Private cloud services enable broad, on-demand, and easy access to professional software and tools. It is also often required for specific reasons, such as in preparation for a sale or acquisition, or to safeguard assets. Mr. Norby also indicated that there were some irregularities in regards to expenses that were charged to the administrative costs of the plan. She suggested that a good solution would be a rule that would allow employees to receive a distribution from their 401(k) plan if they transfer from the controlled group, which maintains the plan to another controlled group that does not participate in the plans. These important protections do contribute to the complexity of managing retirement plans during restructuring, but the Code has relieved this complexity somewhat by providing a transition period. Maintain DE&I Commitments. However, if the seller does not maintain a group health plan after the sale, there is no requirement of the seller to establish a group health plan solely to accommodate the terminated employee. Expand the current relief on the same desk rule to include other entities such as partnerships, limited liability companies, etc. The suit contends that SBCs motive to get their new employees (those acquired in the PTG) out of AirTouch, a key SBC rival, drove the decision to provide participants with notice of the liquidation that all but said participants had no means of avoiding the liquidation of their shares. We cannot see a clear resolution to this matter, as the details involved in such notice cannot easily be reduced to a safe harbor statement. This may increase the life of the building by another 4-5 years but such an option will not be economically feasible in order to fix the issues of major seepage, weak walls, and foundations, leaking water pipes, etc. Cost-saving strategies - HR Operations Advantages and disadvantages of restructuring - Restructuring.net Organizational Restructuring Process & Templates to Help Plan Mr. Norby and Mr. Phelps both think that the preemptive provisions of ERISA do not protect the interests of plan participants. The definition of workforce downsizing may be narrowed to reducing the number of workers, or more likely to refer to general efforts to restructuring human resources in public organizations, Early Retirement Incentive Programs (ERIP) represents a viable alternative for organizations seeking to reduce staff. Some of the inconsistency may, however, be attributed to a simple failure to communicate. It is his opinion that these statutes tend to promote continuity in the event of mergers and acquisitions. In conclusion, the witness urged the Council to recommend changes to current laws that will protect the benefits of plan participants from corporate actions that reduce their anticipated pensions. Benefits of Building Redevelopment v/s Structural Repair - MySocietyClub Followings are the major benefits of redevelopment: Better planned and designed flats with earthquake structure having attached bathrooms in bedrooms. The pension plan is a combined plan, which covers both vocational workers and management. Within this context, the benefit plans of both the acquiring and the acquired entity or the divesting and the divested entity become subject to possible change. Recognizing and Rewarding Positive Behavior Implementing and sustaining the change, enabling action, and celebrating short-term wins. We see this most often as an outcome of implementing new technology in the workplace. The working group does not dispute this position. Thank you! According to Thomson Financial Securities Data, mergers worth $1.6 trillion were consummated in 1999. Nondiscrimination rules can prevent the buyer from providing the sellers employees with the same benefits previously provided by the seller or from tailoring benefits to address employee needs and competitive conditions in a new line of business. Notices and disclosures to participants. Business Restructuring: The Pros and Cons - LinkedIn Mergers and acquisitions can lead to restructuring throughout the entire company. But, once granted, how such right operates does trigger fiduciary conduct concerns. 5 Benefits to Organizational Restructuring | Red Clover HR Certain tax losses and reliefs can be utilised across a group as opposed to just in the company in which they arose. Ms. Hennessy indicated that a rule that would allow employees to participate in the plan of any company that owned 25 percent or more of the venture would be helpful in providing benefit continuity, particularly for participants transferred to the joint venture. If youre considering business restructuring, we have outlined some of the key benefits below. Organizational Restructuring: Strategies and Benefits - Wisestep Employer privilege to design plan terms as it sees fit to meet its operational objectives. However, under the terms of the PTG 401(k) plan, many thousands of participants had the right to withdraw or roll out their AirTouch shares at any time. IT Restructuring: Challenges and Opportunities | EDUCAUSE You can also conduct comparative research to determine whether you need to adjust any organizational revenue sources, including chargeback and technology fees. Often employees would like to retain their current investment in the sellers stock. See Relevant ERISA Provisions for more information on the specific statutory provisions involved in each policy area. Those members are all experts within their respective areas of ERISA and their value in arriving at this report must be recognized. Your