise of matching contributions. However, consistent with its goal of improving retirement readiness, SECURE 2.0 permits employers to offer “de minimis” financial incentives to encourage plan enrollment. Such incentives may not be paid from plan assets.
While SECURE 2.0 does not define de minimis, the Senate summary of SECURE 2.0 mentions, without further explanation, “low-dollar” gift cards. Regardless of the amount, employers must treat the value of gift cards as taxable income to the employees receiving them. The incentive would also be subject to income and employment taxes. It’s possible certain tangible incentives (such as small gifts of food, books, or flowers) would be excluded from compensation if, considering their value and frequency, it would be unreasonable or impractical for the employer to account for them.3 Guidance from the IRS on this issue would be welcomed.
Treating Employer Contributions as Roth Contributions
Before SECURE 2.0, employers could only make employer matching contributions to their 401(k) plans on a pre-tax basis – Roth matching contributions weren’t permitted. If participants wanted to convert pre-tax employer matching contributions into Roth contributions, they had to complete an in-plan Roth conversion (if permitted by the plan), and pay tax on the amount converted and any accumulated earnings.
Now, under SECURE 2.0, employers may offer 401(k) plan participants the option of receiving employer matching contributions or profit-sharing/nonelective contributions on a Roth basis. Such contributions must, however, be nonforfeitable to the participant (i.e., 100% vested).
Most recordkeepers should be able to accommodate this election. Even before SECURE 2.0’s enactment, many recordkeepers assisted participants in completing in-plan Roth conversions.
Before offering this new SECURE 2.0 option to participants, employers should consider whether, in their circumstances, it makes sense to eliminate vesting requirements imposed on matching or profit-sharing/nonelective contributions.
Facilitating Automatic “Roll-Ins” and Portability
Under current law, employers may automatically cash out the 401(k) plan accounts of terminated participants whose balances don’t exceed $1,000. If a terminated participant’s account balance equals or exceeds $1,000, but is less than $5,000 (increasing to $7,000 in 2024 – another SECURE 2.0 change), the employer may roll the former participant’s account balance over to an individual retirement account (IRA) established on the participant’s behalf.
After being transferred to an IRA, a former participant’s funds will generally be invested in a default investment option intended to protect the former participant’s principal. Despite that intent, the former participant’s funds may be lost or eroded by the IRA provider’s fees.
SECURE 2.0 addresses this issue by permitting employers and their recordkeepers to transfer the IRA balances of former 401(k) plan participants into retirement plans maintained by the individuals’ new employers (unless a former participant elects otherwise). This change will help participants consolidate their retirement savings in a single employer-sponsored retirement plan, lessening the likelihood those funds will be forgotten or lost due to inaction.
What Should Employers Do Now?
As noted above, the SECURE 2.0 changes described in this article are optional – employers aren’t obligated to adopt them. However, employers considering adopting one or more of the SECURE 2.0 changes should work with their recordkeepers to ensure the requested changes can be incorporated into their plans’ administrative processes. Employers may also need to adopt plan amendments to properly document the incorporation of certain SECURE 2.0 changes into their 401(k) plans (for example, updating the plan’s hardship withdrawal determination process or to allowing the employer to make Roth matching contributions). Such plan amendments must be adopted by the end of the plan year in which the change is effective.
These SECURE 2.0 changes should be popular with employers looking to lessen the administrative burden (and cost) of maintaining their 401(k) plans. We anticipate that, over time, the IRS and the DOL will issue guidance clarifying the scope of many of these SECURE 2.0 changes. Employers eager to implement the time- and money-saving SECURE 2.0 changes described herein for the 2023 plan year should take a good faith approach to doing so.
FOOTNOTES
1 For convenience, in this article, we’ll refer to all such plans, collectively, as “401(k) plans.”
2 According to a 2022 survey, 55% of Americans say their retirement savings are not where they need them to be. Around 35% said they were “significantly behind” in saving for retirement.
