Seyfarth Synopsis: Back in 2015, the U.S. Securities and Exchange Commission (“SEC”) issued proposed rules on the pay-for-performance disclosure required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”). While that proposal generated much commentary at the time, the rules were never finalized. Seemingly to refresh the debate and move things forward, the SEC recently reopened the 30-day comment period for those 2015 proposed rules.

Dodd-Frank was enacted to address financial stability after the 2008 financial crisis by requiring accountability and transparency of SEC registrants.¹ Certain Dodd-Frank provisions required rulemaking by the SEC in order to be implemented. In particular, Section 953(a) of Dodd-Frank (which added Section 14(i) to the Securities Exchange Act of 1934) requires the SEC to adopt rules for requiring registrants’ proxy statements to describe the relationship between the executive compensation actually paid and the financial performance of the company.

2015 Proposal

The reopened comment period relates specifically to the portion of the 2015 proposal related to new disclosure rule Item 402(v) of Regulation S-K. This “2015 Proposal” would require a registrant to describe how the executive compensation actually paid by the registrant relates to the registrant’s financial performance. The 2015 Proposal would require a proxy table providing:

  • the “total compensation” actually paid to the company’s principal executive officer (“PEO”) and, on average, to the company the company’s other named executive officers (“NEO”), as reflected in the Summary Compensation Table;
  • the “compensation actually paid” to the PEO and other NEOs, which is based on the amounts reported as “total compensation,” adjusted to (i) exclude changes in actuarial present value of pension benefits and (ii) take into account the fair value of equity awards at vesting, rather than their grant date fair value;
  • the company’s total shareholder return (“TSR”) over the three most recently completed fiscal years as a measure of its financial performance; and
  • the TSR of the company’s peer group over the three most recently completed fiscal years.

Smaller reporting companies are required to disclose the relationship between executive compensation actually paid and TSR over the registrant’s three most recently completed fiscal years but are not required to disclose the peer group TSR.

2022 Release

The SEC’s stated objective in reopening the comment period to the 2015 Proposal is to determine whether the disclosure of additional performance metrics would provide investors with useful information to evaluate the relationship of executive compensation to a company’s financial performance while preserving comparability. The press release accompanying the Reopening of Comment Period for Pay Versus Performance (the “2022 Release”) includes a statement from SEC Chairman Gensler that “commenters expressed concerns that total shareholder return would provide an incomplete picture of performance.” Accordingly, the SEC is also considering requiring registrants to disclose the following measures of performance to clarify for investors the relationship between executive compensation and financial performance:

  • Disclosures in tabular form of the registrant’s pre-tax net income, net income and a measure chosen by the company to measure its financial performance;
  • In a format of the registrant’s choice (e.g., a graph or narrative text), a clear description of the relationship among the measures provided in tabular form (e.g., the three new measures proposed); and/or
  • A list of the registrant’s five most important measures used to link compensation actually paid during the fiscal year to company performance, in order of importance.

In connection with reopening the comment period, the SEC Commissioners stated that “financial incentives are a key motivator to drive performance of executives in their role as fiduciaries to companies and shareholders,” and “understanding what those incentives are and whether they are working and how they link to the company’s performance is important to investors in evaluating the company’s compensation practices.” In addition, one Commissioner specifically noted that companies are increasingly linking executive pay to environmental, social and governance (“ESG”) measures to advance their ESG goals and improve performance, including through ESG-related performance measures. (See Seyfarth’s thought piece on this topic here.) More broadly, citing to the growing gap between pay for executives and for everyday workers, one Commissioner stressed that “investors need to know if the growth in executive compensation has also resulted in value creation.” The Commissioners requested feedback from commenters on how flexibility in the rule could provide companies and investors with better information to evaluate these types of customized incentive pay arrangements with the performance of the company.