Portfolio: Is Your Boss Raiding the 401(k) Till? A transaction may close when financing is obtained or the Hart-Scott-Rodino antitrust period ends or when regulatory approvals are obtained or simply when the business people iron out all the details. Lastly, and sometimes an unexpected byproduct of better communication is the discovery of new opportunities. Subject to certain conditions being met, there are also exemptions from UK corporation tax in relation to profits from a disposal of shares in a subsidiary and reliefs from stamp taxes on the transfer of shares and properties between group members.. If the successor company does not wish to include this provision for all employees from that point forward, it must account for the two groups separately and test each for nondiscrimination. And, whether explicit or implicit, likely or unlikely, staff members face fear over for their roles in the new organizational structure if in fact they'll have a role at all. Typically, businesses go through reorganization when they have financial troubles, new owners or staff, or a structural change. .manual-search ul.usa-list li {max-width:100%;} Most benefit plan changes are made by the employer in the exercise of its "plan sponsor" authority to design and amend the plans. This is only natural, since these involve deep-rooted changes that will affect every level of the organization. The Retiree Guardian, newsletter of the U S West Retiree Association, as well as Highlights of the Pay and Benefits Changes for Classic U S West Employees with 20 or more years of service, series of letters from association president James Norby to various personages (Witnesses also provided copy September 2000 issue of the AARP Bulletin, featuring an article "Pension revolt catches fire: Longtime employees say they want their ?just due by Trish Nicholson. Yet it is important to the participants that their salary reductions continue uninterrupted to obtain the tax advantage of the 401(k) plan. Welsch v. Empire Plastics, Inc., May 19, 2000. Finally, although during the hearings a number of technical issues were raised, insufficient data was gathered to make specific recommendations in these highly technical matters. Before sharing sensitive information, make sure youre on a federal government site. Thus, a change in sponsor that involves a simultaneous change in coverage would trigger the right to change certain elections. The treatment of such amounts in the context of mergers or divestitures is not discussed in the regulations and it is unclear whether these balances can transfer when the plan sponsor transfers the employees in something other than an equity sale. ERISA does, however, have specific claims procedures for employees who believe they have been denied benefits to which they are entitled. A successful reorganization requires preparation and planning that addresses programmatic needs, support services required to advance organizational goals, and effective workforce planning and communication. By inviting participation, employees feel heard and they feel like their opinion matters. Whilst each brings a set of challenges, they also bring clear benefits. Guidance from the Department providing guidance on safe harbor investment options that would not cause the plan to lose its ERISA Section 404(c) protections or that would provide some other sort of comfort for fiduciaries would go a long way toward insuring uninterrupted 401(k) savings. Financial solvency of benefit plans has been substantially improved. Company restructuring to become more tax-efficient. The change in investment funds offered to participants as a result of a merger including the costs associated with the wholesale liquidation of one portfolio and investment into a new portfolio, if any. The Internal Revenue Code minimum coverage rules include a specific transition provision for retirement plans undergoing a change in sponsors. Reporting to the provost indicates that the institution values and leverages technology to support teaching and learning. It could also lead to the loss of any tax reliefs. The key to these arrangements is that when the rules are satisfied, the general tax principal of constructive receipt does not apply and the employee does not pay tax on the benefit, even though he or she had the unrestricted right to the cash. The witnesses testified to cases of the reduction or elimination of post- retirement health benefits or the increase in the retirees required contribution to such plans. What are the benefits of restructuring? Indeed, since the funds inception, they have consistently had, in the aggregate, half of all their assets come from the plans. Tax benefit is conditioned upon the plans providing substantially similar benefits to highly compensated employees and rank-and-file employees. The buyer could be held responsible for the liability to the PBGC. This will force more buyers to reject any seller DB plan. It does not appear to apply to spin-offs or the sale of a business by a partnership. In some situations, sponsors can continue separate benefit structures. Lock PBGC Departments | Pension Benefit Guaranty Corporation One useful clarification of the terms comes from Harvard Business Review, which describes two types of reorganization: The difference we should be paying attention to, therefore, is perhaps not the difference between reorganization and restructuring. The basic purpose of the statute is to deal with "job lock", i.e. Understanding the Restructuring. Steps in Managing a Reorganization | People & Culture Again