3 This is the approach taken by the IRS in connection with respect to other de minimis fringe benefits.
© 2023 Foley & Lardner LLP
Michigan House Moves Quickly to Repeal Michigan Right to Work Act
The Michigan House of Representatives moved quickly yesterday to advance legislation repealing Michigan’s Right to Work law, which has been in effect for the last decade. Right to Work prohibits the inclusion of a clause in a union labor contract that conditions access to employment (and continued employment) on becoming and remaining a Union member in good standing. Before enactment of Michigan’s Right to Work law, Unions could legally negotiate a union security clause into a labor contract. In a nutshell, union security means that employees performing work covered by a labor contract must join the union and remain in good standing with the union or be terminated. On March 8, the House passed both House Bill 4005 (private sector unions) and House Bill 4004 (public sector unions). The bills will now be taken up by the Michigan State Senate.
What Does Repeal of Right to Work Mean for Michigan Companies?
If Right to Work is repealed, employers with Union labor contracts can expect requests to meet and bargain regarding union security clauses. If repealed, existing labor contracts will not be presumed to include such clauses. Rather, union security clauses and the terms and scope of such provisions are a subject of negotiation. Existing labor contracts should be reviewed with labor counsel to determine the employer’s obligations to engage in mid-contract bargaining on this important topic. Labor contracts on this issue vary. For example, labor contracts may contain:
- A union security clause that becomes effective upon a change in the law;
- An obligation to meet and negotiate with the Company upon a change in the law; or,
- The labor contract may be silent on the issue.
© 2023 Varnum LLP
SECURE 2.0 Act Brings Slate of Changes to Employer-Sponsored Retirement Plans
In December, the SECURE 2.0 Act of 2022 (“SECURE 2.0”) was passed, a package of retirement provisions providing comprehensive updates and changes to the SECURE Act of 2019. The legislation includes some key changes that affect employer-sponsored defined contribution plans, such as profit-sharing plans, 401(k) plans, 403(b) plans and stock bonus plans. While some of the changes are effective immediately upon the law’s enactment, most required changes are not effective before the plan year beginning on or after January 1, 2024, so employer sponsors have time to prepare for compliance.
Required Changes
Mandatory automatic enrollment in new plans.
Plan sponsors are currently allowed to provide for automatic enrollment and automatic escalation in 401(k) and 403(b) plans. SECURE 2.0 requires new 401(k) and 403(b) plans to automatically enroll participants at a new default rate, and to escalate participants’ deferral rate each year, up to a maximum of 15%, with some exceptions for new and small businesses. This provision applies to new plans with initial plan years beginning after December 31, 2024.
Changes to long-term part-time employee participation requirements.
The Act currently requires 401(k) plans to permit participation in the deferral part of the plan only by an employee who worked at least 500 hours (but less than 1000 hours) per year for three consecutive years. SECURE 2.0 changes this participation requirement by long-term part-time employees working more than 500, but less than 1000, hours per year to two consecutive years instead of three. However, this two-year provision does not take effect until January 1, 2025, which means the original SECURE Act three-year provision still applies for 2024. Employers should start tracking hours for part-time employees to determine whether they will be eligible in 2024 or 2025 under this provision. For vesting purposes, pre-2021 service is disregarded, just as service is disregarded for eligibility purposes. This provision is applicable to 401(k) plans and 403(b) plans that are subject to ERISA and does not apply to collectively bargained plans. This provision applies to plan years beginning after December 31, 2024.
Changes to catch-up contributions limits.
If a defined contribution plan permits participants who have attained age 50 to make catch-up contributions, the catch-up contributions are now required to be made on a Roth basis for participants who earn at least $145,000 (indexed after 2024) or more in the prior year. This provision is effective for taxable years beginning after December 31, 2023.
Changes to the required minimum distribution (RMD) age.
Currently, required minimum distributions must begin at age 72 for participants who have terminated employment. SECURE 2.0 increases the age to age 73 starting on January 1, 2023, and to age 75 starting on January 1, 2033. This means that participants who turn 72 in 2023 are not required to take an RMD for 2023; instead, they will be required to start taking RMDs for calendar year 2024, the year in which they turn 73. This provision is effective for distributions made after December 31, 2022, for individuals who turn 72 after that date.