While the 2022 Release would add content requirements to proposed disclosures that certain commenters have already characterized as onerous, it would also provide companies with greater ability to document how value is created for its shareholders with effective incentive policies. Specifically, the 2022 Release would allow companies to use a customized alternative performance metric to demonstrate how their uniquely designed incentive programs contribute to the company’s financial performance. Customized performance measures could be designed with industry specific variations in mind including addressing sustainability or other ESG features. For example, progress towards certain industry-specific ESG standards (e.g., as identified by the Sustainable Accounting Standards Board) could be incorporated into a company’s performance metric.

Finally, note that the SEC does not appear to be unified in the quest to issue a final rule under Dodd-Frank Section 953(a). One SEC Commissioner stated his disagreement with the need for additional disclosure requirements, opining that such disclosure would be burdensome to public companies, questioning its utility to investors, and suggesting that the 2022 Release exceeded the statutory mandate of Section 953(a).

The new 30-day comment period ended on March 4, 2022. We are hopeful that this means that a final rule will be issued some time in 2022.

If you have any questions on the SEC’s proposed pay-for-performance rules, please contact your Seyfarth executive compensation specialist.

  1. Generally, an “SEC registrant” includes, but is not limited to, an “issuer” of a security required to make a filing under the Securities Act of 1933, the Securities Exchange Act of 1934, and a registrant that files periodic reports under the Securities Exchange Act of 1934 or the Investment Company Act of 1940. This includes companies trading on a U.S. exchange.

Seyfarth Synopsis: In keeping with their recent more vocal stance on fiduciary duties, the Department of Labor has weighed in on the wisdom of 401(k) plans including an ESG fund or a crypto investment option in its line-up. And, it’s complicated.

As we’ve covered in this space, over the last few years the DOL has opined on the type of investment that would be appropriate for a fiduciary to include in a 401(k) plan’s line-up. For example, the DOL’s thinking on whether an ESG-focused investment is appropriate has evolved over this time period, from a hostile outlook to one that acknowledges that ESG factors may be pecuniary in nature, requiring an evaluation of those factors. [See our prior posts here and here for more background on that complicated history.] In fact, following their newly announced attitude toward ESG funds, in February the DOL’s EBSA issued a Request for Information to solicit input on how retirement savings could be impacted by “climate-related financial risk” and what actions the EBSA should be doing in that regard. The RFI focused on whether the EBSA should be collecting data on plans’ climate-related financial risk and whether the Form 5500 should be used for this task. This latest issuance from the DOL seems to mark a full about face on their ESG views, from one which almost forbids its consideration to one which mandates it.

One might have thought that following the DOL’s more open attitude toward ESG-focused investment options in 401(k) plans, they would be content to just let the prudent fiduciary standards generally apply to selection of investment options. That turns out not to be the case. The DOL has just issued a Compliance Assistance Release on 401(k) investments in crypto-currencies, including a wide range of digital assets. Contrary to their ESG views, in this case, the DOL expressly warns fiduciaries about including such an offering or risk personal liability. They cite such concerns as the speculative and volatile nature of, and the valuation concerns with, cryptocurrency, the difficulty in recordkeeping and custodying such assets, as well as the evolving regulatory environment. The agency also notes that not all 401(k) participants are sophisticated investors and evaluating whether they should invest their retirement savings in crypto would be extraordinarily difficult for them. Participants may surmise that because such a fund is offered in their plan, means it is an appropriate and prudent option for their own retirement savings.

The DOL leaves us with an ominous warning that it will conduct a program to investigate plans that offer investments in cryptocurrencies and related products to take “appropriate action to protect the interests of plan participants and beneficiaries.”

On Tuesday, March 22, 2022, 9:00 am to 5:00 pm ET, Seyfarth partner Linda J. Haynes will participate in the Practicing Law Institute (PLI) one-day program, “ERISA Plan Investments in the Financial Markets 2022: The Fundamentals.” Linda is a Co-Chair of the program and will present as part of the “ERISA Enacted in 1974 – The Initial Transition to the New Rules and Application to the Financial Community” panel.

Open to all practitioners in the field (or those who are considering entering the field), this program will provide an in-depth look at the nuts and bolts of various financial instruments and investment vehicles, and the ERISA issues that arise in connection with them. By focusing on different plan investments, each panel will explore the interaction between ERISA and how financial products and markets actually work. This event will be available as a live webcast.