where the transferred participants have the option to transfer their investment from the sellers stock to other investments in the buyers plan, one witness proposed that the buyers plan should be permitted to treat the seller stock fund as employer securities. Graduate Trainee Chartered Accountant (ACA), Manchester accountants -our city centre office, London accountants our central London office, Let Property Campaign HMRC is reviewing landlord tax through rent deposit scheme data. .h1 {font-family:'Merriweather';font-weight:700;} Although this guidance deals only with the plans reporting obligation on the Form M-1, it does indicate that the DOL is aware of the issues posed in these circumstances. Mr. Shultz's remarks addressed issues that arise under the mirror provisions of the Internal Revenue Code and Title I of ERISA by corporate transactions where retirement plans are involved. For example, an employee may defer $50 per month, but incur a cost early in the year and request a reimbursement of up to their total annual payment, even though their cumulative deposits to date do not cover the amount of the benefit. Designed for a single employers workforce, the rules do not work well for large employers with diverse businesses that are often engaging in mergers, acquisitions and divestitures. Human resources executives of the acquiring companies were involved 81 percent of the time in the pre-merger negotiations. point of view, restructuring your business could significantly reduce your tax liability going forward. How does your IT staffing compare with that of your peers? What are the strengths, weaknesses, opportunities, and threats related to the delivery of centralized and decentralized IT services? Section 414(a)(2) provides that where an employer maintains a plan of a predecessor employer, service for the predecessor is treated as service for the successor employer "to the extent provided in regulations". Strategies for restructuring include changing the IT organization's placement, consolidating IT, distributing IT, downsizing staff, redesigning the IT organization, creating new services, and outsourcing services. This is because the participants have already made the investment choice in the sellers plan and the transfer to the buyers plan shouldnt cause that investment option to lose its 404(c) protection. These would not typically apply if the companies were not in a group structure. The case was filed in May 1999 in the Eastern District of Virginia in Richmond. Are IT functions focused on revenue creation or service provision? Too often they must file suit to obtain relief. First, the participants in a group health plan who have a "qualifying event", i.e. Many IT staff will embrace and relish the change that restructuring affords for them and for the organization. Written Testimony by Peter J. Tobiason, Assistant General Counsel for Employee Benefits and OSHA, ITT Industries, Inc., on behalf of the ERISA Industry Committee, as well as the news release issued by ERIC on his appearance before the working group. Restrictions on temporary and permanent salary increases (TPI, ADS, in-grades, position reviews) for professional staff. Regardless of the number and types of challenges faced during an organizational change, however, it is important to address those issues early. We recommend that these agencies solicit input from stakeholders in drafting these guides. This ties into the anti-cutback provisions of the Code. The buyers plan and the sellers plan rarely have exactly the same investment options. Chapter One of the report outlines the existing statutory and regulatory framework in which this activity takes place. He informed the Study Group that the new regulations do not address the sale of ownership interests in non-corporate entities. The Working Groups assignment was to identify the challenges to benefit continuity confronting sponsoring organizations and their employees undergoing restructuring. Please update your browser to one of the following: Chrome, Firefox, Edge, By continuing to use the site, you agree to the use of cookies. The pressure on IT leaders to evolve their organizations for the era of digital business comes straight from the top: According to the 2019 State of the CIO survey. It does not enable employees to take their current plan with them if they change jobs. The Office of Benefits Administration (OBA) manages the termination process for defined benefit plans, provides participant services (including calculation and payment of benefits) for PBGC-trusteed plans, provides actuarial support for PBGC, and carries out PBGC's responsibilities under settlement agreements. Plan Defect-Short Year Vesting. PLR 200027059, Same desk rule applies to prevent contract for outsourcing of information services from causing separation from service. .manual-search ul.usa-list li {max-width:100%;} Other sources of information and assistance. This would allow the different sectors in a business to be split with the creation of subsidiaries. No Constructive Discharge in Requiring Choice Between Pension or Employment, BNA, June 5, 2000. The employee guide would advise employees of their rights, changes that they may expect to see, where they can obtain information or assistance, etc. This can create discrimination testing problems as the group of transferred employees shrinks over time and becomes more senior (and therefore more highly compensated). In either case, however, both are major decisions that will affect many areas of the organization. That means that the plan