Early withdrawal tax exemption for emergency withdrawal expenses.
SECURE 2.0 provides for an exception from the 10% early withdrawal tax on emergency expenses, defined as certain unforeseeable or immediate financial needs, on a limited basis (once per year, up to $1000). Plans may allow an optional three-year payback period, and participants are restricted from taking another emergency withdrawal within three years of any unpaid amount on a previous withdrawal. This provision is effective for plan years beginning on or after January 1, 2024.
Changes to automatic enrollment for new plans.
Almost all new defined contribution plans will be required to auto-enroll employees upon hire (existing plans are exempt from this provision). This provision is applicable for plan years beginning on or after January 1, 2025.
Optional Changes
Additional catch-up contribution opportunities.
Currently, the catch-up contribution limits for certain plans are indexed for inflation and apply to employees who have reached the age of 50. SECURE 2.0 increases catch-up contribution limits for individuals aged 60-63 to the greater of: (1) $10,000 (indexed for inflation), or (2) 50% more than the regular catch-up amount in effect for 2024. This provision is effective for plan years beginning on or after January 1, 2025.
Additional employer contributions to SIMPLE IRA plans.
Current law requires employers with SIMPLE IRA plans to make employer contributions to employees of either 2% of compensation or 3% of employee elective deferral contributions. SECURE 2.0 allows employers to make additional contributions to each employee of a SIMPLE plan in a uniform manner, provided the contribution does not exceed the lesser of up to 10 percent of compensation or $5,000 (indexed). This provision is effective for taxable years beginning after December 31, 2023.
Replacing SIMPLE IRA plans with safe harbor 401(k) plans.
The new law also permits an employer to elect to replace a SIMPLE IRA plan with a safe harbor 401(k) plan at any time during the year, provided certain criteria are met. The current law prohibits the replacement of a SIMPLE IRA plan with a 401(k) plan mid-year. This provision also includes a waiver of the two-year rollover limitation in SIMPLE IRAs converting to a 401(k) or 403(b) plan. This change is effective for plan years beginning after December 31, 2023.
Increasing involuntary cash-out threshold.
Currently plans may automatically cash-out a vested participant’s benefit that is between $1,000 and $5,000 and roll this amount over to an IRA. SECURE 2.0 allows plans to increase the $5,000 involuntary cash-out limit amount to $7,000. This provision of the law is effective for distributions made after December 31, 2023.
Relaxation of discretionary amendment deadline.
Under current law, a discretionary plan amendment must be adopted by the end of the plan year in which it is effective. SECURE 2.0 allows plans to make discretionary plan amendments to increase benefits until the employer’s tax filing deadline for the immediately preceding taxable year in which the amendment is effective. This applies to stock bonus, pension, profit-sharing or annuity plans to increase benefits for the preceding plan year. This provision is effective for plan years beginning after December 31, 2023.
Elimination of unnecessary plan notices to unenrolled participants.
SECURE 2.0 eases the administrative burden on plan sponsors by eliminating unnecessary plan notices to unenrolled participants. Under the amended law, plan sponsor notices to unenrolled participants may consist solely of an annual notice of eligibility to participate during the annual enrollment period, as opposed to numerous notices from the plan sponsor. This provision is effective for plan years beginning after December 31, 2022.
Crediting of student loan payments as elective deferrals for purposes of matching contributions.
Under SECURE 2.0, student loan payments may be treated as elective deferrals for the purposes of matching contributions to a retirement plan. This provision is available for plan years beginning on or after January 1, 2024.
Matching contributions designated as Roth contributions.
Previously, employer matching contributions could not be made as Roth contributions. Effective on the date of the enactment of SECURE 2.0, 401(a), 403(b), or governmental 457(b) plans may allow employees the option to designate matching contributions as Roth contributions.