Find more information and register for this program at

Seyfarth Synopsis: Last summer and fall, the Departments of Treasury, Labor, and Health and Human Services issued Interim Final Rules (IFRs) [here] and [here], implementing the sweeping changes that applied to out-of-network health care providers and health plans under the No Surprises Act. While much of the IFR content was welcome relief for health plans and participants, not all providers were content with the new rules, leading to the filing of several lawsuits. One such lawsuit was recently decided by the federal court in the Eastern District of Texas, which has struck down portions of the IFRs related to determining disputed payment levels.

If a health plan and an out-of-network provider cannot agree on a payment amount, the No Surprises Act requires that the appropriate amount be determined by an independent arbitrator, referred to as an “IDR entity.” When choosing between the provider’s requested payment rate and the plan’s offer, the IDR entity is directed to consider the plan’s “qualifying payment amount” or “QPA.” As we described in our Legal Update, the QPA is the lesser of the provider’s billed charge or the plan’s median contracted rate for the same or similar service in the geographic region where the service is performed. The IDR entity is to consider the QPA, the training and experience of the provider, the market share of the plan and provider, any contract history, and the services provided. The Court said that the IFRs require the IDR entity to presume the plan’s QPA is correct, and consider other factors listed in the Act only if credible and demonstrate the appropriate rate is materially different from the QPA, which imposes a heightened burden to overcome the QPA presumption.

The Court found that the agencies did not follow proper notice and comment, and failed to follow the text of the No Surprises Act itself when it set forth its guidance as to how IDR entities were to give deference to the QPA when arriving at a provider’s payment amount. As a result, the Court vacated the portion of the IFRs at issue. The Court’s decision indicated that the No Surprises Act contained sufficient detail on the IDR process to allow arbitrations to proceed in the absence of the regulatory presumption in favor of the QPA as the appropriate payment level.

What’s Next?

While the administration may appeal the ruling, the decision has nationwide impact immediately. Similar cases filed in other Federal districts may be put on hold pending any appeal, or revision of the IFRs in final rules.

Implications for Plan Sponsors

Most plan sponsors have delegated the IDR process to their third-party administrators (or insurance carriers, in the case of fully-insured plans), so it is likely that no immediate action is required for most plans. Plan sponsors should be aware, however, that in the absence of the regulatory presumption in favor of the QPA, there is a greater risk that an arbitrator would side with the provider rather than the plan, resulting in potentially greater payment obligations from the plan sponsor.

Seyfarth Synopsis: After announcing a moratorium on the State’s collection of the Washington Cares Fund long term care (“LTC”) payroll tax from employers on December 17, 2021, Governor Inslee signed into law House Bills 1732 and 1733 on Thursday. The bills formally delay the program until July 1, 2023, and implement several changes that are intended to  address criticisms levelled at the first-of-its-kind program.


As we discussed in our prior blog posts, here, here and here, passed by lawmakers and Governor Inslee in 2019, the Washington Cares Fund (“Act”) was set to begin collecting payroll taxes from Washington employees in January 2022 to help pay for the LTC expenses of the State’s residents. After a host of questions and criticism about the program, including a class action lawsuit filed against it, Inslee announced last month that the State would pause on collecting the tax from employers until lawmakers reassessed revisions to the program. However, because the Governor later backtracked on the moratorium, some employers have begun withholding a 0.58 percent payroll tax from Washington workers’ paychecks at the start of the new year.

For more information on the class action lawsuit, see our blog and Legal Update.

Latest Developments

On January 27, 2022, Governor Inslee signed House Bills 1732 and 1733 that temporarily halt the State’s payroll tax on Washington workers and institute changes  intended to address criticisms of the Act.

The changes implemented under House Bill 1732 include:

  • The start of the payroll tax was delayed to July 1, 2023;
  • Benefits will not be available until July 1, 2026;
  • Any premiums collected from an employee prior to July 1, 2023, shall be refunded to the employee within 120 days of the collection of the premium; and
  • Workers born before January 1, 1968, who have not met the 10 year vesting requirements under the program’s current structure will be eligible to receive partial benefits based on the number of years paid into the program, as long as they have paid the payroll tax for at least one year.