may be restricted in its ability to divest itself of the shares. Research and development tax credits offer a generous tax relief for many companies which, in the current climate, can provide a vital lifeline to businesses. Capital Gains Tax on Property the 60-day rule for residential property. ABA Net story on Comments Regarding the Internal Revenue Service and Treasury Department Proposal on the Application of Section 4119d)(6) to Defined Contribution Plans. If the employee remains employed by the same corporation following a stock sale, even if that corporation leaves the seller's controlled group, there has been no "qualifying event". Thus, the participants right to access funds prior to retirement is limited. This field is for validation purposes and should be left unchanged. Advisory Council Report of the Working Group on Benefit Continuity Chapter Four of the Report provides the Work Group's findings and recommendations arising from this discussion and analysis. The plan sponsor can eliminate this right. In Mr. Shultz's opinion, a buyer may be discouraged from continuing the seller's plan because it could be responsible for any operational deficiencies in the seller's plan. Mr. Gottesdiener discussed four class action suits that he has filed within the past two years against First Union Corporation, SBC Communications, Inc. and New York Life Insurance Company arising out of these companies handling of their of in-house 401(k) and defined benefit plans. As a cloud broker, the IT organization would. Currently, the need for an audit of the acquired plan typically costs between $10,000 and $50,000 and results in an average delay of six months for assets to be transferred. Required fields are marked *. For services best supported institutionally, consider creating new services, such as mobile applications that are based on a well-defined mobile strategy. In addition, he suggested that a defined benefit plan should be permitted to eliminate all other optional benefit forms, provided that the plan offers a 50% joint and survivor annuity. Restructuring Your Organization Post-Pandemic? Maintain DE&I Commitments If the policy period ends for any reason, the right to coverage ceases with no right to refund for previously paid premiums. In large-scale projects, such as organizational restructuring, this commitment and leadership is particularly essential. These provisions included those with direct and indirect implications for continuity. Restructuring offers huge opportunities for the IT organization and the institution it serves. Whilst many companies choose to reward employees with bonuses and other desirable perks, some go further and offer shares in the business. This is nearly triple the value of such activity in 1996. The employers guide should be readily available in print and on each agencys web page. In additional testimony, Mr. Hickey noted the need for clear guidance regarding the use of Transition Service Agreements when a sale of part of a business results in certain employees changing employers. It would contribute to predictability to have official guidance making it clear that continuation of the sellers benefits for some period of time will not violate the various nondiscrimination rules. They had goals to increase their field workforce to expand their service area to additional states and geographical locations. There has been a constant erosion of health benefits. The EEO Director is Brenecia Watson. Mr. Norby, who is a Northwestern Bell retiree, informed the Working Group that the association, which was formed in 1992, has a membership of approximately 19,000 members and represents 45,000 individuals. ERISA Sections 406 through 408 on prohibited transactions. It remains both prudent and necessary to obtain the guidance, cooperation and assistance of the professional advisors to these sponsors for comprehensive relief to be developed. Further, these cloud services are platform and device agnostic: they can be acquired from almost any wireless- or cellular-capable device almost anywhere an Internet or cellular connection is available. would fall within fiduciary conduct. It should include, but not be limited to: The Department should consider developing a legislative package that re-examines the timing of the disclosure requirements, such as the 90-day requirement for the SPD, 210 days for the Statement of Material Modifications, particularly in the context of sponsor restructuring. In their opinion, ERISA has become a law for corporations. They urged the Council to recommend legislation that will amend ERISA, enforce vesting and reverse the Hughes case. The plan can be amended to increase or reduce future benefit accruals, to add features or to remove unprotected features. With increased costs and higher interest rates effecting the profitability of many companies in the current economic climate, restructuring is a tool that many firms should review. This amounts to more than a 45 percent reduction of his projected benefit. Sharon P. Pitt is interim deputy CIO and interim executive director, Technology Systems Division, at George Mason University. She indicated that guidance from the Department of Labor providing direction on Safe Harbor investment options that would not cause the plan to lose its 404(c) protections would go a long way towards insuring uninterrupted 401(k) savings. Regardless of the perspective, however, restructuring entails enormous angst. Having a solid change management plan is essential and communicating that plan to all involved is just as