Expansion of the Employee Plans Compliance Resolution System (EPCRS).
Currently, EPCRS contains procedures to self-correct certain limited, operational failures that are insignificant and corrected within a three-year period. SECURE 2.0 expands this, generally permitting any inadvertent failure to be self-corrected under EPCRS within a reasonable period after the failure is identified, without a submission to the IRS, subject to some exceptions. This provision went into effect on the date of enactment.
Recoupment of overpayments.
Currently, fiduciaries for plans that have mistakenly overpaid a participant must take reasonable steps to recoup the overpayment (for example, by collecting it from the participant or employer) to maintain the tax-qualified status of the plan and comply with ERISA. Under SECURE 2.0, 401(a), 403(a), 403(b), and governmental plans (not including 457(b) plans) will not lose tax qualification merely because the plan fails to recover an “inadvertent benefit overpayment” or otherwise amends the plan to permit this increased benefit. In certain cases, the overpayment is also treated as an eligible rollover distribution. This provision became effective upon enactment with certain retroactive relief for prior good faith interpretations of existing guidance.
Simplified plan designs for “starter” 401(k) and 403(b) plans.
Effective for plan years beginning after December 31, 2023, SECURE 2.0 creates two new plan designs for employers who do not sponsor a retirement plan: a “starter 401(k) deferral-only arrangement” and a “safe harbor 403(b) plan.” These plans would generally require that all employees be enrolled in the plan with a deferral rate of three percent to 15 percent of compensation.
Financial incentives for contributions.
SECURE 2.0 allows participants to receive de minimis financial incentives (not paid for with plan assets) for contributing to a 401(k) or 403(b) plan. Previously, plans were prohibited from offering financial incentives (other than matching contributions) to employees for contributing to a plan. This provision became effective for plan years starting after the date of enactment.
When do employers need to amend their plans for the SECURE Act, CARES Act, and SECURE 2.0 (“the Acts”)?
If a retirement plan operates in accordance with the Acts, plan amendments must be made by the end of the 2025 plan year (or 2027 for governmental and collectively bargained plans). (The amendment deadlines for SECURE and CARES were extended late last year.)
© 2023 Varnum LLP
Washington’s Focus on the Electric Vehicle Supply Chain in 2023
In 2022, the president and US Congress solidified their support of the industry by passing sweeping legislation aimed at funding and incentivizing US electric mobility manufacturing for the next decade and beyond.
Looking ahead to 2023, the Administration will be writing the rules to implement that support. This will take the form of rulemaking for key statutes such as the Infrastructure Investment and Jobs Act (IIJA), the CHIPS Act, and the more recent Inflation Reduction Act of 2022 (IRA). On the non-tariff front, Congress passed, and the president signed, the 2021 Uyghur Forced Labor Prevention Act.
Background
- The IIJA authorized $18.6 billion to fund new and existing electric vehicle (EV)-related programs, including a nationwide network of 500,000 EV charging stations and monies for publicly accessible alternative fuel infrastructure. Also, the law injected $10.9 billion in funding for transitioning school buses, transit buses, and passenger ferries to low- and/or zero-emissions alternatives.
- The CHIPS Act allocated $11 billion in support of advanced semiconductor manufacturing research and set up a $2 billion fund to support technology transfers from laboratory to applications.
- The IRA, perhaps the most significant development from Washington, DC, injected billions of dollars in tax credits and other incentives to spur US domestic manufacturing of electric vehicles.
- In December 2022, news came that a United States-Mexico-Canada Agreement (USMCA) Dispute Settlement Panel had completed its findings on a complaint by Mexico and supported by Canada that the United States has been misinterpreting the product origin calculations for “core parts” for USMCA vehicle qualification. In January of 2023, that ruling was made public. See Long Awaited USMCA Panel Decision on Automotive “Core Parts” – What Happened and What’s Next.
- In June 2022, the Administration published its “Strategy to Prevent the Importation of Goods Mined, Produced, or Manufacture with Forced Labor.” Customs and Border Protection (CBP) has launched a vigorous and highly intrusive enforcement strategy for a number of key sectors, including the automotive industry.