The revisions under House Bill 1733 allow an employee to apply for an exemption from the program if they are:

  • A veteran of the United States military who has been rated by the United States Department of Veterans Affairs as having a service-connected disability of at least 70 percent;
  • A spouse or registered domestic partner of an active duty service member of the United States Armed Forces;
  • Working under a non-immigrant visa for temporary workers and employed by an employer in Washington; or
  • Employed by a Washington employer, but has a permanent address and primary residence out of state.

An employee who  receives an exemption is permanently ineligible from receiving benefits under the program unless their exemption is discontinued because they no longer meet the exemption criteria.

Takeaways for Employers

In accordance with the new measures, employers who have withheld the payroll tax from employees and who have not sent the amounts to the State will need to issue refunds within 120 days of the collection date. To the extent amounts have been sent to the State, the State will also make refunds within this 120 day period. Employers who delayed withholding the payroll tax will not need to worry about any refunds, and not need to start implementing the tax until 2023.

While delaying the start of the program will allow lawmakers to fully address many of the systemic issues inherent in the Act, uncertainties remain for many employers and employees. For example, among additional changes that have been proposed is another bill that would allow people to exempt themselves from paying into the tax.

Seyfarth will continue to monitor and report on developments with respect to the Act. For additional guidance, please contact the authors of this blog or your attorney for more information.

Seyfarth Synopsis: Almost a decade after the 408(b)(2) fee disclosure requirements took effect for retirement plan service providers, Congress finally passed legislation addressing compensation disclosure rules for service providers to group health plans. At the end of 2020, Congress passed the Consolidated Appropriations Act, 2021, which requires individuals to disclose direct and indirect compensation of $1,000 or more that they reasonably expect to receive in connection with the provision of brokerage or consulting services to group health plans. The written disclosures are required to be made to the plan/fiduciaries in advance of contracting to assist plan fiduciaries in assessing the reasonableness of the service provider’s fees.

These disclosure requirements generally became effective on December 27, 2021 (subject to the exception noted below for grandfathered arrangements) and shortly thereafter, on December 30, 2021, the Department of Labor (“DOL”) issued Field Assistance Bulletin 2021-03, extending a “temporary enforcement standard” with respect to these disclosure requirements. DOL will not be issuing regulatory guidance on the disclosures at this time, but the bulletin answers some questions relating to how the DOL intends to apply and interpret the fee disclosures requirements. In the meantime, service providers will be deemed to be in compliance with the disclosure rules so long as they follow a reasonable, good faith interpretation of the requirements. Below are some key takeaways from the bulletin:

  • Look to Retirement Plan Rules for Guidance. Plans may rely on the parallel guidance for retirement plans under 408(b)(2) in order to better understand how the DOL intends to enforce the requirements.
  • Obligations Extend to Certain Excepted Benefits. The DOL is taking a more expansive view of the term “group health plan,” and intends to apply the disclosure requirements to certain excepted benefits, including limited-scope dental and vision plans, and presumably certain other ancillary “health” benefits such as health FSAs.
  • Vendor Label Does Not Control. The rules apply to any entity providing “brokerage” or “consulting” services to group health plans, regardless of whether they have labeled themselves as such.
  • Grandfathered Contracts Exempt until Renewal. The requirements only apply to contracts that are “entered into, extended, or renewed on or after” December 27, 2021, measured from the execution date.
  • Both Fully-Insured and Self-Insured Plans Are Covered. The disclosure requirements apply in the context of both fully-insured and self-insured group health plans.
  • Compensation Estimates. If the form of compensation varies based on certain factors (enrollment, usage, etc.), the DOL provides broad discretion to the vendor on how to disclose the amount of anticipated compensation as long as the methodology for making the determination is disclosed, even if such amounts are just an estimate or a range.

If you offer a group health plan for which you purchase services or you provide services to a group health plan, and you have questions about the implications of these compensation disclosure requirements, please contact the author of this blog post or the benefits lawyer you work with for additional information.