essential. Compliance adjudication that jeopardizes the future competitiveness and career and earnings opportunities for employees is dysfunctional. This is the provision that restricts the ability of a successor employer to apply a pre-existing condition clause to the employees coming into its plan. The situation is even worse for cafeteria plans, flexible benefits, and self-funded health plans, where discrimination rules apply, but there is no transition period. If a business decides to downsize during a restructure, it could consider outsourcing some of its operations during a restructure at a much cheaper cost than in-house roles might bring, such as payroll and financial management. Workforce reduction strategies - HR Operations It could also lead to the loss of any tax reliefs. There has been a lot of debate as to what is the lifespan of buildings (RCC structure) in India when you talk about building redevelopment? The plan is to be operated for the exclusive benefit of plan participants and their beneficiaries. What are the growth areas? Timothy J. Mahota, Integral Development, Inc. Patrick N. McTeague, McTeague, Higbee, MacAdam, Case, Watson & Cohen, James S. Ray, The Law Offices of James S. Ray, Michael Stapley, Deseret Mutual Benefit Association, Richard T. Tani, Retired, William M. Mercer, Martha Hutzelman and Janine Bosley, Attorneys, Nelson Phelps, Executive Director and A.J. How to access such information; reach the DOL hotline, etc. Stilt or underground parking will fix the parking issue and shall ease space on the ground. How to Plan an Effective Organization Restructure | Indeed.com Understanding what those impacts are will help change leaders design a change program that gets better results. Mr. Campagna agreed that this was an area of uncertainty under the law. This is the point of emphasizing the insurance nature of these deferrals. This website cannot be displayed as your browser is extremely out of date. She then summarized issues in the following areas: Ms. Hennessy emphasized that continuity in health plan coverage is very important and that continued participation in the sellers plan would create the least disruption, but there is concern that such an arrangement would create an unintended multi-employer welfare plan (MEWA) which would be subject to state insurance laws. As a result, many employees end up without a plan or have their benefits split between two plans, which may mean less in the way of overall benefits. .usa-footer .grid-container {padding-left: 30px!important;} The Working Group then reviewed these recommendations in light of the need to balance policy objectives. Assets must be set aside to fund retirement benefits, and held solely for that purpose. A business impact analysis can be used to assess how the change will impact the organization and its operations. When acquiring a new company or following a merger, it may be necessary to reorganise the corporate structure of a business to facilitate the new business to slot into the corporate structure. Modern facilities/ amenities/gadgets like lifts, intercom system, smoke detectors, firefighting alarm system, concealed plumbing, concealed wiring for electricity, telephone, cable TV, Clubhouse, Swimming Pool, Gymnasium, Community Hall etc. 10 Benefits of Organizational Restructuring - CMI Whatever the case for change, restructuring is always focused on benefits realization. Date: January 18, 2023. An official website of the United States government. As an example he cited the Sears decision to reduce over a ten-year period the retiree life insurance benefit, an unpopular and difficult decision, but a decision that benefitted current and future employees and better-positioned Sears for the future. Further, rather than using just one mobile or connected device, faculty, staff, and students use multiple computing devices for research, work, and study, including desktops, laptops, tablets, e-readers, and smartphones. The Office of Equal Employment Opportunity (OEEO) provides support to the Corporation for integrating the full spirit of EEO requirements within the agency's overall work environment, strategic mission and corporate initiatives and developing and maintaining a diverse, discrimination-free work environment. Mr. Gottesdiener explained that there are two First Union cases. Also, additional space, if available, could be purchased from the Developer at best available price. Though the Treasurys perspective on this matter was that these deferrals have the character of insurance, it is not clear that permitting the continuation of these benefits would violate any policy objective and such permission would contribute to continuity. Patrick McTeague Working Group meeting October 13. For advice on restructuring and assistance with understanding the tax benefits that this may bring, contact our tax team for further assistance. The result is increased work opportunities for more junior staff and the more experienced professionals have more time available to focus on strategic work. These are settlor functions. It's helpful to have a clear plan that includes organizational assessment outcomes, organizational principles, steps for implementation, and timelines. Mr. Bortz emphasized that if such employees lost these deferrals during the course of such transaction; they should not be looked upon as forfeitures. The "compliance" perspective. John explained that restructuring a business wisely will ensure that it becomes as tax efficient as possible and this can have a significant impact on future profits.