What to Know
Based on the legislative developments from the last year, the EV industry should expect:
- Import Enforcement. If 2022 was the year of federal infusion of funding and policy development, 2023 will be the year of import enforcement and accountability. Supply chains will be scrutinized, and compliance will have to be demonstrated. In addition, claims of tariff preferences under US trade agreements will be closely monitored to guard against fraudulent product descriptions or county of origin. In terms of US forced labor legislation, a January 2023 article in a well-read trade media reported on a meeting with US Trade Representative Katherine Tai at which the Ambassador “suggested that auto or auto parts imported from China could be in CBP crosshairs.” (International Trade Today, January 6, 2023 Vol 39, No 4).
- Accountability. With the massive funding from Congress and the White House, federal agencies will be scrutinizing how monies have been spent, particularly whether they have been spent to meet the goals to incentive US domestic production. Global supply chains will come under the microscope. A December 2022 Treasury Department publication can be read here.
- Corporate Readiness. Companies that engage in the global marketplace dread the unknown. There is no crystal ball. But what corporate executives can do to mitigate the risk of potentially bad news on the trade front is to monitor developments, conduct self-assessments, and, where possible, build in flexibilities.
- Know Your Customer. Know Your Suppliers. Know Your Suppliers’ Suppliers. A common thread weaving throughout these developments on the trade front is Washington’s not so subtle objective of determining the essential source of imported products. That effort will shift the onus onto the private sector, with companies having to provide far more transparency into their product’s life span.
For product development and marketing executives in the electric mobility sector, 2023 is potentially a very good news story. But for general counsels and corporate compliance and procurement officers, the uncertainties of regulatory change will require extra attention. In the interim, company officials are taking a fresh look at the current legal and regulatory exposures of their supply chains to be best prepared for the trade policy changes ahead. The adage “when in uncertain times, start with what you know” is particularly relevant today.
To that end, the USMCA can play a critical “bridge” for many companies with strategic business interests in the US market.
© 2023 ArentFox Schiff LLP
Beltway Buzz, January 20, 2023
Union Membership Decreases. The percentage of workers who are union members dropped to 10.1 percent in 2022 from 10.3 percent in 2021, according to data released this week by the U.S. Bureau of Labor Statistics (BLS). In the private sector, the unionization rate fell to 6 percent last year from 6.1 percent in 2021. According to BLS:
The 2022 unionization rate (10.1 percent) is the lowest on record. In 1983, the first year where comparable union data are available, the union membership rate was 20.1 percent and there were 17.7 million union workers.
Thus, despite some splashy headlines and a few high-profile examples, the great majority of employees continue to reject unionization. Expect labor unions and their allies in Washington, D.C., to spin these numbers as a reason to double down on efforts to tilt the labor policy field in favor of labor unions.
D.C. Circuit Issues Ruling on NLRB 2019 Election Regs. This week, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision relating to five specific provisions of the National Labor Relations Board’s (NLRB) 2019 changes to its regulations governing union elections. In a May 2020 decision, the U.S. District Court for the District of Columbia (in an opinion by then-judge Ketanji Brown Jackson) invalidated the five provisions as contrary to the Administrative Procedure Act because the NLRB did not seek public comment on the changes. (The Board argued that the changes were procedural, not substantive, in nature and that public comment was not necessary.) In this week’s decision, the D.C. Circuit agreed that the district court was correct in invalidating three provisions: “the rules regarding the eligible employee-voters list, the timeline for certification of election results, and election-observer eligibility.” However, the D.C. Circuit ruled that the two remaining provisions—regarding pre-election litigation of voter eligibility and the timing of the date of an election—are “‘internal house-keeping’ rules” that are exempt from notice and comment requirements.