Seyfarth Synopsis: Although Washington State Governor, Jay Inslee, has announced a moratorium on the State’s collection of the Washington Cares Fund long term care (“LTC”) payroll tax from employers without penalty, last Thursday he backtracked somewhat, saying that he does not have the authority to allow employers not to collect the tax from employees, leaving employers wondering whether to collect the tax or not.

The Washington Cares Fund was originally set to begin collecting taxes in January 2022 to help pay for the LTC expenses of the State’s residents. For more information on Inslee’s announced moratorium on collecting the payroll tax from employers, see our blog post here.

After making this announcement, however, last Thursday Inslee cautioned employers that only the Legislature can delay the implementation of the payroll tax. He also added that although he believes that the Legislature will delay the tax when they return from recess next month, if for some reason this does not happen, employers will be responsible for making up the difference. Apparently, Inslee is now urging employers to collect the tax and hold it until additional guidance is issued by the Legislature.

Interestingly, the Legislators who announced the moratorium with him have urged employers not to collect the tax.

While it is anticipated that the Legislature will postpone the tax next month, unless and until that occurs, Washington State has muddled an already muddled law. Stay tuned for more developments….

We will continue to monitor and alert you of developments regarding the LTC Act. In the interim, please contact the author of this blog post or the benefits lawyer you work with for additional information.

Seyfarth Synopsis: Reminiscent of the DOL’s about-face on ESG investing by ERISA fiduciaries [discussed here], on December 21st the DOL issued a “supplemental statement” on its view of the use of private equity investments in participant-directed retirement plans, such as 401(k) plans. 

As a refresh, in June 2020 the DOL issued an Information Letter to two private equity firms that sanctioned the use of private equity investments as a component of certain designated investment alternatives, such as professionally managed target date funds and balanced funds, offered to participants in individual account plans. The firms represented that including private equity as a component of a larger managed fund allows participants access to equities outside of publicly traded securities with a potential of larger returns. The requestors also indicated that plan fiduciaries were concerned about liability for including private equity even where they believed the investment was prudent. In response to the request and representations, and recognizing the difficulties inherent in private equity with liquidity and valuation, the DOL nonetheless concluded that “a plan fiduciary would not, in the view of the Department, violate the fiduciary’s duties under section 403 and 404 of ERISA solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative for an ERISA covered individual account plan in the manner described in this letter.”

Fast forward a year and a half, and under a new Administration, the DOL has seen the need to issue a supplemental statement out of a concern that the Information Letter could be marketed as endorsing the use of private equity investments. The DOL stated that it has received considerable feedback from a number of stakeholders regarding the Information Letter.  It also noted that after its issuance of the Information Letter, the SEC had issued its own “Risk Alert” that highlighted compliance issues discovered in examinations of registered investment advisors that manage private equity funds. In response, the DOL felt the need to issue the supplemental statement so that the Information Letter is not misread as suggesting that private equity “as a component of a designated investment alternative — is generally appropriate for a typical 401(k) plan.”

The DOL is now emphasizing its concerns with adequate disclosure and valuation of private equity. It also stresses the importance of obtaining assistance from a qualified investment adviser where the responsible fiduciary does not have the skills, knowledge and experience to evaluate the prudence of the private equity component and the continual monitoring of such an investment. The DOL further notes that the Information Letter should be read in the context of use of private equity investments in a defined contribution plan where the sponsor also offers a defined benefit plan that uses private equity. Finally, the DOL states its own concern that fiduciaries of small plans will not typically have the expertise in private equity to be able to make the evaluation and monitoring determinations needed to make a prudent decision.

Bottom line: Offering a private equity component in a designated investment alternative in a participant-directed retirement plan is not endorsed by the DOL. Such an offering should be limited to one within a large plan, that perhaps parallels investments in a companion defined benefit plan, and the risks of which have been vetted (and are continually monitored) by sophisticated plan fiduciaries with investment experience in private equity.

Seyfarth Synopsis: The IRS has announced the adjustment to the applicable dollar amount for the Patient-Centered Outcomes Research Institute (“PCORI”) Fee for 2022.