House Republicans Seek Information From Federal Agencies. Representative Virginia Foxx (R-NC) is wasting no time exercising her authority as chair of the House Committee on Education and the Workforce. Late last week, Foxx resent to federal labor agencies a series of previous information requests that were answered while Republicans were in the House minority in 2021 and 2022. The requests include the following:
- Letters to Secretary of Labor Martin Walsh regarding, among other issues, his involvement in various high-profile labor disputes; documents and communications relating to the development and implementation of the Occupational Safety and Health Administration’s (OSHA) 2021 vaccine-or-test emergency temporary standard; and information surrounding the February 2022 report offered by the Task Force on Worker Organizing and Empowerment, such as attendance lists, meeting minutes, rejected policy proposals, involvement of outside organizations.
- A letter to National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo regarding her April 2022 memorandum relating to employer speech. Specifically, the letter asks for information about the possible involvement of outside organizations, other agencies, and the White House, in the drafting of the memo.
- A letter to NLRB Chair Lauren McFerran inquiring about potential conflicts of interest that Member Gwynne Wilcox and Member David Prouty may have regarding the Board’s joint employer policy.
The Buzz suspects that these letters are just the first examples of what will be at least two years of aggressive agency oversight by the committee.
DHS Announces Deferred Action for Workers Involved in Labor Investigations. Late last week, the U.S. Department of Homeland Security (DHS) announced a new streamlined and expedited process for undocumented workers seeking deferred action as a result of their cooperation in investigations into potential violations of labor laws. The new policy further implements provisions of DHS’s October 2021 memorandum, “Worksite Enforcement: The Strategy to Protect the American Labor Market, the Conditions of the American Worksite, and the Dignity of the Individual.” According to the announcement, DHS will “provid[e] new guidance to labor agencies regarding processes to seek deferred action for certain workers” and will create a “single intake point for deferred action requests from noncitizen workers.” As such, “[t]he centralized intake process will allow DHS to efficiently review these time-sensitive requests, provide additional security to eligible workers on a case-by-case basis, and more robustly support the mission of labor agencies.”
OFCCP Proposes Changes to Complaint Intake Process. This week, the Office of Federal Contract Compliance Programs (OFCCP) proposed changes to its complaint intake process. OFCCP is proposing to add a preliminary step to evaluate the timeliness of allegations, whether it has jurisdiction over a matter, and how the matter should proceed. If OFCCP determines that an investigation is warranted, it will direct the complainant to fill out a more detailed form. According to the proposal, this two-step procedure “will improve the efficiency of [OFCCP’s] complaint intake process.” Comments are due by March 20, 2023.
Days of Hayes. President Rutherford Birchard Hayes passed away this week (January 17) in 1893. Hayes, the nineteenth president, was a former congressman and three-time governor of Ohio before he ran for president in 1876. His election against Democrat Samuel Tilden, the governor of New York, was mired in controversy and allegations of voter intimidation, resulting in disputed Electoral College votes. This led to the creation of an electoral commission, which eventually swung the Electoral College votes to Hayes by a margin of 185–184. The process earned Hayes the nickname “Rutherfraud” from Democrats. While Hayes hasn’t been the subject of popular movies or Broadway shows, he was a very interesting president:
- Although twelve presidents who served before him were lawyers, Hayes was the first president to graduate from law school.
- At almost forty years old, with no previous military experience, Hayes volunteered to fight for the Union during the Civil War. He was wounded several times, and served in the same infantry unit as fellow future president, William McKinley.
- In 1879, Hayes signed the “Lockwood Bill,” which permitted women to practice law in federal court.
- Hayes was the first president to make a trip to the West Coast and the first president to have both a telephone and a typewriter in the White House.
Hayes is responsible for the first Easter Egg Roll on the White House lawn, a tradition that will celebrate its 145th anniversary in just a few weeks.
© 2023, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
New York Adult Survivors Act
New York’s Adult Survivors Act[1] (“ASA” or “the Act”) (S.66A/A.648A) became effective on November 24, 2022. The Act provides a one-year lookback window for people to seek civil remedies for sexual abuse they experienced after they turned 18, regardless of what year the abuse occurred. This law adds critical energy to the ongoing momentum of the #MeToo movement, allowing survivors to file suit against both their abusers and the institutions that enabled them.
The one-year lookback window lasts until November 23, 2023, so as of today, survivors have just over ten months to take advantage of the law. The following guide provides context and recommendations for understanding and using New York’s Adult Survivors Act.
What does the ASA do?
The ASA creates a one-year lookback window for sexual assault survivors to pursue civil claims in court for abuse that may have occurred years earlier, as long as they were over 18 at the time. Previously, a person who experienced sexual abuse only had a few years to file a lawsuit in New York before their claim would be time-barred. This meant that survivors had little time in which to come to terms with the abuse they experienced, find an attorney, prepare a case, and file an action. For those who missed that small window, the ASA reopens the courthouse doors. So until November 23, 2023, whether you experienced abuse in 2015, 2000, or 1985, you can file a claim in court and seek recovery for what happened to you.
What does the law cover?
Sexual offenses covered by the ASA span a wide range of behaviors, including but not limited to forcible touching, rape, sexual assault, sexual misconduct, and other forms of sexual abuse. Not every sexual offense is covered under the ASA,[2] and an attorney can help assess whether your claim falls within its provisions.
Who can you sue?
Another powerful provision of the law is who it allows to be named as a defendant. Survivors are not limited to suing their abusers—they can also hold accountable the institutions that insulated those abusers from justice. These institutions can include entities that had responsibility to keep the survivor safe and to control the actions of the abuser. Claims against the institutions can involve both intentional and negligent acts. If your abuser was part of a larger organization that contributed to or failed to prevent, notice, or stop the abuse, the ASA empowers you to go after that organization.
This provision comes directly from New York’s 2019 Child Victims Act (“CVA”).[3] Over 10,000 people have used the CVA to sue institutions that had a role to play in their abuse, including churches, hospitals, overnight and day camps, and schools. For example, a large number of CVA cases name the Roman Catholic Church and the Boy Scouts of America as institutional defendants. The ASA provides a similar recourse to justice: oftentimes, survivors are subject to abuse by people who hold power over them. For minors, these people could be coaches, religious leaders, teachers, mentors, or other caregivers. For people over 18, those in power may be employers, professors, or community leaders. The ASA enables adult survivors to sue the institutions that gave their abusers power and protected those abusers from answering for their actions.
The institutional defendant provision of the ASA opens significantly larger opportunities for recovery, as institutions oftentimes have deeper pockets than individual abusers. Examples of institutions that could face liability under the ASA include employers, colleges and universities, social organizations such as fraternities and sororities, medical practices, and facilities that house people with disabilities. Any entity that knew about or should have known about and stopped the abuse could be on the hook.
Who is it for?
The ASA opens the courts to people who were over the age of 18 when they experienced sexual abuse but are otherwise unable to file due to missing the statute of limitations. You can use the ASA even if you have previously tried to file but had your suit dismissed as untimely.[4]
It is important to note that if you have resolved or released your claims through a settlement process, you may not file under the ASA. For example, the nearly 150 women who received payment from a settlement with Columbia University Irving Medical Center and New York Presbyterian Hospital based on sexual abuse by Dr. Robert Hadden cannot use the ASA to file new suits as their claims have been fully resolved.
Why do we need this?
The Adult Survivors Act is a game-changer for people who were previously unable to file claims for sexual abuse due to a short statute of limitations. In 2019, New York extended the statute of limitations for certain civil lawsuits related to sex crimes from five to 20 years. But that law did not apply retroactively, so survivors who experienced abuse just a few years prior were still barred from seeking justice.
The ASA honors the lived reality of sexual abuse. Like the CVA before it, the ASA recognizes sexual abuse can take years to process, and those years often extend far beyond the short filing windows New York historically placed on these types of claims.