The Affordable Care Act (ACA) established the PCORI to support research on clinical effectiveness. The PCORI has been funded in part by fees paid by certain health insurers and sponsors of self-insured health plans. The PCORI fee is determined by multiplying the average number of covered lives for the plan year times the applicable dollar amount, and is paid annually to the IRS using Form 720. The applicable dollar amount as set by the IRS for 2021 was $2.66 per covered life.

On December 21, 2021, the IRS issued Notice 2022-4 announcing that the applicable dollar amount or “PCORI fee” for plan years ending on or after October 1, 2021 and before October 1, 2022 is $2.79 per enrollee.

For more information on paying the PCORI fee, see our prior post here and on the IRS website.

The IRS previously announced the 2022 cost-of-living adjustments for employer-sponsored health and welfare plans and retirement plans. Those adjustments are summarized in our previous articles, Employee Health & Welfare Benefit Plan Limits and Looking to Save More? You’re in Luck!

Seyfarth Synopsis: The IRS has released final instructions for completing Forms 1094-C and 1095-C for 2021. Notably the instructions provide that the due date for furnishing Form 1095-C to individuals is extended to March 2, 2022. As expected, the instructions no longer offer penalty relief for good faith incorrect or incomplete filings and Form 1095-C has been modified to add new codes 1T and 1U for individual coverage HRAs offered to the employee and spouse but not dependents. 

Employers with 50 or more full-time employees (including full-time equivalent employees) in the previous year (“applicable large employers” or “ALEs”) use Forms 1094-C and 1095-C to report the information about offers of health coverage and enrollment in health coverage for their employees. Form 1094-C is used to report information for each ALE Member and to transmit Forms 1095-C to the IRS. Form 1095-C is used to report information about each employee to the IRS and to the employee.

In September of 2021, the IRS released draft Affordable Care Act (ACA) reporting forms and instructions which, among other things, added two new codes (1T and 1U) to Line 14 of Form 1095-C, removed references to relief from the requirement to automatically furnish Forms 1095-B and 1095-C, and removed the references to penalty relief for reporting incomplete or incorrect information if a good-faith effort to comply was made. On November 22, 2021, the Department of Treasury and the IRS issued proposed regulations which were intended to provide Form 1095 reporting relief. On December 9, 2021, the IRS issued final instructions for Forms 1094-C and 1095-C (the “Final Instructions”) providing the expected relief. Final instructions for Forms 1094-B and 1095-B were also issued, but not discussed here.

The Final Instructions implement aspects of both the draft instructions and proposed regulations. Some notable highlights are:

  • Consistent with the proposed regulations, the Final Instructions make automatic, the 30-day extension – from January 31 to March 2, 2022 – for furnishing Form 1095-C to individuals.
  • The Form 1095-C instructions include the two new codes (1T and 1U) that were included in the draft instructions. These codes are used when the applicable individual and their spouse receive an HRA offer of coverage from their employer, but exclude dependents as recipients of the HRA coverage.
  • Forms 1095-C must be mailed to each full-time employee on or before March 2, 2022, unless the recipient consents to receive the statement electronically. However, an ALE Member may furnish the forms to employees who have been part-time at all times during 2021 and non-employees who are enrolled in the self-insured health coverage by posting the forms on the ALE Member’s website, provided certain requirements are met, including the following:
    1. The employer must provide clear and conspicuous notice, in a location on its website that is reasonably accessible to all individuals, stating that individuals may receive a copy of their statement upon request. The notice must include an email address, a physical address to which a request for a statement may be sent, and a telephone number that individuals may use to contact the employer with any questions.
    2. The employer must retain the notice in the same location on its website through October 17, 2022.
    3. The employer must furnish the statement to a requesting individual within 30 days of the date the request is received.
  • The Final Instructions removed the good faith penalty relief references for reporting incomplete or incorrect information. The per-failure penalty remains unchanged at $280 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,426,000.

To stay up to date with further updates, be on the lookout for additional Beneficially Yours blog posts and Seyfarth Legal Updates.