Survivors have many reasons for waiting to come forward with claims of sexual abuse. Some face retaliation by their abusers, some fear the risk of community backlash, and others lack the resources to seek legal representation. Finally, “[t]rauma takes time,” as New York State Senator and ASA champion Brad Hoylman said when promoting the then-bill. Many sexual assault and sexual abuse survivors need years to process what they endured. This can be particularly true when an abuser uses power, manipulation, or threats to coerce submission to sexual contact, a common tactic of notorious abusers Harvey Weinstein, Kevin Spacey, and Dr. Robert Hadden. Understanding the event as sexual abuse, reconciling yourself with your experience, and deciding how to move forward can take decades. The ASA is an effort to respect this process and empower survivors to hold their abusers accountable.
Why would I file a lawsuit about what happened to me?
For many people, surviving sexual abuse is not something that can be “fixed” by any kind of legal action. But the remedies available through civil suits can serve as a proxy for some measure of justice, and that proxy can enable survivors to move forward.
Successful ASA plaintiffs can recover economic, compensatory, and punitive damages from both the individual abuser and the institution. Many survivors suffer financial loss in addition to the mental, emotional, and physical harm of the abuse itself. If your boss sexually harasses you and then terminates you when you protest, you may find yourself without an income. If a classmate assaults you, you may forfeit tuition money after deciding to leave campus for your safety. Civil courts can make you financially whole and further compensate you for the pain of the experience and the efforts you must make to heal. Courts can also provide other remedies, requiring the people who perpetrated or allowed abuse to do or stop certain behaviors, thereby protecting other potential future targets of abuse and assault.
How do I use the ASA?
The first thing you should do is consult an attorney. These cases can be complicated, and plaintiffs still maintain the burden of proof, so you want the expertise of an experienced lawyer. There are several firms that regularly bring these kinds of actions, and many will provide you with a free consultation. If you decide to move forward with your case after a consultation, your attorney will work with you to determine the best strategy. This strategy may include going to court, or it may involve seeking a resolution that works for you outside of court.
As you go through the process of finding an attorney, please know that you deserve counsel that is compassionate, knowledgeable, and focused on your needs and interests as a client. This is about what happened to you, and your attorney is there to guide you. You should feel heard, understood, and respected.
When do I need to file?
You must file your claim by November 23, 2023.
While the ASA is a powerful effort by New York to support the rights of sexual abuse survivors, it is time-limited. November 23, 2023 is the cutoff date for filing a claim, but if you are interested in seeking recovery under the Act, you should take action now. It may take time to find the right attorney for you, and your lawyer will need additional time to put together your case. If you and your lawyer decide to pursue a resolution without going to court, that process could take even longer.
Ten months sounds like a long time, but in the legal world, it can move very quickly. Start considering whether you want to take advantage of the ASA and reach out to an attorney as soon as possible.
What happens after I file?
This will come down to conversations you have with your attorney. Filing is the first major step in the process. Following that process through might include discovery, more court filings, and hearings before a judge or a jury.
What else should I consider?
Take care of yourself as you think about your next steps. Reach out to trusted loved ones and mental health professionals. It is critical that you ground yourself in what is best for you.
FOOTNOTES
[1] New York Governor Kathy Hochul signed the ASA into law on May 24, 2022. The ASA passed the New York Assembly by a majority vote of 140 in favor to 3 against after receiving unanimous support in the state Senate one month prior.
[2] Article 130 of the New York Penal Law lists offenses covered under the ASA.
[3] The CVA came into effect in 2019, providing a two-year lookback window for people who experienced abuse as minors. The CVA amends N.Y. C.P.L.R. § 208 (2019) and allows victims to initiate civil action against their abusers and enabling institutions. As to victims where civil actions were barred before the CVA took effect, N.Y. C.P.L.R. 214-g (2020) creates a lookback period to file a claim. Since 2019, over 10,000 people have filed lawsuits in New York against abusers and the institutions that protected them.
[4] The ASA can revive your claim only if it was dismissed for failure to file by the statutory deadline. If your claim was dismissed for other reasons, this law cannot fix that.
For more labor and employment news, click here to visit the National Law Review.
Katz Banks Kumin LLP Copyright ©